Political Activity, Lobbying and Advocacy: Building the Organization Around the Rules

Groups start because someone wants a law changed, a levy passed or a permit stopped. So the question is never whether to advocate. It is how to build an organization that can advocate for years without losing its exemption, owing a surprise tax or getting a letter from the Secretary of State. This lesson is about those structural choices. The election-season rules (endorsements, forums, voter guides, gifts to committees, churches and the 2026 Idaho guidance on donor lists) are already covered in depth in Nonprofits in Politics, and the Idaho lobbyist and gift rules for officials in course 46, lesson 09. Read those for what to do in October. Read this one before you write the bylaws, the budget and the job descriptions.

Three different things: advocacy, lobbying and campaigning

The tax code uses three buckets, and most mistakes come from mixing them up.

Activity	Federal tax label	501(c)(3)	501(c)(4)	Idaho filings that may follow
Public education on an issue, research, forums open to all sides	Usually not lobbying (if no specific bill and no call to action, or if it is nonpartisan analysis)	Unlimited	Unlimited	None
Urging legislators or a city council to pass, amend or kill a bill or ordinance	Direct lobbying	Limited	May be its primary activity	Lobbyist registration if paid time passes $250 a quarter (Legislature or executive officials)
Urging the public to contact legislators about a bill	Grassroots lobbying	Limited, with a lower sub-limit under 501(h)	May be its primary activity	Indirect lobbying reports for registered lobbyists
Supporting or opposing an initiative, referendum, bond or levy	Direct lobbying (the voters are the legislature)	Limited	Allowed	Sunshine filings once spending passes the thresholds (course 46, lesson 07)
Supporting or opposing a candidate	Political campaign activity	Banned outright	Allowed if not its primary activity; may trigger the 527(f) tax	Independent expenditure, electioneering and 67-6606 statements (course 46, lesson 05)

Two quirks deserve a flag. A school board, zoning board or other administrative body is not a "legislative body" under Treas. Reg. 56.4911-2(d)(3) and (d)(4), so urging a planning and zoning commission to deny a permit is not lobbying for federal tax purposes. A city council or county commission acting on an ordinance is a legislative body, so the same group urging the council to change the zoning code is lobbying. And Idaho's lobbying law runs on a different map from the tax code: it reaches the Legislature and state executive officials, not city councils.

For a 501(c)(3): the substantial part test or 501(h)

Every charity starts under the substantial part test in 26 U.S.C. 501(c)(3): no substantial part of its activities may be attempts to influence legislation. The IRS substantial part page says the answer turns on "all the pertinent facts and circumstances," and that the IRS weighs the time spent by paid and volunteer workers as well as money. There is no number. A charity that loses its exemption under this test owes a 5 percent tax on its lobbying spending for the year under 26 U.S.C. 4912, and any manager who agreed to the spending knowing it would likely cost the exemption owes another 5 percent, unless the agreement was not willful and was due to reasonable cause.

The alternative is the 501(h) election. A public charity files Form 5768 at any time during the year it wants the election to cover, and it stays in effect until revoked, according to the IRS expenditure test page. Churches, their integrated auxiliaries and private foundations cannot elect. Once elected, lobbying is measured in dollars under 26 U.S.C. 4911, and only expenditures count. A volunteer's unpaid evening at the Statehouse costs nothing under the formula, though the paid staff time to organize volunteers does.

The formula, in short: the lobbying nontaxable amount is 20 percent of the first $500,000 of exempt purpose expenditures, 15 percent of the next $500,000, 10 percent of the next $500,000 and 5 percent of the rest, capped at $1,000,000. Grassroots lobbying gets a sub-limit of 25 percent of that amount. The full table and a small-charity example are in course 46, lesson 08. Go over either limit in a year and the charity owes a 25 percent tax on the larger excess. The exemption itself is at stake only under a second test, in Treas. Reg. 1.501(h)-3: if, over four years (the current year and the three before it), total lobbying spending exceeds 150 percent of the total nontaxable amounts, or total grassroots spending exceeds 150 percent of the total grassroots nontaxable amounts, the charity loses its exemption for the following year and has to reapply.

When is 501(h) the wrong choice? A charity that lobbies almost never gains little from filing. A charity with a huge volunteer lobbying program and a tiny budget may do better under the substantial part test if its dollar spending would blow through 20 percent, though it then carries the risk of a test with no line. And a group whose plan is mostly grassroots pressure on bills may find the 25 percent sub-limit too tight and decide its work belongs in a (c)(4).

What counts, and what does not

The definitions in section 4911(d) and Treas. Reg. 56.4911-2 are written for electing charities, but they are the clearest map the IRS offers, and they are worth teaching to every staff member who writes an email blast.

A direct lobbying communication has three parts: it goes to a legislator, a legislative staffer or an official who may help form the legislation (for officials, only when the main purpose is to influence legislation), it refers to specific legislation, and it reflects a view on it. A grassroots lobbying communication goes to the public, refers to specific legislation, reflects a view on it and encourages the reader to act. "Specific legislation" includes a bill already introduced and a specific proposal the group supports or opposes even before anyone drafts it. For a ballot measure, it starts when the petition first circulates for signatures.

The regulation lists four ways a message encourages action:

1. Telling the reader to contact a legislator or staffer.
2. Giving a legislator's address, phone number, email or similar contact information.
3. Providing a petition, tear-off postcard or similar tool for contacting legislators.
4. Naming legislators who oppose the group's view, are undecided, represent the reader or sit on the committee that will vote.

The first three "directly encourage" action. The fourth encourages action but not directly, which matters for the nonpartisan analysis exception: a study that names the committee members can still be nonpartisan analysis, while one that prints their phone numbers cannot. Naming a bill's main sponsor just to identify the bill does not count.

The exclusions

Section 4911(d)(2) and the regulation take these out of lobbying entirely:

• Nonpartisan analysis, study or research. An independent, objective treatment of a subject. It may reach a conclusion and advocate a view if it gives a "sufficiently full and fair exposition" of the facts so readers can form their own opinion. It must be available to the public or to government bodies, not only one side, and it cannot directly encourage action. Unsupported opinion does not qualify, and later use of the same material in a lobbying campaign can pull it back in.
• Broad social and economic problems. Discussing water supply, housing costs or rural health care is not lobbying, even while a bill on the subject is pending, as long as the discussion does not address the merits of a specific proposal and does not directly encourage action.
• Technical advice on written request. Answering a written request from a legislative body or committee for technical advice. A committee chair's email asking the group to explain how a fee formula works is the kind of request that qualifies; an invitation to the public hearing open to everyone does not.
• Self-defense. Communications with legislators about action that might affect the group's own existence, powers, tax-exempt status or the deductibility of gifts to it. A bill to tax all nonprofit property, or to dissolve a class of organizations, is fair game.
• Member communications. Talking to bona fide members about legislation of direct interest to them, as long as the message does not urge them to contact legislators (which counts as direct lobbying) or to get others to contact legislators (grassroots).

For a 501(c)(4): primary purpose, the dues notice and the proxy tax

A social welfare organization has more room. The IRS social welfare page says a 501(c)(4) "may further its exempt purposes through lobbying as its primary activity." It may also engage in some political activity, "so long as that is not its primary activity," and that spending may be taxed under section 527(f), as course 46 lesson 08 explains. What it gives up is deductibility: gifts to it are not charitable deductions, which lesson 05 covers along with Form 8976 and Form 1024-A.

The catch for membership groups is 26 U.S.C. 6033(e). Businesses cannot deduct lobbying and political spending under section 162(e), including the share of trade or membership dues used for it. So an exempt group outside 501(c)(3) that lobbies must either tell each dues payer a reasonable estimate of the share of dues that went to lobbying and political spending, or pay a proxy tax on that amount at the highest corporate rate in section 11, which section 11(b) sets at 21 percent. Spending is treated as coming from dues first, up to the total dues, and any excess carries forward to the next year.

The 2025 Schedule C instructions list the ways out:

• More than 90 percent of dues come from groups that cannot deduct them anyway, such as other exempt organizations or governments.
• For 501(c)(4) and (c)(5) groups, more than 90 percent of annual dues come from people, families or entities paying $143 or less a year in 2025 (an amount adjusted for inflation each year).
• Records show that 90 percent or more of members cannot deduct their dues, or the group is not a membership organization, or it has a private letter ruling.
• The only lobbying was in-house direct lobbying of $2,000 or less for the year, with no political spending, excluding allocable overhead.

A small citizen (c)(4) whose members pay $25 or $50 a year usually fits the 90 percent dues exception. A trade association whose members are businesses paying $1,500 a year usually does not, and has to send notices or pay the tax. The proxy tax is reported on Form 990-T.

Idaho lobbyist registration: staff and volunteers

The Idaho lobbying law moved in 2025. The registration and reporting rules that used to sit in Title 67 Chapter 66 are now in Title 74, Chapter 7, Lobbying Disclosure, added by 2025 Session Laws chapter 280. The definitions in Idaho Code 74-702 treat lobbying as attempting, through contacts with members of the Legislature or by causing others to contact them, to influence legislation, and extend it to indirect lobbying (working on public opinion) and to communications with executive officials about rules, rates, procurement, contracts, bids and bonds. "Executive official" covers statewide elected officers, department and agency directors and deputies, division administrators, bureau chiefs, and members of boards and commissions that make rules. A lobbyist is "any person who lobbies."

Who is exempt

Idaho Code 74-704 exempts:

• People whose lobbying is limited to appearing at public sessions of legislative committees, or at public meetings and hearings held by executive officials.
• News media employees gathering and publishing news in the ordinary course.
• People who receive no compensation for lobbying, or whose lobbying compensation is $250 or less in total during a calendar quarter. For an employee who lobbies for an employer, the statute counts the value of time spent, prorated hourly.
• Members of a trade association lobbying for it at its request, if the association itself is registered and reports.
• Elected state officers, gubernatorial appointees confirmed by the Senate and elected officials of political subdivisions acting officially.
• A member representing a bona fide church solely to protect the free exercise of religion.
• Employees of a corporate entity that has registered and named an official designated lobbyist, who then reports those employees' expenditures and names any employee whose expenditures reach $50 in a calendar year.

So for a typical advocacy group: unpaid volunteers never register, however much they lobby. A paid staff member who only testifies at public hearings does not register. A paid staff member who meets legislators privately, or runs a call-your-legislator campaign, registers once that time is worth more than $250 in a quarter. A contract lobbyist registers for each client.

Registering and reporting

Under Idaho Code 74-703, a lobbyist registers with the Secretary of State before lobbying or within 30 days of being hired or designated, whichever comes first, pays $10 per registration (a separate one for each paying client, with a combined statement allowed when several pay for the same legislation), reports changes within one week and re-registers by January 10 every year or the registration lapses. The statement lists the employer, the general subjects of interest and who keeps the records. The Secretary of State's lobbyist page sends filers to the Sunshine lobbyist portal.

Idaho Code 74-705 requires monthly reports, filed online within 15 days of the first of the month for the prior month. They total spending by category (entertainment, food, honoraria, travel, lodging, advertising and similar), itemize any single-occasion expenditure of more than $135 per person for a legislator or executive official (an amount the Secretary adjusts every two years), split costs among clients and list the bills and other matters supported or opposed. Indirect lobbying spending of $100 or more must be reported within 48 hours (food, refreshment and entertainment go on the monthly report instead). The statute also says an association talking to its own members is not lobbying under Idaho law. The Secretary of State's page says annual reports ended in 2025 and all lobbyists, including executive branch lobbyists and state entities, report monthly after July 1, 2025. Under Idaho Code 74-712, violations carry civil fines up to $250 for an individual and $2,500 for an entity, some knowing violations are misdemeanors with up to six months in jail, and prosecution must start within two years.

Election spending: when to build a separate PAC

Lobbying limits are about bills. Election spending is about candidates and ballot measures, and it brings in Idaho's Sunshine Law, which ignores tax status. Course 46 covers each filing: forming a PAC in lesson 04, independent expenditures and electioneering in lesson 05, and ballot measures in lesson 07. The organizational point is this: under Idaho Code 67-6606, a nonprofit that spends more than $1,000 of its own money in a year on Idaho candidates or measures files a statement naming everyone who paid it more than $500, for any reason, in the current or two prior years. That can mean the whole dues list.

A separate PAC, with its own treasurer, bank account and donors who give for politics, keeps that list to the PAC's donors. The choices by type:

Group	Candidate work	Ballot measure work	Usual structure
501(c)(3)	None, ever. May not form or fund a candidate PAC	Allowed as lobbying, within limits; may give to a measure-only committee	Measure work from the charity's budget inside its lobbying limit, or through an affiliated (c)(4)
501(c)(4)	Allowed if not primary; 527(f) tax on the lesser of net investment income or spending	Allowed	A connected Idaho PAC for candidates; a measure committee for big measure campaigns
501(c)(6)	Allowed if not primary; dues notice covers political spending too	Allowed	A connected PAC funded by members who choose to give

Many Idaho causes run as a pair: a 501(c)(3) for education and research, a 501(c)(4) for lobbying, sometimes a PAC beside the (c)(4). Lesson 05 covers the rules for keeping the first two separate. The rule of thumb for the whole family is that each entity pays its own way: shared staff and space are split by written agreement at fair value, and charitable money never pays for the (c)(4)'s lobbying beyond the charity's own limit or for anything a PAC does.