Budget Deficit Forces Questions About Charity Spending on Lobbying

When President Obama sought to limit the value of all itemized deductions last year, many interest groups set out to persuade Congress to block the plan.

Among them was a mix of powerful real-estate groups that spent nearly $30-million to preserve the mortgage-interest deduction and lobby lawmakers on other matters important to the industry.

Another group was much smaller: a coalition of nonprofits spent $830,000 to protect deductions for gifts to charities and to press legislators about other issues important to the nonprofit world.

By the end of the year, both groups had succeeded in their main mission: No lawmaker proposed limits to itemized deductions.

The reprieve was short-lived, however. Charities and other interest groups are already back at work on Capitol Hill to protest President Obama’s latest plan to limit itemized deductions, which were included in the budget proposal he sent Congress last month.

As such proposals proliferate, and pressure to cut the federal deficit makes it more likely that nonprofits will face high-stakes challenges, many are wrestling with the best ways to make sure their concerns are heard and are considering whether to take their cues from successful business lobbying efforts.

“There’s no doubt that nonprofits would be better off if they spent more money on lobbying,” says Diana Aviv, chief executive of Independent Sector, a coalition of nonprofits and foundations, though she adds that simply spending money on lobbying doesn’t necessarily guarantee better results.

“Money doesn’t buy votes, it buys access,” Ms. Aviv says. “Nonprofits have to work 10 times as hard to make their case and make sure they are connecting with all local folks who likely know a lawmaker and are willing to talk to lawmakers.

“We need more efforts to organize that access, and that takes money,” says Ms. Aviv.

Many groups also want to loosen the limits charities and foundations face on advocacy—which are much stricter than those for businesses.

Independent Sector and the Center for Lobbying in the Public Interest have been pushing lawmakers and federal agencies to make changes that would ease restrictions and simplify rules that stymie groups from pursuing advocacy.

Some organizations are also trying to help nonprofits become smarter advocates. Independent Sector, for example, plans to release a major study this month that will offer some insights into which factors help advocacy and lobbying efforts succeed—including strong leadership, a clear vision, and an in-depth understanding of lawmakers’ priorities.

Finding Funds to Lobby

The issue of lobbying limits and the amount charities spend compared with businesses is put into stark relief when nonprofits focus on issues that affect all kinds of organizations, such as limits on charitable deductions.

When businesses face a threat to their self-interest, they rally lots of people to come up with lobbying money. But the causes that affect the widest number of nonprofits seem to attract fewer dollars compared with hot-button issues that affect, say, health care or gun control.

“There is no question that sector-wide issues need to be strengthened,” says Larry Ottinger, president of the Center for Lobbying in the Public Interest, a nonprofit that encourages charities to pursue advocacy campaigns. [The previous comment from Mr. Ottinger has been changed from a previous version to clarify a statement that had been attributed to him].

The contrast between how much groups raise to lobby on specific issues and on measures that affect a diverse range of nonprofits can be seen with just a skim of nonprofit records.

In 2011, nonprofits spent $27.7-million lobbying on hundreds of issues, compared with the less than $1-million spent by charity coalitions to lobby on the charitable deduction and other matters of importance to many nonprofits.

Charities poured money into efforts to promote health-care spending, science education, revamp the criminal-justice system, and hundreds of other issues, according to data from the Center for Responsive Politics.

Such financial backing is a far cry from the top industry lobby in 2011, the pharmaceutical industry, which spent $237.5-million. And that doesn’t count another potent form of influence: political campaign contributions, which charities are not legally allowed to make. Pharmaceutical companies provided $31.8-million in such donations in 2010.

Confusing Rules

The gap in spending between businesses and nonprofits stems in large part from lack of knowledge and resources.

Experts say many nonprofits are confused by Internal Revenue Service rules that govern nonprofit lobbying.

Under the tax code, charities and community foundations can visit a lawmaker to advocate on legislation or urge people to contact their representatives, as long as those and other lobbying efforts aren’t a substantial part of their day-to-day work.

“Nonprofits are by and large afraid of retribution from the IRS if they lobby,” says Jeffrey Berry, a political-science professor at Tufts University. “Many are just misinformed, and the ignorance remains profound.”

For their book, A Voice for Nonprofits, Mr. Berry and his co-author, David F. Arons, surveyed 1,700 nonprofits in 1998 about their knowledge of lobbying and found that most did not fully understand the federal laws that govern nonprofit lobbying.

But findings from a more recent study, whose results have yet to be published, may indicate that the nonprofit world has become savvier about lobbying rules.

In 2008, two University of Washington scholars, Steven Rathgeb Smith and Robert Pekkanen, surveyed 1,500 nonprofits in Seattle and 500 in Washington, D.C., and found that many charities lobbied government officials and were involved in advocacy.

Of the Seattle charities surveyed, Mr. Smith said, more than 80 percent cited lack of money or staff, rather than concerns about tax laws, as chief impediments to advocacy.

Waiting for Big Issues

Money is indeed a very real challenge in nonprofit lobbying, says Alan J. Abramson, a professor of government and politics at George Mason University.

“Businesses can call on folks they supported in past election cycles for policy favors,” he says. “Nonprofits can’t.”

Some nonprofit umbrella groups have worked to find ways to move more money toward lobbying efforts.

The National Committee for Responsive Philanthropy started Philanthropy’s Promise last year, a campaign asking grant makers to commit to devoting at least 25 percent of their grants each year to advocacy.

Robert Egger, president of the D.C. Central Kitchen, a social-service group in Washington, created CForward last year, an advocacy group under Section 501(c)(4) of the tax code, which allows it to endorse candidates.

He also established CForwardPAC, a political-action committee created to raise money from nonprofit employees, volunteers, and others to provide campaign contributions to select local and state politicians.

So far the committee hasn’t attracted much money. Since last November, the political-action committee has raised about $20,000 from roughly 45 donors, Mr. Egger says.

“Traditionally, the nonprofit approach has been to react to issues and then rush up the Hill with a last-minute effort. We don’t want to lobby people, we want to send people into office that understand nonprofits,” Mr. Egger says.

“There are 10 million nonprofit employees in the United States. If everyone gave a buck, imagine how many people we could elect that we didn’t have to lobby.”

Lacking a United View

It’s not just money or other obstacles that hobble nonprofit advocacy. Nonprofits often lack a united view on public-policy matters, and that makes them unlikely to work together to push a particular view.

For example, some people in the nonprofit world are glad President Obama is seeking to limit write-offs for wealthy donors, saying that the current system favors charities with rich donors.

“The charitable deduction is not as important to a lot of nonprofits that get government funding or get small donations,” notes Mr. Smith, the University of Washington scholar. “It’s certainly not central in the way that the mortgage-interest deduction is to the real-estate industry.”

‘Playing Defense’

Some observers hope nonprofits will do more to form a united front focused on preserving and expanding federal spending that benefits all nonprofit organizations, arguing that such direct support is more important than the subsidies that nonprofit groups get through charity write-offs.

“Government support of nonprofits is two-thirds more important than private giving,” says Mr. Abramson, of George Mason.

“I haven’t seen us make much of a dent in figuring out how the sector can come together and lobby on the spending side of the budget,” he says.

Mr. Abramson says nonprofits could look at federal budget proposals, calculate the “nonprofit budget,” and lobby Congress for more spending that benefits nonprofit groups, rather than just seeking to protect a specific cause, like education or health care.

“A lot of times nonprofits are just playing defense and have real trouble developing a proactive policy agenda,” Mr. Abramson says.

“Meanwhile, “ he says, “other industries have a five-point policy platform that may take 10 years to get enacted, but they chip away at it year by year.”