I recently spoke with Tony Martignetti, host of Nonprofit Radio, about election year issues for charities in 2024. You can join the 13,000 weekly listeners and catch the Nonprofit Radio podcast here.

Tony and I have previously spoken about election year advocacy for charities. It’s important at the outset to note that this post focuses on the laws for public charities and not for private foundations, which have more detailed and strict rules to follow.

Advocacy is a critical part of every charity’s work. Charities advocate in furtherance of their mission to donors, funders, and the general public. And advocacy can take many different forms. It may include the messages on a charity’s website, speeches delivered in auditoriums and elevators, emails to subscribers, and calls for change.

Lobbying

Sometimes, the advocacy is directed at a change in the law. In such case, such advocacy activities may constitute lobbying. Too many people and organizations think the 501(c)(3) limitation on substantial lobbying is best managed by an internal prohibition against lobbying activities. But, generally speaking, that’s unnecessary and a sign that a charity isn’t advocating fully in furtherance of its mission.

Unfortunately, it appears that less than one percent of charities report lobbying expenditures on their Form 990. But that figure also shows that there is great untapped power in the charitable sector to advocate on changes in the laws that would better our communities, our environments, and our futures.

Generally, public charities can lobbying in furtherance of their 501(c)(3) missions so long as the amount of their total lobbying activities is not considered substantial. How to measure lobbying depends on which of two tests the charity has selected:

1. Substantial part test. This test, which applies as the default test unless the organization opts otherwise, provides that no more than an insubstantial amount of the organization’s overall activities may involve lobbying. However, there is little guidance as to what constitutes an “insubstantial amount” in this context and there is no bright line rule. Generally, all of the facts and circumstances and all of the organization’s activities (e.g., expenditures, volunteer time, staff time, use of donated resources, use of website space, etc.) will be considered in determining whether an organization has engaged in more than an insubstantial amount of lobbying. Accordingly, if subject to this test, public charities must ensure that they properly document all of their lobbying expenses and activities of any nature. If a public charity engages in substantial lobbying in any one year, it could possibly have its tax-exempt status revoked. In addition to revocation, violation of the substantial part test may result in the imposition of (i) a 5% tax on the organization on all lobbying expenditures, and (ii) a 5% tax on organizational managers (e.g., directors and officers) who permitted such expenditures knowing that they would jeopardize the organization’s tax-exempt status.
2. 501(h) Expenditure Test. Most, but not all, public charities (churches being a significant exception) may elect to have this test apply by filing the simple Form 5768 with the IRS. Public charities that make the 501(h) election have their lobbying activities measured solely based on expenditures and not on other activities (e.g., volunteer time). As long as such organizations do not exceed certain defined limits of permitted expenditures on total lobbying and grassroots lobbying, they will not risk jeopardizing their tax-exempt status on this basis.

Organizations that elect to be subject to the 501(h) expenditure test are subject to the following limits on total lobbying expenditures (including both direct and grassroots lobbying):

• 20% of the first $500,000 of Exempt Purpose Expenditures, plus
• 15% of the next $500,000 of Exempt Purpose Expenditures, plus
• 10% of the next $500,000 Exempt Purpose Expenditures, plus
• 5% of the remaining Exempt Purpose Expenditures, up to a total cap of $1 million.

Of its total lobbying expenditure limit calculated pursuant to these guidelines, an electing organization may only spend 25% on grassroots lobbying expenditures. The 25% cap on grassroots lobbying expenditures applies to the organization’s total lobbying limit, regardless of the amount it actually spends on lobbying in a given year (for example, an electing organization could engage solely in grassroots lobbying so long as its grassroots lobbying expenditures did not exceed 25% of its total lobbying expenditure limit calculated per the above).

Under the 501(h) expenditure test, an organization that engages in excessive lobbying activity over a four-year period may lose its tax-exempt status, making all of its income for that period subject to tax.  Should the organization exceed its lobbying expenditure dollar limit in a particular year, it must pay an excise tax equal to 25 percent of the excess.

For more information on public charities and lobbying, see:

Maximize Your Lobbying Limit: Elect to Measure Your Lobbying Using the 501(h) Expenditure Test (AFJ Bolder Advocacy)

Being A Player: A Guide to the IRS Lobbying Regulations for Advocacy Charities (AFJ Bolder Advocacy)

Recordkeeping and Reporting for 501(c)(3) Public Charities (AFJ Bolder Advocacy)

Political Campaign Intervention

ln contrast to the rules on public charity lobbying, 501(c)(3) organizations are strictly prohibited from engaging in political campaign intervention. More specifically, they are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. But that doesn’t mean public charities can’t engage in any political activities. For example, charities are generally permitted to carry on the following activities:

• Voter registration drives and get-out-the-vote (GOTV) drives conducted in a neutral, non-partisan manner.
• Educational activities aimed at all of the candidates on public interest issues within the charity’s purview.
• Candidate questionnaires and voter guides, if designed and disseminated in a neutral, non-partisan manner.
• Candidate debates organized and conducted in a neutral, non-partisan manner
• Criticisms of an incumbent’s actions in such capacity even if the incumbent is also a candidate, subject in part to whether the criticism was timed specifically in connection with an election and/or whether the charity has a history of such criticisms.
• Hosting candidate speakers on non-candidacy matters (e.g., on areas of their expertise) if the speakers do not speak about their candidacy or the election and with an accompanying charity disclaimer.

On the other hand, the following activities may constitute prohibited political campaign intervention:

• Comparisons of positions of the charity to those of candidates (e.g., scorecards timed with an election).
• Requests to candidates to take pledges.
• Support of a candidate or political party through selective use of space or resources (including emails from charity email accounts).
• Support (e.g., a grant) granted to a non-charity (e.g., a 501(c)(4)) without restricting such support so it cannot be used for prohibited political campaign intervention.
• Allowance of employees to wear election-related items (e.g., candidate buttons) when acting in the capacity of an authorized representative of the charity.
• Links of political campaign intervention webpages from the charity’s website.

Of course, individual directors, officers, employees, and volunteers of a charity are permitted to engage in political campaign intervention activities in their individual capacities.

For more information on public charities and political activities, see:

The Electioneering Prohibition: A Closer Look

Election Checklist for 501(c)(3) Public Charities (AFJ Bolder Advocacy)

501(c)(3) Electioneering Rules: Employee Endorsements & Election Activities

501(c)(3) Electioneering Rules: Candidate Appearances & Debates

501(c)(3) Electioneering Rules: Voter Guides & Candidate Questionnaires

Other Generally Permissible Activities not Considered Lobbying or Prohibited Political Campaign Intervention

The following activities may be made with the purpose of advocating a particular position but may not constitute lobbying or prohibited political campaign intervention if conducted in a non-partisan manner.

1. Technical advice or assistance in response to a request by a legislative body: This communication must be made in response to a written request by a legislative body or a legislative committee or subcommittee and made available to all members of the requesting body.
2. Nonpartisan analysis, study, or research: This communication can refer to or reflect a particular view on specific legislation, but if it (a) provides a sufficiently full and fair exposition of the underlying facts; (b) is made available to the public, members of legislative bodies, and/or governmental employees; and (3) doesn’t directly encourage a recipient to take action, then it may not be considered lobbying.
3. Examinations and discussions of broad social, economic, and similar problems: These communications can address the public, members of legislative bodies, or governmental employees on general topics which are the subject of specific legislation, but cannot refer to specific legislation or include a call to action.
4. Certain communications with members: A charity may inform its members of the issues and its position on a specific piece of legislation, without a call to action.
5. Certain communications with the general public: In certain cases, a charity may communicate with individuals or groups without such communications being regarded as lobbying if (a) they do not refer to specific legislation; (b) if they do refer to specific legislation, they express no view on such legislation; or (c) if they express a particular view on specific legislation, they include no call to action.
6. Certain direct communications with a legislator or legislative body: A charity may educate a legislator about the effects of a policy on their constituency.
7. Communications with non-legislative bodies: A charity generally may contact an executive or administrative body on issues regarding development or implementation of its regulations and/or policies.
8. Fact sheets: A charity may create and distribute fact sheets to educate the general public on issues that do not include a call to action with respect to specific legislation.
9. Litigation activity: A charity may engage in litigation to further its charitable purpose.
10. Self-defense communications: Communications with a legislative body that address matters that might affect the existence of the organization, its powers and duties, its tax-exempt status, or the deduction of contributions to the organization are not counted against any lobbying limits, even if they may otherwise involve lobbying activities.

For more information, see:

Nonprofit Advocacy is More Than Lobbying

Charities and Issue Advocacy: Doing it Right – Part One, Part Two