|
Foundation Lobbying
| Nonprofit
Lobbying | Disclaimer
What foundations and nonprofits
should know about lobbying and advocacy
Foundations and nonprofits play a vital role in the
development and implementation of public policy. Advocacy
and lobbying, within certain constraints, is legal for
nonprofit organizations and conducive to an informed,
healthy and strong democratic society. The Donors Forum
supports the advocacy rights of nonprofits and believes
that nonprofits can and should participate in public
policy dialogue that affects their organizations, communities
and the people they serve.
There are important guidelines, rules, opportunities
and restrictions that apply to foundations and nonprofits
that participate in the policy process through advocacy
and lobbying. In this section you will find explanations
of some of the key issues and links to national web
sites with more resources and information.
What's the difference between "lobbying"
and "advocacy"? The legal definition of lobbying
usually involves attempting to influence legislation.
Advocacy covers a much broader range of activities that
might or might not include lobbying. One way to differentiate
between the two terms is to understand that lobbying
always involves advocacy but advocacy does not necessarily
involve lobbying. Lobbying may only be a small part
of the advocacy carried out by charities.
Advocacy and lobbying are important
tools for foundations and can be used within the guidelines
established by federal law to educate public officials,
conduct grantmaking and respond to "self-defense"
legislative issues.
In their publication Myth v. Fact: Foundation Support
of Advocacy, the Alliance for Justice points out
that the federal law carves out "safe harbors .
. . that permit foundation grants to organizations and
projects that include lobbying and other forms of IRS
regulated activities. These safety zones...are designed
to assure foundations that advocacy-oriented grants,
if properly made and limited, are no more risky than
grants to support other charitable activities."
This publication also details areas in which foundations
may more directly engage in lobbying activities. The
Alliance
for Justice is a Washington, D.C.-based public charity
that works to strengthen the advocacy rights and abilities
of public interest organizations. Another good resource
is "Private Foundations and Influencing Legislation,"
by Thomas Troyer at Caplin & Drysdale, which is
a free document offered by
Center for Lobbying in the Public Interest .
Can Foundations Lobby?
Generally private foundations may
not lobby. However, the tax rules recognize two important
exceptions to the definition of lobbying. A private foundation
may lobby if invited to do so by a legislative body or
in its "self-defense."
Self-defense lobbying
This exception protects communications with legislators,
their staffs and executive branch officials involved
in the legislative process concerning legislation that
might affect a private foundation's existence, powers
and duties, tax-exempt status, or right to receive tax-deductible
contributions. This exception permits foundations to
fund communications with legislators and government
officials -- but not with the general public -- on a
range of important issues, including the proposal to
reduce the excise tax that private foundations pay on
net investment income
Technical assistance or lobbying
by invitation
Another exception excludes response to written requests
for technical assistance from a legislative committee
or subcommittee or other governmental body. The written
request should be signed by an authorized official of
the governmental body, such as a committee chairperson,
but not an individual legislator who is not considered
a governmental body. Such requests can provide organizations
with broad scope for presenting legislators, but not
the general public, with facts, analysis and recommendations
on legislative issues.
Two specific types of issue-oriented
foundation work also lie outside of the definition of
lobbying:
Nonpartisan analysis
Making available the results of nonpartisan analysis
on a legislative issue is not treated as lobbying even
if the research report includes specific legislative
recommendations. A communication qualifies as nonpartisan
analysis if it: presents a "sufficiently full and
fair exposition of the pertinent facts as to permit
the public to form an independent opinion or conclusion,"
does not include a "direct" call to action
(that is, does not explicitly encourage recipients to
contact legislators or accomplish the same objective
by providing such information or materials as legislators'
addresses or phone numbers or preprinted postcards to
send to legislators), and is not distributed to persons
who are interested solely in one side of the issue.
The "full and fair exposition"
standard requires the analysis to present a rational,
fact-based argument in support of the report's conclusions,
but it does not require that the report devote equal
space to the discussion of alternative points of view.
The tax rules also make clear that grants to support
the preparation and distribution of nonpartisan analysis
will not be treated as lobbying expenditures even if
the grantee, or others, subsequently use the analysis
as part of a lobbying communication unless a foundation's
primary purpose in funding the analysis was to support
the grantee's lobbying or the foundation knew, or had
reason to know, that the grantee's primary purpose in
performing the research project was for lobbying use.
Discussions of broad social issues
Finally, the regulations exclude from the definition
of lobbying discussions of broad social, economic and
similar problems, even if the problems are the subject
of legislation already pending before a legislative
body. This exception affords a further opening for foundations
to fund communications on general policy issues -- for
example, the importance of strong environmental protection
standards or a strong national defense -- provided the
communications do not address specific legislation.
Grants to public charities that
lobby
Most foundation grantees qualify
as public charities for federal tax purposes, and as such
may elect to be subject to substantially more liberal
rules on lobbying activities. Specifically, an electing
public charity may make lobbying expenditures up to 20
percent of the first $500,000 of its charitable expenditures,
and declining percentages thereafter, up to a maximum
of $1 million each year. These permitted lobbying expenditures,
combined with the favorable rules on what does, and does
not, constitute lobbying, permit public charities--particularly
those with a substantial base of non-lobbying expenditures--to
play a quite active role in the legislative process.
The tax rules in turn, permit private foundations to make
both general support and project grants to public charities
engaged in lobbying activities. General support grants
are permitted so long as the funds are not earmarked for
lobbying--that is, so long as the public charity does
not agree to use the funds for that purpose. Project grants
are permitted--even if the project includes some lobbying--provided
that the funds are not earmarked for lobbying and the
amount of the grant does not exceed the grantee's budget
for the non-lobbying components of the project.
Broad flexibility
Notwithstanding the federal tax rules' prohibition on
private foundation lobbying expenditures, foundations,
in fact, have broad flexibility to fund activities that
can have direct and significant impact on the public policy
process. As outlined above, this flexibility derives from
both the favorable rules protecting grantmaking foundations
from attribution of their public charity grantees' lobbying
expenditures and the favorable definition of lobbying.
Through careful attention to the applicable tax rules,
foundations can thus play an active role in the formation
of public policy without risk of adverse tax consequences.
Community foundations and lobbying
Community Foundations can lobby,
with the same restrictions that apply to other public
charities (see nonprofit
lobbying page). Community foundations are governed
under the same federal tax rules for lobbying as public
charities, under section 501(c)(3). Unlike private foundations
that are generally restricted from lobbying except on
"self-defense" issues like legislation affecting
their tax-exempt status or the foundation payout rate,
community foundations may lobby with the same latitude
permitted other public charities. As stated before, lobbying
is defined as any attempt to influence specific legislation.
By default, community foundations are subject to the vague
"no substantial part" rule that says no more
than an insubstantial amount of a 501(c)(3)'s exempt purpose
expenditures may be used for lobbying. Unfortunately the
IRS never defined how much constitutes an insubstantial
amount, so in 1976 Congress enacted an alternative set
of rules called the expenditure test. The expenditure
test is often known as the 501(h) election.
Why Make the Lobbying Election?
Like public charities, it is beneficial for community
foundations to consider "electing" the 501(h)
expenditure test rules of the 1976 lobby law. Electing
is simply the process by which a 501(c)(3) organization
chooses to come under these precise guidelines. Electing
to come under the 1976 lobby law is easy. Complete the
one page IRS Form 5768 and send it in. During the year,
record the community foundation's lobbying expenditures.
Then, during the next time the community foundation's
annual tax form 990 is being prepared, fill in the amount
of lobbying expenditures on Form 990 Schedule A, Part
VI on the top half of page for electing organizations.
Choosing to follow the 501(h) expenditure
test rules offer three main benefits: safety, clarity,
latitude. Safety: The IRS has stated that making the
election does not raise the risk of audit. On the contrary,
they state that 501(c)(3)s which have elected are more
likely to be in compliance with the law than non-electing
501(c)(3) organizations. Clarity: The 501(h) rules provide
clear definitions of direct and grassroots lobbying.
They also make it easy to distinguish lobbying from
general public policy activities by including eight
legislation related activities that are excluded from
the definitions. Latitude: The 501(h) rules provide
fairly generous lobby expenditure limits, 20% of a 501(c)(3)
organization's first $500,000 of their exempt purpose
expenditures may be spent on lobbying. Up to $1 million
may be spent on lobbying in a year. If a community foundation
does not elect, then it is subject to the vague "substantial
part" rule that does not clearly define lobbying
or state how much money a community foundation may spend
on lobbying.
Community Foundations can Support
Lobbying via Grantmaking
Community foundations may make general support grants
to public charities that lobby. They also may make grants
earmarked for lobbying to public charities, to other
community foundations, and to organizations that are
not charities. If a community foundation makes a grant
for lobbying the grant counts against the foundation's
lobby expenditure limits if it has already elected under
the 501(h) rules. If the community foundation has not
elected, and therefore is under the substantial part
rule, a grant to a public charity earmarked for lobbying
still counts as a lobbying expenditure by the foundation.
Why would a community foundation
make a grant for lobbying by another organization?
Community foundations that want to influence legislation
may not have the internal capacity to lead a legislative
campaign themselves so they may want to provide funding
for one or more 501(c)(3) organizations, or a coalition,
to take the leadership of a lobbying effort.
What is the role of donors' advisors
in community foundation public policy activities?
Community foundation staff may educate donors about
organizations that engage in public policy and lobbying
for causes they care about. Educating donors about opportunities
to support organizations engaged in public policy can
also be a way of expanding the pipeline of usually scarce
dollars for advocacy and lobbying activities. Philanthropy
for public policy can be an exciting way for a donor
to feel apart of social change efforts. It should be
noted that a donor may not receive a tax-deduction for
a contribution to a 501(c)(3) that is specifically earmarked
for lobbying as defined under section 501(c)(3) of the
Internal Revenue Code. Community foundation staff may
advise donors that funding broader public policy work
does not necessarily mean that a nonprofit will engage
in lobbying, but lobbying could be one of many types
of policy activity conducted by the organizations ultimately
receiving their contributions. Therefore, donors may
be encouraged to recommend general support grants from
advised funds to organizations that engage in lobbying.
Disclaimer
The Donors Forum maintains this page to provide general
information and guidance about the laws and regulations
pertaining to foundation and nonprofit lobbying. The
law, however, can change or vary from jurisdiction to
jurisdiction. None of this information should be used
or relied on as legal advice or opinion about specific
matters, facts, situations or issues. It is always advisable
to consult a lawyer about your particular circumstances.
Top of Page |
Can
I Lobby?