Let’s talk about how nonprofit leaders have the power to shape their funding streams through advocacy and (gasp!) lobbying, too. Legislation plays a critical role in determining the availability and distribution of grant funding for nonprofits. Many government grant programs, whether at the federal, state, or local level, are created through legislative action. Legislators pass laws that allocate budgets for specific grant programs, set eligibility criteria, and define the priorities for funding. Changes in legislation, such as new policies or shifts in funding priorities, can directly impact the amount of funding available for nonprofits. Therefore, nonprofits often advocate for legislation that supports or increases funding for the programs they rely on to carry out their missions. Understanding the legislative process and staying informed about policy changes can help nonprofits better navigate and secure critical funding opportunities.
When it comes to engaging in political activity, it can sometimes feel like a minefield. The terms "advocacy" and "lobbying" are often used interchangeably, but in reality, they have distinct meanings and legal implications for nonprofit organizations. The good news? Nonprofits are allowed to engage in advocacy, and, under certain circumstances, can even participate in lobbying activities without jeopardizing their tax-exempt status. Let’s break down the key differences between advocacy and lobbying and explore how nonprofits can get involved in both, while staying compliant with IRS rules.
What is Advocacy?
Advocacy is about raising awareness and educating the public about an issue, with the goal of promoting change or influencing public opinion. For nonprofits, advocacy can take many forms, and it is broadly allowed as long as it doesn’t specifically attempt to influence specific legislation or elections.
Lobbying, on the other hand, is a more direct form of political activity. Lobbying involves attempting to influence specific pieces of legislation or government policies by directly communicating with legislators or government officials. Essentially, lobbying is advocacy that specifically targets the outcome of legislation or regulation.
There are two main types of lobbying:
Direct lobbying: This involves direct communication with lawmakers or government officials about specific legislative proposals.
Grassroots lobbying: This involves encouraging the public to contact legislators to influence their decisions on a particular issue.
What Can Nonprofits Do?
Nonprofits are allowed to engage in both advocacy and lobbying, but there are important distinctions to keep in mind in order to protect your tax-exempt status. Under IRS rules, nonprofits are permitted to engage in advocacy as much as they want, but lobbying is subject to limits. Here’s a breakdown:
Advocacy
Nonprofits can advocate freely: There are no limits on advocacy as long as it’s educational, promotes public awareness, and does not directly call for legislative action.
Public education: Your organization can share information, host discussions, and mobilize public support around an issue. You can also educate policymakers about the impact of policies on your mission, as long as you are not asking for specific legislative changes.
Lobbying
Nonprofits can lobby, but with limits: The IRS allows nonprofits to engage in lobbying activities, but these activities cannot become a substantial part of their work. To avoid jeopardizing your tax-exempt status, lobbying should not represent more than an insubstantial portion of your overall activities. The IRS examines the amount of time and effort spent on lobbying versus other activities. For instance, if a nonprofit spends most of its time on educational programs and only a small amount on lobbying, this is more likely to pass the test. Unclear? We all are! I highly recommend speaking with your accounting firm for clarification if you have not already.
The 501(h) election: Nonprofits that wish to be more explicit about how much lobbying they can do can elect to be measured under the "501(h)" expenditure test, which sets clear dollar limits on lobbying activities based on the organization’s size and revenue. This provides more flexibility compared to the "substantial part" test, which is more subjective.
What counts as lobbying?: If your organization is contacting lawmakers or government officials to influence specific legislation or regulations, that’s lobbying. If you're encouraging your supporters to contact their representatives about specific bills or proposals, that’s grassroots lobbying.
What You Cannot Do:
Partisan political activity: Nonprofits are prohibited from engaging in partisan political activity or supporting specific candidates for office. This includes donating to political campaigns or engaging in activities that show favoritism toward a particular party or candidate.
Excessive lobbying: As mentioned, nonprofits cannot spend a significant portion of their time or budget on lobbying efforts. If lobbying activities become “substantial,” your organization risks losing its tax-exempt status. The IRS uses a case-by-case analysis to determine what constitutes "substantial."
Tips for Engaging in Advocacy
Know the difference: Understanding what constitutes advocacy versus lobbying is key to staying compliant. Advocacy can be more general and wide-reaching, while lobbying is targeted and direct.
Track your lobbying activities: If your organization engages in lobbying, keep detailed records of the time and money spent on these efforts. If you opt into the 501(h) election, be sure to track your lobbying expenditures to ensure they stay within the legal limits.
Be strategic: Focus your advocacy efforts on issues that align with your mission. Whether it’s educating the public or influencing policymakers, your efforts should strengthen your organization’s core work, not detract from it.
Use storytelling: Advocacy can be powerful when you tell compelling stories that connect the issue to real people’s lives. By sharing personal stories, you can create emotional connections that inspire action without directly lobbying for legislative change.
Engage your community: Whether it’s through social media, petitions, or public demonstrations, mobilizing your community can amplify your advocacy efforts and increase visibility. Grassroots efforts can also be a powerful form of lobbying, especially if they encourage community members to contact legislators on key issues.
Stay nonpartisan: Nonprofits must remain neutral when it comes to partisan political activity. However, you can support or oppose policies and issues, as long as you don't align with a political party or candidate.
Conclusion
Nonprofits play a critical role in advocating for positive change in society. Whether you’re advocating for a cause or engaging in lobbying efforts, it’s important to understand the legal boundaries and the difference between the two. Advocacy is a valuable tool for creating public awareness, while lobbying allows nonprofits to directly influence the legislative process, within certain limits.
By understanding the rules and regulations, you can confidently engage in both advocacy and lobbying, helping to advance your mission and create lasting change — all while maintaining compliance with your nonprofit status.
So go ahead, advocate for the issues that matter most to your organization. And if you’re considering lobbying, just make sure it’s done in a way that stays within the IRS guidelines. Seek guidance from qualified advisors, such as a government relations agency, your accountant, and your legal team. Make the investment now to protect your work, your mission, and your funding streams. Your advocacy can make a difference, and with the right approach, you can amplify your voice in the public and political arenas.
Comments