Many nonprofit organizations engage in lobbying as a way to translate their values into law, furthering the impact of their mission. Lobbying is any activity that attempts to influence legislation, whether at the federal, state, or local level. For nonprofits deeply committed to a cause, lobbying can be a powerful tool, but it comes with important legal boundaries that every organization should understand.
What Counts as Lobbying?
Lobbying falls into two main categories:
Direct lobbying means communicating with legislators or their staff about specific legislation. This includes testifying at legislative hearings, meeting with legislators in person or by phone, reaching out via video chat or social media, and providing gifts or covering the cost of attendance at events.
Indirect (or grassroots) lobbying means urging members of the public to contact legislators about specific legislation. Common examples include collecting petition signatures, attending public hearings or rallies, organizing letter-writing and social media campaigns, conducting media outreach, and door-to-door canvassing.
Both forms of lobbying count toward your organization’s lobbying limits, so it’s important to track them separately.
Restrictions on Lobbying
The IRS permits 501(c)(3) organizations to engage in lobbying, but only to a limited extent. The general rule is that lobbying cannot be a “substantial part” of an organization’s activities. Because this standard is applied on a case-by-case basis and can be difficult to predict, the IRS offers a clearer alternative: the expenditure test, available to organizations that file Form 5768.
Under the expenditure test, organizations are generally advised to spend no more than 20% of their exempt-purpose expenditures on lobbying overall, with no more than 5% of that amount–or 5% of total expenditures–going toward grassroots lobbying. Exceeding these limits can result in excise taxes and, in serious cases, jeopardize your organization’s 501(c)(3) status. If your organization anticipates any significant lobbying activity, filing Form 5768 to elect into the expenditure test is strongly recommended, as it provides much more predictable guidance than the vague “substantial part” standard.
Keep in mind that IRS rules are only part of the picture. Many government agencies and private foundations prohibit the use of their grant funds for lobbying activities. This makes accurate recordkeeping essential; you willl need to be able to demonstrate clearly that restricted funds were not used for lobbying purposes.
Tracking Lobbying Activity
Good recordkeeping is the foundation of lobbying compliance. As a standard practice, everyone in your organization who participates in lobbying activities should maintain their own records of time spent and money expended. Those records should include notes on meetings and communications, the names of legislators or staff contacted, and the bill numbers or specific legislation discussed.
Your tracking system does not need to be elaborate–a spreadsheet, a simple Word document, or even a handwritten journal will work, as long as it is consistent and complete. Be sure to note whether each activity is direct or grassroots lobbying, because the two categories are reported separately on your Form 990 and in state filings. Templates and examples for lobbying tracking are widely available online if you’d like a starting point.
Reporting Lobbying in Oregon
Oregon has its own lobbying registration and reporting requirements that apply separately from IRS rules. Any organization (or individual acting on behalf of an organization) that spends more than $1,000 or 8 hours per quarter on lobbying activities must register with the Oregon Government Ethics Commission (OGEC) and submit quarterly reports. This requirement applies to each person within the organization who lobbies and incurs related expenditures, not just the organization as a whole.
A few specifics to keep in mind: any single occasion where more than $50 is spent on lobbying must be itemized and reported. And even in quarters where no lobbying expenditures occurred, a report must still be filed with OGEC confirming that fact.
If your organization retains an outside lobbyist, that individual must register and report with OGEC separately from the organization. Make sure any contract lobbyist you hire understands and meets their own obligations.
For organizations engaged in federal lobbying, (which is less common for most Oregon nonprofits) the federal Lobbying Disclosure Act (LDA) applies when lobbying expenditures exceed $14,000 in a quarter. If your organization reaches or approaches that threshold, it is worth consulting with legal counsel to ensure full compliance with LDA registration and reporting requirements.
Have questions about whether your organization’s activities count as lobbying, or how to set up a tracking system? Contact our office; we are here to help your nonprofit stay compliant and mission-focused.
