Can Nonprofit Organizations Lobby?
As a nonprofit organization, the goals of the nonprofit may come in conflict with politics and legislation. As stated by the Internal Revenue Services (IRS), lobbying is only allowed for a 501(c)(3) organization to an extent. If a nonprofit organization is found to be excessively lobbying, it can lose its tax-exempt status. Recognizing what lobbying entails, understanding the lobbying activity tests used by the IRS, and finding alternative ways for the nonprofit to represent themselves politically will be discussed to help determine the position of your nonprofit organization.
What is Lobbying?
Lobbying is the persuasion or influence on policies of the legislature. Legislation can include all actions of Congress, state, and local bodies when determining bills, acts, proposals, nominations, resolutions, and more. A nonprofit will be constituted as ‘lobbying’ if they themselves contact or urge their supporters to contact any legislative bodies in order to initiate the support, proposition, or opposition of legislation. In most cases, high levels of lobbying activity occur right before a vote takes place for a legislature.
Lobbying is a great way to ensure that a nonprofit organization will be able to continue functioning along with its goals and the law, however, the IRS keeps track of lobbying activity to ensure that the nonprofit’s income is being spent on the attainment of a mission and not only on politics. In order to avoid losing 501(c)(3) tax-exemption status and dodge heavy fines, make sure to connect with a consultant to determine whether your organization is at risk of losing its status.
How is Lobbying Measured?
Under the rules of lobbying set by the IRS, there are two tests to measure lobbying activity. These test results will then determine whether your nonprofit organization or 501(c)(3) organization, will keep or lose their tax-exempt status.
In the substantial part test, the IRS looks at the facts and circumstances of the lobbying activity. The IRS considers the amount of time that was devoted, the compensation of employees involved, and the funding that was spent on legislation to determine if the activity is substantial enough to impose consequences on the organization. Along with losing tax-exempt status, coordinators of the intentional lobbying can receive an additional taxation as a punishment.
In the expenditure test, organizations are not looked upon individually by case. Instead, the size of the organization is compared to a set amount of allowed expenditure. There is a predetermined table stating the size of the organization and the maximum amount of monetary resources that are allowed to be spent on lobbying. If an organization over lobbies, they may lose their tax-exempt status and may be subject to an additional taxation.
What is Allowed for Nonprofits?
Since nonprofit organizations are unable to lobby substantially, the IRS still allows for alternative ways for nonprofit organizations to institute their political beliefs onto their supporters. A nonprofit can host educational seminars, in order to inform their supporters of political topics that may affect their organization both positively and negatively.
Nonprofit advocacy is allowed, in which the nonprofit can declare political issues they care about and how the legislature will result in the nonprofit’s long-term existence. The organization can make efforts to voice their opinions by educating the public and bringing awareness to an issue. Through this, supporters can be influenced to vote in favor of the nonprofit organization’s needs.
As a nonprofit organization, you want to keep all your benefits of the 501(c)(3) tax-exempt status. To avoid losing this status, it is important that you hire a professional consultant to measure the amount of expenditure that has been used in your organization to sway legislation. It is essential to understand what is allowed and what is not, so the nonprofit organization is able to continuously gain their supporters for years to come without the worry of losing tax-exempt status, having to pay taxes and fines, and damaging the organization’s position.
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