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It Ain't Illegal to Lobby!: How 501(c)(3)s Can Change Public Policy for the Better

Updated: Nov 4, 2022

Can I talk to you for a minute about that infamous "L-word," you know, the one that makes nonprofits throw up the proverbial "finger cross" and pull out their holy water?

Well, at the risk of banishment, I'll just come right out and say it.


There. I said it.

And don't go reporting me to the IRS either because guess what?

The tax code allows, even ENCOURAGES, nonprofit lobbying.

That's right!

Not only is lobbying not illegal, but the history of the tax code shows that Congress actually wants nonprofits to do it!

I'll explain more in a minute, but first let's talk about where this whole "nonprofits can't lobby" myth came from.

The Origins of the Myth

I'm not entirely sure where 501(c)(3)s got the idea that they aren't allowed to lobby.

But my guess is that for the earliest proponents of the myth, the idea served as protection against having their tax exempt status revoked.

Before 1976, 501(c)(3)s could only lobby if their lobbying activities were "insubstantial," hence the creation of the "insubstantial test" in figuring out how much lobbying is allowable.

But the insubstantial test is ridiculously vague, don't you think?

How are nonprofits supposed to figure out how much activity is "insubstantial?"

The "less than 5% of all activities" rule that some experts came up with to define it isn't much help.

It's nearly impossible to quickly and confidently "percentify" activities, at least down to a number as small as 5%.

So, in an effort to play it safe instead of sorry, nonprofits came up with the idea that they shouldn't (or couldn't) lobby at all.

That's my version of the story at least.

But regardless of how the myth came to be, it's false, fear-based, and it's kept thousands of 501(c)(3)s from using their grassroots experience to change public policy for the better.

Section 501(h) to the Rescue

Here's some good news though!

While the insubstantial test still exists, to encourage nonprofits to lobby, Congress amended the tax code in 1976 to add section 501(h).

It allows for a clear, straightforward expenditure test for figuring out how much a nonprofit can lobby based on its annual expenses.

Now, nonprofits can safely lobby without worrying about whether they are jeopardizing their tax exempt status.

And nonprofit advocacy organizations all over the nation have been using the 501(h) election for decades to make major changes to public policy and improve the lives of the people they serve.

Let's look at some examples.

Nonprofits That Changed Their Communities By Changing the Law

1. Mothers Against Drunk Driving (MADD)

Mother's Against Drunk Driving (MADD), was founded in 1980 by Candy Lightner, a grieving mother whose 13 year-old daughter had recently been killed by a drunk driver with multiple DUI offenses.

As well as changing the public perception of drunk driving through highly successful public education campaigns, MADD was the driving force behind legislative efforts leading to the federal drinking age being raised to 21 in 1984.

MADD has also led legislative efforts resulting in more strict drunk driving laws and the blood alcohol level for legal intoxication being lowered to 0.08 in every state.

2. Rhode Island Coalition for the Homeless (RICH)

In June 2012, Rhode Island became the first state to pass a Homeless Bill of Rights, which prohibits discrimination based on housing status.

"No person’s rights, privileges, or access to public services, " it states, "may be denied or abridged solely because he or she is homeless. Such a person shall be granted the same rights and privileges as any other resident of this state.”

The bill's passage was due in large part to RICH's campaign educating the public and legislators about the harsh realities of life as a homeless person.

Since the bill's passage in Rhode Island, a Homeless Bill of Rights has been passed in Illinois and Connecticut and has been considered in seven other states, in Puerto Rico, and in various major cities across the U.S.

3. Nebraska Appleseed

During the 2018 midterm election, Nebraska Appleseed led a succesful advocacy campaign that led to the passage of Ballot Initiative 427, which aimed to provide health insurance to 90,000 Nebraskans affected by a coverage gap.

The coverage gap was comprised of those whose income was too high to quailfy for Medicaid but who could not afford private health insurance.

Nebraska Appleseed mobilized thousands of volunteers to gather the 135,000 signatures needed to include the measure on the statewide ballot.

Then, by talking to community members and gathering their stories, they were able to educate the public about the impact of the insurance coverage gap through op-eds, letters to the editor, presentations at community forums, and fact sheets published on their website.

They also served as a valuable source of technical assistance to legislators and reporters.

Nebraska Appleseed's hard work paid off, and Initiative 427 passed, providing health insurance to thousands of Nebraskans.

See? Nonprofits have used legislative advocacy, including lobbying, to make major policy changes that have positively impacted not just local communities but communities throughout entire states!

And if they can do it, you can do it too.

Hey, are you still here?

You haven't banished me yet have you?

Oh, good!

Then look out for my next blog post to learn more about the section 501(h) election and how it helps nonprofits lobby without sweating over losing their tax-exempt status.

It's one of the first steps on your journey to changing the world.

I'll talk to you again soon, but shoot me an email if you have any questions. I'm always glad to help!


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