Financial Management Workshop for CILs…Regulations and Beyond IL-NET presentation on May 25-27, 2016 Module 18: Regulations Regarding Lobbying and Political Activity PAULA MCELWEE: We're going to talk about lobbying next, and I want to do a preamble before John jumps into the details. You know a lot of times, as centers, we, because we're required to do advocacy, it's one of our core services, including systems advocacy. We find ourselves sometimes struggling a little bit with this lobbying versus advocacy issue. I can tell you that there are SILCs and centers that have had to pay back federal funds that were determined on a review to be lobbying. And so a lot of centers really have carefully looked at this, and some use their discretionary funds for the things that they feel might cross that line, and we'll talk about the definitions and some of the things you can and can't do, based on IRS and other regulations in a second. But some of you are going to, for example, some of you are going to the NCIL conference in July, and as you know, there are visits on Capitol Hill that are included as part of that. And sometimes NCIL will give you an agenda and say, you know, here are bills we're supporting, here are bills we're opposing, are there things you want to talk to your legislator about. And there are many centers who separate out the costs for that portion of their trip to NCIL and call it lobbying and put it on their PAR that way and keep their costs separate, rather than run into a situation where they feel they would be questioned. Some of the things that SILCs have run into, if you're doing a statewide caucus of some kind, have you crossed over the line into lobbying or have you kept your lobbying cost separate and know that they're paid for with funds other than federal dollars? So we're going to talk a little bit about those details but this is financial because if you're doing any lobbying, you're allowed to do lobbying, you just can't pay for it with federal dollars. So you need to know, what is lobbying. Where is the line drawn? And also how you keep track of it financially? Because you want to keep track of it financially in a way that distinguishes lobbying from advocacy, if you're doing some lobbying. So, John. JOHN HEVERON: Thanks, Paula. So I'm going to talk about the lobbying rules under Uniform Guidance, and under the federal regulations for nonprofits here for charities specifically. So Uniform Guidance, I've cited this section, it's 200.450, addresses lobbying, including lobbying activities which are unallowable costs, such as attempting to influence a federal employee regarding a Federal award on any basis other than the merits of the matter. So you can try to influence them based on the merits of the matter but nothing else. This section identifies costs that aren't specifically unallowable such as nonpartisan analysis, research reports, and any activity specifically authorized by statute to be undertaken with Federal awards. And lobbying is an activity, it's a program, so it needs to be charged with indirect costs as well. We're probably not talking about an awful lot of money here because there's not a lot of money spent directly on lobbying and therefore, your indirect at 15 or 21% won't amount to a lot. It's more the process. Your federal funders are extremely aware of the fact that this is supposed to be treated as a program, treat it as a program. Advocacy is not lobbying, although it can include lobbying. So not all advocacy is lobbying, it can be any of a variety of activities with the objective of bringing about systemic social change. And it really is encouraged. It can advance your cause, increase your visibility, but it may or may not include lobbying. It can also include communicating with your legislators and the general public about helpful legislation without addressing specific legislation. If you're not addressing specific legislation, a bill that's pending, that you want to support or overturn, then it's not lobbying. Saying there ought to be a law about this is not lobbying, because you're not addressing a specific. PAULA MCELWEE: We have a lot of resources on this on our website, one of them is listed there in the handout, that is a great link for you to look at how can you influence policy and where is the line drawn and some of those details? JOHN HEVERON: Just to continue with that, lobbying is attempting to influence legislation by stating a position on specific legislation to legislators or other government employees who participate in the formulation of legislation, and that's called direct lobbying. I'll show you why that's important in a minute. Urging your members or the general public to contact their legislators with a position on specific legislation is called grassroots lobbying. Lobbying expenses include amounts for research, preparation, planning or coordination of any activity related to lobbying, again, about specific legislation, as well as direct lobbying costs. Uniform Guidance actually refers to the federal, the IRS regulations in defining activities that are excluded from the definition of lobbying and influencing legislation, so those are fairly well in sync. But I do want to remind you that something that is allowable doesn't mean you have a budget for it. In fact, you won't have a budget for lobbying, because it just isn't going to happen. For advocacy, you may or may not have a budget. AUDIENCE MEMBER: So, lets say you talk to a legislator about there ought to be a law about this. Something that affects people with disabilities, it's a big issue, you'd like to see something done, and the legislator says you're absolutely right, I want to write a bill, I want you to help me write the bill. Is that lobbying if you help him write the bill when he asks you to? JOHN HEVERON: You know, I'm not sure when it would turn, but providing technical assistance certainly wouldn't be, you know, the first thing you talked about certainly wouldn't be lobbying because there isn't any specific legislation at that point in time. Until there's a bill, it's not really lobbying. I think you could help, you could provide input. In fact, it specifically says in the IRS guides, that type of thing isn't lobbying. Now, once the bill is submitted by the legislator, that's a different deal. AUDIENCE MEMBER: Okay, once the bill is submitted and it's going to come up in committee, because you worked with the legislator, if he asks you to be available in the committee meeting to answer questions, and you're called to answer questions, is that lobbying? JOHN HEVERON: You actually can testify with information about a bill and that is not lobbying either. You're providing information. You're not pushing that, and of course, you're invited in to do that, to help people, to help legislators consider it. PAULA MCELWEE: Just don't have a closing comment that says so vote for this, because that's what you can't say. JOHN HEVERON: Okay. Charities exempt under 501(c)(3), which you all are, I'm quite sure, have an option to register to come under a safe harbor which allows you to spend a certain percentage of your total expenditures on lobbying each year. Again, not unallowed activities but on lobbying, And this may be a little hard to read, but these are the percentages you can spend without having any impact from IRS on your organization. You can spend 20% of the first $500,000. So if you have annual expenses of $500,000, you could spend 100,000 of them on lobbying. Pretty generous. The next half a million dollars it goes down to 15%. The next, between a million and a million five, another 10%, and over that 5%. Up to any limit, so if you have a $4 million budget, the math is you'd be able to spend $225,000 plus 5% of the amount over a million five. Now, that's for lobbying. That's for working with your legislators. Those amounts are cut in to a fourth for grassroots lobbying. So that raises the question, if you're doing some lobbying, should you elect, and the answer is, absolutely yes. I have been doing, I've been in the accounting business working with nonprofits since 1969, believe it or not, before many of you were born, and there has never been any indication that by electing to come under the safe harbor rule there's any greater likelihood of you being audited by the IRS, any greater scrutiny, nothing bad comes out of it. It's a protection. Your responsibilities year after year are very, very simple. You put like two numbers into your tax return for the year, so if you are doing lobbying, electing the safe harbor is a good thing to do. The election itself is, I mean, it's like a half page. Real, real simple. PAULA MCELWEE: We have a question here. JOHN HEVERON: Okay. AUDIENCE MEMBER: I guess on lobbying, because I like talking to our politicians because they need to know information, I always like to say it's informative. But when we talk to the general public about candidates, I kind of guess read ahead, but I guess my question is, to inform them of what people have said, as long as we say don't vote for this person, that's okay. Like I can say, oh, Donald Trump made fun of somebody with a disability, Hillary Clinton, has said she wants to end 14(c). Not telling you who to vote for, we're just telling you, but we're being equal to. So if Donald Trump said he wants to end 14(c), we post that as well. But anything disability related we post of what a candidate says. JOHN HEVERON: You can provide information but getting involved with political candidates is a very slippery slope. You can lose your exempt status very easily. This is different from lobbying. Political intervention is absolutely prohibited, so publishing factual information isn't that. Things you do on your own time are not that. You can do whatever you want on your own time. But you can't use the organization's facilities or resources or website or anything of that nature to support or oppose a candidate in any way. If you have a member of the senate or assembly in your area who gets some, a member money for your organization, this happens all the time in New York, and you send the president and the Executive Director to the, a golf tournament that supports them, that's a big serious problem. Our Rotary Club inadvertently did that, and there are watchdogs that are looking for this all the time, looking where funding is coming from. Somebody blew us in, it was just sort of a thank you, because one of the members got a nice tax grant for rotary sun shine campus where we have a facility for disabled kids. Seemed to them to be a good thing to do. The officers of the organization didn't even know it happened. It wasn't a lot of money. IRS starting position is, we're going to revoke your exempt status. They had to get the money repaid from the political candidate. They had to show that they had implemented policies to avoid this thing, occurring again in the future, to get out of hot water here. So it's a very, very serious matter, and by the way, with you know websites now linking to somebody's website whether it be a political candidate or somebody who has a position on a political candidate is considered to be the same as if you did this yourself, so. PAULA MCELWEE: Notice, we've moved from whether the costs are allowable to the risk of losing your exempt status. And you must be a 501(c)(3) exempt organization to receive Title VII funds. That's the regulations. So that's the slippery slope that includes losing your funding. Yeah. AUDIENCE MEMBER: So let's get down where the rubber meets the road. A.D.A. Restoration Act, increasing IL funding, I can't think of how many e-mails I've received in the last four or five months saying, contact Congressman Sarbanes about this issue. You're saying all of that is lobbying. Not public education. PAULA MCELWEE: If it's lobbying you can't pay for it with federal dollars. So you have to keep the costs separate. JOHN HEVERON: But you can do it. PAULA MCELWEE: But you can do it up to those limits that we mentioned. You can do it, up to those limits, you elect it on your 990, where do you elect that? JOHN HEVERON: It is a separate form. AUDIENCE MEMBER: But you're saying we can't use any federal money to do it. We can't use our IL system at work to do it because that's been paid for, in part, by federal money, so we can't use our e-mail blast or anything. PAULA MCELWEE: As soon as there's a bill number attached, you can no longer do it with IL money. You have to do it with discretionary money. So you need to really be cautious, and that's why a lot of centers have just said, we're going to elect, we're going to keep a separate fund. We're going to make sure that we are clean on this, because we want to be able to point to the fact that we didn't use federal dollars to do it. And we should be able to show that in our books, you know, that this was from our discretionary funds from some other source. We have a couple more questions. AUDIENCE MEMBER: Real simple question. I've always used a very simple rule of thumb, and that is lobbying is not educating, it's asking for the vote. So you said earlier you cannot talk about a specific piece of legislation but we do all the time, as long as we're just educating. PAULA MCELWEE: As long as the last word is not so support this, so call your legislators. As soon as you do that, you have crossed the line. AUDIENCE MEMBER: You can talk about a specific piece of legislation. You can post the comments of a politician. As long as you're just not being bias and only doing one, not the, you know. PAULA MCELWEE: Let's talk about candidates a little separately. But for the bills, for sure, if you're not asking for the specific vote, that's where the line is, by my understanding. Candidates are a little more. JOHN HEVERON: Candidates are a different story. You could arguably post a comment that's just a factual statement of this person said that. But there could easily be a bias built into that. In almost every case, you wouldn't be publishing the entire thing that a candidate said but maybe a component of it, which means you've taken it out of context, which means you may have some bias for or against that comment, and so that you need to be very careful with. But education about a bill, information about what it really means and how it would affect the community, your community, absolutely. That's educational. PAULA MCELWEE: Especially at the local level, state or local level, it's real easy for you to come up with the same four questions that you're going to ask every candidate and you're going to post the response of every one who responds, and you can prove that you asked everybody and you can post what you did there and it, you know, that's very fair, because you're not taking anything out of context. Everybody is being asked the same thing. You can have a candidate forum and every candidate is invited and the only candidate who shows up is the one that really considers these issues important, well, that's okay. You invited everybody. So, and the same questions are asked of every candidate that attends. Question here. AUDIENCE MEMBER: It's really not question, but our center was denied liability insurance based on a picture on our website of our previous Executive Director holding a sign in front of a nursing home. We were denied coverage. PAULA MCELWEE: Oh, my. That's not a lobbying issue. Advocacy issue, but my, my, my. Here, repeat it. AUDIENCE MEMBER: It wasn't a question, it was just a statement, that our center was denied liability insurance based on a picture of our previous Executive Director holding a sign in front of a nursing home. You know, to get, you know, get out of nursing homes. Paris, Tennessee. JOHN HEVERON: Time for a new insurance company. PAULA MCELWEE: You didn't want them anyway. I think Dave had a question, and then over here. AUDIENCE MEMBER: So in North Carolina, there's a bunch of us here, and we have been asking legislators, possibly, we were considering, I should say that, asking legislators to move some IL funds to the actual centers, because they have $16 million or something they have, they do their own independent living program in state. We're saying we do it better. There's an idea of asking legislators to give that to a CIL so that's strictly illegal for us in the SILC. PAULA MCELWEE: It's not illegal. But you can't do it with federal funds. There's a difference. You can lobby. AUDIENCE MEMBER: So we have to do it with unrestricted funds PAULA MCELWEE: You have to do it with unrestricted funds and you can't exceed these limits. AUDIENCE MEMBER: So, if I go there, my time has to be paid with unrestricted. PAULA MCELWEE: Correct. Your time, your travel expenses, your postage, any of those costs. And you have to make sure that you're clean with this with the IRS by electing that you do in fact elect to lobby and putting your limits in there. AUDIENCE MEMBER: Thank you. PAULA MCELWEE: A question over here. AUDIENCE MEMBER: I hope I'm not opening up a can of worms with this one, but we pay association dues to our state CIL association and with those funds, the state CIL association pays for a lobbyist. Is that allowable? So far it has been, but this raises a question in my mind if it's not allowable. PAULA MCELWEE: That's the great question. Actually, all across the country, that's what's been happening, and we have not yet had a center have a difficulty with those membership dues. That doesn't mean that at some point somebody is not going to say, is this lobbying and you might have to make the dues from that year forward, you might have to have a plan. You might have to make the dues from that year forward out of discretionary money. Or you may decide to do that now to avoid the problem, but it's happening everywhere. John, I don't know what you think there. JOHN HEVERON: I have not run into this specific problem. I guess the technical answer would be the portion of it that is lobbying, and it's always reported. These organizations report what portion of your dues is lobbying, should be treated as, should be reported as lobbying. That is allowable. But the technical answer is, yes, it's lobbying. PAULA MCELWEE: Should be separated out, usually isn't. So far not a problem. But it could become a problem. AUDIENCE MEMBER: I'm the new CFO at the center in Raleigh and the question I have, I have not had a chance to get into the detail, the 990, but I'm not sure if they've ever filed that election. If we file election again and it's already been filed, is that a problem, or. JOHN HEVERON: No, it's not a problem, to refile it. If you did file the election, there is a section on the 990 where you would be reporting your lobbying expenses. It's a very, very brief section. If you haven't been doing that, it's a reasonable presumption that you haven't elected, but submitting that twice is not a problem. I've never heard any negative feedback from doing that. AUDIENCE MEMBER: Okay. Thank you. PAULA MCELWEE: Question here, or comment? DARRELL JONES: I just wanted to get some clarification here backing up to the advocacy for expanding the independent living program to suggest to the legislature that there needs to be more funding for the independent living program. My understanding is that that in and of itself is not lobbying. JOHN HEVERON: Agreed. DARRELL JONES: That it's only when it moves to the point of this becomes a specific budget bill that it then becomes lobbying, so the discussions about expanding the program is just advocacy. PAULA MCELWEE: Advocacy and education. Because you're usually showing need in some way with some facts and figures. You can always do those things, advocacy and education. You just need to know where to draw the line. AUDIENCE MEMBER: I wanted to ask your opinion, if you've been in existence for a while and you haven't done the Safe Harbor Registration and now you do it, would that cause them to ever look to see if you've been lobbying before then? JOHN HEVERON: As I said, in my 40 some years of doing this, I've never, ever seen that create any sort of audit follow-up or any sort of additional scrutiny. The risks of not doing it are way greater. AUDIENCE MEMBER: I agree, I just wanted to check. PAULA MCELWEE: Other questions? So we're clear that you can lobby, you need to keep good records related to that, including your reporting to the IRS, and you need to make sure your staff are aware of what constitutes lobbying when they're working. On your own time, you know, not an issue, as long as you can truly distinguish yourself as an individual from your organization. Which sometimes is tricky because they want to put your title in the article where they're interviewing you or whatever. JOHN HEVERON: And I sort of think that you drove us right to the next slide, and fully covered it, so here we talk about involvement with political candidates or political parties, prohibited, avoid supporting or opposing candidates. Charities cannot allow paid employees to work on behalf of a candidate or political organization while receiving compensation. Campaigning against one is the same as campaigning for one. PAULA MCELWEE: Notice, this is a different rule. We're not saying you can do it with discretionary funds. We're saying you can not do it. There's a difference. AUDIENCE MEMBER: I've heard it said a couple of times, you can do some things on your own time. But if you take a vacation day, you're being compensated while you're on your vacation day, right? JOHN HEVERON: I think your vacation day is your own time. I won't suggest everybody would necessarily agree with that. I get your point, but I think your vacation day means up do whatever you personally please. I'll leave it at that. PAULA MCELWEE: I have visited centers that have political signs in their front yard for a specific candidate. Not okay. JOHN HEVERON: Or website links, not okay. PAULA MCELWEE: Not okay. That is a great risk to your organization's nonprofit status. JOHN HEVERON: So just want to continue this prohibition, also extends to contributions to candidates' campaigns, engaging in fundraising activities, distributing statements and similar activities. You can't use your organization's resources for golf tournaments or fundraisers. You can't allow a candidate or political organization to use your facilities or equipment. Paula mentioned a very good exception to that, though, if you invite all candidates in, you can do that. AUDIENCE MEMBER: But you're not talking about federal funds when you say that. You're saying my organization's resources as a 501(c(3) no matter what source. JOHN HEVERON: No matter what. PAULA MCELWEE: You can't do this as a 501(c)(3). It doesn't have to do with your funding structure. AUDIENCE MEMBER: This is kind of going off a little bit that of, if you're doing something on your own time, would it be recommended even to kind of have a statement signed saying, I as an employee did this lobbying activity but I was not compensated through any funds? I was basically off the clock. JOHN HEVERON: I don't think you really need to do that or that that adds any value. It almost sounds like unnecessarily defensive, so I wouldn't even. PAULA MCELWEE: You may want to say that verbally if you're interviewed, especially, because I think that's where all, a lot of times a center director will get entangled because somebody is going to ask them questions as to their opinion, but then they quote them as the director of the center, and so you need to be extremely clear if you're being interviewed by the news media in any way, and some of you come from small towns where they want to talk to you about everything anyway, you know? One of our site locations, the guy on, it was a Wednesday paper, on Tuesday afternoons if they hadn't filled the paper would walk down the street and stop in all our offices to see what he could get us to say so he could write an article. Small town weekly paper. But we got quoted a lot. And you really had to say to him, Jim, you can not do this, you can't quote me as the center director if you're going to say that. JOHN HEVERON: We already talked about watchdog organizations, but I want to point out a really great resource. And it isn't all about what you can't do. It's actually very much about what you can and should do. This is independentsector.org. They provide clarity on the difference between lobbying and advocacy. They actually have, they encourage advocacy. They provide resources for advocacy. So it's just a great link to have. Independentsector.org. And look at the policy and advocacy tab of their website. PAULA MCELWEE: That will give you some example, scenarios of different kinds that will help with training if you want to do some staff training or board training on this. JOHN HEVERON: If we don't have other questions, we're going to talk about some of our resources here. PAULA MCELWEE: Looks like we have a couple more lobbying questions maybe. He's coming right by. AUDIENCE MEMBER: Sorry, I have a lot of questions, but I just wanted to get clarification because you mentioned board training. So even though board is not paid, do they still, they're still bound by the same rules as staff. PAULA MCELWEE: Second part with candidates is where you get a concern. If they are on behalf of your organization endorsing a candidate, then that's a problem. And they need to know that. Can't say, I'm the president of the board, and I know that my center, da, da, da, da. And that's why I'm endorsing so and so. He's crossed that line into putting your exempt status in jeopardy. AUDIENCE MEMBER: Raised another question in my mind. So one of my volunteer board members is going to testify next week on Baltimore County's home act that allows people to rent regardless of the source of where they get their income. And I'm sure she plans on saying, and I'm here with the IMAGE Center and we strongly support this and it is a bill, it's a real bill. JOHN HEVERON: Testimony is fine. The, they should be, they should be discouraged from taking a position on it, but testimony is perfectly permitted. And it's not lobbying, and. AUDIENCE MEMBER: When you go in there to sign the list, right, the list, there's two lists. One is those in favor and other is those against. You're hung right from the very beginning about whether or not you are supporter or an opposition. PAULA MCELWEE: I haven't heard that before. JOHN HEVERON: I wasn't aware of that. AUDIENCE MEMBER: When you go to legislature, they do the same thing. I used to work for the legislature. We organized hearings. We wanted to know who is in favor, who is opposed? They want to balance it out, or. PAULA MCELWEE: I haven't thought that through. AUDIENCE MEMBER: I had never either. JOHN HEVERON: If you've been asked to testify, I understand what you're saying, and if that's a necessary part of the process, you probably need to check the right box. I would think that that wouldn't taint it, if it's a requirement. You're there to testify and that's part of providing testimony. And that's not lobbying. AUDIENCE MEMBER: I agree with Mike. What's the point in testifying if you can't participate, isn't that what testimony is? PAULA MCELWEE: Typically the testimony is facts and figures, clarification, education. If you're doing it as a staff person. If you're doing it as an individual, you have to make that distinction and say I'm here as an individual on my own time, and you know, here's my position on it. But we're not saying you can't do that. We're saying, if you do it, if you decide you want to go testify and give your position, you just need to separate the costs out and call it lobbying. And admit, hey, I'm lobbying. And a lot of centers do that as a moral imperative. They say, you know what? I better be lobbying. That's part of the advocacy, and it's an important thing for us and I want to go to testify and I want to say it strongly and I want to say, you know, my center is strongly in favor of this bill because it will have this impact on us. A lot of centers choose to do that. But you just have to keep track of your cost separately so it's not allowable with federal funds, and you are electing it with your IRS report. AUDIENCE MEMBER: Kind of confidential in a way, because, our core services require us to do advocacy, individual and systems advocacy. I mean its like being caught between a rock and a hard place. PAULA MCELWEE: Yeah. You can do the systems advocacy and not use, and use federal dollars right up to the moment that you would say, so support this bill, or so oppose this bill. But as soon as you do that, you have begun to lobby, and that has to be paid for separately. It can't be paid for with federal dollars. JOHN HEVERON: It does. PAULA MCELWEE: You can do it. You just have to keep the figures separately because you're not going to pay for that with federal dollars. You're not allowed to pay for it with federal dollars. AUDIENCE MEMBER: That brings me to another question. If you're putting it on your, recording the time and effort as lobbying and you're registering your nonprofit in that additional way that you're doing lobbying, do you have to be a registered lobbyist? JOHN HEVERON: No. That's a different thing. AUDIENCE MEMBER: Mine was actually just a comment. We put right on our PAR form lobbying or general fund to make sure that any time that is spent it's clearly indicated that it is paid for out of general funds and not out of any state or federal funds. JOHN HEVERON: Excellent. As we said, it is a program. PAULA MCELWEE: Like I said, it's a moral imperative to some centers. They have said, we must, therefore we will take the time to set it up clearly, and handle it legally, and make sure that federal funds don't support that activity but other funds do.