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Confusing forms give incomplete lobbying picture.

A 501 (c)(3) nonprofit that plans to do any consistent public policy work should make a 501(h) election, according to Elizabeth Heagy, president of the Center for Lobbying in the Public Interest (CLPI) in Washington, D.C. Filing the IRS Form 5768 means a nonprofit elects to fall under the 1976 Lobby Law, which clearly defines lobbying activities and spending limits. But only about 2 to 3 percent of all nonprofits choose the 501(h) election, she said, otherwise they automatically fall under the "substantial activities test."

There is a sense that the Lobby Law is more complicated than the substantial activities test, Heagy said, as well as some reticence because there is a separate form to file which some believe might call attention to a non-profit's lobbying activity. But the Internal Revenue Service ORS) has consistently stated that filing Form 5768 does not automatically raise a red flag, she said, while the Lobby Law provides much greater clarity.

"You just have to take a guess what substantial means for your organization," under the substantial activities test, Heagy said. "It could be financially, it could be the amount of time people spend on issues, the importance of an issue to your organization." At one time, some thought substantial was 5 percent of a nonprofit's budget, however, that's not a set rule.

There's actually more of a burden reporting under the substantial activities test because a nonprofit has to provide a description of activities without clear definitions of lobbying, as well as volunteer time spent lobbying. Under the Lobby Law, "all you count is the money actually lobbying, as it's defined very clearly," Heagy said.

According to the 1976 Lobby Law, nonprofits with budgets up to $500,000 can spend 20 percent of expenses for lobbying, with a sliding scale as it gets larger:

* Budgets of $500,000 to $1 million - $100,000 plus 15 percent of excess over $500,000;

* Budgets of $1 million to $1.5 million--$175,000 plus 10 percent of excess over $1 million.;

* Budgets up to $1.5 million to $17 million-$225,000 plus 5 percent of excess over $1.5 million.

Whether a nonprofit chooses the 501(h) election or not, it must report lobbying expenditures on its Form 990, it's just a matter of which section. Part VI-A Lobbying Expenditures by Electing Public Charities requires expenditures for grassroots and direct lobbying, with the limits stipulated in the Lobby Law.

Part VI-B Lobbying Activity by Nonelecting Public Charities provides nine lines for a variety of expenditures:

* Volunteers;

* Paid staff or management;

* Media advertisements;

* Mailings to members, legislators or the public;

* Direct contact with legislators;

* Publications, or published or broadcast statements;

* Grants to other organizations for lobbying purposes;

* Direct contact with legislators, their staffs, government officials, or a legislative body, and

* Rallies, demonstrations, seminars, conventions, speeches, lectures or any other means.

If a nonprofit spends more than $24,000 every six months on direct lobbying at the federal level, it must file a Lobbying Report under the Lobbying Disclosure Act of 1995 (LDA) with the clerk of the House of Representatives and secretary of the U.S. Senate. The report requires "good faith estimates" for expenses related to lobbying activities rounded to the nearest $20,000, in addition to listing who lobbies for the organization and in what areas. Lobbying firms also must file reports detailing income related to their lobbying activities and from what organizations, however, it's not uncommon for a firm's LDA to differ from an organization's LDA that it represents.

"I don't think right now there is a consistent or accurate way to examine federal lobbying expenditures," said Rick Cohen, former executive director of the National Committee for Responsive Philanthropy (NCRP) in Washington, D.C.

"I think LDA reports should be greatly modified. The problem is not only which organizations are spending, but if you look at what they're actually listing as issues they're lobbying on, it's hard to get a sense of that."

In some cases, the forms are very specific about certain legislation that a nonprofit is lobbying on, while at other times, they merely list "charity issues" or "budget and tax issues," Cohen said. He suggested more specific categories to see how money gets spent, in addition to digitizing the forms.

Lobbying expenditures can vary widely between an organization's Form 990 and if it files an LDA report.

For instance, the American Heart Association (AHA) had lobbying expenditures of $2.5 million according to its Fiscal Year 2004 Form 990, while its LDA Report indicated federal lobbying of $1.34 million. The March of Dimes reported $1.8 million in lobbying expenditures on Form 990 for 2004 while reporting $440,000 on its LDA Report.

The reason for discrepancies between the Form 990 and the LDA report could be that a nonprofit can use different definitions for lobbying for each form, according to Heagy.

Also, Form 990 requires all lobbying expenditures (grassroots and direct) at all levels--federal, state and local--while the LDA is strictly federal lobbying. What some nonprofits might not know, Heagy said, is that the LDA allows the use of Form 990 definitions for lobbying when completing the LDA.
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Article Details
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Title Annotation:lobbying laws and expenditure
Author:Hrywna, Mark
Publication:The Non-profit Times
Article Type:Law overview
Geographic Code:1USA
Date:Oct 1, 2006
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