Guidance on Lobbying and Political Campaign Activities of 501(c)(3) Organizations

Tax Professionals' Resource
June 22, 2012 — 1,203 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

Gaining the 501(c)(3) organization designation for your group means that it is certified as a "charitable organization" and exempt from a number of taxes and financial obligations. However, there are certain strict guidelines that go along with such a designation. Executive directors and board members of 501(c)(3) organizations should be aware of the following information regarding political campaign activities and lobbying.

The United States Congress modified existing tax code after irregularities arose in the past concerning vague descriptions of the law. Basically, the current legislation states that 501(c)(3) organizations can lobby under predetermined exemptions, which "provide a safe harbor for lobbying activities," according to the law. If a company chooses not to follow the safe harbor limits, they may still lobby as long as that activity does not take up the majority of its operations.

Any charitable organization can file for safe harbor with the Internal Revenue Service through Form 5768. The amount of lobbying in which a 501(c)(3) organization can safely engage in varies after the election is made. There are no specific spending or time limits on lobbying underneath safe harbor, but the "no substantial part" rule causes confusion here.

According to the National Trust for Historic Preservation, the expenditure limits under the election rules are stacked beginning at 20% of the first $500,000 of the organization's charitable expenses. For charitable "exempt function" purposes, add 15% of the second $500,000, plus 10% of the third $500,000, plus 5% of any additional capital, subject to a maximum of $1,000,000 for any one year.

There are two different kinds of lobbying as defined by the federal government in the U.S. One is referred to as direct lobbying, and the other as grassroots lobbying. Direct lobbying attempts to influence legislation by contacting an employee of a respective legislative organization and any relevant federal staff. A trickle-down effect also occurs when members of a political organization are further encouraged through employees who have already been lobbied.

Grassroots lobbying is a little different - this is an attempt to swing the opinions of federal legislators through the use of the general public. This includes aspects like public opinion, approval rates and other statistics.

Tax Professionals' Resource