501(c)(3) tax-exempt public charities play an important role serving the public through their work, which often includes influencing public policy. For example, a food bank that operates food pantries can also advocate for expanded access to free or reduced school lunches and fresh fruits and vegetables. Or, a charity that provides educational resources to working parents may want to urge lawmakers to address the rising cost of child care.
Navigating the types of activities that tax-exempt nonprofits are allowed to engage in (and how much) without jeopardizing their tax-exempt status can be tricky. Many charities engage in types of activities that are important to the organization’s mission, donors, and people they serve. Two activities that charities may use to influence public policy include “advocacy” and “lobbying.” While advocacy and lobbying are terms that are sometimes used synonymously, the two are distinct in important ways, most notably because federal tax law limits the amount of lobbying that charities may engage in.
How Does Advocacy Differ from Lobbying?
Advocacy can take many forms that do not constitute lobbying, including: leading, directing, conducting, and publishing research; and disseminating educational information. Charities may engage in many different types of advocacy, and so long as that activity does not constitute lobbying, 501(c)(3) organizations are generally not limited in the amount of time or money they can spend on advocacy.
Lobbying, on the other hand, is subject to specific, restrictive rules. Charities may engage in only an insubstantial amount of lobbying, and must take care not to jeopardize their tax-exempt status or run afoul of other lobbying restrictions. Lobbying is any attempt to influence legislation, which can include acts, bills, resolutions, or ballot initiatives by Congress, state legislatures, local councils, or similar governing bodies. An organization whose employees contact or urge others to contact members or employees of one of these bodies for the purpose of influencing (by encouraging them to adopt, reject, support, or oppose) legislation, is engaging in lobbying.
State and Local Lobbying Registration, Reporting, and Disclosure Requirements
In addition to following the strict federal tax rules governing the type of lobbying and amount of lobbying an organization can engage in, charities should also be aware of any state and local requirements to register (including registration of certain employees as lobbyists, or registration of the organization itself, which retains and pays lobbyists) and to report lobbying expenditures and activities on a regular basis.1 Federal and state lobbying rules can be confusing and complicated, and often depend on several factors, including: (1) whether the organization employs an in-house lobbyist or an outside lobbyist; (2) whether any of the organization’s employees are lobbying; (3) the total amount of expenses the organization spends on lobbying activities; and (4) the timing of any contacts or communications made with federal or state officials.
After the organization makes a determination about which federal and state registration requirements apply to its lobbying activities, the organization and its lobbyists must file regular reports (often quarterly or semi-annually) until the registration terminates (the method by which registrations are terminated also varies from state to state), or otherwise expires.
If an organization decides to engage in lobbying activities, it is critical to ensure that executive staff are aware of the applicable requirements for registration, reporting, and disclosure. Failure to comply can result in fines, censure from the regulatory agency, and possible negative press exposure for the organization.
1 While this article is focused on the lobbying rules as they pertain to 501(c)(3) public charities, it is worth noting that 501(c)(4) organizations, which may engage in unlimited lobbying in furtherance of their tax-exempt missions, are more likely to trigger lobbying registration and disclosure requirements.