Q&A: The Rules that Allow Lobbying by Nonprofits
In general, what is considered lobbying?
Lobbying is the attempt to influence the passage or defeat of legislation through the presentation of views to any person in a position to affect that process: a member of Congress, a Congressional staff member, a state legislator, or a city council member.
Individuals as private citizens may lobby as much as they want, on whatever they want—there are no forms to file or expenses to report for individual citizens. Lobbying by individuals is not controlled or limited by the laws on nonprofit lobbying, as long as they are not being paid or reimbursed by the nonprofit for their lobbying.
By law, the IRS considers a 501(c)(3) nonprofit to be lobbying when it expends funds to urge, or to ask others to urge, a legislative official (officeholders, staff) to act one way or another on legislation. For the nonprofit organization, federal law makes two basic, modest requirements: 1) report on the annual tax return the total amount of funds expended for lobbying; and 2) do not exceed the limit on the percentage of your budget that can be devoted to lobbying.
What is the difference between permissible lobbying activity and prohibited electioneering activity?
Electioneering is strictly prohibited for 501(c)(3) organizations. The relationship between nonprofits and political parties and candidates for public office is governed by a specific provision of the tax code, which prohibits the participation of nonprofits in partisan political activities. A 501(c)(3) may not support or oppose parties or candidates for office. It may not provide materials, money, or other organization resources for that purpose. An orchestra may not endorse or oppose a candidate for office, and may not suggest that others support or oppose candidates.
Nonprofits are allowed, however, to contact candidates and parties in an election, both to seek their views on issues and to communicate the nonprofit’s views. But again, you may not represent the orchestra as supporting or opposing the candidate.
As an individual, of course, you may be involved in a campaign as much as you want, including donating your own money. But you may not use the orchestra's property, name, or time to do so. For this reason, it is important to be absolutely clear when you are acting in your individual capacity, and when you are speaking on behalf of your organization.
Can orchestras participate in campaigns on referenda or issues on the ballot in an election?
Yes! This is different from elections for candidates for office, and the IRS specifies that this is allowable lobbying activity. Nonprofits are allowed to expend funds and take public positions on referenda, ballot initiatives, propositions, tax levies, etc., as long as they do not cross the line into party or candidate endorsement. Why this exception? Technically, the law considers the public to be “the legislators” in the case of ballot issues. Therefore, if a nonprofit wants to lobby on the issue as it would a legislator, it has to be able to lobby the public. A nonprofit may endorse ballot issues, advertise, pass out leaflets, participate in debates, write letters to the editor, and engage in similar activities designed to communicate its point of view to the general public. The legal limits that apply are the same as for direct lobbying.
What is considered lobbying by a nonprofit organization?
The law provides very generous opportunities for lobbying by a 501(c)(3) nonprofit, since the clear intent of the law and regulations on this subject were to encourage nonprofits to communicate their views on public policy.
Federal definitions and limits on nonprofit lobbying are contained in the U.S. tax code. In its simplest form: it is considered to be lobbying when a nonprofit urges a legislative official to take a position or action on specific legislation or regulations and when funds have been expended by the nonprofit for that purpose. Keep in mind that using staff time is an expenditure of funds. Otherwise, when no funds are expended, no reportable lobbying has occurred, under the current federal statute.
- It is lobbying if you try to influence the development of law: to repeal an old law, to modify legislation, or to approve new legislation or appropriations, but it only applies if you communicate directly to a legislative official to promote a specific point of view and if you expend funds to do so.
- It is not lobbying if you discuss the needs or interests of your organization in a general way, with no urging for changes in law or legislation, or if no organization funds have been expended.
- Sending your season brochure or a newsletter about the orchestra’s activities to a member of Congress is not lobbying. Sending a message urging support for an amendment to a bill before Congress is lobbying.
- It is not lobbying when you respond to inquiries from Congress or other government officials; it is not lobbying when you present testimony that was requested by a Congressional committee, nor is it lobbying if you inquire to a government agency about a grant or specific program already in effect.
Note this important exemption! The Schedule C of the Form 990 spells out an important exemption from the definition of direct lobbying activities, as follows:
“A communication is not a direct lobbying communication if the communication is an appearance before, or communication with, any legislative body concerning action by that body that might affect the organization's existence, its powers and duties, its tax-exempt status, or the deductibility of contributions to the organization, as opposed to affecting merely the scope of the organization's future activities.”
What is “grassroots” lobbying?
Grassroots lobbying is using the nonprofit’s resources to call for public action in support of a legislative goal. Galvanizing public support for the arts by using various forms of the media is extremely important, and is a method that is often underutilized. The trigger for this activity to be considered grassroots lobbying is: 1) urging people to action to influence specific legislation; and 2) the expenditure of orchestra funds. Again, the limits on these allowable expenses are so high, you would have to do an extraordinary number of op-ed articles or time writing social media messages to get anywhere near it. One positive aspect of social media is how little time and money it takes to draft and send out a message.
- It is grassroots lobbying if a paid staff member writes, on behalf of the orchestra, an article for the local newspaper or a blog on your community listserv in which citizens are urged to write to members of Congress about government funding for the arts.
- It is grassroots lobbying if your orchestra sends a mass advocacy message to your donors by email or social media urging them to contact their member of Congress about legislation.
- It is not grassroots lobbying if staff members, trustees, or patrons write something on their personal social media accounts, in their private capacity, for which no staff time or orchestra funds were used.
- It is not grassroots lobbying if you are just disseminating an educational article or blog post about a policy development that does not include a call to action.
- An article explaining what good the National Endowment for the Arts has done for the country is not lobbying. A Facebook post on the orchestra’s account saying Congress wants to cut NEA funding and directing readers to call their member of Congress to express opposition is grassroots lobbying.
How much lobbying can my orchestra do? Why should I file the 501(h) election?
Glad you asked! Electing to come under the IRS 501(h) definition of lobbying will take the mystery out of determining how much you may lobby. The League of American Orchestras strongly recommends that each orchestra file the 501(h) election. It’s not essential, and the orchestra can lobby without it, but it is a good idea—free, simple, and permanent. (In fact, your orchestra might have done this already, as the League made a big effort to encourage orchestras to take the election in the late 1990s!)
The original law, part of the IRS code since 1934, does not define specific spending limits on lobbying, aside from requiring that, “no substantial part of the activities” may be for “carrying on propaganda, or otherwise attempting, to influence legislation.” In 1976, Congress enacted Sections 501(h) and 4911 [together, referred to as 501(h)] to the U.S. tax code, which gave nonprofits the option of selecting to come under a new, more specific nonprofit lobbying law. You are not required to make an election, but unless you file IRS Form 5768 and mark “Election,” you are assumed to be working under the vague terms of the original law.
Filing the 501(h) election costs nothing and couldn’t be simpler: the one-page Form 5768 can be obtained from the IRS. It simply requires that you provide a signature from a member of the orchestra’s governing body and send it back to the IRS. There is no expiration, and no further filings or reporting are required.
I’ve taken the 501(h) election! Now, what are the limits on how much lobbying my orchestra can do?
The legal limits on nonprofit lobbying take effect only when funds are expended by the organization for lobbying. The law’s generous limits on such lobbying, for nonprofits making the 501(h) election, are set forth below.
Direct lobbying is defined as 1) contacts by an organization with legislators or government officials regarding specific legislation and 2) contacts with the general public regarding a referendum, initiative, constitutional amendment, or similar procedure.
Grassroots lobbying refers to attempts to influence legislators by shaping the opinions of the general public, including your audiences. If your orchestra expends funds to use the media or by making other appeals to the public to get elected officials to act on specific legislation, that is considered grassroots lobbying. An organization’s communications to its members regarding legislation may be considered direct lobbying. The Alliance for Justice has a helpful guide to help sort out when communicating with members is a direct or grassroots lobbying expenditure. Note that an organization’s grassroots lobbying expenditures may not exceed 25% of its total lobbying expenditure limit.
According to the IRS, the expenditure limits for nonprofits are determined by the organization’s budget size:
What records does an orchestra have to keep for legal purposes?
Lobbying expenditures must be reported on Schedule C of the annual Form 990 tax return. There is no other filing required. For lobbying that is carried out with the use of orchestra funds, you need only keep a simple record of how much was spent, for what legislative purpose, which officials were lobbied, and when. Nonprofit organizations should remember to keep a simple tally throughout the year of any expenses incurred in your lobbying efforts like printed materials or direct costs associated with meeting with a legislator. Remember that staff time used for lobbying is an expense that must be tracked and included in your report of total expenditures. Since different expenditure limits apply to each, your direct lobbying and grassroots lobbying expenses should be tracked separately.
Do the federal limits apply to state and local legislative lobbying?
Yes, your expenses for lobbying at the state and local level also count toward the limits and are reportable. For state reporting rules, check with your state nonprofit association or state arts advocacy group.
Can donors earmark their contribution to be used for lobbying?
Yes, if they wish, but they cannot take a tax deduction for it when donating to a 501(c)(3) organization. Organizations that do lobbying may invite donors to make specific donations because such work is of special interest to those donors, and should remind inform donors that the donation is not tax deductible.
The law provides a different category for nonprofits that are designed to make lobbying their primary function. These are known as 501(c)(4) organizations. Unlike a 501(c)(3), tax-exempt 501(c)(4) organizations have little limitation on lobbying on behalf of their exempt purpose, but contributions to them are not taxdeductible charitable contributions.
Can public officials tell me how to lobby?
Federal agency administrators—employees of the U.S. Department of Education or the NEA, for example—are prohibited from specifically urging organizations or citizens to engage in organized lobbying of legislators to affect specific legislation. Department officials can explain their position, and advocate its adoption, but they cannot urge organizations to target Congress with a lobbying campaign. In a public meeting with a federal official, when someone in the audience asks, “What do you think our organization should do about this issue?” the official must decline to recommend specific lobbying action. This rule is designed to keep government employees from using their position to pressure citizens to lobby on behalf of their programs.
Can the orchestra ask audience members to contact legislators?
Yes. You may place signs in the lobby, distribute an advocacy newsletter, urge support for legislation through your program book, send letters to your subscribers, have places for audience members to opt-in for electronic advocacy messages, speak from the stage—all of these are permitted just as long as you track the related expenses for material and staff time and your total expenses for the year remain under the lobbying expenditure limits. These activities would be considered grassroots lobbying.
Can my orchestra lobby even if it gets government grants?
Yes. It just can’t use government funds to lobby. The resources (including staff time) used in lobbying have to be derived from nongovernmental sources.
If I get a for-profit corporation to speak on behalf of positions we support, is that lobbying by my orchestra?
If this is an organized effort using orchestra resources to get these organizations or corporations to advocate on a legislative issue, your use of orchestra resources would count as grassroots lobbying. The expenses of the corporation are its own, and it can lobby on whatever it wants, including issues affecting the arts. You are only responsible for what you spend, if anything, in such an effort.
Do our orchestra dues or payments to organizations that lobby count as lobbying by the orchestra?
As a 501(c)(3) nonprofit, your dues to an organization specifically set up to lobby, such as a 501(c)(4), can count as lobbying, but not your general membership dues to a 501(c)(3) professional association such as the League of American Orchestras, for which lobbying is not the primary purpose. No lobbying reporting requirement applies to your annual dues to the League.
Is inviting a member of Congress to concerts considered lobbying, and is it allowable?
Current rules allow members of the U.S. Senate, U.S. House of Representatives, and their staffs to accept gifts of no more than $99.99 from a single source in a calendar year, with each gift limited to $49.99. Individual gifts valued at less than $10 dollars do not count toward the limit. These gifts must be reported by the member or a staffer, but need not be reported in any special way by the donating organization, other than as a lobbying expense on the Form 990 if the activity fits the definition of lobbying. If you provided tickets to a concert or gala to a member of Congress and his/her guests, but in the course of that event, no lobbying on legislation was conducted, it need not be reported by you as a lobbying expense. There are a list of exceptions to the House gift rules, including exceptions for widely attended events, charity events, and educational events. Senate rules also include exceptions for widely attended events, charity events, and constituent events.
Senate and House ethics staff say that if you waive the admission fee for a member of Congress to your fundraising gala (effectively letting him/her in for free), you need not count the full face value of the ticket as a gift, if part of that price is designed to be a donation. For example, if a $500 ticket is given to a member of Congress, but $451 of that face value is for fundraising and only $49 represents the value of what he/she received in return (food, concert, etc.), the legislator has effectively received a gift of only $49.
A Guide to Gift Rules is available on the League’s site, created in partnership with the Performing Arts Alliance.