Some public charities, including community foundations and women’s funds, can make general support grants to nonprofits that lobby without running afoul of federal restrictions, as long as the grants are not earmarked for lobbying.
While the Private Letter Ruling from the IRS applies only to the Alliance for Justice, which requested the ruling, the letter indicates how the IRS likely would respond to other public foundations and grantmaking nonprofits, the Alliance for Justice says.
The letter also is relevant only for charities that have elected to follow the 501(h) expenditure test, a method of measuring a charity’s lobbying expenditures that is approved by the IRS.
“For the first time, public charities have guidance on how to treat grants to groups that lobby,” Nan Aron, president of the Alliance for Justice, says in a statement. “We hope this clarification will give more grantmakers the confidence they need to fund aggressive advocacy.”
Assuming a charity makes the 501(h) election, the letter indicates a group can make a grant of general operating support to a nonprofit that lobbies and that the grant will not count against the grantors’ lobbying limits.
While the grant cannot be earmarked for lobbying, the recipient nonprofit may use the money however it wishes, including for lobbying efforts, the Alliance for Justice says.
The IRS letter also says grants received by public charities that are earmarked for a specific program will not be assumed to be for lobbying, even if the program specified includes lobbying activities.
A discussion of further clarifications made in the letter is available on the Alliance for Justice website.