Charitable organizations often find themselves in the precarious position of determining the difference between lobbying, education and advocacy. This issue revolves primarily around the determination of what constitutes a lobbying expenditure versus expenditures that may be programmatic in nature. Reporting activity falling under any of the three categories can be costly – with penalties ranging from an excise tax of 25 percent on excess expenditures to loss of exemption or the loss of the ability to attract tax deductible contributions.
So what exactly is lobbying? Per the IRS, lobbying expenditures are “expenditures (including allocable overhead and administrative costs) paid or incurred for the purpose of attempting to influence legislation through – (1) communication with any member or employee of a legislative body (direct lobbying communications); or (2) by attempting to affect the opinions of the general public (grassroots lobbying).”
Direct Lobbying Communication
A direct lobbying communication is any attempt to influence any legislation through communication with a member or employee of a legislative or similar body. Communication with a legislator or government official will be treated as a direct lobbying communication only if the communication refers to specific legislation and reflects a view on such legislation. The key point, in this case, is reference to specific legislation with an opinion.
Grassroots lobbying is any attempt to influence any legislation through an attempt to affect the opinions of the general public or any part of the general public. Grassroots lobbying not only involves reference to specific legislation, but also requires a communication that encourages a recipient to take action when it calls for recipient contact directly or indirectly with a legislator associated with a specific piece of legislation. Communications generally have names, address phone numbers, email addresses, etc. of legislators or officials. The communication must identify one or more legislators who will vote for or against the legislation. This also includes contact with a member of the legislative committee that will consider the legislation. The key to grassroots lobbying is that, in addition to the aforementioned lobbying communication, it is a communication that cannot meet the “full and fair exposition test as nonpartisan analysis, study or research.”
Nonpartisan Analysis, Study or Research
According to IRS literature, engaging in nonpartisan analysis, study or research – and making the results of this work available to the general public or governmental bodies, officials or employees – is not carrying on propaganda or otherwise attempting to influence legislation. Nonpartisan analysis, study or research refers to an independent and objective exposition of a particular subject matter, including activities that qualify as educational activities. Nonpartisan analysis, study or research may advocate a particular position or viewpoint as long as there is a sufficiently full and fair exposition of relevant facts enabling the public or an individual to form an independent opinion or conclusion. However, a mere presentation of unsupported opinion does not qualify as nonpartisan analysis, study or research.
Presentation as part of a series. Normally, whether a publication or broadcast qualifies as nonpartisan analysis, study or research will be determined on a presentation-by-presentation basis. However, if a publication or broadcast is one of a series prepared or supported by a charitable organization and the series as a whole meets the standards of nonpartisan analysis, study or research, then any individual publication or broadcast in the series will not result in lobbying even though such individual broadcast or publication does not, by itself, meet the standards of nonpartisan analysis, study or research. Whether a broadcast or publication is considered part of a series will ordinarily depend on all the facts and circumstances of each particular situation. However, for broadcast activities, all broadcasts in any period of 6 consecutive months will ordinarily be eligible to be considered as part of a series. If an organization times or channels a part of a series in a manner designed to influence the general public or the action of a legislative body for a specific legislative proposal, the expenses of preparing and distributing that part of the analysis, study or research are considered lobbying expenses.
Making results of analysis, study or research available. An organization may choose any suitable means, including oral or written presentations, to distribute the results of its non-partisan analysis, study or research, with or without charge. This may include distribution of reprints of speeches, articles, and reports; presentation of information through conferences, meetings, and discussions; and dissemination to the news media, including radio, television, and newspapers and other public forums. These presentations may not be limited to, or directed toward, persons who are interested only in one side of a particular issue.
Example: M, a public charity, establishes a research project to collect information demonstrating the dangers of using pesticides in growing crops. The information collected includes data on proposed legislation, pending before several state legislatures that would ban the use of pesticides. The project takes favorable positions on the legislation without producing a sufficiently full and fair exposition of the relevant facts to enable the public or an individual to form an independent opinion or conclusion on the pros and cons of the use of pesticides. This project is not within the exception for nonpartisan analysis, study, or research because it is designed to present information only on one side of the legislative controversy.
After going through the task of determining whether lobbying has occurred, an organization must decide how it will report this activity. Additionally, if an organization determines that the materials represent an analysis, study or research, it must then decide how the presentation fits into its exempt purpose. The organization may have to determine if it has undertaken a new program to be described in Part III of its Form 990.
This article originally ran on Marks Paneth's blog.