Summary of "Basics of Advocacy & Lobbying for 501(c)(3) Organizations (Part 1) (May 24, 2017)"

Summary of "Basics of Advocacy & Lobbying for 501(c)(3) Organizations (Part 1)"

Speaker:

Aaron, Senior Counsel at Ennio Law Group, San Francisco

Main Ideas and Concepts:

Introduction to 501(c)(3) Organizations:
Nonprofits and tax-exempt organizations are distinct concepts; nonprofit refers to the corporate form, while tax-exempt is a status obtained through IRS filing. 501(c)(3) organizations must be organized and operated exclusively for exempt purposes (e.g., charitable, educational, religious).
Requirements for 501(c)(3) Exemption:
Must meet organizational and operational tests. Activities must align with the purposes listed in Section 501(c)(3), and organizations can engage in some unrelated activities as long as they are insubstantial.
Lobbying and Advocacy:
501(c)(3) organizations can engage in an insubstantial amount of Lobbying. Advocacy is broader than Lobbying and can be conducted without restrictions, including educating the public and encouraging civic engagement.
Lobbying Rules:
Lobbying includes efforts to influence legislation at any level (federal, state, local). Organizations must be cautious about earmarked donations for Lobbying, as they may not be tax-deductible for donors.
Types of Lobbying:
- Direct Lobbying: Communication with legislative members regarding specific legislation.
- Grassroots Lobbying: Communication to the public that encourages action regarding specific legislation.
Tests for Lobbying Activities:
Organizations can either follow the vague "substantial part test" or elect the more specific "501(h) expenditure test." The 501(h) test allows organizations to spend a certain percentage of their exempt purpose expenditures on Lobbying without risking tax-exempt status.
Expenditure Limits under 501(h):
Limits are based on total exempt purpose expenditures, with specific percentages allowed for Lobbying and grassroots Lobbying. Exceeding these limits can result in excise taxes but has less severe penalties than failing the substantial part test.
Exceptions and Nuances:
Certain activities, such as nonpartisan research and member communications, may not count as Lobbying. Paid mass media ads related to legislation can be presumed to be grassroots Lobbying if they are timed close to a legislative vote.

Detailed Instructions/Methodology:

Understanding Nonprofit Status:
Recognize the difference between Nonprofit Status and tax-exempt status. Ensure the organization is formed for exempt purposes as defined by the IRS.
Engagement in Lobbying:
Determine whether to follow the substantial part test or elect the 501(h) test. Track expenditures on Lobbying activities to remain compliant with IRS regulations.
Advocacy Activities:
Engage in Advocacy without restrictions, focusing on public education and outreach. Use Advocacy as a tool to further organizational missions effectively.
Monitoring Contributions:
Be aware that contributions earmarked for Lobbying may not be tax-deductible for donors. Structure funding conversations with potential donors accordingly.
Compliance with Lobbying Limits:
Calculate total exempt purpose expenditures to determine Lobbying limits under the 501(h) test. Keep detailed records of Lobbying expenditures to avoid penalties.