Why You Should Elect to Come Under the 1976 Law

The right of citizens to petition their government is basic to our democratic way of life, and nonprofit, 501(c)(3) nonprofit organizations are one of the most effective vehicles for making use of citizen participation in shaping public policy. Fortunately, legislation passed by Congress in 1976 makes it possible for nonprofits to lobby freely for their causes, communities and individuals they serve. The federal government clearly supports lobbying by charities. Congress sent this unambiguous message when it enacted the exceedingly helpful 1976 lobby law. The same message came from the IRS in regulations issued in 1990. Together, the law and regulations provide wide latitude for nonprofits to lobby.

But the law only provides this latitude for nonprofits that elect to be covered by it. In most circumstances, nonprofits should become subject to this law - not only because it provides liberal limits on how much they can spend on lobbying, but also because it provides very clear and helpful definitions of what activities related to legislation do not constitute lobbying. If you are formally asked to testify before a congressional committee, for example, your testimony would not constitute a lobbying expense.

Generally, organizations that elect the 1976 lobby law may spend 20% of the first $500,000 of their annual expenditures on lobbying ($100,000), 15% of the next $500,000, and so on, up to $1 million dollars!
If you do lobbying but don’t elect to be subject to the 1976 law, your lobbying must be "insubstantial." This is a vague term that has never been defined. If you remain subject to this rule, you cannot be certain how much lobbying your charity can do.

Some nonprofits have been reluctant to elect the 1976 law for fear that this action will either change their section 501(c)(3) status or serve as a “red flag” to the IRS and prompt an audit of the organization. Neither concern is justified. Electing to come under the 1976 law does not affect a nonprofit's tax exempt status. Electing organizations remain exempt under section 501(c)(3) of the Internal Revenue Code.

Further, the IRS has made clear in a letter to INDEPENDENT SECTOR that far from singling out for audit charities that elect, the reverse is true. The letter states, “. . . our intent has been, and continues to be, one of encouragement [of charities] to make the election . . . Experience also suggests that organizations that have made the election are usually in compliance with the restrictions on lobbying activities.”