American Geological Institute

Government Affairs Program


Lobbying Guidelines for AGI and its Member Societies

April 17, 1997

The following memorandum was sent from AGI Government Affairs Director David Applegate to the presidents and executives of AGI's member societies, Member Society Council representatives, AGI Government Affairs Program Advisory Committee representative s, and AGI's Executive Council.

There has been a standing request from the AGI Government Affairs Program Advisory Committee and several member society executive directors for a memo setting down some basic guidelines for lobbying by AGI and its member societies. This memo addresses li mitations placed on lobbying by the Internal Revenue Service, congressional registration requirements, and limits on gifts to Congress and the executive branch.

I have attended several seminars and poured through a sizable stack of information in an effort to understand what does and does not apply to AGI and its member societies. I also have engaged in a sizable amount of procrastination and apologize for the r esulting delays. The exercise has been yet another reminder of why lawyers roam freely about our land and particularly within the Washington Beltway. The memo's basic conclusion is that all of AGI's member societies can engage in and support more lobbyi ng than they do now. Because I am a geologist and not a lawyer, however, I encourage you to consult with your legal counsel if you or your society is at all unsure about anything in this memo. Also, we would be happy to provide you with any of the very he lpful materials listed at the end of the memo for additional information and greater detail.

Societies that, like AGI, file under Section 501(c)(3) of the Internal Revenue Code of 1986 as non-profit charitable organizations are allowed to engage in lobbying activities so long as those activities do not represent a "substantial" amount of the orga nization's expenditures. The very murkiness of what constitutes "substantial" has led many organizations to avoid all lobbying activities even though they are well within their rights to do so. It is well worth noting that the American Chemical Society, whose government affairs program has a staff of 20 and a $1 million budget, is a 501(c)(3) organization. This memo discusses the controversy surrounding the definition (or lack thereof) of "substantial," changes to the tax code -- election under Section 501(h) -- that allow for greater clarity, and the proscription on political campaign activities. For those member societies that file under Section 501(c)(6) as trade associations, the lobbying restrictions are considerably looser and some political camp aign activities are allowed.

Does your society need to register as a lobbying entity with Congress? This memo also addresses an entirely separate set of lobbying disclosure requirements and gift rules passed by Congress in 1995 that apply equally to all organizations, regardless of their tax status. The registration requirement hinges on three questions: Does your society spend more than $20,000 in a six-month period on lobbying activities? Do you make multiple lobbying contacts? Does anyone on your staff spend more than 20 percent of their time lobbying? If you answer yes to all three, then you have to register your organization. The congressional registration requirements apply primarily to AGI, which has registered, and it is highly unlikely that any of the member societies (wi th the possible exception of AGU) would come close to the time and monetary thresholds for disclosure. It is also worth noting that volunteer activities such as Hill visits by a public affairs committee are specifically exempted from the registration req uirements.

The rules and regulations most likely to affect member society public affairs committees or others visiting Washington are those restricting gifts and free meals for federal employees. Different rules apply to the Senate, the House, and to federal agenci es, but the restrictions are easily adhered to and the burden lies on the recipient not the giver.

IRS LOBBYING ALLOWANCES FOR CHARITABLE ORGANIZATIONS

Regulations on the books since 1934 have held that charitable organizations may retain their fully tax-exempt status so long as no "substantial part" of their activities consist of attempts to influence legislation. That remains the test for 501(c)(3) ta x-exempt status, which applies to educational, scientific, and religious organizations, and the IRS has made no effort to clarify what level of activity constitutes "substantial". An oft-quoted rule of thumb is five percent of revenue, but the IRS has ne ver officially ruled on that percentage and other qualitative factors such as volunteer efforts, the importance of the issues, and whether lobbying is a primary thrust of the organization can be taken into consideration. In 1976, Congress enacted an alte rnative provision to clarify the situation, but it was not until 1990 before final regulations were promulgated as section 501(h) of the tax code. In the vast majority of cases, election under these new regulations is advantageous in terms of certainty, simplicity of filing, and potential penalties. Election is made by filing the one-page IRS Form 5768.

By electing under section 501(h), organizations have much clearer thresholds beyond which they must not go as well as less stringent penalties should that threshold be passed. The allowance follows a sliding scale: 20% for the first $500,000 of exempt-pu rpose expenditures, 15% for the second $500K, 10% for the third $500K, and 5% of all remaining expenditures. This limit applies to "direct" lobbying of the legislative branch on specific legislation and "grassroots" lobbying, defined as efforts to sway p ublic opinion on specific legislation. No more than a quarter of the total limit may be spent on "grass-roots" lobbying. Note that "grassroots" does not include communications back to members of the organization, only those to the general public urging them to take a position on a specific bill or issue.

If a 501(c)(3) organization electing under 501(h) exceeds either the total limit or the "grass-roots" portion of it, then it must pay a 25% excise tax on the excess. It can only lose its 501(c)(3) status if either limit is exceeded by more than 150% over a four-year period. By contrast, those choosing not to elect 501(h) status face revocation of 501(c)(3) status for any violation of the vague "substantial" test. Currently, AGI's government affairs program budget represents less than two percent of its total expenditures. Under section 501(h), it would be permissible to spend up to eight percent, or $400,000, on lobbying activities.

All of the materials that have been put out by the American Society of Association Executives, Independent Sector, and other trade groups urge 501(c)(3) organizations to choose election under section 501(h). Those that do not elect under 501(h) must file a detailed list, description, and schedule of their expenditures on legislative activities as part of Schedule A of their 990 Form. An organization electing 501(h) must simply report the total of its lobbying expenditures, the portion of the total that w ent to grass roots expenditures, and the total expenditure allowances applicable to it under the statute.

501(c)(3) Organizations May Not Engage in Partisan Political Activity

Lobbying activities should not be confused with partisan political activity, or electioneering, which is prohibited under section 501(c)(3). Qualifying organizations may "not participate in, or intervene in ... any political campaign on behalf of (or in opposition to) any candidate for public office." What does this mean? You can lobby a senator or representative on how they should vote but you cannot tell your membership for whom to vote nor can your society make political contributions. Although it is acceptable under certain circumstances to provide information on candidates' voting records or positions on issues, such practices are best avoided because any hint of partisanship would be a violation. Stay away from campaigns except as a non-partisa n convener of debates or the like. If your 501(c)(3) society wants to engage in political activities, it is possible to create a political action committee (PAC) or other separate entity whose charter and tax status allows them. An example would be the creation of SAFE (Save All Fossils for Everyone) by the Society of Vertebrate Paleontologists. SAFE is a 501(c)(4) organization specifically formed to lobby on fossil legislation and regulations.

Looser Rules Govern Societies Filing as 501(c)(6) Trade Associations

Several of AGI's member societies file as Section 501(c)(6) trade associations rather than 501(c)(3) charitable organizations. These organizations -- donations to which do not qualify for charitable deductions -- can engage in substantial lobbying relate d to their respective exempt purposes without endangering their tax exempt status. Unlike 501(c)(3) organizations, they can seek to advance their goals principally through lobbying and may engage in political activities so long as they are not the primary means of accomplishing the organization's exempt purposes.

CONGRESSIONAL REGISTRATION AND GIFT RESTRICTIONS

When the 104th Congress began in 1995, the new Republican majority brought with it a trail of promises to reform the way that Congress does business. They passed the Lobbying Disclosure Act of 1995 (Public Law 104-65) to increase public disclosure requir ements for lobbyists, and they established new rules restricting gifts to lawmakers and their staffs. Because the gift rules are internal to each chamber, there are a number of significant differences between House and Senate, and an entirely separate se t of rules cover federal agency employees. The Lobbying Disclosure Act provisions apply equally to both chambers and to the executive branch.

Lobbying Disclosure

It is important to note that organizations, not individuals, must register under the congressional lobbying disclosure rules. Does an organization need to register? Only if the answer to all three of the following questions are answered in the affirmative :

1. Did anyone in the organization make a lobbying contact with a covered legislative or executive branch official?
2. Does anyone in the organization spend more than 20% of their time on lobbying activities?
3. Does the organization spend more than $20,000 on lobbying activities in a semi-annual period?

Covered executive branch officials generally include all political appointees, senior executive service positions, and those in a policy-making capacity. Covered legislative branch officials include virtually all staff in committees and personal offices along with the senators and representatives themselves. AGI can answer yes to all three questions and consequently is registered as a lobbying organization. We recently met the monetary threshold for lobbying activities when we hired a second full-time government affairs staffer. John Dragonetti, Kasey Shewey, and I are listed on the registration form as employees qualifying as lobbyists. Also on the registration form, we are required to disclose any affiliated organization that provides more than $10, 000 in a six-month period and in whole or in major part, plans, supervises, or controls the lobbying activities at issue. None of the member societies meet this dual test, and none are listed on our form. Every six months, we are required to file a repor t disclosing specific issues for which we lobbied, a list of congressional entities and federal agencies contacted, the names of qualifying lobbyists, and a good faith estimate of AGI's total expense for lobbying activities during the semiannual period ro unded to the nearest $20,000. Reports are due on February 15th and August 15th.

If you are at all unsure of whether you may run afoul of these limits or have questions about the lobbying law, you can contact the Senate's Office of Public Records (202-224-0758) or the House Legislative Resources Center (202-226-5200) for additional gu idance.

What Activities Are Considered Lobbying? Two Definitions

Throughout the above discussion, a rather crucial question to ask is what constitutes a lobbying activity. The trouble is that the IRS defines lobbying activities one way and Congress another. GAO is supposed to come out with a report soon that will sugg est ways to mesh the two. The IRS definition of lobbying focuses on the legislative branch, defining it in Section 501(h) as "influencing legislation" at any level of government, including foreign. Lobbying activities are defined as either direct or gra ss roots communications and must involve the expression of views on a specific legislative proposal. Direct communications include contacts with legislators, their staff, and related government officials. Grass roots communications also must refer to a specific legislative proposal and must encourage the public to contact legislators. The definition excludes non-partisan analysis and research, self-defense, technical assistance, and discussions of broad social issues.

In contrast, the Lobbying Disclosure Act governing registration includes lobbying contacts with covered legislative and executive branch officials (see above for who is considered "covered") as well as all preparatory efforts in support of such con tacts. These contacts may concern the formulation, modification, or adoption of Federal legislation; the formulation or modification of Federal rules, regulations, executive orders, or other policy positions; the negotiation, award, or administration of a Federal program, policy, contract, grant, loan, permit, or license; and nominations subject to Senate confirmation. Whew! There are exemptions for testimony before a congressional committee, responses to Federal Register notices or questions from Congre ss, and a number of other types of communication. Overall, however, the congressional definition is much broader than the IRS definition. Consequently, it is important to note that charitable organizations electing under Section 501(h) may use the IRS de finition for purposes of calculating the monetary threshold for congressional registration. Those 501(c)(3) organizations not electing under 501(h) and all 501(c)(6) organizations must use the broader congressional definition.

Congressional Gift Restrictions

The new congressional gift rules are quite strict, and a visiting public policy committee could run afoul of them if they have a pension for expensive knickknacks or lavish dinners. The good news is that the onus and penalty lies on the member of Congres s or staffer being contacted and not on the individual or organization involved. In general, gifts above a nominal value (i.e. not including ball caps or mugs) are prohibited in the House of Representatives. This includes a prohibition against taking me mbers or their staff out for a meal, although food served at receptions is exempted. There is an exemption for informational materials in general and specifically for publications put out by the organization offering it (for example, AGI could offer a fr ee subscription to Geotimes but not to Time). In the Senate, there is a one-time $50 allowance and cumulative allowance of $100. Gifts under $10, however, do not count toward the total, so a lobbyist can take a Senator or Senate staffer to as many $9.99 lunches as they please. There are plenty of exemptions, the most stunning of which involves travel. A corporation can still pay for a fact-finding trip, including meals -- only the free rounds of golf are out (except for Senators or their staff if the greens fees are under $50). For both houses, meals can be paid for if the person is being asked to speak or if the event in question is otherwise "widely attended" (a somewhat discretionary term representing a number greater than twenty and implying some diversity among the attendees, i.e. not all from one company).

Executive Branch Gift Restrictions

Over in the Executive branch, gift restrictions are also fairly strict. Executive branch employees may only accept de minimis gifts below $20 per gift or $50 per year from a single source. Gifts from personal friends and family are exempted as are socia l invitations to meals. As with Congress, meals can be provided at events where the employee participates (i.e. as a speaker) or those that are "widely attended". There are also large exemptions for travel-related payments and for honoraria.

Sources

Independent Sector, 1991, Lobby? You? Yes, Your Nonprofit Organization Can! It Should! (Washington DC)

Internal Revenue Service, 1990, Final regulations: Lobbying by public charities, lobbying by private foundations. Federal Register, page 35579 (8-1-90).

Timmer, Barbara, ed., 1996, Compliance with lobbying laws and gift rules guide (Glasser LegalWorks: Little Falls, NJ).

Troyer, Thomas A. and Amy R. Segal, 1994, A review of rules governing lobbying and political activities of charities. Association Law and Policy (2-1-94).

Webster, George D., 1992, Nonprofit lobbying. Association Management, pages 106-107 (March issue).


(Contributed by David Applegate, AGI Government Affairs)

Please send any comments or requests for information to AGI Government Affairs Program at govt@agiweb.org.

Memorandum Dated April 17, 1997; Uploaded April 26, 1997


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