A Quick Review of Rules for Political and Lobbying Activities

Special thanks to Lisa Ryssel, who contributed significantly to this blog.

Organizations that are tax-exempt pursuant to IRC Section 501(c)(3) must comply with IRS rules and regulations regarding political and lobbying activities. Understanding these rules can help nonprofits safeguard their tax benefits and promote transparency while addressing ethical considerations and mitigating reputational and legal risks.

Political activities refer to any activity related to a campaign or an election (whether it be a candidate or a party). Lobbying is an organization’s attempts to influence legislation or government policy. 

Allowable political activities

• Voter education activities (in a nonpartisan manner)
• Voter registration and Get-Out-the-Vote drives (in a nonpartisan manner)

Prohibited political activities

• Direct or indirect participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for elective public office
• Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office
• Voter education or registration activities with evidence of bias

Violating the prohibitions can result in revocation of tax-exempt status and the imposition of certain excise taxes.

Lobbying activities

An IRC Section 501(c)(3) organization is lobbying 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.

Organizations may engage in some lobbying (but not too much). There are two tests the IRS uses to measure lobbying activity: the Substantial Part Test and the Expenditure Test. Keep in mind there are tax planning methods that can help mitigate an organization’s risk to its federal tax exemption.

How we can help

If you are engaging in political or lobbying activities, please contact your tax advisor to review the activity and help keep your tax-exempt status out of jeopardy.