Lobbying and Advocacy Q & A

By Anita Lichtblau, Esq., CAPLAW

May 2008

Q: Can Community Action Agencies lobby to influence
legislation?
A: YES!!! Federal laws permit CAAs to lobby. Since public CAAs are part of local government, however, they should check their local government’s rules on lobbying.

Q: Before you get into specific issues, what’s the bottom line on
the best way to lobby within the rules?
A: CAPLAW recommends that CAAs put aside a small amount of unrestricted funds to pay for legislative lobbying expenses, including an allocation of staff time, travel, and other expenses. These lobbying expenses should be tracked for purposes of establishing that they were paid out of nonfederal funds and for reporting to the IRS.

Q: What type of lobbying are we talking about here?
A: For purposes of this Q & A, we are only talking about legislative lobbying, i.e. activities for the purpose of influencing state or federal legislation (but not local legislation), or referenda or ballot initiatives (that are voted on by the general public, rather than the legislature). This does include appropriations bills, but does not include trying to influence actions of executive branch agencies, for example comments on proposed Head Start regulations or requests to the federal Department of Energy to release LIHEAP fuel assistance funds to the states. However, you should check the terms and conditions of your federal grants and other grants derived from federal funds (such as CSBG) to see if there are additional lobbying restrictions.

Q: So, is every contact with a legislator or his or her staff
lobbying?
A: No, it’s not lobbying unless it’s for the purpose of influencing legislation. The key factor usually is whether specific legislation is discussed. Your CAA may participate in numerous types of advocacy or communications involving legislators that do not relate to legislation and therefore would not be considered lobbying.

Q: Isn’t there a limit on how much lobbying CAAs can do?
A: If you are a nonprofit 501(c)(3) CAA, the Internal Revenue Code does limit the legislative lobbying the organization can do; it cannot be a “substantial part” of the organization’s overall functions. The test of whether the lobbying is “substantial” is not a strict percentage of the total budget; the IRS looks at all of the “facts and circumstances,” including not only expenditures, but time spent by volunteers. The IRS will also balance the importance of the lobbying activities against the objectives and circumstances of the organization as a whole, rather than just looking at the time or money spent. For most CAAs, however, because the vast majority of their efforts are focused on providing direct services to and administering and coordinating anti-poverty programs for low-income individuals and families, it is unlikely that lobbying activities will exceed the “substantial part” test.
A nonprofit CAA, like most other 501(c)(3)s, may elect to be subject to the “expenditure test” rather than the “substantial part” test described above, for measuring lobbying activity. If it makes this so-called “501(h) election,” the CAA is subject to a sliding scale expenditure test made on the basis of a four-year average; it may spend annually up to 20% of the first $500,000 of its total expenditures for a tax-exempt purpose on legislative lobbying; 10% of the next $500,000, and 5% of the balance of expenditures, up to a total of $ 1 million per year. The election may be made by filing IRS Form 5768.

Q: Do we need to report to the IRS on lobbying?
A: Whether or not you make the 501(h) election, your CAA must still answer questions on the Form 990 (the informational return filed annually with the IRS) about legislative lobbying activities. If the 501(h) election is not made (most CAAs have not made this election), you must answer questions about the specific type of activity and provide narrative description and, for some questions, dollar amounts, in connection with the lobbying activity. For IRS purposes, you must report not only on lobbying paid for by the CAA, but also other lobbying, for example by volunteer board members or employees on their own time, if they are doing it as a representative
of the CAA, rather than as a private citizen. In order to understand the type of information you need to track for the Form 990, we recommend reviewing the IRS Form 990 and its instructions relating to lobbying, which are available on the IRS website www.irs.gov.

Q: So now I know that 501(c)(3)s in general can do a little lobbying, but I thought that CAAs can’t lobby because they receive so much federal funding?
A: Even 501(c)(3)s that receive federal funding may conduct lobbying activities, so long as they do not use federal funds to do so. This restriction is based on a combination of annual appropriations bills that Congress passes every year, regulations issued by the Office of Management and Budget (OMB)(2 CFR 230 App. B, paragraph 25, which recently replaced OMB Circular A-122), and the Anti Lobbying Act, 18 U.S.C. section 1913. This means that CAA resources paid for with federal funds, such as staff time (paid with direct or indirect funds), supplies, equipment, postage, or space, generally may not be used for lobbying activities relating to state or federal legislation (local legislation is OK, except for referenda or initiatives). Don’t forget that program income and federal matching funds are also considered federal funds for purposes of restrictions on their use.

Q: How do we lobby, but still ensure that federal funds aren’t
being used for that purpose?
A: There are generally three ways to do that:
1. Use Unrestricted Funds. Allocate CAA resources in such a way that any time, supplies, etc. spent on legislative lobbying is tracked and paid for or reimbursed out of nonfederal, unrestricted funds (also check rules and/or grant and contract terms of other funding sources, such as state funds, to determine if lobbying use is allowed). If one staff member is primarily responsible for lobbying, then some or all of that person’s compensation should be paid out of nonfederal funds. If staff members, either in addition to or instead of one primary person, spend just a small amount of time engaging in lobbying activities, then based on past history, you could estimate the percentage of time spent on lobbying by each person (as long as lobbying constitutes no more than 25 percent of the employee’s total work time) and pay that percentage of compensation from nonfederal funds.1 Or time spent on lobbying could be paid out of nonfederal funds as needed based on actual reporting. Don’t forget, though, that lobbying costs may not be included in the indirect cost pool if your CAA has an indirect cost rate. However, these lobbying costs must be separately identified in the indirect cost rate proposal. So, if an employee who lobbies is charged to indirect costs, a portion of his or compensation must be charged as a direct cost and paid out of nonfederal funds. This lobbying time could be tracked on a time card or other similar report on an ongoing basis, or as an “exception report” when the employee engages in lobbying activities. One state CAA association has suggested that each CAA designate an “advocacy kiosk” paid for entirely out of nonfederal funds (including computer, phone, space, etc.) that can be visited by staff members who engage in advocacy and lobbying activities. Those staff members could either “clock out” during that time or record their time and be paid for it with nonfederal funds.
2. Lobby on Personal Time. Another way to conduct lobbying without using federal funds is for employees to do so on their own time, using non-CAA resources to do. For example, an Executive Director may choose to take an afternoon off to meet with legislators at the state capital to lobby for passage of increased state supplemental Head Start appropriations. In that case, not only the time spent meeting with the legislators, but also preparation time spent either by the executive director or his or her staff, must also be either done on personal time or compensated out of nonfederal funds. If this is done during the regular workday and workweek, however, make sure that time cards or other records reflect that this activity is done on personal time. Also, have a written policy indicating your CAA’s regular work hours. Even if a CAA expects an executive director to be “on duty” 24/7 if a need arises, that doesn’t mean that he or she is never on personal time. Also, be careful if nonsalaried employees (i.e. those that are NOT exempt from being paid overtime under federal and state wage and hour laws) “volunteer” to lobby on their own time. If those employees are asked or required to lobby, or if the lobbying relates to their paid job, they must be paid to do so; otherwise this may result in a violation of the wage and hour laws.
3. Use Board Members or Other Volunteers. A third way to lobby without using federal funds is to use volunteer board members or other volunteers. Again, as with staff members, make sure that any CAA resources used to prepare for or carry out the lobbying activities (for example, staff time to research and provide talking points, food or space for meetings, phones, paper, etc.) are not paid out of federal funds.

Q: But we don’t lobby legislators, we educate them. That’s OK to
do with federal funds, isn’t it?
A: Hate to sound like lawyers, here, but it depends. Just because you call it “educating,” doesn’t mean it isn’t lobbying as well. If the “education” is done for the purpose of trying to get state or federal legislation passed, introduced, modified, defeated, signed, or vetoed, or to influence the outcome of a referendum or ballot initiative, then it’s still lobbying and federal funds generally can’t be used. Don’t forget that legislation also includes appropriations bills. So, for example, if you meet with, call or email your U.S. Representative or a member of his or staff to ask her to increase the Head Start appropriation, that is but not on federally-funded using federally-funded resources. On the other hand, if you invite your state senator to visit and tour your job training program and explain the program and needs of your clients, and perhaps even ask the legislator to hold a hearing on the job training needs of your community, but do not discuss any then that is education, or advocacy, but not lobbying. If costs associated with that meeting fall within one of your grants, and are otherwise allowable under 2 CFR Part 230 (OMB A-122) (i.e. documented, reasonable, allocable, etc.), then they could be charged to federal funds.

Q: Can you give us some other examples of legislative lobbying
activities?
A: Sure, here are some more:
• Signing on to a letter to state or federal legislators about pending
or proposed legislation or appropriations.
• Paying dues to an organization primarily engaged in lobbying
• If the CAA pays dues to an organization that does some lobbying,
but that is not its primary activity, such as a state 501(c)(3) CAA
association, for example, and if the association uses dues to pay
lobbying expenses, then that portion of dues used for lobbying
expenses should be paid out of nonfederal funds.
• Asking your U.S. Representative or Senator to sign on to a
“Dear Colleague” letter requesting support for a piece of
legislation or increase a legislative appropriation.
• Legislative liaison activities, such as attendance at legislative hearings,
gathering information regarding legislation, and analyzing the effect of
legislation, when such activities are carried on in support or in
knowing preparation for an effort to influence legislation. But, if such
activities are not carried out for that purpose, but rather to keep
informed about programs and appropriations for purposes of
budgeting and planning, that it is not considered lobbying.

• Asking the Governor to sign legislation.
• Asking clients or staff to engage in the activities described above.

Q: Can CAA employees or board members lobby as private
citizens?
A: Yes, they can. If they don’t represent themselves to be acting on behalf of the CAA, and don’t use any CAA resources or the CAA name, then they would be lobbying as private citizens (or perhaps on behalf of another organization). That’s fine and the CAA would not in that case need to report that activity to the IRS on the Form 990 or allocate any unrestricted CAA funds to the activity.

Q: Aren’t there some exceptions in 2 C.F.R. Part 230 (OMB A-122)
to the general rule that federal funds can’t be used for lobbying:
A: Yes, there are:
• Lobbying in connection with local legislation (except referenda or
initiatives).
• Lobbying to influence state legislation in order to directly reduce
the cost, or to avoid material impairment of the organization’s
authority to perform the grant, contract, or other agreement.
• For example, lobbying for legislation to lower unemployment
insurance premiums.
• Providing a technical and factual presentation of information on a
topic directly related to the performance of a grant or contract.
• Through hearing testimony, statements or letters
• To Congress or a state legislature, or subdivision, member , or
cognizant staff member of such body member,
• In response to a documented request (including a Congressional
Record notice requesting testimony or statements for the record
at a regularly scheduled hearing),
• Provided such information is readily obtainable and can be
readily put in deliverable form, and
• Provided costs for travel, lodging or meals are unallowable
unless incurred to offer testimony at a regularly scheduled
Congressional hearing pursuant to a written request for such
presentation made by the Chairman or Ranking Minority
Member of the Committee or Subcommittee conducting such
hearing.
• Any activity specifically authorized by statute to be undertaken
with grant funds.

Q: Can you boil down the implications of those exceptions to the
OMB A-122 lobbying restrictions?
A: The only exception that a CAA is likely to be able to make much use of is the third – the technical and factual presentation. But read the numerous requirements carefully. It does not cover phone calls or meetings; only written or oral testimony or letters in response to a documented request and it generally doesn’t cover travel and
hotel costs in connection with the presentation. The clearest activity to come within this exception is personally testifying at and/or submitting a written statement to a public hearing held by a legislature or legislative committee (although, again, travel costs are not generally allowable). Due to the fact that annual federal appropriations bills language prohibiting use of appropriated federal funds for lobbying to influence federal, and sometimes state, legislation, does not explicitly include these exceptions, if your CAA is receiving federal funds indirectly, such as through the state, it is important to confirm that OMB A-122 (or 2 C.F.R. Part 230) applies to your subgrant or state contract. You can check this in the grant terms and conditions or state contract provisions.

1 See 2 C.F.R. Part 230, App. B, pgh. 25(c)(4) (identical language as in
OMB Circular A-122, Att. B, pgh. 25(c)(4)).