One reason a nonprofit might seek to qualify as a 501(c)(4) organization is to pursue lobbying activities at the federal or state level. Unlike other popular forms of nonprofit, a 501(c)(4) can focus a significant part of its resources on lobbying for legislation and other forms of governmental change without losing its exemption from income tax. A 501(c)(3) can do some lobbying, too, but it faces tight limits on how far it can go before its tax exemption may be jeopardized. Most organizations that will expend significant efforts in lobbying will need to give thought to the laws that govern lobbying. These laws include registration and reporting requirements at the federal and state level.
California’s lobbying disclosure laws, chiefly the Political Reform Act, impose registration and reporting requirements on individuals and organizations with $2,500 of lobbying activity in a quarter. The obligation to report continues even in future quarters where efforts do not meet this threshold. California’s system is somewhat similar to the federal system, insofar as many lobbying arrangements will trigger reporting obligations on behalf of the lobbyist (if self-employed) or the firm employing the lobbyist, and not the lobbyist’s client. In other words, if a 501(c)(4) organization contracts with an outside firm to handle its lobbying, that firm will report its activities as part of its independent compliance activities.
In California a “lobbyist” is a person who receives consideration of $2,000 or more (whether in cash or otherwise, but not including expense reimbursements) in a calendar month to communicate with elected or appointed government officials with the goal of influencing lawmaking or administrative actions. A person is also a lobbyist if his or her principal duties for the employer are to conduct such communications. Note that if someone who works for a nonprofit receives a salary and benefits that exceed $2,000 per month that can be tied to the person’s legislative advocacy work, he or she may be a lobbyist under these rules. Note that any effort to influence legislative or administrative action can be subject to the rules. As an example, the statute notes that providing information, like charts or research, can be a form of lobbying.
California law has an important exception that may require 501(c)(4) organizations that otherwise don’t meet the definition of lobbyist to report. Organizations that spend $5,000 or more in a quarter are required to report even if they don’t employ someone who qualifies as a “lobbyist” under the rules. Under California’s rules, “expenses” mean, among other things, payments or gifts to state officials or their immediate family members, including consulting fees. The date of the payment or gift, together with a detailed description of it, must be included on the form. Such reports must disclose the total kinds of actions the organization was lobbying for, such as the name of the bill or regulation that was the subject of the effort. The reports must also disclose details about the organization’s lobbying expenses.
Complying with California’s lobbying disclosure rules need not be a significant burden, but it is important for a 501(c)(4) organization to understand them. The Church Law Center of California works with clients in the religious and secular nonprofit fields. We can help your organization understand its obligations under state and federal lobbying disclosure rules. To find out how we can be of help to your organization, call us at (949) 892-1221 or reach out to us through our contact page.
