Nonprofit Political Activity Rules

Any political activity at all which is either in support of, or opposition to, a candidate for public office will result in loss of 501(c)(3) status. Do not confuse political activity with lobbying or legislative activity, described below.

The non-partisan educational activities listed below are permitted, but be very careful. Do not engage in any of the listed activities without knowledgeable professional advice.

    • 1. Publication of voting records
    • 2. Publication of candidates responses to questionnaires.
    • 3. Public forums.
    • 4. Voter registration activities.
    • 5. Political science courses at universities.
    6. News stories; news reporting.

The following activities are specifically not permitted:

    • 1. Statements in support of or in opposition to a candidate – written or oral.
    • 2. Candidate rating (of any kind – even scrupulous objectivity is no defense).
    3. Solicitation of financial or other support for a candidate establishment of a PAC.

In addition to revocation of 501(c)(3) status, the IRS can impose a 10% tax on the political expenditure, and require recovery of the political expenditure. A 100% tax can be imposed if the funds are not recovered. A 501(c)(3) that has had its exemption revoked because of political activity is prohibited by law from applying for 501(c)(4) status.

 

Lobbying, In General

Basic Rule: 501(c)(3) organizations may engage in insubstantial amounts of lobbying or legislative activity. The courts have generally interpreted this to mean 5% or less of overall activities, financial expenditures, staff hours or other measurable standards. Organizations that exceed this guideline will have their 501(c)(3) status revoked. Most 501(c)(3)�s may elect more liberal limits using IRS Form 5768 [the 501(h) election]. The rules that follow apply only to those organizations that have made the election.

 

Direct Lobbying, Electing Organizations

Definition: General discussion of controversial issues does not, alone, constitute lobbying. In order for the IRS to find that direct lobbying has taken place, there must be three elements:

1. Specific Legislation

    • This could be a bill or other piece of legislation already introduced in the legislature, or a specific legislative proposal.

2. Reflecting A View

    • In order to be lobbying, a discussion must take a position with respect to (support or oppose) the specific legislation.

3. A communication with a legislator or a government officialSpecial rule: Discussion of initiatives and referenda are considered direct lobbying (subject to more generous percentage limits) even though communication is with the general public.

Limitations: If all three of these elements are present, you have “Direct Lobbying.” The rules governing direct lobbying for an organization which has made the section 501(h) lobbying election are as follows:

    • 1. The organization is allowed to spend up to 20% of its overall budget on direct lobbying without penalty.
    • 2. If more than 20%, but less than 30%, of the budget is spent on direct lobbying, there will be a penalty tax, but the 501(c)(3) status is not in jeopardy.
    3. If expenditures for direct lobbying average more than 30% of the organization’s overall expenditures over a four year period, the IRS can take away the 501(c)(3) tax exempt status.

(Caution! If the organization’s budget exceeds $500,000 per year, these “safe harbor” percentages are reduced!)

Recordkeeping

    • 1. Keep track of the total amount spent directly for this kind of lobbying – long distance phone calls, postage, travel, payments to lobbyists.
    • 2. Paid employees, if any, should keep logs to determine the percentage of their salaries and benefits to be allocated to lobbying.
    3. Arrive at a reasonable method for allocating overhead and similar costs to the lobbying activity.

 

Grassroots Lobbying, Electing Organizations

Definition: General discussion of controversial issues does not, alone, constitute lobbying. In order for the IRS to find that grassroots lobbying has taken place, there must be three elements:

1. Specific Legislation

    • This could be a bill or other piece of legislation already introduced in the legislature, or a specific legislative proposal.

2. Reflecting A View

    • In order to be lobbying, a discussion must take a position with respect to (support or oppose) the specific legislation.

3. A Call To Action

    Includes urging people to contact legislators, giving out legislators’ addresses or phone numbers, or identifying legislators who are either in favor of, or opposed to, the specific legislation.

Special rule – In some cases, communications with an organization�s own members may receive more lenient treatment.

Limitations
If all three of these elements are present, you have “Grass-Roots Lobbying.” The rules governing grass-roots lobbying for an organization which has made the section 501(h) lobbying election are as follows:

    • 1. The organization is allowed to spend up to 5% of its overall budget on grass-roots lobbying without penalty.
    • 2. If more than 5%, but less than 7.5%, of the budget is spent on grass-roots lobbying, there will be a penalty tax, but the 501(c)(3) status is not in jeopardy.
    3. If expenditures for grass-roots lobbying average more than 7.5% of the organization’s overall expenditures over a four year period, the IRS can take away the 501(c)(3) tax exempt status.

(Caution! If the organization’s budget exceeds $500,000 per year, these “safe harbor” percentages are reduced!)

Recordkeeping

    • 1. Keep track of the total amount of print space (column inches), and the amount devoted to grass-roots lobbying, in newsletters or other publications. Determine a percentage, to be applied to all costs of producing and distributing the publications.
    • 2. Paid employees, if any, should keep logs to determine the percentage of their salaries and benefits to be allocated to lobbying.
    3. Arrive at a reasonable method for allocating overhead and similar costs to the lobbying activity.