Advocacy 101 for Funders

Panelist Nikhil Pallai Alliance for Justice

Investing in Change: Funding Lasting Community Impact Nikhil Pillai

For free coaching about laws impacting nonprofit advocacy: advocacy@afj.org 866.675.6229 For free tools, fact sheets, and publications www.bolderadvocacy.org @AFJBeBold BolderAdvocacy @NikhilAFJ

1. Introduction: What is advocacy? 2. The differences between 501(c)(3) private foundations, 501(c)(3) public charities, and other nonprofits 3. IRS lobbying limits for public charities (like your grantees) and definitions of lobbying 4. Tools for funding advocacy 5. Questions AGENDA

Should we support advocacy? Can we afford not to?

Capacity Builder Responder Convener Funder of Specific Projects General Supporter Advocate Fund Engage Private Foundation Support for ADVOCACY

Convener 11 th Hour helped to build the Animal Agriculture Reform Collaborative, which regularly meets to discuss various policy tactics to fight the industrial animal agriculture system. Funder Involvement in ADVOCACY

Litigation Responder Bloomberg Philanthropies and the Bill and Melinda Gates Foundation co-launched an international fund to assist governments in developing countries in defending laws that reduce tobacco use. Funder Involvement in ADVOCACY

Educate the Public Advocate The Meyer Memorial Trust has used its blog to highlight the importance of being involved in advocacy, shared expertise with various state committees and elected officials, as well as with the funder community around how to frame questions in a certain way to move an agenda forward at the local level. Funder Involvement in ADVOCACY

LOBBYING Funder of Specific Projects General Supporter Mile High United Way has focused on advocacy efforts at the state level by hiring a lobbyist and funding organizations that work in policy and advocacy such as grassroots, research, or lobbying organization. Funder Involvement in ADVOCACY

501(c)(3) Private Foundation 501(c)(3) Public Foundation/ Charity 501(c)(4) 501(c)(5) 501(c)(6) Examples Tax Treatment Tax-Exempt Contributions tax-deductible Tax-Exempt Contributions tax-deductible Tax-Exempt Lobbying Activities EXTREMELY LIMITED Tax on foundation and managers LIMITED Insubstantial Part or 501(h) Expenditure UNLIMITED Electoral Activities Cannot support or oppose a candidate for public office Cannot support or oppose a candidate for public office Secondary activity Follow election law

Public Charities and Public Foundations may LOBBY Must stay within limits set by the IRS Insubstantial part test OR 501(h) expenditure test

Private Foundations Tax on Lobbying Private foundations pay tax on lobbying expenditures 20% on foundation; 5% on managers 100% on foundation; 50% on managers

INSUBSTANTIAL PART TEST 1. What is insubstantial? 2. Default test 3. Activities-based 4. Lobbying not defined 5. Penalty HOW MUCH LOBBYING FOR PUBLIC CHARITIES AND PUBLIC FOUNDATIONS? or 501(H) EXPENDITURE TEST 1. Dollar-based limits 2. One-time election IRS Form 5768 3. Expenditures only 4. Definition of lobbying 5. Penalty less severe

LOBBYING LIMITS under 501(h)

1. Calculate organization s Exempt Purpose Expenditures Annual Expenditures (for most organizations) 2. Overall lobbying limit ANNUAL EXPENDITURES $500,000 or less 20% OVERALL LOBBYING LIMIT $500,000 to $1 million $100,000 +15% of excess over $500,000 $1 million to $1.5 million $175,000 +10% of excess over $1 million $1.5 million to $17 million $225,000 + 5% of excess over $1.5 million Over $17 million $1,000,000 3. Grassroots lobbying limit is 25% of overall limit

TOTAL LOBBYING LIMITS for 501(c)(3)s making the 501(h) election with annual expenditures of $500,000 Direct Grassroots Education & Non-Lobbying Advocacy Overall Lobbying Limit Grassroots Lobbying Limit $100,000 $25,000

TOTAL LOBBYING LIMITS for 501(c)(3)s making the 501(h) election with annual expenditures of $11,000,000 Direct Grassroots Education & Non-Lobbying Advocacy Overall Lobbying Limit Grassroots Lobbying Limit $700,000 $175,000

Organize Communities Educate Legislators Encourage Voting Educate Public PARTISAN POLITICAL Educational Conferences Research Nonpartisan Voter Ed. IRS Lobbying Exceptions LOBBYING Skills Training Change Corporate Behavior Regulatory Efforts Litigation Private Foundation Avenues of Advocacy

Educate the Public

Write an Op-Ed Article

Skills Training

Not all advocacy is lobbying! If an activity doesn t have all the elements of lobbying its not lobbying.

501 (H) LOBBYING Definitions

501 (H) LOBBYING Definitions (Applicable to Private Foundations and a Great Option for Grantees)

DIRECT Communication Legislator Expresses a view about specific legislation LOBBYING using 501(h) GRASSROOTS Communication General public Expresses a view about specific legislation Call to action

DIRECT Communication Legislator Expresses a view about specific legislation GRASSROOTS Communication General public Expresses a view about specific legislation Call to action

Call to action DIRECT Communication U.S. Legislators and staff Legislator Expresses a view about specific legislation State Legislators and staff GRASSROOTS Communication General public Expresses a view about specific legislation County Board of Supervisors, City Council and staff

DIRECT Communication President, governor, mayor, or other executive official who participates in the formulation of legislation. Legislator Expresses a view about specific legislation GRASSROOTS Communication General public Expresses a view about specific legislation Call to action

School boards Zoning boards Housing authorities Sewer and water districts Other special purpose bodies NOT LEGISLATORS

DIRECT Communication Legislator Expresses a view about specific legislation SPECIAL LEGISLATOR RULE Members of the general public are legislators. Ballot Measures - ballot initiatives - referenda - constitutional amendments - bond measures GRASSROOTS Communication General public Expresses a view about specific legislation Call to action

DIRECT Communication Legislator Expresses a view about specific legislation GRASSROOTS Communication General public Expresses a view about specific legislation Call to action

Regulations Executive Orders Enforcement of Existing Laws Litigation NOT SPECIFIC LEGISLATION

DIRECT Communication Legislator Expresses a view about specific legislation GRASSROOTS Communication CALL TO ACTION General public Expresses a view about specific legislation Call to action

DIRECT Communication Legislator Expresses a view about specific legislation GRASSROOTS Communication General public Expresses a view about specific legislation TELLING TO CONTACT legislator(s) PROVIDING ADDRESS, telephone number, and/or other contact information of legislator(s) PROVIDING MECHANISM to enable communication with legislator(s) IDENTIFYING legislator(s) Call to action

DIRECT Communication Legislator Expresses a view about specific legislation GRASSROOTS Communication General public Expresses a view about specific legislation Call to action

DIRECT Communication Legislator Expresses a view about specific legislation GRASSROOTS Communication General public Expresses a view about specific legislation These Are NOT Calls to Action: Learn more Take action Support our efforts Get involved Not Lobbying Call to action

We need

Nonpartisan analysis, study, or research Request for technical assistance Self-defense Examinations and discussions of broad social, economic, and similar problems LOBBYING EXCEPTIONS

MUST represent full and fair discussion be broadly disseminated MAY NONPARTISAN ANALYSIS express a view contain indirect call to action LOBBYING EXCEPTIONS

MUST BE invited in writing on behalf of committee TECHNICAL ASSISTANCE available to all members of committee MAY express a view on Specific legislation LOBBYING EXCEPTIONS

MUST RELATE TO powers and duties tax-exempt status deductibility of contributions SHOULD consult with attorney SELF-DEFENSE LOBBYING EXCEPTIONS

NO SPECIFIC LEGISLATION blue ribbon panel ANALYSIS + DISCUSSIONS annual reports early stages of policy development NO CALL TO ACTION communication does not include call to action LOBBYING EXCEPTIONS

IRS Lobbying KEY POINTS for Your Grantees: All 501(c)(3) public charities have a right to lobby (influence legislation). Many activities that influence public policy will not even meet the definition of lobbying. Contact Alliance for Justice for assistance.

Capacity Builder Convener FOUNDATIONS can support ADVOCACY Fund Advocacy/ Lobbying Efforts

Capacity Builder Convener CAPACITY BUILDER Fund Advocacy/ Lobbying Efforts

The Meyer Memorial Trust has funded advocacy through 1 to 2 year grants towards grassroots campaigns. Through these grants, the Trust has seen positive results, specifically around the 2016 passing of a $258.4 million bond measure on affordable housing that was the largest measure of its kind ever on the city of Portland s ballot.

Capacity Builder Convener CONVENER Fund Advocacy/ Lobbying Efforts

In late 2016, the Collaborative decided to create a focused initiative with the State of MN s Office to Prevent and End Homelessness, working with the lead staff there who facilitates the state Interagency Council on Homelessness. It stressed that the Collaborative was ready to commit more funds and work in partnership with the state on this important issue, which is a statewide concern.

Capacity Builder Convener Fund Advocacy/ Lobbying Efforts PUBLIC and PRIVATE FOUNDATIONS SUPPORTING ADVOCACY

Earmarking? Definition of earmark: A grant by a private foundation is earmarked if the grant is given pursuant to an agreement, oral or written, that the grant will be used for specific purposes.

Private Foundation Funding for Advocacy and Lobbying : You can support public charities that engage in non-lobbying advocacy*. You can support public charities that engage in lobbying without earmarking the grant for lobbying. You cannot support public charities with grants that are earmarked for lobbying. *Private foundations have some limits on support for voter registration. See next slide!

Private foundation grants earmarked for voter registration drives must meet specific requirements. Special Rules: Funding Voter Registration Drive

Earmarked project funded must be: Sponsored by a 501(c)(3) organization Nonpartisan Conducted in 5 or more states Not confined to one specific election cycle Run by an organization that meets additional rules related to the diversity of its funding Special Rules: Funding Voter Registration Drive

Two completely legal avenues for private foundations to fund grantees that lobby $$$ General Support Grants Specific Project Grants

If a private foundation does not EARMARK a grant for lobbying, the foundation is not legally responsible for its grantee s lobbying. General Support Grant Safe Harbor

Two completely legal avenues for private foundations to fund grantees that lobby $$$ General Support Grants Specific Project Grants

How the Specific Project Grant Rule Works

For Public Foundations and Private Foundations Foundation grant Specific project s non-lobbying component SPECIFIC PROJECT Grants

Restricting grantees from lobbying is not necessary. Restrictive grant clauses limit grantees flexibility to accomplish their missions and ability to lobby within their own limits. Lobbying restriction is only necessary when private foundation makes grant to non- 501(c)(3) organizations Restrictive Clauses in Grant Agreements

If the grant is not earmarked for lobbying, grant agreement should state it is not earmarked for lobbying. If the grant is for a specific project grant, the grant agreement should state that. If the grant is for general support, the grant agreement should state that. Helpful Clauses in Grant Agreements

This grant is not earmarked for lobbying

This grant may not be used for lobbying

This grant is not earmarked for lobbying vs. This grant may not be used for lobbying

Grants to Non-Public Charities: Private foundations may make grants to 501(c)(4) organizations (or other non-public charities) as long as the grant is for charitable purposes. Charitable purposes include any permissible 501(c)(3) public charity activity except lobbying and voter registration. The private foundation must exercise expenditure responsibility over a grant to a non-public charity. Expenditure Responsibility Pre Grant Inquiry Writing (prohibited activities, sub granting requirements, etc.) Reporting Requirements Contact Alliance for Justice for assistance.

Grants to Non-Public Charities: Public foundations may also make grants to 501(c)(4) organizations (or other non-public charities) as long as the grant is for charitable purposes. Charitable purposes include any permissible 501(c)(3) public charity activity. The whole grant will be treated as a lobbying expenditure absent any evidence to the contrary. Counted towards the grassroots limit, unless earmarked otherwise Controlled Grant Contact Alliance for Justice for assistance.

Funding Advocacy Key Points 1. Foundations have a great deal of power. They have a huge capacity for funding advocacy. 2. All foundations can legally maximize funding for organizations that lobby by making general support grants and specific project grants. 3. Let grant applicants know that you are willing to fund advocacy and lobbying. 4. Avoid unnecessary restrictions in grant agreements. 5. Contact Alliance for Justice for assistance.

Hypothetical Situations

Question 1 A 501(c)(3) working on gun control issues requests a $20,000 general support grant. The grant proposal describes the group s past success in lobbying the legislature for a ban on semi-automatic weapons. Is this o.k.?

Question 2 A 501(c)(3) grantee plans a study on housing discrimination and plans to give part of your grant to its affiliated 501(c)(4) to fund dissemination of the report at the 501(c)(4) s annual conference. Is this o.k.?

Question 3 A 501(c)(3) requests $100,000 to fund its campaign in opposition to a voter initiative that would ban affirmative action in the 501(c)(3) s home state. Is this o.k.?

Question 3 A 501(c)(3) requests $100,000 to fund its campaign in opposition to a voter initiative that would ban affirmative action in the 501(c)(3) s home state. Is this o.k.? A: This would constitute a grant earmarked for direct lobbying because it is a ballot measure campaign. The foundation would be taxed if it gives this grant.

Question 4 A 501(c)(3) submits a grant request for $8,000 to fund part of a $15,000 project focused on homelessness. The budget for the project includes $2000 to draft and advocate for a new anti-camping ordinance in the city. Is this o.k.? A: Yes, the grant is less than the $13,000 nonlobbying amount, therefore no excise tax would be assessed.

Question 5 One of your 501(c)(3) grantees has applied for renewal of its general support grant. In conversations with the 501(c)(3) s executive director, you learn that the organization exceeded its lobbying limits in the previous year and had to pay an excise tax. Is the foundation liable for the grantee exceeding its limits, and can you give a renewal grant?

For more information:

QUESTIONS?

For free coaching about laws impacting nonprofit advocacy: nikhil@afj.org advocacy@afj.org 866.675.6229 For free tools, fact sheets, and publications www.bolderadvocacy.org @AFJBeBold BolderAdvocacy @NikhilAFJ

FTEH Advocacy Resources Policy Priorities for the New Administration Webinar: Advocacy The Funder s Role Legal Limitations on Lobbying

Thank You! 89 South Street, Suite 803 Boston, MA 02111 617.245.0314 www.funderstogether.org www.facebook.com/funderstogether @funderstogether