One Thing Non-Profits Can Do Now to Make a Difference

The U.S. election is over. Now the real work of turning policies and campaign promises into practice begins. It won’t be easy.

With a Biden-Harris Administration in the White House, America’s public interest non-profits have a critical chance to advance urgent healthcare, environment, social justice and other priorities that can benefit people and communities across the country.

But pushing progress through a sharply divided House and Senate will take commitment and concerted action. Matt Viser (@mviser), Seung Min Kim (@seungminkim) and Annie Linskey (@AnnieLinskey) got it right in Sunday’s Washington Post: “[Biden] can reorient various federal agencies and regulations, and he can adopt a different posture on the world stage. But pushing major legislation through Congress could prove a challenge.”

America’s non-profit leaders aren’t discouraged. They’ve faced tough fights before. They know this is their moment to make a difference. The problems our country faces are just too great to stand on the sidelines. But sadly, that’s exactly where most traditional 501(c)(3) non-profits will be unless they consider one step now.

The U.S. tax code limits what non-profits can do to engage national lawmakers, support legislative change and encourage others to join them. Without taking other action, non-profits generally can only promote passage of specific legislation if that activity accounts for an “insubstantial” share of their exempt purpose expenditures. If they exceed that vague limit, they can lose their tax-exempt status.

But non-profits can loosen the bonds and raise their voices by simply completing and returning an obscure half-page form (Form 5768) to the Internal Revenue Service. By doing so, they elect to apply a provision of the tax code (Section 501(h)) that allows them to spend between 5 and 20 percent of their annual exempt purpose expenditures (up to $1 million) on lobbying.  

Without electing to apply the provisions of Section 501(h) of the tax code, non-profits are stuck warming the bench – waiting to be asked their opinion and perhaps producing non-partisan reports aimed at educating stakeholders on key issues. Those roles are valuable, too, but don’t take full advantage of non-profits’ tremendous experience and expertise.

Don’t let your non-profit get caught unprepared. Making the election could not be easier, and the choice can apply as soon as the current tax year. It’s another vote for change and a decision that enables non-profits, their supporters and stakeholders to get in the game when and where they are needed.

Of course, electing 501(h) isn’t the only way non-profits can mobilize advocacy resources and promote specific legislation that achieves their charitable mission. Making the election comes with certain reporting, record keeping and other requirements. There are penalties for exceeding the 501(h) thresholds, and organizations can lose their tax-exempt status for repeated violations. Non-profits considering ways to strengthen their voice in public policy should consult their legal and tax advisors.

When your non-profit is ready, Ceartas Advisors can help. We enable non-profits to design effective policy solutions and to lobby successfully for legislative and regulatory change. Join the movement at ceartas.org.

‍

(Thanks to @dylan_nolte for the wonderful photo of a woman boxer getting ready for a fight. We want her nail polish.)

###

‍