Foundations and Lobbying: Sorting Out the Do’s and Don’ts

Can we lobby? What are the rules about foundations and lobbying?

These are such scary questions for some foundations that the answers aren’t even pursued. And no wonder; it is part of the U.S. Tax Code, which ranks as one of the most complex compilations of rules ever fashioned. Thus, many foundations prefer not to deal with this. They are missing out on some of the most effective work they can accomplish.

Here are some ways you can engage.

To answer the easy question first, no, foundations cannot lobby, except in their own defense.

If, for example, Congress were considering legislation that would directly affect foundations, such as changing the excise tax, it is not just okay, but perhaps an obligation for foundations to present their case to lawmakers. In that case you are allowed to lobby.

If, though, a foundation felt strongly about legislation affecting the environment, housing, the arts, and so on, then the answer is no, lobbying on those items is not allowed for foundations. So, don’t even think of it.

However, you can make grants to other nonprofits that in turn can, and usually do, lobby for constructive changes in laws and regulations affecting their issues.

You must follow the rules, but they are mostly applicable to your grantee organizations. In simplest terms, because  this is not, after all, tax advice, nonprofits can elect under a provision of the tax code to spend a certain amount of their funds on lobbying activities. And you can fund such groups so long as you do not earmark funds for lobbying.

The key is the definition of the term “lobbying.” Lobbying refers specifically to a particular piece of legislation, a particular House or Senate bill, or maybe an amendment to the Clean Water Act, for example. Then you can make general support grants to a nonprofit that has elected to spend a limited (usually 20%) of their resources on lobbying activities so long as you do not specifically say that this grant is for such lobbying.

Two opportunities here:

• If it is not a specific bill you are addressing and just an educational effort promoting clean water, that is not lobbying and you can fund it.
• The grantee can receive a general support grant, or even a “clean water activities support” grant, from you and that does not constitute funding lobbying. You can even state in a general support grant that the grant is not earmarked for lobbying. Make sure your grant agreements are clear and do not include overly restrictive language.

You can also fund coalition building, regulatory advocacy, and research and analysis of issues. None of that is lobbying, and all of it can affect public policy.

Funding groups that lobby is one way of changing public policy on your issues, so I encourage you to try it out.

Next up: How to win friends and influence public policy without lobbying.

Exponent Philanthropy member Gerald P. McCarthy serves as executive director of Virginia Environmental Endowment, which he started in 1977 when VEE was established as a result of an unprecedented decision by the federal court in the U.S. v. Allied Chemical water pollution case. The Endowment is a grant making foundation whose purpose is to improve the quality of the environment by encouraging the private, nonprofit, and public sectors to work together to prevent pollution, conserve natural resources, and promote environmental literacy.