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Five Things Nonprofits Should Know About: Lobbying & Political Campaigns

Please note that the term “nonprofit” as used here specifically means entities holding 501(c)(3) status under the Internal Revenue Code.

  1. Why Political Campaign Activity is a Problem. 501(c)(3) entities are not allowed to participate in or intervene in any political campaigns. Political campaign activity includes activity on behalf of or opposing a candidate, publishing or distributing statements related to a political campaign, or making such statements orally. Political campaign activity compromises a nonprofit’s tax-exempt status.
  2. Why Lobbying Might Be A Problem. Federal tax law places limits on an exempt entity’s ability to conduct lobbying activities. Too much lobbying compromises a nonprofit’s tax-exempt status.
  3. How Much Lobbying is Too Much Lobbying. Lobbying threatens exempt status where a substantial part of the organization’s activities are lobbying activities. This default, “substantial part” test is not a particularly clear or helpful test. Fortunately, organizations can instead file a simple form to elect to use a clearer, more predictable test generally based on funds spent on lobbying versus funds spent on the organization’s exempt purpose.
  4. What Lobbying Is. If a nonprofit is attempting to influence legislation, whether through contact with a legislator or legislative body, through “grass roots” contact with the general public, or through other means, the organization may be “lobbying” for federal tax purposes. Organizations that are lobbying or may conduct lobbying activity should consider making the above election and should track all lobbying efforts and related expenses.
  5. That Additional Rules May Apply. In addition to federal tax rules that limit and govern a nonprofit’s ability to conduct lobbying activities, an exempt organization should be aware of additional lobbying rules and requirements. For example, state law may require the organization and its staff to register as lobbyists and to regularly report certain lobbying activity and expenses. Bear in mind that the definition of lobbying for federal tax purposes is often different than the definition under state law. For example, discussions with a member of the executive branch may be lobbying for state law purposes but may not be lobbying for federal tax purposes.
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