Yes. If a nonprofit has over $25,000 in gross receipts in its fiscal year, it will file the IRS Form 990-EZ or 990. Schedule C must be filed with either of these forms, and political campaign and lobbying activity is reported on this schedule. There is no comparable filing in Iowa.

Yes. For nonprofits doing more significant amounts of lobbying, both federal and state laws should be considered. Federally, the Lobbying Disclosure Act, 2 U.S.C. § 1601 et seq., applies to nonprofits  if: 1. the organization has at least one employee who is a “lobbyist” and  2. expenditures of $20,000 or more per six-month period are spent on lobbying  activities. A “lobbyist employee” is an employee who makes at least two lobbying contacts and spends at least twenty percent of his or her time on lobbying activities. This act only applies to lobbying on the federal level. Federal lobbying is reported on form LD-2. Iowa Code Ch 68B sets out rules for reporting of lobbying activity on the state level. Iowa lobbying reporting forms and rules are available from the Iowa Ethics and Campaign Disclosure Board, 510 East 12th, Suite 1A, Des Moines, IA  50319.

Yes. Private foundations often restrict use of amounts granted, allowing no political activity of any kind. This is due to the IRC sec. 4945 penalty taxes for inappropriate political activity of private foundations. This penalty tax is not imposed on public charities. 501(c)(3) organizations designated as private foundations are subject to a 10% tax on any expenditures made to either influence political figures or the opinion of the general public. Additionally, any manager who agreed to the expenditure is subject to a tax of 2.5% of the total expenditure. If these taxes are not paid within the taxable period, an additional tax of 100% of the taxable expenditure will be levied against the foundation along with a tax of 50% of the total expenditure on management who approved the expenditure. In addition to private foundations, no federal government grant can be used for political activity. The Byrd Amendment, 13 U.S.C. § 1352, provides that federal grant money may not be used for political activity.

A 501(c)(3) organization can elect to qualify under 501(h) by submitting IRS Form 5768. Section Part VI-A on the Form 990 Schedule A will also need to be completed annually. This is the only way to elect to lobby under 501(h). Organizations that do not complete this paperwork will have their lobbying limits measured under the “substantial part of activities test.” Not all 501(c)(3) nonprofit organizations may elect to qualify under 501(h). This option is not available to churches, an integrated auxiliary of a church, a convention or association of churches, or a member of a group of affiliated organizations that includes a church. Also, private foundations cannot make this election.

Learn more: Online Compendium of Federal & State Regulations for US Nonprofit Organizations: Lobbying and Political Activity

Yes. The Iowa Principles and Practices for Charitable Nonprofit Excellence states in Part XI that "Nonprofit organizations should individually and collectively communicate their views to government about matters which affect the delivery of their services." That being said, it is important for nonprofits to be aware of the tax code's restrictions on both lobbying and political campaign activity.

If a nonprofit engages in political campaign activity, the IRS may revoke the organization’s tax-exempt status or compel the organization to pay fines. Both the organization itself and the individuals responsible for the illegal political activity may be fined. Despite the severe consequences for a nonprofit if it engages in political activity, the Internal Revenue Code does not define the phrase in great detail. IRC 501(c)(3) provides that political activity is “participat[ing] in, or interven[ing] in (including the publishing or distributing of statements) any political campaign on behalf of (or in opposition to) any candidate for public office.” However, “political expenditures” are defined further in the Internal Revenue Code. In essence, a nonprofit may express a point of view about an issue, but may not support or oppose a specific candidate.

If an organization has not elected to lobby under 501(h) and have its lobbying limits measured by the “expenditure test,” its lobbying limits will be measured by the “substantial part of activities test.” If it is determined that an organization has engaged in lobbying beyond an insubstantial amount, that organization will generally lose its federal tax-exempt status. However, if an organization has elected to qualify under 501(h), its lobbying limits will be measured by the “expenditure test.” If an organization exceeds the limits established under this test, it must pay an excise tax based on the amount exceeding the limit. Therefore, under the “expenditure test,” exceeding the lobbying limit results in the organization having to pay a monetary fine, not in the complete loss of the organization’s tax-exempt status. However, a nonprofit can lose its tax-exempt status under the “expenditure test” if it exceeds the lobbying limit for four consecutive years.

The basic definition of lobbying as presented in the Internal Revenue Code 501(c)(3) is “carrying on propaganda, or otherwise attempting, to influence legislation.” Two categories of lobbying are identified:  Direct lobbying is “any attempt to influence any legislation through communication with any member or employee of a legislative body or with any government official or employee who may participate in the formation of legislation.” The communication must be about pending legislation to constitute lobbying. Note that the focus is on legislative bodies. This does not include judicial, executive, and administrative bodies. As a result, an organization that encourages an executive or administrative body to do something will not normally be considered to have engaged in lobbying. Grassroots lobbying, on the other hand, is “any attempt to influence legislation through an effort to affect the opinions of the general public or any segment thereof.”  To be grassroots lobbying within the terms of the Internal Revenue Code, there must be: (1) reference to specific legislation, (2)  a specific viewpoint on the legislation, and (3) encouragement of the recipient to take action with respect to the legislation. The tax code has more restrictions on grassroots lobbying than direct lobbying.

According to the Iowa Principles and Practices for Charitable Nonprofit Excellence, "organizations are limited under the Internal Revenue Code to 'insubstantial' activities to influence legislation." (XI, A, 2) The amount of lobbying activities in which a 501(c)(3) public charity can engage is subject to more specific tests for what is "insubstantial". The Code establishes two standards for measuring an organization’s compliance with those limitations, and the organization itself may elect which standard will be employed. One test is known as the “substantial part of activities test.” This test requires that “no substantial part of a charity’s activities… be carrying on propaganda or otherwise attempting to influence legislation.” The wording is vague, and the test’s exact meaning has proven difficult to establish. In an attempt to establish a baseline, some courts have said that lobbying expenditures in excess of 5% of an organization’s total expenditures are substantial, but the circumstances surrounding the individual case are also taken into account. An attempt by Congress in 1976 to create a more objective standard for measuring an organization’s compliance with lobbying limits resulted in what has become known as the “expenditure test.” The test is found in IRC secs. 501(h) and 4911, and establishes limits based on a percentage of an organization’s exempt purpose expenditures. Chapter 3 of IRS Publication 557 more thoroughly describes lobby expenditure limits under the expenditure test.