A nonprofit can engage in lobbying efforts, but you probably already knew that.
It is difficult to think of a time in recent memory during which the political battle lines have been so clearly drawn. Arguably with the help of social media – even beyond the trolls – our society has become more divided and divisive. No matter one’s viewpoint, it seems much is at stake. And nonprofits have stepped up to push different political agendas. You could probably easily think of many examples of organizations that work hard to push for particular political agendas. Their activities include drumming up support from the general public, as well as lobbying local, state and federal governments for legislative change. These organizations frequently make headlines.
How much can they lobby? The answer is not entirely clear and depends on the type of organization. In some cases, it can be pretty subjective.
Tax-exempt charitable entities organized under Section 501(c)(3) may lobby so long as efforts don’t constitute a substantial part of their total organization’s activities. That is, the charitable cause is supposed to be the focus of their work and lobbying should only amount to a small part of that. Substantial in this context is not clearly defined and can be measured in two ways. The first way is the substantiality test, which will depend on the facts and circumstances of each case. The second is the expenditure test, which determines allowable lobbying expenditures based upon the organization’s exempt purpose or charitable expenditures.
On the other hand, social welfare entities organized under Section 501(c)(4) may exist for the purpose of lobbying, so long as the organization’s lobbying efforts are germane to the organization’s mission. That might include some participation in specific political campaigns, though not direct donations. But qualifying as a 501(c)(4) social welfare organization is much tougher than qualifying as a 501(c)(3) charitable organization. Rather than a charitable organization that might focus on providing help to a particular cause or subset of people, such as women or the LGBTQ community or those with cancer, or a religious institution, a social welfare organization should look to better society at large.
For either type of organization, the price for violating the lobbying restrictions could be loss of tax-exempt status, a steep price, to be sure, making it important to tread carefully.
This article originally appeared as a column for the Cleveland Jewish News.