501(c)(3)s can play an important role in shaping public policy. But when it comes to engaging in advocacy, 501(c)(3)s must navigate a complex web of regulations to maintain their tax-exempt status. One of the most critical areas of compliance involves the rules around lobbying activities. While 501(c)(3)s are allowed to engage in some lobbying, they can only do so within certain limits.
However, there is an important exception that allows 501(c)(3)s (including private foundations, which typically are not permitted to engage in even an insubstantial amount of lobbying) to engage in nonpartisan analysis, study, and research, even if such activity would otherwise constitute lobbying. This exception is a powerful tool that allows 501(c)(3)s to educate the public and legislators without the fear of exceeding their permitted lobbying limits.
The Exception
Generally, engaging in nonpartisan analysis, study, or research and making available such analysis, study, or research to the general public will not constitute direct or grass roots lobbying. The exception covers independent and objective exposition of a particular subject matter and includes any activity that is considered “educational” within the meaning of § 501(c)(3) of the Internal Revenue Code.
Nonpartisan analysis, study, or research may advocate for or against a particular position so long as there is sufficiently full and fair exposition of the pertinent facts to enable the reader to form an independent opinion on the subject matter.
For example, an environmental organization creates and widely distributes a report about the impacts of desalination facilities used to create freshwater. The report presents a full and fair discussion of the economics, policy considerations, environmental implications, alternative technologies, and other relevant information relating to desalination plants and concludes that such facilities are harmful to the environment and thus should not be subsidized by the government. The report refers to a specific piece of legislation, includes a view on the legislation, and lists the specific legislators who will vote on the matter. Under 501(c)(3) lobbying rules, this would be considered lobbying. However, the nonpartisan analysis, study, or research exception applies because the report (i) is widely distributed and (ii) presents a full and fair discussion of the subject matter. Accordingly, the resources spent on creating and disseminating the report would not be considered lobbying activity and would not count toward the environmental organization’s permitted lobbying limits.
Now, let’s discuss the two prongs of the exception: full and fair discussion and broad distribution.
1. Full and Fair Discussion
The 501(c)(3) must present a complete and unbiased discussion of the issue, including full and fair description of the facts. The discussion must be sufficient to allow readers to form their own conclusion or opinion regarding the subject matter. The analysis must not be skewed, and the facts cannot be presented in a way that favors or disfavors a particular view.
Even though a 501(c)(3) is allowed to state their position on a certain issue or piece of legislation, it must include a discussion of all other perspectives, including those disfavoring the 501(c)(3)’s view.
2. Broad Distribution
The analysis, study, or research must be made available to the general public, a segment of the general public, or to governmental bodies or employees. The information may be distributed as a report, fact sheet, presentation, podcast, speech, webinar, article, white paper, or any other medium that allows for full and fair discussion of the subject matter. For example, a bumper sticker or pin would not be considered an appropriate medium because they cannot present a comprehensive discussion of the issue.
The analysis, study, or research must be disseminated in a nondiscriminatory and objective manner. Meaning, the analysis cannot be made available or disseminated only to individuals holding the same viewpoint as the 501(c)(3). The analysis must be distributed to individuals representing all sides of the issue equally.
What Types of Communication are Allowed Under the Exception?
Analysis, study, or research must meet the two prongs – full and fair discussion of the facts and broad distribution – in order to be covered by the exception. Where the two prongs are met, the 501(c)(3) may express a view on the subject matter or a specific piece legislation and can include an indirect call to action.
An indirect call to action is a communication that may encourage someone to take action but does not expressly ask the person to do so. For example, an indirect call to action would be providing the names of legislators voting on a certain piece of legislation.
In contrast, direct calls to action are not allowed. For example, if the organization states: “Call your legislator and urge them to oppose bill X,” the organization would be engaging in a direct call to action. Direct calls to action constitute lobbying even if the analysis, study, or research otherwise provides a full and fair discussion of the facts and is broadly distributed.
Subsequent Use Rule
Often, creating nonpartisan analysis, study, or research takes considerable resources and the results may be relevant over an extended period. It’s not uncommon for 501(c)(3)s to distribute a report or study multiple times over the course of a year or several years. It is important to note that even if the activity initially falls within the exception, subsequent use may render it lobbying activity.
For example, if a 501(c)(3) created and distributed a report that falls under the scope of the nonpartisan analysis study, or research exception and four months later uses the report as part of a grass roots lobbying communication, the resources expended to create the report will be presumed to be lobbying activity and will need to be counted toward the organization’s lobbying limits.
There are two safe harbors from the subsequent use rule. First, if the 501(c)(3) can show that the primary purpose of the analysis, study, or research was a non-lobbying purpose, the subsequent use rule will not apply. Second, if the organization waits six months before using the analysis, study, or research in a grass roots lobbying communication, the subsequent use rule will not apply.
Conclusion
The nonpartisan analysis exception is vital for 501(c)(3) organizations because it allows them to fulfill their mission of educating the public and contributing to informed public debate without running afoul of lobbying restrictions. Navigating the rules governing lobbying activities can be challenging for 501(c)(3) organizations, but the nonpartisan analysis exception provides a valuable avenue for engaging in public policy discussions. By ensuring that their analyses are full, fair, nonpartisan, and widely disseminated, nonprofits can inform and influence the public discourse on important legislative issues without risking their tax-exempt status.
Lobbying rules for 501(c)(3) can be quite complex. Remember to reach out to a tax professional before engaging in any activity that may be considered lobbying to make sure the proper safeguards are in place for your organization.
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Kyler Mejia is an associate (bar admission pending) with Caritas Law Group, P.C. Kyler counsels nonprofit and socially responsible businesses on corporate, trademark, tax, and fundraising matters nationwide and advises donors concerning major gifts. To schedule a consultation, call 602-456-0071 or email us through our contact form.