Lobbying vs. Political Activity: Key Insights for Nonprofits During Election Seasons

Navigating the complexities of lobbying and political activities can be particularly challenging for nonprofit organizations during election years. Nonprofits need to understand the laws and regulations governing these activities to maintain their tax-exempt status and uphold their reputation.

One critical distinction nonprofits must make is between lobbying and political campaign activity, as all tax-exempt organizations can engage in some level of lobbying activities, but only certain types of organizations can engage in political campaign activities. Lobbying is generally defined as advocating for the adoption or rejection of legislation. In contrast, political campaign activity involves support or opposition of candidates for elective federal, state, or local public office. A simple mnemonic to keep in mind is: Lobbying relates to Legislation (Laws), while Political involvement concerns Politicians (People).

For this article, we’ll focus on the most common type of nonprofit organization: the 501(c)(3) entity. This subtype of nonprofit includes charitable, religious, educational, scientific, and literary organizations and is subject to some of the more stringent guidelines for permissible activity.

What is “Insubstantial” Lobbying?

For 501(c)(3) organizations, the IRS permits only “insubstantial” amounts of lobbying activity—but what does that mean? There are two methods for assessing this: the “substantial part” test, which can be subjective and considers all facts to determine what is considered lobbying and whether it is excessive, and the “expenditure” test, which provides clear-cut thresholds for substantial lobbying. Under the substantial part test, even a single year of significant lobbying can endanger an organization’s tax-exempt status, while the expenditure test considers excessive lobbying over a four-year period.

Regardless of the test applied, it’s important to keep detailed records and ensure that lobbying remains “insubstantial” to avoid jeopardizing tax-exempt status. During election years, the line between permissible lobbying activities and prohibited political campaign activities can blur, so it’s also important to ensure a clear understanding of the difference between these two categories when engaging in activity.

Below are a few key considerations for 501(c)(3) entities to keep in mind as we head into election season:

Educate, Don’t Advocate

Nonprofits can play a significant role in educating the public about issues, legislative actions, and the implications of policy decisions. Providing information and resources about legislation without explicitly supporting or opposing candidates or political parties is crucial. Nonprofits must present information in a balanced, non-partisan way.

Voter Engagement and Mobilization

A 501(c)(3) entity can encourage voter registration, education, and participation, provided these efforts are non-partisan. They can host candidate forums, distribute voter guides, and conduct get-out-the-vote campaigns if they ensure that all candidates are treated equally without bias or favoritism.

Candidate Appearances

Inviting political candidates to speak at nonprofit events is permissible as long as the organization provides an equal opportunity to other candidates seeking the same office and refrains from indicating support or opposition to any candidate.

Issue Advocacy vs. Political Campaign Intervention

Nonprofits can advocate for issues that align with their mission, even during election years. However, they must avoid issue advocacy that functions as political campaign intervention. They should not make communications within close proximity to elections that refer to candidates or voting and have a message that could be construed as supporting or opposing a candidate.

Conclusion

Election years bring increased scrutiny to nonprofit organizations’ lobbying and political activities. By understanding and distinguishing between allowable lobbying and banned political campaign activities and implementing stringent internal controls and education, nonprofits can advocate effectively for their causes without jeopardizing their 501(c)(3) tax-exempt status. Moreover, they can play a positive role in the democratic process by disseminating valuable information, encouraging civic engagement, and championing issues that matter to their communities.

As the political landscape evolves, nonprofits must stay vigilant and flexible to overcome these challenges. Adherence to non-partisanship and compliance should direct their actions during election years and beyond. With thoughtful planning and execution, nonprofits can be powerful agents for change while staying within legal boundaries.