There are common misconceptions when it comes to lobbying activities by 501(c)(3) organizations. Although the lack of clarity causes and seemingly complex regulations and reporting requirements relating to public charity lobbying and advocacy efforts result in some nonprofits avoiding lobbying altogether, federal tax laws allow all public charities to engage in some legislative lobbying activities, but strictly prohibit political activity engagement. Notably, considering the role of public charities in bridging the gap between government and private sectors, lack of nonprofit advocacy efforts could result in a diminished voice from those disadvantaged segments of the population that charities exist to service.

Specifically, public charities are permitted to engage in lobbying and advocacy so long as such efforts are not a “substantial amount” of their overall activities.

Public charities recognized as exempt under IRC Section 501(c)(3) can choose one of two methods to measure their lobbying: (1) the “Insubstantial Part Test”, or (2) 501(h) Election. 
The “Insubstantial Part” Test is the default method of measuring lobbying activities, and the name of the test gives the rule: no substantial part of a nonprofit’s activities may be “carrying on propaganda, or otherwise attempting to influence legislation. This test is flexible as there are no clear definitions or guidelines as to what constitutes lobbying, what an “insubstantial part” is, or how to measure activities. An organization is subject to the “Insubstantial Part” Test unless and until it elects otherwise.
The lobbying limit imposed by this test is based on activities, not expenditures. Even unpaid lobbying activities, such as lobbying by volunteers, count against those limits.  Although the IRS has provided no reliable guidance about how much lobbying is “substantial,” case law has shown that activities merely appearing to be substantial, even if having no correlation to the amount of resource dedicated to those activities, can be deemed “substantial” under this test. As such, this test subjects public charities to quite a bit of uncertainty.
Conversely, the “Expenditure Test” offers far more clarity than the “Insubstantial Part” Test.  Under this test, lobbying is measured solely based on the nonprofit’s expenditures for lobbying activities.  The overall limit on lobbying is set as a percentage of the organization’s annual expenditures. 

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