Non-Profit / Tax-Exempt Entities

• Organization and Governance
• Charitable Entities and Social Welfare Action Organizations
• Compliance with IRS and State Regulations
• Donations and Solicitations

The short answer is yes, a charity can do some lobbying, but it is subject to a prohibition that "no substantial part" of its activities may consist of lobbying. The Internal Revenue Service (IRS) and the courts have been inconsistent in measuring the word "substantial." Should it be measured by quantity (percent)? Or should it be quality - e.g., the importance of the legislation to the mission of the organization? The unsatisfactory answer is the IRS knows it when it sees it.

But there is an alternative. Charities can elect to measure and limit their lobbying activity using a formula found in the Internal Revenue Code. Known as a 501(h) election (made by filing an IRS Form), this code section permits a 501(c)(3) organization to spend up to a specific amount on lobbying without getting into trouble, relying on a prescribe mathematical formula based upon the entity's exempt purpose expenditures. The bad news is that the math includes - and limits - grassroots lobbying expenditures (not just reportable direct lobbying spending). This limitation does make it tough for a 501(c)(3) entity to use direct mail for grassroots lobbying.

The good news, however, is that the IRS provides definitions of lobbying under the 501(h) election; such definitions are only available if 501(h) status is elected. For example, under the 501(h) election an entity is not lobbying if there is no call to action. The entity can "talk" forever about legislation, the pros and cons, the why and wherefores, as long as it does not say, "write or call your congressman," or include a postcard to send to a legislator. It could also broadcast on television a replay of a principal of the entity testifying before a Congressional Committee about how America will be saved if only this legislation were passed--so long as the entity does not include a call to action.

Many other issues may affect a charity's ability to lobby. For example, whether state law further limits lobbying, whether certain lobbying may cross over to prohibited campaign or election related communications, and whether the lobbying itself falls outside the entity's mission. If you would like to make an appointment with our attorneys, please call us at 703-865-7480.