Information for Tax Preparers
Notice to 501(c)(3)s' Tax Return Preparers and to Nonprofit Organizations Regarding Lobbying
Has Your Organization Elected to Come Under the 1976 Lobby Law?
Some tax return preparers for nonprofits and some nonprofit organizations have been slow to recognize that the federal government, including Congress and the Internal Revenue Service, supports lobbying by 501(c)(3)s. Congress sent that unambiguous message when it enacted the liberal provisions under the 1976 lobby law. The same message came from the Internal Revenue Service in regulations issued in 1990, which support both the spirit and intent of the 1976 legislation. Following are key points about that legislation. They apply only to nonprofits that have "elected" to come under the 1976 law. Those that have not elected remain subject to the ambiguous "insubstantial" test, which leaves uncertain which activities of nonprofits related to legislation constitute lobbying and how much lobbying is permitted.
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Nonprofits That Have Elected to Come Under the 1976 Lobby Law
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Organizations may engage in lobbying with certainty over tax results.
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Strictly quantitative standards for measuring permissible lobbying activities.
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Certain and definitely allowable amount of lobbying expenditures.
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Safe harbor exceptions.
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No jeopardy to tax-exempt status for a single year's violations.
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Managers of electing organizations never become subject to a penalty tax by reason of an organization's lobbying activities.
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Importance of an issue to an organization is not a relevant factor in measuring permissible lobbying activities. |
Nonprofits That Are Subject to the Insubstantial Test
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Organizations operate under vagueness and uncertainty over possible dire tax results of engaging in lobbying.
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Quantitative and qualitative standards' of measuring lobbying activities.
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No certain and definitely allowable amounts of lobbying expenditures.
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No safe harbor exceptions.
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A single year violation may result in loss of tax-exempt status.
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Managers of non-electing organizations may become subject to penalty tax due to an organization's lobbying activities.
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Importance of an issue to an organization is a relevant factor in determining permissible lobbying activity. |
To come under the 1976 lobby law a 501(c)(3)'s governing body simply elects to do so and files the one page IRS form 5768 with the Internal Revenue Service.
See the official statement of the American Bar Association's Exempt Organizations Committee's about the legality of lobbying and the importance of the 501 (h) election. |