The first months of the second Trump administration have been a whirlwind of policy disruption. By executive order, the White House has announced vast changes to public policy on civil rights, health care, the environment, immigration, the arts, and federal contracting, all while canceling billions of dollars of grants to nonprofits and proposing a sweeping revision to federal tax law. Profound policy changes that impact nonprofits of all stripes are happening at a breakneck pace.
Amid the storm, many nonprofits want to speak out but are concerned about violating the law, unsure of their rights. Can tax-exempt nonprofits lobby Congress or the executive branch about administration policy? Can you write editorials, engage with and inform the public about issues of concern, support litigation, or organize peaceful, law-abiding protests?
The answer to all these questions is yes. Most advocacy activity is protected by the First Amendment and is not limited by tax law so long as it’s related to the organization’s mission. You may lawfully engage in advocacy activity, and, consistent with your mission, have a hand in shaping public policy through direct and grassroots action. There are limits, but those are much narrower than many nonprofits believe.
Know What Types of Lobbying Are Allowed
Perhaps the main barrier to policy engagement is widespread misunderstanding of the two limits imposed by federal tax law on advocacy activity by organizations classified as tax-exempt under Section 501(c)(3) of the Internal Revenue Code. One rule, the “Johnson Amendment,” bars charities from electioneering activity — namely, endorsing or opposing candidates in elections. However, this rule only applies to advocacy about election outcomes, not to issues. And once the election is over and the politicians start to engage in policymaking, the Johnson Amendment typically no longer comes into play.
Which brings up the other limit on advocacy: the rule that says that tax-exempt organizations cannot allow lobbying to become a substantial part of their activities. Naturally, nonexperts read this language and hesitate to engage with public policy or meet with government officials to express their views. But a cautious approach to advocacy and lobbying is mostly misguided.
A cautious approach to advocacy and lobbying is mostly misguided.
Part of the confusion comes from the word “lobbying.” The common understanding of the term is quite broad and covers a lot of advocacy activity, like generic lobbying for policy change and petitioning the government. But contrary to public opinion, lobbying as defined by the tax law is broadly permissive of many forms of advocacy and public-policy work. For clarity, let’s call the activity that is limited by tax law as “legislative lobbying” to distinguish it from other types of lobbying and advocacy work.
In broad brush, to count as legislative lobbying subject to limits, legislation has to be at its center. For the most part, legislation refers to actual bills introduced in a legislative body, like Congress. It does not include already enacted law or actions by the executive or judicial branches.
That means communications about nonlegislative forms of policy making are not legislative lobbying and so not subject to the lobbying limit. Executive orders, existing or proposed agency rules and regulations, litigation and court decisions, criticisms or praise of passed legislation, policy statements by government officials — none of these are unenacted legislation. You may endorse or condemn executive action to your members, to the public, to members of Congress, even to the world. Your group could run banners on its website with opinions about public policy without triggering the lobbying limit.
In addition, the lobbying limit does not bar an organization from contacting executive administration officials about administration policy, whether it is the White House or an executive agency. A nonprofit may even reach out to members of Congress and their staff regarding executive action without running afoul of the rules.
Lastly, grassroots lobbying about actions by the executive branch not related to specific legislation doesn’t bump up against the lobbying limit. Considering that most of the Trump administration’s actions to date have been nonlegislative, the lobbying limit does not come into play.
Understand Where the Limits Are
Even when specific legislation is involved, charitable organizations may still advocate about the legislation without limit, so long as some types of communications are avoided. Here, the details matter, but they are not hard to master.
Considering that most of the Trump administration’s actions to date have been nonlegislative, the lobbying limit does not come into play.
There are two types of communications about specific legislation that may be limited: direct communications with government officials, and grassroots communications with the general public.
For direct communications — think meetings with members of Congress or the administration and their staff — the lobbying limit is triggered when the organization makes its views on specific legislation known. This is how most people think of lobbying: going to Capitol Hill and meeting with lawmakers to push for or against a bill. If this type of direct influence is important to you, while permitted, it must be done within the confines of the lobbying limits.
For grassroots outreach with the public, the lobbying limit is triggered only if the communication both expresses a view on specific legislation and contains a call to action, such as telling the audience to contact a legislator or their staff. Grassroots messaging without a call to action is not legislative lobbying but considered a type of issue advocacy (unless it occurs within two weeks of a scheduled vote). That means you may express mission-related views on legislation to the general public without limit. Speeches, podcasts, editorials, media appearances: All may contain views on legislation without being considered lobbying, so long as the audience is not encouraged to contact legislators.
Learn How to Lobby Legally
Further, even if the limit is triggered, legislative lobbying is allowed, so long as it does not become “substantial.” Legislative lobbying then becomes a matter of compliance, or staying within the limits. (One note: Private foundations generally may not engage in legislative lobbying.)
For charities that wish to do so, the easiest path is to make what is known as a “501(h) election.” This just requires that you check a box on your group’s Form 990 and then report all legislative lobbying based on lobbying expenses. Because only expenses count toward the limit, activity by volunteers does not count. And many forms of lobbying are cheap, like posting content on a website, or sending mass emails to members that contain a call to action. This means that you can engage in a lot of legislative lobbying without incurring many expenses, staying well below the limit.
Speeches, podcasts, editorials, media appearances: All may contain views on legislation without being considered lobbying.
Under the 501(h) test, total lobbying expenses may not exceed a certain percentage of your budget. For example, an organization with a $500,000 budget (for its exempt purposes), can spend up to $100,000 a year on legislative lobbying. For larger organizations with budgets of more than $17 million, the legislative lobbying limit is $1 million a year. Grassroots lobbying may not be more than 25 percent of the organization’s total legislative lobbying.
Even if the lobbying limit is exceeded in one year, the nonprofit will not lose its tax-exempt status, but would instead have to pay an excise tax for the year, thus increasing the cost of the lobbying activity for the year. Loss of tax exemption becomes a risk only with excessive lobbying over multiple years. This is easily avoided with careful planning.
Watch for Possible Changes to Tax Law
Some defined activities don’t count as legislative lobbying. These include nonpartisan analysis or research and what is known as “self-defense” lobbying. These two exceptions to the lobbying definition could be the ones to watch in potential changes to tax legislation under Trump.
First, under the research exception, objective educational reports are not lobbying. Thus, nonprofits that study and report on the effects of proposed legislation are engaged in education, not lobbying, even if the report expresses a view on the legislation.
Secondly, if Congress were to introduce legislation to repeal or reduce the charitable deduction or take away tax exemption from categories of nonprofits, charities could defend themselves by lobbying against the legislation in direct communications with government officials without limit.
There are special rules that you should be aware of when invoking either of these exceptions. For example, if your research is used in grassroots communication with your supporters, it might trigger the lobbying limit. The self-defense exception does not apply to grassroots outreach or to general funding cuts or appropriations by Congress. But even if an activity may be subject to the limit, some lobbying is still allowed, and with a 501(h) election in place, you can rest assured you will not lose your exempt status.
Advocacy activity must be germane to the organization’s mission.
Finally, if you do want to engage in substantial legislative lobbying, your group has the option of forming a 501(c)(4) social-welfare organization. These groups may engage in unlimited legislative lobbying. Use of such subsidiaries is common and legal, the important caveat being that funding for the 501(c)(4)’s lobbying cannot come from any 501(c)(3) organization, whether its affiliate or another charity.
Speak Out With Confidence
When it comes to advocacy activity by nonprofits, there are far fewer limits than most people believe. Mainly, advocacy activity must be germane to the organization’s mission. Given that, electioneering is not allowed, and legislative lobbying is limited, but compliance with the limit is not especially difficult. Otherwise, nonprofits are free to engage with government officials and the public, and express opinions about public policy, including all nonlegislative policy initiatives.
At a time when the nation’s direction is changing rapidly, nonprofits have an important role to play. You can weigh in on public policy and should be confident that you can speak out without violating your tax-exempt status. Just know your rights, understand the law, and take action appropriate to your mission.
