Tax-exempt organizations (other than private foundations) have the ability to influence legislation either as an insubstantial part of their activities or by making the 501(h) election and measuring their lobbying expenditures. However, state and federal laws often require principals and their lobbyists to register prior to engaging in lobbying and file expenditure reports. In Arizona, the Secretary of State regulates lobbying activity.
In light of a recent public disagreement over one nonprofit’s duty to register its employees as lobbyists, it’s a good time to remind Arizona nonprofits of their duty to register with the Secretary of State if they are engaging in lobbying.
For purposes of the lobbyist registration rules, Arizona defines lobbying more broadly than federal tax law. Specifically, Arizona defines lobbying as attempting to influence the passage or defeat of any legislation by directly communicating with any legislator; or in the case of bonding lobbyists, directly communicating with any school district employee or a school district governing board member or attempting to influence any formal rulemaking proceeding by directly communicating with any state officer or employee.
Principal Registration and Reporting
A nonprofit that wishes to lobby must register as a Principal before it conducts lobbying activities. The Principal must provide the name of its Designated Lobbyist and any others lobbying in on its behalf. The Secretary of State’s office must be notified of any changes in this information within five business days of a change.
The nonprofit must also notify any person it lists as a lobbyist that it has disclosed the individual as such and that the individual is therefore required to register with the Secretary of State and provide reports. Additionally, the nonprofit principal must provide annual reports and renew its registration every two years until it no longer engages lobbyists.
Types of Lobbyists
Designated Lobbyist Registration and Reporting.
Each Principal must have a Designated Lobbyist whose responsibility it is to file their Lobbyist Registration and Lobbyist Quarterly Expenditure Reports as well as the Principal’s Registration and Annual Expenditure Reports. The Designated Lobbyist signs all reports filed for himself and for the Principal he or she represents. The Designated Lobbyist can be an individual or a professional lobbying firm.
Lobbyist for Compensation
A Lobbyist for Compensation is an individual or firm that is compensated by the Principal and whose primary job responsibility is to lobby in Arizona for a Principal. A Lobbyist for Compensation is also required to file a Lobbyist Registration form and to file Lobbyist Quarterly Expenditure Reports with the Secretary of State’s office.
A lobbyist who is other than a designated lobbyist or lobbyist for compensation is an Authorized Lobbyist.” An Authorized Lobbyist may be paid staff or a volunteer for the Principal. An Authorized Lobbyist is considered registered when listed on the Principal’s registration form. He or she is not required to file expenditure reports directly to the Secretary of State. Instead, he or she reports expenditures to the Designated Lobbyist, who includes the expenditures on the Designated Lobbyist’s Quarterly Expenditure Report.
Employees of Lobbyists
Are lobbyists who are employed by lobbyist firms or by other lobbyists as their employees. Employees of Lobbyists are registered by the lobbyist who employs them or by the lobbyist firm when they file their Lobbyist Registration. Employees of Lobbyists do not file expenditure reports directly to the Secretary of State’s office. Instead, the Employee of Lobbyist’s expenditures is included in their employer’s Lobbyist Quarterly Expenditure Report.
Nonprofits that engage professional lobbying firms likely have these registrations taken care of by their lobbying firms. Those who aren’t so fortunate should calendar these duties and make sure someone is assigned to make sure their registration and expenditure reports are filed on time.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.