March 11, 1999 | Read Time: 1 minute
The Internal Revenue Service has good news for charities that have been reluctant to embrace an alternate way to have their lobbying work measured by the government. Contrary to widespread opinion, such charities do not risk an I.R.S. audit as a result of making that choice.
Federal law has long allowed charities to lobby, as long as they pass a test to prove that “no substantial part” of their overall activities focuses on influencing legislation.
Because of the imprecise nature of that test, Congress enacted a law in 1976 that permits a charity to spend a set percentage of its total budget on lobbying. The I.R.S. issued regulations in 1990 that explain how the service is enforcing the law.
Charities that choose to be covered under the 1976 law and subsequent regulations must notify the I.R.S. of their decision to do so. Otherwise, they are still judged according to the “no substantial part” test.
Influential tax lawyers have encouraged charities to adopt the approach in the 1976 law, saying that the older test is archaic and subjective. But many charities have declined to do so, concerned that such a step would increase the possibility that they would be audited.
Not to worry, says Marc Owens, director of the revenue service’s Exempt Organizations Division. “I can state emphatically that is not the case,” he wrote in a letter to Charity Lobbying in the Public Interest, a project of Independent Sector, a national coalition of charities and grant makers. “The fact that an organization has made the election is not a ground for an examination of the organization.”
Mr. Owens said that this position has been written into the Internal Revenue Manual, which sets out the agency’s policies and procedures and is used by field agents.
