8 Legal Decisions Affecting Nonprofits Right Now

By Sean Norris

5. Election Lobbying: Public Charities
Section 501(c)(3) exempt organizations that are classified as public charities, on the other hand, can engage in lobbying activities so long as they do not represent a substantial part of the organization’s overall activities. Unfortunately, under what is referred to as the “Substantial Part Test,” there is no clear definition of what constitutes substantial and whether an organization has violated the test will be determined based on the facts and circumstances. An organization that engages in too much lobbying could jeopardize its tax-exempt status.

However, many Section 501(c)(3) public charities (other than churches) have the option of making an election under Internal Revenue Code Section 501(h) to have their lobbying activities measures by what is referred to as the “Expenditure Test” instead. The Expenditure Test sets forth clearly established limits on how much an organization may spend on lobbying activities without jeopardizing its exempt status. For many (though  not all) organizations, it will make sense to make the Section 501(h) election.

Note that there are a significant number of advocacy activities that do not necessarily constitute lobbying in most instances, including influencing or educating legislators on non-legislative matters; influencing the executive branch on executive decisions; organizing; educating the public; encouraging voting; conducting research; changing corporate behavior; and nonpartisan voter education. Some of these activities may, however, be subject to additional rules and regulations that an organization should ensure it is aware of before beginning such activities.
— Erin Bradrick

6. The America Gives More Act of 2015
The America Gives More Act of 2015 (H.R. 644) easily passed the House in February, but has yet to be addressed by the Senate. This legislation would permanently restore three expired giving incentives (food donation tax deduction for small businesses, enhanced deduction for conservation easement donations, and the IRA charitable rollover) and simplify a private foundation excise tax on investment income. The Obama administration opposed an earlier version of the act, noting the lack of budget offsets and claiming that the incentives primarily benefit higher-income taxpayers. What the administration appears to be ignoring is that the incentives primarily benefit the communities and persons served by the nonprofits.
— Gene Takagi

7. H.R. 2646
The national network of Protection and Advocacy (P&A) nonprofit organizations has been assisting children and adults with psychiatric disabilities and their families since 1986, under the Protection and Advocacy for Individuals with Mental Illness (PAIMI) program to prevent abuse and neglect, ensure access to services and support and protect civil and human rights. There is a PAIMI program in each state and territory in the U.S.

Bill H.R. 2646 would negatively impact the work of the P&A organizations for people with mental illness. While PAIMI funding is not being reduced in this bill, program restrictions are proposed by this bill, such as restricting advocacy to only situations involving abuse and neglect and a bar on PAIMI advocates from raising concerns on decisions made by doctors of family members for persons with mental illness.
— Jamie Ray-Leonetti

8. The Charitable Deduction
Legislation affecting the charitable deduction has great significance to the nonprofit sector, because the deduction has a substantial impact on charitable giving. There have been several proposals related to the charitable deduction, including President Obama’s proposal to cap itemized deductions at 28 percent for taxpayers earning more than $200,000 per year. According to Independent Sector, experts predicted this proposal would cause charitable giving to decline by anywhere between $1.7 billion and $7 billion per year when the top marginal tax rate was at 35 percent. The decline might even be greater with the top marginal tax rate now close to 40 percent.
— Gene Takagi