rules, recordkeeping & advanced strategies
DESCRIPTION
Public Charity Lobbying. Rules, Recordkeeping & Advanced Strategies. Terry Miller www.terrymiller.biz [email protected]. Agenda. Review IRC 501(h), 4911, & Regs Recordkeeping; Reporting Identifying Lobbying Excise Tax & Revocation Describe & discuss advanced operational strategies. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/1.jpg)
Terry Millerwww.terrymiller.biz
Rules, Recordkeeping
& Advanced Strategies
Public Charity Lobbying
![Page 2: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/2.jpg)
1. Review IRC 501(h), 4911, & Regs• Recordkeeping; Reporting• Identifying Lobbying• Excise Tax & Revocation
2. Describe & discuss advanced operational strategies
Agenda
![Page 3: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/3.jpg)
Overview
• public charities may lobby, within limits• 2 tests: facts and circumstances test OR
IRC 501(h) expenditure test• expenditure test requires election: Form
5768• most, but not all, public charities are eligible
(churches & certain affiliates, government units, supporting organizations to (c)(4,5,6) organizations, 509(a)(4) testing for public safety)
![Page 4: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/4.jpg)
History: The Law Evolves
• 1930: Slee v. Commissioner of Internal Revenue
• 1934: “no substantial part” added to IRC 501(c)(3)
• 1954: prohibition on candidate “intervention” added to IRC 501(c)(3)
• 1976: IRC 501(h) and 4911 added to provide more certainty
• 1990: defining regulations adopted
![Page 5: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/5.jpg)
Electing 501(h) v Non-Electing
a)Note: 2008 990,
b)narrative appears gone
![Page 6: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/6.jpg)
501(h) Recordkeeping: 3 Steps
1) Calculate Lobbying Allowances a/k/a “Lobbying Nontaxable Amount”
2) Identify Lobbying ActivitiesMust keep in mind special rules
3) Calculate Lobbying Expenditures
![Page 7: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/7.jpg)
Lobbying Allowances - the Formula• 2 allowances: Total, and “Grassroots”• Total allowance:
sliding scale % of Exempt Purpose Expenditures• 20% of first $500K• 15% of next $500K• 10% of next $500K• 5% over $1.5M
• Maximum allowance = $1M (occurs at $17M EPE)
• Grassroots allowance is 25% of total allowance
![Page 8: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/8.jpg)
Exempt Purpose ExpendituresReg. 56.4911-4
Usually all expenses, EXCEPT:a) costs of “separate fundraising unit”
(2 or more staff)b) payments to fundraising counsel or
professional fundraisersc) capital expenditures (s/l depreciation OK)d) investment management expensese) certain excise taxesf) certain transfers (see Reg. 56.4911-4(e))
![Page 9: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/9.jpg)
Calculate Lobbying Allowance(“lobbying non-taxable amount”)
• Exempt Purpose Expenditures = $1,760,000 20% x 500,000 = 100,000 15% x 500,000 = 75,000 10% x 500,000 = 50,000 5% x 260,000 = 13,000EPE 1,760,000 238,000 = total allowance
x 25% 59,500 = grassroots allowance
Example:
![Page 10: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/10.jpg)
Identify Lobbying Activity
• “Direct Lobbying” is communication with legislator about specific legislative proposal, expressing a view, with intention to influence the legislation >> Reg 56.4911-2(b)(1)
• “Grassroots Lobbying” communication with the public, about specific legislative proposal, expressing a view, calling for action to communicate with a legislator to influence the legislation >> Reg 56.4911-2(b)(2)
![Page 11: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/11.jpg)
Direct v. Grassroots Lobbying
![Page 12: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/12.jpg)
Calls to Action
Direct:1. Tells recipient to contact legislator2. Provides legislator contact info3. Provides response mechanism
Indirect:4. Lists key, allied, opposed, or undecided
legislators on a specific legislative proposal
![Page 13: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/13.jpg)
What is NOT Lobbying? 11) Volunteer effort (501(h) is an expenditure
test) >> Reg 56.4911-2(b)(4)(ii)
2) Attempts to influence executive branch matters >> Reg 56.4911-2(b)(1)(i)
3) Communications with the public expressing a view on specific legislation, with NO call to action >> Reg 56.4911-2(b)(2)(ii)
4) Communications with members expressing a view on specific legislation, with NO DIRECT call to action >> Reg 56.4911-5(b)
![Page 14: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/14.jpg)
What is NOT Lobbying? 25) Communications about a Broad Social Problem
are not a specific legislative proposal, by definition >> Reg 56.4911-2(c)(2)
6) Nonpartisan Analysis Study & Research >> Reg 56.4911-2(c)(1) • substantial non-lobbying distribution, not just to one
side of a proposal >> Reg 56.4911-2(b)(2)(v)(E)• full exposition of the facts >> Reg 1.501(c)(3)-1(d)(3)• may express a view, but only contain an indirect call
to action >> Reg 56.4911-2(c)(1)(vi),(vii)
![Page 15: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/15.jpg)
What is NOT Lobbying? 3
7) Requests for opinions, recommendations and Technical Advice by a legislative body, committee or sub-committee >> Reg 56.4911-2(c)(3)
8) Self-defense lobbying (affects existence, powers & duties, tax-exempt status, or deductibility of contributions)
>> Reg 56.4911-2(c)(4), 2(d)(3)
![Page 16: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/16.jpg)
What is NOT Grassroots Lobbying?
1) Communication with the public on ballot measures is DIRECT lobbying
>> Reg 56.4911-2(b)(1)(iii)
2) Communication with members encouraging them to make a DIRECT lobbying contact (but NOT encouraging them to “tell your friends and neighbors”)
>> IRC 4911(c)(3)(A)
![Page 17: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/17.jpg)
What MAY BE Lobbying?1) Subsequent Use of Nonpartisan Analysis Study &
Research within six months may render the earlier preparation costs grassroots lobbying >> Reg 56.4911-2(c)(1)(v)
2) Mass Media advertisements within 2 weeks of a highly publicized vote by legislative body or committee even with NO call to action >> Reg 56.4911-2(b)(5)
3) Also don’t forget: Preparation for Lobbying (could be either type), Contact with executive branch officials to encourage action on
specific legislation (direct), and accidentally saying in a membership communication “so tell your
friends and neighbors” (grassroots)
![Page 18: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/18.jpg)
Identifying Lobbying: Flowchart
![Page 19: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/19.jpg)
Advanced Topics: Mixed Purpose / Mixed Audience
>> Reg 56.4911-3
Allocate Lobby / non-Lobby
Lobby: “tell public”
Direct call to action
Only indirect call to action
Members Only (>85%)
reasonablesplit
100% grassroots
100% direct 0% lobby, 100% educ
Primarily Members (>50%)
reasonable split
100% grassroots
split % mbrs: dir public: gr
split % mbrs: educ public: gr
Primarily non-Members (the Public)
same specific subject; all grassroots
100% grassroots
100% grassroots
100% grassroots
![Page 20: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/20.jpg)
Calculate Lobbying ExpendituresCost Allocation Basics• Direct costs (travel, publications, lobbyist
fees, mailing costs, media)• Portion of mixed-purpose activities (case-by-
case analysis & allocation)• Staff cost (timesheets or incident reports)• Proportionate share of Overhead
Allocation must be “fair and Allocation must be “fair and reasonable“reasonable“
![Page 21: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/21.jpg)
Sample Timesheet 11 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total
Adopt a Kid Project
6 8 7 8 4 5 3 4 4 49
Direct Lobbying 4 2 3 9GR Lobbying 3 3
Health Project 2 1 4 5 3 2 4 21
Direct Lobbying
GR Lobbying
VacationSick Leave 8 8
Total 8 8 8 8 8 8 9 8 8 9 8 90
![Page 22: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/22.jpg)
Sample Timesheet 21 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total
Adopt a Kid ProjectUnadopted Kids
Memo 6 6 12
Adoption Day Event 2 8 4 5 7 4 30
“I’m adopted” Ads 5 5
Tax Incentive Work 7 3 4 14
Health Project 2 1 4 5 3 2 4 21
Direct Lobbying
GR Lobbying
VacationSick Leave 8 8
Total 8 8 8 8 8 8 9 8 8 9 8 90
![Page 23: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/23.jpg)
Staff Member Total Hours Direct Lobbying
% of hours
for Direct
Grassroots Lobbying
Executive Director 2010 449 22.3% 111
Deputy Director 2000 151 7.6% 58
Research Director 2150 100 4.7% 99
Research Assistant
1901 0 0% 32
Special Program Coordinator
1939 0 0% 0
Total 10,000 700 300
Percentage of Total Hours
7.0% 3.0%
Sample Staff Time Summary% of
hours for GR
5.5%
3%
4.6%
1.7%
0%
![Page 24: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/24.jpg)
Cost Center or Workpaper?• Always keep:
• contemporaneous source documents (time records) always best
• records on mailings and distributions• samples of contents• copies of Web pages, email alerts
• Cost center or Workpaper?• Cost Center: allows for careful monitoring• Workpaper: allows flexibility
![Page 25: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/25.jpg)
Reporting: 990 Schedule A, Pg 2
a)Note: this is no longer the form as of the 2008b)Form 990. A similar question (just yes/no) is now on c)Part IV of Core Form
![Page 26: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/26.jpg)
Reporting: 990 Schedule A, Page 5
a)Note:b)2008c)Form 990d)is verye)similar butf)this partg)is now inh)Schedule C
![Page 27: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/27.jpg)
Reporting: non-Electing Charities, Part VI-B
Line Items
a)Note: 2008 Form 990 is very similar but this partb)is now in Schedule C
![Page 28: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/28.jpg)
Reporting: Electing Charities, Part VI-A
4 year test
1 year test
a)Note:b)2008c)Form 990d)is verye)similar butf)this partg)is now inh)Schedule C
![Page 29: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/29.jpg)
Excise Tax & RevocationElecting Charities
• excess lobbying, either type, in any one year: 25% excise tax (if both exceeded, the higher of the two)
• revocation only if exceed either allowance by 150% over any given four-year period
• State A.G. might have questions about excise tax as use of charitable funds
Non-Electing Charities• excess = revocation
![Page 30: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/30.jpg)
AdvancedStrategy
Ideas
![Page 31: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/31.jpg)
Use a (c)(4) “bank”
• Electing charity makes controlled grants, one for grassroots lobbying, one for direct lobbying to an affiliated or allied 501(c)(4) (or (c)(5) or (c)(6)) allied organization each year+fully spends allowance, no tax+prevents need to overspend in some years,
paying tax on prior years+tidy; all lobbying done by affiliate
Reg 56.4911-3(c)
![Page 32: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/32.jpg)
Always make substantial non-lobbying distribution• Electing charity always takes research
results and prepares a study, which it distributes widely for public education purposes +assists with allocation of research efforts
between lobbying and non-lobbying; documents that the primary purpose is not lobbying
+Tip: maintain a list of professors & press & other nonprofits
Reg 56.4911-2(b)(2)(v)(E)
![Page 33: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/33.jpg)
Know “Donors” = “Members” • Members are those who contribute more
than nominal amount of time or money (and some honorary). All donors should be characterized as members; they need not vote on corporate business+Communications with members are favored
as 1) direct lobbying even with a direct call to action, and 2) as education only if the call to action is merely indirect
Reg 56.4911-5(f)(1)
![Page 34: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/34.jpg)
Carefully Parse Your List• Parse sub-lists in the database so that
mailings can be structured / controlled as “only” to members (allows 15% other), “primarily to members” (over 50%) or “primarily to the public” as needed+The rules permit substantial flexibility in
allocations between lobbying and non-lobbying if a mailing is to only, or primarily members
+The rules treat communications to members without a direct call to action as mere education: unlimited
+Careful parsing also facilitates making substantial non-lobbying distribution (professors, press, interested nonprofits – on all sides of an issue)
>> Reg 56.4911-3, -5
![Page 35: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/35.jpg)
Establish Annual Patterns• Plan to engage in certain activities
annually, establishing a pattern+most relevant to avoiding appearance of
prohibited candidate electioneering: Is it electioneering to have banquet speaker who is allied officeholder seeking re-election?
+annual voting record scoring tied to legislative cycle rather than election cycle: Is it lobbying? Electioneering?
+polling and survey research on public opinion about relevant public policy issues: Is it annual research or lobbying preparation?
![Page 36: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/36.jpg)
Adopt New Fiscal Year• Adopt fiscal year-end that applies two
annual lobbying allowances to:+one legislative session, or +preparation and campaigning on one ballot
measure
![Page 37: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/37.jpg)
Learn to do NPASR • >> Reg 56.4911-2(c)(1)
• Non Partisan Analysis, Study, and Research is NOT lobbying, even if it reaches a conclusion about what legislative proposal is best, and even if it contains an indirect call to action+substantial non-lobbying distribution (“at
least as great as the lobbying distribution?”)+cannot only distribute to one side or the other+educates the public, lays a base for later
battles+easier to raise charitable money to support
![Page 38: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/38.jpg)
Calculate and monitor theexcise taxable amount and revocation ceiling• Measure questionable transactions (“is
it preparation for lobbying?”); if not reported as lobbying, verify these costs will not exceed allowance by 50% for a four-year period+think of it like a reserve account
![Page 39: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/39.jpg)
Master Calls-to-Actiondirect? indirect? none?
+ NPASR: expresses a view, only has indirect call to action: NOT lobbying
+ communications with members that expresses a view about specific legislation and only has an indirect call to action: NOT lobbying
+ grassroots lobbying vs. public education: communication to general public that expresses a view on specific legislation but has no call to action: NOT lobbying
+ SOP 98-2: is it a feature or a bug?+ if adopted for Form 990, allows lobbying activity to
potentially hide as fundraising+ some groups inadvertently issue lobbying calls to action in
order to solve the 98-2 call to action as v. pure fundraising
![Page 40: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/40.jpg)
Master Discussion of Broad Social Problems
• Master discussion of broad social problems and calling for action as part of the early stages of a larger debate and issue campaign
![Page 41: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/41.jpg)
Train Staff• Staff training: make sure that program
staff know what is direct lobbying and what is grassroots lobbying+document the training efforts to show IRS in
support of time records+add to employee manual certain controls?+allows staff to account for time accurately+allows staff to construct issue campaigns
strategically
![Page 42: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/42.jpg)
Train Members• Member training: make sure members
and financial supporters are trained in advance, and have an easy-to-save (refrigerator magnet?) list of legislators and policy-makers+later, communications to members about
specific legislation, and expressing a view, even if including an INDIRECT call-to-action (key legislators), will not be lobbying, and the members will hopefully know what to do
>> Reg 56.4911-5(b)
![Page 43: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/43.jpg)
Issue Campaigns = 5 Year Planning • Learn to do five-year planning and
budgeting for the full arc of an issue campaign+begins with public education and calls
for action on broad social problem+moves into specific lobbying+in some cases may move into
candidate accountability
![Page 44: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/44.jpg)
Plan for List ownership by an IRC 501(c)(4,5,6) if possible• Arrange for the list to be held by an
affiliated non-charity if possible; it allows much greater flexibility - CAUTION: cannot spend charitable money
building the list if owned by non-charity+(c)(4,5,6) may provide use to (c)(3) for free,
or charge fair market value+(c)(4,5,6) may do “list enhancement”
merging in voter participation information
![Page 45: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/45.jpg)
Arrange Invitations to give Technical Advice• Technical Advice does not require the
same “full and fair exposition of the facts” test that NPASR does+friendly committee chairs can often arrange
to invite testimony in writing+helps create a substantial non-lobbying
purpose for research costs
![Page 46: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/46.jpg)
Understand the “Macintosh” rules for Private Foundations
• Private Foundation may provide support for a specific project that includes lobbying, so long as the grant is less than the non-lobbying portion+foundations may need education on this
point+Alliance for Justice booklet: “Foundation
Support for Advocacy: Myth vs. Fact”
![Page 47: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/47.jpg)
Learn to recognize Self-Defense Lobbying• Self-Defense exception is NOT about budget
cuts or reductions in funding. Examples are:+attempt to repeal property tax exemption for
charities through ballot measure or legislature+attempts to change deductibility of certain gift
items such as highly appreciated stock +legislative or ballot measure efforts to make it
harder for employers to allow charitable solicitation of employees for charities that lobby
![Page 48: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/48.jpg)
Know when to revoke Section 501(h) election
• Authorities differ on this point, but possible scenarios for revocation include:+budget sufficiently large that 5% is well over $1M
maximum 501(h) allowance+no direct lobbying, but grassroots is a bit over 5%+the IRS targeted audit program continues+cases where substantial non-lobbying VOLUNTEER
effort would reduce the substantiality of lobbying under facts and circumstances
![Page 49: Rules, Recordkeeping & Advanced Strategies](https://reader036.vdocuments.net/reader036/viewer/2022062323/56816784550346895ddc9676/html5/thumbnails/49.jpg)
end