While nonprofit organizations need to be aware of restrictions on the amount of “lobbying” in which their organization can engage, many activities that can help educate policymakers and influence policy development are not considered “lobbying” and therefore are not subject to those limitations.
“Lobbying” is defined by the Internal Revenue Service (IRS) as “activities that attempt to influence legislation” (see detailed citations below). IRS rules state that “an organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation.” Nonprofit organizations that wish to engage in lobbying by participating in efforts to influence specific legislation can do so legally, as long as this does not constitute a “substantial part” of what the organization does. Compliance with the IRS rules can be measured using one of two standards: 1) by meeting the “insubstantial part test” (this is the default standard used by the IRS but is more vague); or 2) by electing to use the 501(h) "expenditure test," which sets out dollar limits based on the overall budget of the organization.
The Expenditure Test allows for a generous amount of lobbying: for example, 20% of the first $500,000 of an organization’s exempt purpose expenditures (generally speaking, this is the overall budget of the organization minus some fundraising or capital costs) can be allocated to lobbying activities. Learn more about the specifics of these two standards via the resources below.
Nonprofits with Federal Funds: Nonprofits may mistakenly believe that if they accept federal grant money, they cannot participate
in lobbying activities. That is not the case. As a nonprofit, the organization can use its non-federal funds to participate in lobbying
activities within the limits established by the IRS rules for nonprofit organizations as described above. However, nonprofits receiving
federal funds are prohibited from using federal funds to “influence federal, state, or local officials or legislation” and other prohibited
activity specified by their federal funding source(s).
Many activities that can help educate policy makers are not considered to be “lobbying” under the IRS rules. In its guidance, the IRS notes that nonprofit organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise discuss public policy issues in an educational manner that is not focused on influencing specific legislation.
Included below are explanations of federal guidelines and IRS tools used to measure nonprofit organizations’ lobbying activities, as well as advice for complying with limitations on nonprofits’ ability to lobby.