Nonprofits May Be Leaving Their Policy Power Untapped

Many nonprofit leaders assume lobbying is off limits. The fear is understandable: no organization wants to jeopardize its tax-exempt status or cross a legal line. But for public charities, the rules are not as restrictive as many believe.

Federal law allows public charities to lobby for or against legislation, as long as lobbying does not become a substantial part of the organization’s overall activities. That means nonprofits can speak with lawmakers, weigh in on bills, encourage supporters to contact elected officials and participate in policy discussions that directly affect the communities they serve.

The confusion often comes from mixing lobbying with partisan political activity.

Public charities are prohibited from supporting or opposing candidates or political parties. That is different from advocating for legislation, educating policymakers or taking a position on public policy.

The IRS generally recognizes two types of lobbying. Direct lobbying involves communicating with legislators or their staff about specific legislation. Grassroots lobbying is aimed at encouraging the public to contact lawmakers about a bill or policy proposal. Both are permitted for public charities, provided the organization stays within legal limits. State rules may also apply, so nonprofits should understand both federal and local requirements.

Despite these rights, relatively few organizations appear to use them. Research cited by Candid found that fewer than 3 percent of public charities reported lobbying on their 2023 Form 990 filings. Larger organizations were more likely to understand the rules and participate in advocacy, while smaller nonprofits were less likely to know what is allowed.

That knowledge gap matters. Smaller organizations are often closest to the people and problems affected by public policy, yet they may be the least likely to bring that perspective into legislative conversations. Limited staff time, legal uncertainty and lack of relationships with policymakers can all keep nonprofits on the sidelines.

For organizations worried about the ambiguity of the “substantial part” test, the 501(h) election can provide clearer lobbying spending limits. Nonprofits should also seek guidance from qualified legal counsel or nonprofit advocacy resources before building lobbying into their work.

The larger point is that lobbying is not necessarily separate from mission. For many organizations, policy change can expand impact beyond what direct service alone can accomplish. A food bank, for example, may meet immediate needs through food distribution, but policy advocacy around nutrition assistance programs can address hunger on a much broader scale.

Public charities do not have to become political organizations to have a policy voice. They can educate, inform, advocate and, within limits, lobby. For nonprofits working toward long-term community change, understanding those rights may be the first step toward using influence they already have.

Source:  Candid