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The Fine Line Between Nonprofit Lobbying and Advocacy

Jul 31, 2023

Many not-for-profit organizations hesitate to engage in lobbying, concerned it might jeopardize their tax-exempt status. However, even without significant financial resources or professional assistance, these organizations can effectively lobby without compromising their status by discerning the delicate balance between nonprofit lobbying and advocacy.

Nonprofit Lobbying versus Advocacy

Knowing the difference between lobbying and advocacy is essential to complying with the lobby law. Lobbying always involves advocacy, but advocacy doesn’t necessarily involve lobbying. The key to determining whether an activity is considered lobbying or advocacy depends partly on the audience an organization is trying to influence. Questions to consider include:

  • Does the audience of an organization’s efforts make the laws or simply follow and enforce them?
    If the audience makes laws and the organization attempts to change legislation by encouraging these lawmakers to vote a certain way, then it’s lobbying. If the organization is speaking with an administrative official or other non-lawmaking individual or group about a broad policy change, then it’s advocacy.
  • Does the organization want these individuals to vote a certain way on proposed legislation or simply be more aware of issues?
    Promoting a point of view and providing public education aren’t considered lobbying activities — even if the organization is speaking with a public official. The discussion crosses the line only when specific legislation is discussed, or a particular vote is influenced.

Measuring Lobbying Efforts

How much lobbying is considered too much--causing a not-for-profit to lose its tax-exempt status? How much of an effort does it take for an organization’s efforts to be considered lobbying? The IRS evaluates if an organization's lobbying activities are a “substantial part” of their overall activities based upon two distinct tests: 1) measuring the amount of time spent by the organization on lobbying activities, and 2) on the amount of money expended by the organization for such activities. The substantial part test is a facts and circumstances test. Even though there is no absolute guidance as to what constitutes “substantial”, most practitioners advise that an organization can devote approximately 3%-5% of its overall activities to lobbying.  The expenditures test is generally based on the size of the organization, and it may not exceed $1,000,000. For example, if exempt purpose expenditures are $500,000 or less, the nontaxable lobbying amount is 20% of the exempt purpose expenditures. For expenditures greater than $500,000 and less than or equal to $1,000,000, the nontaxable amount is $100,000 plus 15% of the excess expenditures over $500,000. Under the expenditure test, an organization that exceeds its lobbying expenditure dollar limit for a particular year must pay an excise tax equal to 25% of the excess. Private foundations are subject to a different set of taxes on their lobbying expenditures, and churches are not subject to excise taxes on excessive lobbying.

Focus on Walking the Line with CRI

Lobbying can significantly amplify your organization’s mission in the public eye. Enhance your mission’s visibility while CRI’s not-for-profit CPAs guide your organization in adhering to IRS rules on lobbying, ensuring the preservation of your tax-exempt status.

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