Private Foundations and Advocacy: Understanding the Rules

Unlike public charities, discussed in a recent post, private foundations are prohibited from lobbying in any capacity (absent a specific exception to the prohibition). However, private foundations still can accomplish much in the way of advocacy through their grantmaking without running afoul of the rules.

Grantmaking Structure

A private foundation cannot earmark grant funds for lobbying. However, a private foundation still can make grants to recipients that conduct lobbying activities, as long as those grants are structured properly.

For a general support grant, the grant will not be considered earmarked as long as there is not written or verbal understanding with the grantee that the grant funds will be used for lobbying. In other words, a grantee can use grant funds from a general support grant from a general for lobbying, unless the grant agreement expressly prohibits such use.

For a project grant, the grant will not be considered earmarked as long as (i) there is not written or verbal understanding with the grantee that the grant funds will be used for lobbying, and (ii) the foundation reasonably expects that the non-lobbying expenses will equal or exceed the grant amount. In other words, a grantee could technically use grant funds from a project grant for lobbying, even if the entire project is funded from a combination of private foundation grants, so long as the non-lobbying expenditures exceed the amount of each foundation grant (considered separately, not in the aggregate).

Example: project budget is $1,200,000, of which $600,000 is allocated to non-lobbying expenses and $600,000 is allocated to lobbying expenses. Three private foundations fund the project with grants of $400,000 each. Because the non-lobbying expenses exceed the $400,000 amount of each foundation grant, each foundation satisfies these rules, and their grants will not be considered lobbying expenditures (even though we know that some foundation moneys would have to be used for lobbying).

Private foundations may, for a variety of reasons, elect to be more restrictive in their grant agreements than the regulations actually require. For example, their grant agreements may expressly prohibit the use of grant funds for lobbying in all cases, rather than doing due diligence on a grantee’s non-lobbying budget.

Exceptions  to Lobbying Definition

As with the regulatory regime for public charities, there are some specific  exceptions to the definition of lobbying that can be helpful to private foundations:

  • Self-defense, if the communication addresses legislation that affects an organization’s existence, powers and duties, tax-exempt status and/or deductibility of contributions (only applies to direct lobbying);
  • Technical advice or assistance, if the organization gets a written request from the legislative body;
  • Nonpartisan analysis, study or research, where an organization engages in independent and objective study and research and makes it available to the public. It can even advocate particular viewpoint on legislation in the context of that study and research, if it provides sufficiently fair and full exposition of underlying facts; however, it cannot reflect a viewpoint on legislation if there is a direct call to action; and
  • Examination and discussion of broad social, economic or similar problems: discussion may address matters that are the subject of legislation if the merits of the legislation aren’t discussed and there is no direct call to action.

These exceptions can allow a foundation, for example, to fund projects to conduct and distribute in-depth research and analysis on timely issues like gun control or childhood obesity, or to directly advocate against measures that would affect their ability to accept tax-deductible contributions (something that has definitely been at the forefront lately with the recent fiscal cliff discussions, discussed previously on our blog).

See Our Services