Members of Prosperity Indiana have a right and a duty to be engaged in public debate on important policy issues. This is especially true of the nonprofit members.

All nonprofits have a vital role to play in  democracy. For 501(c)(3) nonprofit organizations (public charities), this role can include advocacy and lobbying. Building relationships with elected officials is permitted and strongly encouraged to support Prosperity Indiana's efforts on behalf of members and the community economic development industry.

What is advocacy?

Advocacy involves identifying, embracing and promoting a cause. There is no limit to the amount of advocacy you can do. Advocacy is not lobbying! It is only when this advocacy deals with specific legislation that limits come into play. Lobbying is defined by federal tax law as any attempt to influence specific legislation. Legislation means a bill that has been introduced, or a draft bill that may be introduced in any legislative body such as a city council, state legislature or Congress.

How much lobbying can a public charity do? What is the 501(h) election?

Public charities may engage in a limited amount of legislative lobbying under either the “substantial part” test or by electing to operate such activities under the Section 501(h) of the tax code. The IRS evaluates the “substantial part” test on the basis of the facts and circumstances, such as the time (by both paid and volunteer workers) and the expenditures devoted to lobbying by the organization.

Under 501(h) expenditure test, public charities may spend:

  • on Direct Lobbying:
    20% of the first $500,000 of its exempt purpose expenditures;
    15% of the next $500,000, and so on, up to one million dollars a year.
  • on Grassroots Lobbying: 
    5% of the first $500,000 of its exempt purpose expenditures;
    3.75% of the next $500,000, and so on, up to $250,000 a year.

Direct lobbying is defined as an attempt to influence legislation by stating a position on specific legislation to legislators or other government employees who participate in the formulation of legislation, or urging your members to do so.

Grassroots lobbying is defined as an attempt to influence legislation by stating a position on specific legislation to the general public and asking the general public to contact legislators or other government employees who participate in the formulation of legislation.

What does not count as lobbying? There are five activity categories that are excluded from the term "influencing legislation." They are:

  1. Self-defense. Communication on any legislation that would affect an organization's existence, powers and duties, tax-exempt status, or deductibility of contributions is not lobbying.
  2. Technical advice. Providing technical advice to a governmental body in response to a written communication is not lobbying.
  3. Non-partisan analysis or research. Studying community problems and their potential solutions is considered non-partisan if it is "an independent and objective exposition of a particular subject matter...(which) may advocate a particular position or viewpoint so long as their is a sufficiently full and fair exposition of pertinent facts to enable the public or an individual to form an independent opinion or conclusion."
  4. Examinations and discussions of broad social, economic and similar problems. Communication with the organization's own members with respect to legislation which is of direct interest to them, so long as the discussion does not address the merits of a specific legislative proposal and make no call for action is not lobbying.
  5. Regulatory and administrative issues. Communication with governmental officials or employees on non-legislative (i.e. administrative) matters such as rule-making is not lobbying.

These links are PDF summaries prepared by Prosperity Indiana's advocacy team to guide your efforts.

Want to know how to identify your legislators or what is happening with a particular bill?

Search for federal and state legislators and bills on our action page.

Prosperity Indiana
202 East Market Street, Indianapolis, IN 46204 
Phone // 317.454.8533 Fax // 317.454.8534 
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