Lobbying & Political Campaign Activities for Nonprofits

Transcription

1 Lobbying & Political Campaign Activities for Nonprofits Connecticut Association of Nonprofits, Inc. Public Policy Council January 14, 2016 Priya Morganstern, Esq. Pro Bono Partnership, Inc. Copyright 2015 Pro Bono Partnership. All rights reserved. No further use, copying, dissemination, distribution or publication is permitted without express written permission of Pro Bono Partnership.

2 What is the Pro Bono Partnership? > Pro bono legal assistance for not for profit organizations through the services of our staff, and corporate and private attorneys > To be eligible, the organization must be: > Nonprofit and tax-exempt (or seeking that status) > Primarily serving the poor & disadvantaged, focusing on health and human services, affordable housing, community revitalization, arts, the environment > Unable to pay for legal services without significant impairment of program resources > Visit us at 2

3 Overview > What is Advocacy? > Lobbying > Federal Rules > State Rules > Electoral Activities 3

4 What is Advocacy? > Wide range of activities by which a group moves its agenda forward Issue Advocacy > Can include > Educating public and policy makers > Attempting to influence legislation > Working on development of regulations > Litigating on public policy issues > Voter registration > Giving voice to under-represented groups > Important way to shape our community > Lobbying is a subset of Advocacy 4

5 Lobbying 501(c)(3) Organizations > Federal Rules > IRS Rule:: No substantial part of a 501(c)(3) s activities can be directed towards influencing legislation at the federal, state and/or local level. In other words, a (c)(3) may engage in lobbying if not a substantial part of organization activities > Lobbying is activity directed at supporting or opposing the passage of specific legislation > For IRS purposes, Legislation includes: > Ballot initiatives, bond issues, and referenda > Bills and other legislative proposals > Judicial confirmations > Resolutions > Does not include administrative rules and regulations 5

6 When Does Lobbying Become a Substantial Part? > 501(c)(3)s can lobby up to a point the point at which its lobbying activities become a substantial part of its activities > Two alternatives tests to see when this point is reached: > The substantial part test > The lobbying expenditure test 6

7 Substantial Part Test > Vague standards subject to inconsistent application > Not quantitative; contextual examine $ and soft factors, such as goals and success in achieving, as well as time and energy devoted to legislative matters and the importance of other legislation 7

8 Substantial Part Test > Activities by volunteers may be included (which may be difficult to quantify) > Risk losing tax-exempt status entirely if violated in a single year > Also, liability to manager ($ penalties) if actions are willful 8

9 Lobbying Expenditure Test the 501(h) Election > Establishes a safe harbor allowing 501(c)(3)s to spend a % of their budgets on lobbying activities > Clear definition of lobbying > Unreimbursed volunteer activities not included > No penalties unless the NFP exceeds certain allowable amounts; no penalties against managers 9

10 Lobbying Substantial Expenditure Part Test Test the 501(h) Election > Risk of losing tax-exempt status entirely if based on four years of lobbying expenditures > Most NFPs will never reach the amounts they are allowed to spend on lobbying activities > The election is easy to do IRS Form 5768 > Election is retroactive > Revocation is prospective > Not available to churches and private foundations 10

11 Two Types of Lobbying - Direct > Direct lobbying: communication directly with legislators or their staff or with executive branch officials participating in the formulation of legislation two elements: > Refers to specific legislation > Expresses a view on that legislation 11

12 Two Types of Lobbying - Grassroots > Grassroots Lobbying: trying to influence the general public three elements: > Refers to specific legislation > Expresses a view on that legislation > Includes a call to action states that recipient should contact legislator; gives address and phone number; supplies a tear-off card; or identifies legislators to target 12

13 Special Lobbying Situations > Communications to the members of the NFP to encourage them to engage in direct lobbying are direct lobbying > Communications to the members of the NFP to encourage them to urge non-members to engage in direct or grassroots lobbying are grassroots lobbying > Communications to the public regarding ballot initiatives and referenda are direct lobbying 13

14 Expenditure Test Dollar Limits > 20% of first $500,000 of Exempt Purpose Expenditures (EPE) > 15% of next $500,000 of EPE > 10% of next $500,000 of EPE > 5% of remaining EPE > Overall limit on total lobbying expenses of $1 million 14

15 Expenditure Test Dollar Limits > Grassroots lobbying expenditures may not exceed 25% of the NFP s total allowable lobbying expense ceiling, regardless of what is actually spent on direct lobbying > Penalty for exceeding allowable limits is a 25% tax on excess expenditures for a given year 15

16 Advantages to making the 501(h) Election > Unlimited use of volunteers (assuming no reimbursed costs) > Straightforward spending yardstick > Ability to plan > Soft factors are irrelevant; only expenditures count > Only the organization is penalized for violating; not managers > Less likely to lose exemption unless the NFP exceeds lobbying limits by 50% average over rolling 4 year average > Who shouldn t make the election? Groups that expect to exceed the limit 16

17 Four Activities That Are Exceptions to Lobbying > Making available the results of nonpartisan analysis, study or research on a legislative issue > Discussions of a broad social, economic, or similar policy issue > Responses to written requests for technical advice or assistance from a legislative body > Does not include requests from individual legislators > Self-defense communications pertaining to legislation that might affect the NFP s tax-exempt status, rights, duties, and existence, or the tax-deductibility of contributions to it 17

18 Final Thoughts on Lobbying > Generally, it is impermissible to lobby using federal government funds, such as monies provided pursuant to grants and contracts > Review county and local ordinances and the terms of government requests for proposals (RFPs) and contracts for additional lobbying restrictions/disclosures > There are additional registration and reporting requirements for organizations that engage in lobbying at the federal level (Lobbying Disclosure Act). 18

19 > State Rules Lobbying > Office of State Ethics enforces. Very detailed. > Lobbyist: Anyone that spends or receives more than $3000 per calendar year for the following activities: > Legislative lobbying > Administrative lobbying > Activities in furtherance of lobbying (extremely broad) > Lobbying: Communicating directly or having others communicate with any official or her staff in the legislative or executive branch or in a quasi-public agency for the purpose of influencing any legislative or administrative action. > Note: broader than federal definition, which does not include administrative and executive actions 19

20 > Two Kinds of lobbyists: Lobbying State Rules > Client Lobbyists (basically, the entity that pays) > Communicator Lobbyist (basically, the person or entity that gets paid) > In-house > Retained > Rules for Client Lobbyists i.e. the nonprofit organizations > Must register if spend or will spend $3,000 or more in a calendar year for lobbying > Register every odd year: $250 ($125 for 1 year) > Register once regardless of number of communicator lobbyists 20

21 Lobbying State Rules > Client Lobbyists Must Report: > Compensation, sales tax and reimbursement allocable to lobbying greater than $10 > Expenditures, gifts, benefits for benefit of public official greater than $10 > Note, even if individual gifts are less than $10, if exceed $50 in the aggregate, need to report, and need to file written notice to OSE > All other expenditures for lobbying or in furtherance of lobbying (e.g. research, reports, polls, media, etc.) > Does not include expenditures for publication and to bona fide members > Terms of any contract related to lobbying > Reports are filed quarterly (3Q and 4Q are combined); and are filed monthly when the legislature is in session, regardless of whether registrant engaged in any lobbying > What about Coalitions/Alliances? > May need to register even if not a legal entity 21

22 Lobbying State Rules > Communicator Lobbyists must register: > A person who lobbies and who receives more than $3,000 in connection with the lobbying in a calendar year > Include employees of organizations (in-house communicator lobbyists) > $3,000 includes allocated salary and benefits (subject to 5 hour safe harbor) > Does not include person who gives expert testimony to legislative or administrative body > Reports similar to those for client lobbyists > Banned from making campaign donations for state and local candidates 22

23 Electoral Activities > Political Campaign Intervention > 501(c)(3) organizations cannot participate in or intervene in any political campaign on behalf of, or in opposition to, any candidate seeking public office (federal, state, or local) > This rule is absolute no de minimis exceptions, thereby giving IRS broad range of discretion > Violation can lead to loss of tax exemption and/or imposition of excise taxes on the nonprofit and its managers 23

24 Electoral Activities Political Campaign Intervention > Political Campaign Activity includes: > Endorsements > Contributions to campaigns > Public statements for or against > Distributing statements made by others > Allowing candidates to use the organization s assets or facilities (unless also offered to other candidates) 24

25 Electoral Activities Political Campaign Intervention > Candidate includes people: > Officially running > Thinking about running > Being bandied about in the press > Public Office characteristics: > Created by statute > On-going position; not occasional or contractual > Requires oath of office > Note: candidate does not include federal judges; IRS considers activity to oppose or support federal judges as lobbying 25

26 Electoral Activities Political Campaign Intervention > The prohibition on an organization does not restrict free expression of organization leaders who are speaking for themselves, as individuals. But: > Do not make partisan comments at official organization functions or in organization publications > Use disclaimers (i.e., These views are mine personally and are not intended to represent the views of the organization. > Be off-the-clock > Note: Certain state laws might restrict individuals (e.g., CT s ban on campaign contributions applicable to lobbyists and their families) 26

27 Electoral Activities Political Campaign Intervention > Internet Activities > IRS will look at links from (c)(3)s to other websites > Is material on linked site attributable to the (c)(3)? Is the (c)(3) doing indirectly what it is not permitted to do directly? > Facts and Circumstances Test. IRS will consider > Context for link > Links relation to org s exempt purpose > Directness of links (# of clicks) > Related vs. unrelated organization > Normal Business Activities > Must provide equal access and equal terms and conditions 27

28 Electoral Activities > Other Election Year Activities > Voter Education > Voter Registration and GOTV > Issue Advocacy > Candidate Education Key word: Non-partisan 28

29 > Voter Education Electoral Activities > Permitted to conduct certain voter education activities if non-partisan > Candidate questionnaire/voter education guidelines > Public Forums > Candidate questionnaires/voter education guides > Unbiased questions; broad range of questions > No pledges > Distribute to all candidates > Present responses equally > Same format > No editing 29

30 Electoral Activities > Public Forums and Debates > Forums and debates OK if non-partisan > Invite all viable candidates (different from questionnaire) > Fair rules > Impartial moderator > Unbiased audience > Questions on broad range of issues > Questions unbiased > No fundraising! 30

31 > Scorecards Electoral Activities > Risky if close to an election > OK if > Include all legislators > Distributed to organization s members only > See IRS definition of members > Not close to an election > Commentary permitted but be careful 31

32 Electoral Activities > Voter Registration and Get Out the Vote (GOTV) > Voter Registration > Recruiting and enlisting unregistered voter > GOTV > Getting voters to the polls > Both are permissible if non-partisan > Permissible goal: access to democratic process helping people exercise their right to vote > Important role of nonprofits that have direct, trusting relationship with members of public 32

33 Electoral Activities > All such activities must be non-partisan > The motivation for all such activities must be education and voter participation, not shaping the outcome of an election > Do not indicate a preference for a candidate or political party and avoid code words (e.g., conservative, pro-choice, anti-gay, referencing an election) > Must select target on non-partisan basis. But can target low income, homeless, or students but not a particular party or group who will be expected to vote a certain way > Watch out for timing of events > Be able to document/demonstrate all non-partisan steps taken 33

34 > Issue Advocacy Electoral Activities > 501(c)(3)s may take positions on public policy issues, including those that divide candidates > But communications must be non-partisan > Does it look like the organization is supporting or opposing candidate for public office? > Facts and Circumstance Test > Features of Non-Partisan Communications: > Issues related to organization s purpose > Not coordinated with candidate or political party > Disclaimers > Timing: not tied to election 34

35 > Criticizing incumbents Electoral Activities > OK if non-partisan > Continuing on-going criticism > Focus on organization s issues > Partisan Characteristics > Timing (e.g., start around election and/or ramp up close to election) > Discuss incumbent as candidate 35

36 Electoral Activities > Educating Candidates OK if: Offered to all candidates Information was already gathered Do not create or gather information for a candidate 36

37 > Special Issues Electoral Activities > Candidate appearing at a nonprofit s special event > Candidates on the board of trustees > Nonprofit supporting issues related to a campaign position > When officers and employees of nonprofit are working on a campaign > On their own time > Not using NFP s resources (e.g., photocopier, staff) > Not associating themselves with the NFP 37

38 Contact Us > Questions about Pro Bono Partnership s services, this presentation, or other legal questions? Call us! In Fairfield County: (914) In Connecticut (excluding Fairfield County): (860)

39 Please Note This presentation is provided as a general informational service to clients and friends of the Pro Bono Partnership. It should not be construed as, and does not constitute, legal advice on any specific matter, nor does this presentation create an attorney-client relationship. You should seek advice based on your particular circumstances from an independent legal advisor. 39