Armanino Blog

Lobbying vs. Advocacy: What’s the Difference?

by Katy Brown
June 19, 2017

Many exempt organizations work to promote awareness of their charitable causes in the course of their activities, which may include contact with legislators or other efforts at changing public opinion. When is this considered to be lobbying or political activity subject to additional oversight, and when are these activities simply considered to be general advocacy?

Political Campaign Activity
Efforts for or against a specific person’s candidacy for elected office are considered political activities. Political campaign activities are strictly prohibited for public charities. An initial excise tax of 10% is imposed on political activity expenditures, and any person who authorized the transaction is personally assessed a 2.5% excise tax up to $5,000. Charities that continue to engage in these activities will lose their tax exemption. Voter education and registration activities are excluded from this prohibition.

Efforts for or against a specific piece of legislation. Contact with legislators regarding specific legislation, communications for or against specific legislation and PSAs that mention specific legislation are all included in the definition of lobbying. In California, “legislation” includes voter referendums, and when working for/against referendums, the general public is considered to be the legislator.

A spending safe harbor is available to 501(c)(3) public charities, which is activated by making a Section 501(h) election. This election is permanent unless a written revocation is filed with the IRS. The safe harbor spending amount is calculated using a four-year rolling period that measures exempt purposes expenditures against lobbying expenditures. The election provides a target ceiling number for spending that is not available without the election. Organizations that opt not to make a 501(h) election may not spend any “substantial” amount of their charitable assets on lobbying. “Substantial” has been interpreted very widely in court cases, so there is a risk element to foregoing the 501(h) election.

In either case, lobbying expenses should be tracked separately to facilitate end of year reporting. Staff time, expenses, and overhead should be allocated to lobbying activities as appropriate and are reported on Form 990 Schedule C.

Activities focused on promoting an issue important to a charity’s charitable purpose in general are considered Advocacy. Contact with legislators, letter-writing campaigns, PSAs and other activities are all considered to be permissible advocacy activities, not subject to the limitations imposed on lobbying or political activity. Avoiding any comment on specific legislation or candidates for elected office keeps charitable organizations out of the lobbying and political campaign activity danger zone.

June 19, 2017

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Katy Brown - Manager, Tax - San Ramon CA | Armanino
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