Many nonprofit organizations think that the Johnson Amendment prohibits them from engaging in any lobbying activity as well as endorsing any political candidates. In fact, nonprofit entities are allowed to participate in lobbying activities within certain limits set forth by the IRS.
With a little forethought and by setting up internal tracking techniques that work for your organization you can plan your lobbying activity to best support your community and keep your exempt status.
According to the IRS “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.” Any nonprofit that participates in lobbying activities will need to file a Schedule C Political Campaign and Lobbying Activities form with their 990.
In order to properly fill out this schedule your organization will need to know what activity is permitted and what activity is not permitted. This sheet from Washington Nonprofits provides a list of some activities that are considered lobbying and lists some other permitted activities that are not considered lobbying. If you are unsure of whether an activity constitutes lobbying, contact your tax advisor, internal legal counsel, and/or the Washington State Public Disclosure Commission and they will assist you in determining if your activity is permitted lobbying.
Once you have determined that your activity is lobbying you will need a way to keep track of your Direct Lobbying and your Grass-Roots Lobbying. Direct Lobbying is an attempt to influence a legislative body through communication with a member or employee of a legislative body, or with a government official who participates in formulating legislation and Grass Roots Lobbying is an attempt to influence legislation by attempting to affect the opinion of the public with respect to the legislation and encouraging the audience to take action with respect to the legislation. It is important to note that communications must reflect a view on the legislation (https://www.irs.gov/charities-non-profits/direct-and-grass-roots-lobbying-defined).
Bolder Advocacy has a great guide with suggested methods for record-keeping and keeping track of the staff and volunteer time, direct costs and any overhead expenses that may be related to your lobbying activities.
All of this tracking will help you make sure that your nonprofit’s lobbying activities don’t make up more than 5% of total activities in order to pass the Substantial Part Test of Form 990 Schedule C and keep your non-profit status. If your leadership team thinks that lobbying activities may make up more than 5% of the organization’s activities, the organization should consider filing Form 5768 and making an election under Internal Revenue Service Code Section 501(h). This election allows nonprofit organizations to make lobbying expenditures of up to 20% of their total exempt purpose expenditures and remains in place until another form is filed to revoke the election.
If an organization exceeds their permitted lobbying amounts, an excise tax will be assessed on the overage. An organization that overspends their permitted lobbying amount by 50% or more over a four year period will have their nonprofit status revoked.