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Walking a Fine Line: Lobbying and Not-for-Profits

January 16, 2024


By Jenna Senn

There’s a common misconception that not-for-profit organizations are strictly banned from lobbying for political, environmental, or other social issues. While these organizations aren’t banned from such activities, there are certain guidelines and boundaries that they must consider.

Generally, not-for-profits may not qualify for tax exemption if a substantial part of their activities are attempting to influence legislation. The definition of legislation is complex. According to the IRS, it includes:

  1. Any action by Congress or any state legislature, local council or similar governing body regarding acts, bills, resolutions, or similar items, or
  2. Acts by the public in referendum, ballot initiative, constitutional amendment, or similar procedure.

Unfortunately, there’s no bright-line test to follow. For example, when a hot-button issue spreads though Washington, DC, nonprofits can’t rely on definitive guidelines for being treated as lobbyists. 

Your organization will be regarded as attempting to influence legislation if it:

  1. Contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or
  2. Advocates the adoption or rejection of legislation.

However, there are ways for not-for-profits to be involved in public policy issues without the activity being considered lobbying. For instance, you might conduct educational meetings, prepare, and distribute informational materials, or otherwise consider public policy issues in an educational manner without jeopardizing your tax-exempt status. Like many other tax related issues, whether a particular action or communication is an attempt to influence legislation is determined by all the facts and circumstances.

In addition to direct appeals to legislators, there is another form of lobbying called “grassroots lobbying.”  This includes communications to the public that refer to specific legislation and urge people to act. For example, you might encourage your members to contact someone connected with a legislative body to support or oppose a particular issue. This is treated as a grassroots lobbying communication. 

Other types of activities aren’t treated as lobbying at all. For example, if you give testimony before a legislative committee in response to an official request or if your organization is providing access to the results of nonpartisan analysis, study or research to a legislative body or the public, these would not be considered lobbying.

Another key exception: An organization can defend itself without being characterized as lobbying. As a result, appearing before or communicating with a legislative body concerning possible legislation that could affect your organization’s existence, powers and duties, tax-exempt status, or the deduction of contributions isn’t deemed to be an attempt to influence legislation.

The IRS often focuses on two critical factors when determining whether a substantial part of a nonprofit’s activities is devoted to lobbying:

1. The time devoted by employees and volunteers of the organization, and

2. The amount of expenses incurred.

Keep in mind, however, that these aren’t the only two factors that may come into play. Furthermore, there’s no definitive percentage of either activity to determine when participation is substantial. Therefore, whether and when an organization crosses the substantial threshold again depends on the facts and circumstances.

Another important issue in trying to determine whether attempts to influence legislation are substantial is deciding what supporting activities are considered lobbying. For example, if an organization spends a significant amount of time and effort researching and studying an issue before an organization’s position is even established, this wouldn’t be considered lobbying.

The lobbying rules for charitable organizations are extensive. However, your organization can still actively support or oppose legislative efforts if it adheres to IRS guidelines. Since lobbying looks different from one organization to the next, reach out to your CPA for more specific guidance.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.


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