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1927
2001


Is there a distinction between "good" legislation and "bad" legislation?
For purposes of IRC 501(c)(3), there is no distinction between "good" legislation and "bad" legislation. For example, Rev. Rul. 67-293, 1967-2 C.B. 185, holds that an organization substantially engaged in promoting legislation to protect or otherwise benefit animals is not exempt under IRC 501(c)(3) even though the legislation it advocates may be beneficial to the community. See also Rev. Rul. 67-6, supra. This is in accord with a dictum of the Supreme Court to the effect that the statutory restriction on attempts to influence legislation simply made explicit” a longstanding judicial principle that political agitation as such is outside the statute, however innocent the aim.” Cammarano v. United States, 358 U.S. 498, 512 (1959), citing Slee, supra. For a direct holding, see Kuper v. Commissioner, 332 F.2d 562 (3rd Cir. 1964), cert. denied, 379 U.S. 920 (1964). In Kuper, the Third Circuit stated that it is immaterial . . . that the legislation advocated from time to time was intended to promote sound government and was for the benefit of all citizens rather than in the interests of a limited or selfish group.” Id. at 563. Likewise, in Haswell v. United States, 500 F.2d 1133 (Ct. Cl. 1974), cert. denied, 419 U.S. 1107 (1975), the Court of Claims concluded:

An organization that engages in substantial activity aimed at influencing legislation is disqualified from a tax exemption, whatever the motivation. The applicability of the influencing legislation clause is not affected by the selfish and unselfish motives and interests of the organization, and it applies to all 272.Lobbying Issues organizations whether they represent private interests or the interests of the public. Id. at 1142.

The hearings resulted in the enactment of several statutes. One of these, IRC 4912, concerns the lobbying activities of nonelecting public charities. For years beginning after December 22, 1987, certain organizations whose IRC 501(c)(3) status is revoked because of substantial lobbying activities are subject to a five percent excise tax imposed by IRC 4912 on their lobbying expenditures,” for the year of loss of the exemption. Lobbying expenditure” is defined in IRC 4912(d)(1) as any amount paid or incurred by a charitable organization in carrying on propaganda or otherwise attempting to influence legislation.

Rev. Rul. 62-71 concludes that while the portion of the organization’s activities that consisted of engaging in nonpartisan analysis, study and research and making the results thereof available to the public, when considered alone, may be classified as educational within the meaning of IRC 501(c)(3), the organization was primarily engaged in not only teaching but advocating the adoption of a particular doctrine or theory that can become effective only by the enactment of legislation. Since the primary objective of the organization can be attained only by legislative action, a step that the organization encouraged or advocated as a part of its announced policy, as opposed to merely engaging in nonpartisan analysis, study and research and making the results thereof available to the public, it is an action” organization as that term is defined in Reg. 1.501(c)(3)-1(c)(3) of the regulations. Accordingly, the organization does not qualify for IRC 501(c)(3) exempt status.

For purposes of the lobbying restriction, an organization is an action” organization on either of two distinct grounds. The first occurs if a substantial part of the organization’s activities involves attempting to influence legislation. Reg. 1.501(c)(3)-1(c)(3)(ii) states that an organization will be regarded as attempting to influence legislation if it does the following:

    (A) Contacts, or urges the public to contact, members of a legislative body for the purpose of proposing, supporting, or opposing legislation, or
    (B) Advocates the adoption or rejection of legislation. The second ground is found in Reg. 1.501(c)(3)-1(c)(3)(iv), which provides that an organization is an action” organization if it has the following two characteristics:

      (A) Its main or primary objective or objectives (as distinguished from its incidental or secondary objectives) may be attained only by legislation or a defeat of proposed legislation; and

      (B) It advocates, or campaigns for, the attainment of such main or primary objective or objectives as distinguished from engaging in nonpartisan analysis, study, or research and making the results thereof available to the public. In determining whether an organization has these two characteristics, all of the surrounding facts and circumstances, including the articles and all activities of the organization, are to be considered.

How is nonpartisan analysis distinguished from attempts to influence legislation?
Under IRC 501(c)(3), there are certain circumstances where nonpartisan analysis, study, or research of matters pertaining to legislation may be educational and will not constitute attempts to influence legislation.18 This occurs where the material is available to the public, governmental bodies, officials, and employees, and where the organization does not advocate the adoption or rejection of legislation. See Reg. 1.501(c)(3)-1(c)(3)(iv). Several revenue rulings discuss this issue.

[7.8.1] 3.2.6  (05-25-1999)
Legislative Activities
  1. Identify any legislative activities, such as:
    1. Direct lobbying by the organization or its officers to directly influence legislators. Review itemized billings or reports by representatives retained by the organization to monitor legislation or lobby to determine the amount of lobbying conducted by the representative for the organization.
    2. "Grass-roots" campaigns in which the organization urges members of the public to contact legislators for, or in opposition to, or to propose, some piece of legislation.
  2. Determine, from a review of the organization's publications or financial records, or from a discussion with the officers whether the organization has engaged in the following in furtherance of their legislative interests.
    1. articles or paid advertisements in newspapers or magazines, radio and television;
    2. television, radio or other public commentaries;
    3. articles published by the organization; or
    4. direct mail campaigns.
  3. Analyze disbursements to determine if:
    1. contributions were made to organizations engaged in legislative activities; or
    2. payments were made to attorneys or other intermediaries for legislative purposes of the organization. These payments are frequently charged to advertising or professional fees and services accounts.
  4. Analyze dues paid to parent organizations and state or national organizations to determine if any portion of the dues are used for legislative activities. This activity might be imputed to the subsidiary organization paying the dues.
  5. If the organization has engaged in legislative activity, determine if it made the election under IRC 501(h), subjecting it to the lobbying expenditures test. If not, it is governed by the substantiality test of IRC 501(c)(3).
    1. Lobbying expenditures test--Eligible charities, through an election, may choose to have their legislative activities measured by an expenditures test that sets relatively specific expenditure limits and would replace the uncertain standards of IRC 501(c)(3). Analyze disbursements to determine if:
      1. the sliding scale limits for lobbying nontaxable amount and grass roots nontaxable amount have been exceeded (maximum lobbying nontaxable amount is $1,000,000);
      2. "affiliated" organizations have included their disbursements in the total to determine if the nontaxable amounts have been exceeded;
      3. lobbying expenditures over a 4-year period exceed 150 percent of the lobbying nontaxable amount; or
      4. grass root expenditures over a 4-year period exceed 150 percent of the grass roots nontaxable amount. If the limits of c or d are exceeded, revocation should be considered. If the limits of a above are exceeded, the organization is liable for IRC 4911 tax.
    2. Substantiality test-- "Substantial" is measured not only by the funds spent on the activity but also by the time, effort, and other activities connected with reaching a position on whether to sponsor, support, or oppose certain legislation, and the time and effort of the members in taking "action" to reach the goal decided upon. For example, a single article in their publication requesting legislative action might trigger thousands of the members to contact their legislators but the expense may be minimal.
      1. Analyze all direct and indirect expenses attributable to legislative activities.
      2. For additional information, see Chapter 3.17 of IRM 7.8.2, Exempt Organizations Technical Guidelines Handbook, and consider reviewing the decisions reached in League of Women Voters of the United States v. United States , 180 F. Supp. 379 (1960) and Christian Echoes National Ministry, Inc. v. United States , 470 F2d 849 (1972).

[7.8.1] 3.2.7  (05-25-1999)
Political Campaign Intervention
  1. An IRC 501(c)(3) organization is prohibited from participating or intervening in any political campaign. This prohibition includes publishing or distributing campaign statements. (However, see Rev. Rul. 78-248, 1978-1 C.B. 154, and Rev. Rul. 80-282, 1980-2 C.B. 178 for a discussion of certain "voter education activities." ) The sources set forth in the guidelines above also apply in finding evidence of political activity. Also, see the annual National Office listing of certain Form 1120-POL (U.S. Income Tax Return of Certain Political Organizations) filers sent to the regions, and Form 990, Parts I and IV (Form 990-PF, Part V, if a private foundation) for indications of political activity.

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