To Lobby or Not to Lobby? Examining the Determinants of Nonprofit Organizations Taking the IRS 501(h) Election

Abstract

While public policy scholars are gaining a better understanding of the nonprofit sector's impact on the policy process, the sector's role in lobbying efforts has only been studied in a limited manner. Currently, nonprofit organizations' lobbying activities and expenditures are limited by federal regulations, which are often misunderstood by nonprofit leaders. This article uses 2003 IRS Form 990 data for all nonprofit organizations in the United States to examine the organizational determinants of 501(c)3 nonprofits taking the Internal Revenue Service's 501(h) election and whether organizations use h-election in a manner consistent with patterns of strategic behavior. Results show that nonprofit organizations that are reliant on direct public support are more likely to take the h-election, while those reliant on government grants are less likely to take the h-election. Examining lobbying expenditures, we find nonprofits associate with 501(h) election in a pattern consistent with strategic behavior. The findings suggest that nonprofit organizations with certain revenue streams and in specific subsectors respond differently to this election decision, and that organizations may respond strategically to mechanisms regulating their political activity.

Exploring Nonprofit Advocacy Research Methods and Design: A Systematic Review of the Literature

“…Nearly, half of the articles reviewed (48%) do not clearly specify which venue of advocacy was being examined. When researchers do identify the venue, they commonly examine advocacy occurring within the legislative branch of government (23%) (see Table 3), including the specific focus on lobbying, an activity only applicable to legislative venues (e.g., Grasse et al, 2021; Prentice, 2018). Roughly, 15% examine advocacy aimed at educating the public or swaying public opinion, and another 6% explore advocacy to existing stakeholders.…”

“…Trends of increased advocacy among different subsectors have been noted, including among human services nonprofits (Almog-Bar & Schmid, 2014), associations (Balassiano & Chandler, 2010), and arts organizations (Kim & Mason, 2018), among others. One specific form of advocacy, lobbying, has also seen significant growth (Grasse et al, 2021) As nonprofits have become more involved in the policy process, scholarly interest in the topic has also increased. Symposia and special issues in top public policy and nonprofit journals have been dedicated to the topic, including symposia in Policy Studies Journal, Nonprofit and Voluntary Sector Quarterly, and Voluntas.…”

“…Trends of increased advocacy among different subsectors have been noted, including among human services nonprofits (Almog-Bar & Schmid, 2014), associations (Balassiano & Chandler, 2010), and arts organizations (Kim & Mason, 2018), among others. One specific form of advocacy, lobbying, has also seen significant growth (Grasse et al, 2021). According to the Center for Responsive Politics (CRP), a nonpartisan research group, annual expenditures on lobbying by nonprofit organizations has grown from US$9.74M in 1998 to US$64.76M in 2018.…”

Government Regulation and the Political Activities of Nonprofits

“…Non-501(c)(3) nonprofits have no statutory limits imposed upon lobbying; therefore, they can spend more on these activities without fear of losing their tax-exempt status. Conversely, 501(c)(3) charities are required to keep lobbying expenditures as an "insubstantial" portion of total spending or adopt the h-election (Grasse et al, 2021). Some non-501(c)(3) nonprofits, such as 501(c)(4) organizations, accept the benefit of unlimited spending on political activities but in return give up their ability to receive tax-deductible contributions.…”

Editorial Introduction: Reaching Policy Change: Theoretical and Practical Advances in Policy Learning Research

“…With these findings, Miles and Mullinix thereby provide direct, causal evidence that compulsory voting does, in fact, increase voter turnout-evidence which can serve as a bridge between compulsory voting research and the growing literature on policy feedback theory. Grasse, Ward, and Miller-Stevens (2021) extend this focus on responses to policy change by analyzing the resulting strategies that nonprofits utilize following federal tax regulations. Building upon previous work regarding organizational decision making and nonprofits (e.g., Goss, Barnes, & Rose, 2019), the authors attempt to discern potential strategies and behaviors on the part of the more than 4,000 nonprofit organizations analyzed in their response to the Internal Revenue Service's (IRS) limiting of lobbying expenditures through the use of the 501(h) election.…”