Question: Our private foundation received a proposal for a general support grant from a public charity. The proposed grant meets our guidelines and is within our charitable mission; however, we know the charity engages in lobbying. Can we make a grant to this charity?
Answer: Yes, as long as the grant is not earmarked for the grantee’s lobbying activity. Earmarking is a written or oral understanding that funds will be used for a particular purpose.
What is “lobbying”?
The IRS defines lobbying as a communication with legislators or legislative staff that reflects a view on legislative matters. Lobbying also includes “grassroots lobbying,” which involves urging others to make those contacts with legislators. Private foundations may fund a variety of advocacy activities but may not earmark funds for lobbying. If a grant is earmarked for lobbying activity, the private foundation will be subject to excise taxes on the grant.
Rules for General Support and Project Grants
Treasury Regulations permit private foundations to award general support grants to public charities that lobby. There are no special rules to follow when awarding such grants.
A private foundation may also award project grants to support a grantee’s specific projects—even if the projects involve some lobbying activity—if the foundation follows the safe harbor rules contained in the regulations. To use the IRS safe harbor for project grants, the foundation should review the grantee’s project budget to ensure that it only funds up to the amount projected for non-lobbying activity. For example, if a potential grantee’s total project budget is $50,000 and the organization expects to expend $5,000 on lobbying activity related to that project, the foundation may award up to $45,000 (i.e., the non-lobbying amount) for the project.
Supporting Other Advocacy Activity
Other advocacy activity that is not as strictly regulated as lobbying includes, but is not limited to, educating legislators and the public about issues, influencing regulatory agencies, and participating in litigation.
The rules governing support of charities that lobby have many nuances. Working with your foundation’s counsel will help ensure that you comply with the Tax Code.
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