Lobbying Limitations in Qualifying for Nonprofit Tax-exempt Status

The main challenge in getting nonprofit, tax-exempt status for most community organizations is that they describe what they plan to do (political action) in terms that the IRS interprets as forbidden activities for 501(c)(3) corporations. That is, what some groups do is describe their organizing work in terms that the IRS reads as "lobbying" or “partisan political activity". Lobbying by 501(c)(3) corporations is severely limited and "partisan political activity" (e.g. endorsing candidates, electioneering, etc.) is prohibited. So when you say, "Our purpose is to hold our elected officials accountable…" the IRS will, hold up your application and request additional information or reject it outright.

Tax-exempt, 501(c)(3) corporations are generally expected to engage in "social, educational or charitable work." Though tax-exempt groups ARE permitted to engage in SOME lobbying (provided it does not consume a "substantial" part of the corporation's resources, generally defined as 20% or less), the IRS has of late been focusing more on this and your application may be held up if it features this activity prominently on their initial application. Nonprofit, tax-exempt groups are not allowed to spend any of their resources in endorsing or promoting candidates or getting involved in partisan political activities. If you say anything on your application that even HINTS at such activities, IRS will probably "bounce" your application.

Understand the rules and follow them. You must tell the truth. If you really do intend to spend a substantial amount of your group's resources doing things that IRS restricts or forbids, then maybe 501(c)(3) is not for you; and so you should look at other forms, such as staying an unincorporated association, forming a 501(c)(4) corporation or a "political action committee (PAC)." As discussed earlier, these forms change the way you raise funds and NPS does not enter into Friends Groups relationships with such organizations. If on the other hand, your purpose is education and other permissible activities for 501(c)(3) groups, SAY SO.  Don't use your application for 501(c)(3) recognition as a soap box – it isn’t relevant and the IRS examiner is likely to reject the application if you do.

The above discussion was taken from "Should Your Group Incorporate?", by Will Collette and Ron Simon. Publication date not provided. Contact Citizen's Clearinghouse For Hazardous Wastes, Inc copyright permission.