Staying Legal MI - Lobbying/Advocacy

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Introduction

Most charities should actively engage in advocacy and lobbying to help advance their charitable mission or to advocate for the clients they serve, but charities must know difference between what are permissible lobbying and advocacy activities and what are partisan political activities that are strictly prohibited. For much more detailed information and discussions of these issues, see the Resources section at the bottom of this page.

Definitions

Advocacy

Advocacy is simply speaking up for what one believes in. For nonprofit organizations, advocacy is speaking up for the mission of the organization and the people they serve. For example, an organization with a mission to serve the homeless in our communities may want to extend that mission beyond simply opening a homeless shelter to researching the prevalence of homelessness and its effect on the community, then publishing the results to bring attention to the problem.

There is no legal definition for "advocacy;" rather, advocacy is an umbrella term that includes lobbying and many other activities that promote the cause of the nonprofit, both through political and non-political avenues.

There are no specific reporting, registration or license requirements for organizations that perform this very general type of advocacy, except that any expenses to carry out those activities would be accounted for on the organization�s annual IRS 990 filing and financial accountings.

Lobbying

Lobbying is a specific type of advocacy Under federal IRS rules lobbying involves contacting public officials at the local, state or federal levels to encourage certain legislative action or the adoption of certain policies (direct lobbying); it also includes encouraging the public to contact legislators or policy makers to effect changes (grassroots lobbying). State of Michigan law does not include grassroots efforts as lobbying.

An example of direct lobbying is: If the organization operating the homeless shelter chooses to get to know their state legislators, their representatives to the United States Congress and other policy makers to encourage legislation to provide more support for the homeless, then they would be engaging in direct lobbying.

An example of grassroots lobbying is: If the charity's presentations at local community groups tell citizens that they should contact their legislators to get a bill passed, they are engaging in grassroots lobbying.

Political activity

Political activity involves campaigning for candidates or engaging in partisan politics. This activity is strictly forbidden for 501(c)(3) organizations.

Dos and Donts

Advocacy

All kinds of advocacy are permitted, including educating the general public, the media, lawmakers, policy makers and elected officials about the existence and mission of the organization. There is no limit on how much time or how many assets are used on advocacy, as long as the programs and projects are actually carrying out the mission of the charity. For example, an organization established to promote barrier-free design in buildings will spend a great deal of time on advocacy; whereas a homeless shelter or food bank will spend less time, since their core mission is to operate a shelter or distribute food.

Lobbying vs Political Activity

There are IRS restrictions on the amount of lobbying activity that is permitted by a public charity and private foundations are prohibited from lobbying. See below for IRS and state reporting requirements.

The challenge for charities is to not cross the line from lobbying to partisan political activity. For example, a charity can sponsor a candidate forum, but the organization must be sure to present candiates from at least all major political parties. A charity can also publish information on the positions candidates take on various issues, but they need to ensure that they have provided all candidates with an equal opportunity to have their messages published. For a more complete discussion on these issues, go to

the Nonprofit Advocacy, A Michigan Primer on Michigan Nonprofit Association's website.

IRS Rules & Reporting Requirements

Advocacy

Lobbying

There are IRS restrictions on the amount of lobbying activity that is permitted for a charity, organizations must account for their lobbying expenses on Schedule A that accompanies their annual IRS 990 filing. There are two methods of documenting lobbying activity � the Expenditure Test and the Insubstantial Part Test.

The Expenditure Test, also referred to as the 501(h) election, is the most straightforward method but requires the filing of IRS Form 5768. The Expenditure Test is a clearer and easier way to report lobbying expenses because the limitations are based solely on funds spent, and Schedule A filed with the IRS Form 990, and the Instructions provide guidance as to how much can be expended. For example, an organization with a budget of $500,000 may spend up to 20%, or $100,000 on lobbying activities; and an organization with a budget of $1million may spend up to 20% of the first $500,000, plus 15% of the next $500,000 on lobbying. Form 5768 can be obtained at the IRS website.

The Insubstantial Part Test is based on the rule that lobbying activites by charities cannot constitute a substantial part of the organization's activities or expenditures, but there is no clear definition of lobbying or substantial in the IRS Code. Because of the vagueness of the law, it is much safer for charities to use the 501(h) election described above.

Political Activity

The IRS 990 will request documentation of expenditures on political activity; however, charities should not have any such expenditures to report, since political activity is prohibited.

State Rules & Reporting Requirements

Advocacy

Just as with the federal rules, the State of Michigan has no reporting requirements for advocacy efforts.

Lobbying

The Michigan Secretary of State administers the Michigan Lobby Registration Act which requires any organization or individual who meets certain expenditure thresholds to register as a lobbyist within 15 days of reaching those thresholds. The Act also requires registration of lobbyist agents -- those compensated above certain thresholds for acting as a lobbyist on behalf of another person or organization. Lobbyist agents must register within 3 days of reaching the compensation thresholds. The thresholds are adjusted annually according the Detroit Consumer Price Index. The Secretary of State website offers a document providing current thresholds, fees and penalties.

The Act also requires seminannual reporting of expenditures and activities. The Secretary of State website offers an Introduction to the Michigan Lobby Registration Act and links to necessary information and forms.

Political Activity

As with IRS rules, charities are prohibited from engaging in partisan political activity.

Other Resources

MNA has a publication Nonprofit Advocacy, A Michigan Primer available on its website that provides a comprehensive discussion of nonprofit advocacy, lobbying and political activity.

MNA also offers seminars, workshops, and other resources at the Public Policy portion of its website.

The IRS offers an extensive discussion of what charities may do and required reporting on the IRS website.

The Michigan Secretary of State's website offers extensive information on lobbyist registration and reporting.

The Alliance for Justice offers many resources for organizations that wish to engage in advocacy and lobbying activities.

The Alliance for Justice also now offers a State Resources website that provides information specific to Michigan lobbying laws and requirements. Registration to obtain a login and password is required for access to this site.