An overview of what is, and isn’t, permissible when lobbying
Lobbying and advocacy are great ways to have a broad impact and to make systemic change. While both for-profit and non-profit social enterprises can engage in lobbying, the amount is limited for 501(c)(3) non-profits by IRS regulations. Accordingly, it is important for non-profit social enterprises to know:
- What is considered lobbying
- How much they are allowed to do
What is considered lobbying?
To start, it is important to note that many, if not most, advocacy initiatives are allowed without limit. For example, a non-profit social enterprise could engage in an unlimited amount of voter education campaigns. On the other hand, there are activities that are not permitted in any amount – namely, partisan political activities. This includes directly participating in any political campaign, either in support of or against a candidate.
Lobbying lies in the middle. It is not prohibited, but there are restrictions on the amount that is permissible for nonprofits to do. Generally speaking, lobbying is defined as an attempt to influence legislation. It’s important for an organization to be very clear on what types of activities this includes, so we refer you to resources at the end of this article for greater detail.
How much lobbying can non-profit social enterprises do?
Since the IRS allows non-profits to engage in lobbying, but places limits on the amount that is allowed, it is important to be aware of what those limits are. In order to calculate the permissible level of this type of activity, there exist 2 different tests to calculate the limits:
- Substantial Part Test
- 501(h) Expenditure Test
Broadly speaking, the Substantial Part Test limits a non-profit’s lobbying to an “insubstantial” part of the organization’s overall activities, considering volunteer activities as well as expenditures. The 501(h) Expenditure Test, on the other hand, sets firm limits on the amount of money spent on lobbying activities and is based on the size of the organization.
Where can social enterprises get more information?
While REDF has many areas of expertise, tax law is not one of them. While we hope this brief overview has been helpful, we encourage you to explore this topic in greater detail and check out these additional resources put out by Bolder Advocacy, a program of the Alliance for Justice:
- Worry-Free Lobbying for Nonprofits
- How to use the 501(h) election to maximize effectiveness
- Public Charities Can Lobby: Guidelines for 501(c)(3) Public Charities
- This fact sheet explains the two tests charities can use to measure their lobbying
- Administrative Advocacy: Influencing Rules, Regulations, and Executive Orders
- This fact sheet outlines the types of decisions that are designed to influence federal, state and local agency rules (including school boards), executive orders, and regulations
- Advocacy Capacity Tool!
- This tool helps nonprofits benchmark their advocacy skills, identify specific gaps and opportunities in their advocacy strategies, and efficiently focus resources to get the best results