Nonprofit organizations conducting federal lobbying are subject to two separate definitions of lobbying. Section 162(e) of the Internal Revenue Code (the "Code") defines "lobbying" and requires most tax-exempt organizations either to pay a proxy tax on that lobbying or inform their members that a portion of their dues are non-deductible. The Federal Lobbying Disclosure Act (the "LDA") provides a second – and more restrictive– definition of "lobbying," which requires organizations to track and disclose the amount spent on such activities.

Note: Organizations that can show 90 percent of their members do not deduct their dues are not required to provide notice to their members of the nondeductibility of lobbying expenses, or to report the amount spent on lobbying activities on their informational returns. Moreover, 501(c)(3) organizations are subject to a different definition of "lobbying." For more information, see the ACC Quick Counsel, Lobbying: What Does It Mean for 501(c)(3) Organizations?.


Section 162(e) of the Code denies a deduction for the amount an organization spends on lobbying. Most trade and professional organizations exempt under 501(c)(6) and labor unions and farm bureaus exempt under 501(c)(5) are subject to the requirements of Section 162(e) (as are most taxable business entities). Membership organizations that are subject to Section 162(e) and that conduct lobbying may either: (1) disclose to their members what percentage of their dues are nondeductible because they are used for lobbying; or (2) pay a 35 percent proxy tax on lobbying expenditures. Regardless of the method chosen, they must disclose the amount spent lobbying on their Form 990 informational returns. Most membership organizations choose to report the nondeductible amount to their members.

The regulations implementing Section 162(e) state that a covered organization may use any reasonable method to calculate the amount spent on lobbying. An accurate calculation typically includes tracking employees’ time spent lobbying, allocating overhead costs to lobbying activity and factoring actual lobbying expenses (e.g., travel, payments to outside consultants, publications etc.) into the total. An organization may make reasonable allocations for activities conducted for both lobbying and non-lobbying purposes also.


In addition to complying with the tracking of lobbying activities under the Code, organizations that lobby may be required to register under the Lobbying Disclosure Act (LDA) if one or more of their employees spends more than 20 percent of his or her time on lobbying activities. The LDA requires these organizations to submit quarterly reports to Congress regarding their lobbying activities, including the amount spent on lobbying.

The LDA definition of "lobbying" differs significantly from the definition used for the 501(h) election.


Under Section 162(e)

"Lobbying" includes five broad categories of activity:

  • Influencing legislation. Any attempt to influence legislation through communication with (i) any member or employee of Congress; (ii) any member or employee of a state legislature; or (iii) any federal or state government official or employee who may participate in the formulation of legislation.
  • Grassroots lobbying. Any attempt to influence the general public, or segments thereof, with respect to elections, legislative matters, or referenda. This includes urging association members to engage in grassroots lobbying.
  • Communications to covered federal executive branch officials. Any direct communication with a covered federal executive branch official in an attempt to influence the official actions or positions of such official. Covered federal executive branch officials include the President, the Vice President, employees of the Executive Office of the President, and any individual serving in Executive Schedule Level I or designated by the President as having Cabinet level status and any immediate deputy of any of the foregoing.
  • Political activities. Any activity which constitutes participation or intervention in any political campaign at the federal, state or local level, the expenditures for which are not already subject to tax under Code Section 527(f).
  • Supporting activities. All research, preparation, planning and coordination (including deciding whether to make a lobbying communication) engaged in for a purpose of making or supporting a lobbying communication or political activity (as defined above) is treated as carried out in connection with such communication or activity. In other words, the time spent on any background activity engaged in for a purpose of supporting a future planned lobbying communication must also be counted as lobbying.

Under the LDA

"Lobbying activities" include "lobbying contacts" as well as efforts in support of such contacts, including preparation and planning activities, research, and other background work that is intended, at the time it is performed, for use in contacts and coordination with the lobbying activities of others.

"Lobbying contacts" are the actual communications with "covered officials." Lobbying contacts may be oral, written or electronic. A contact is a lobbying contact only if it involves:

  • The formulation, modification or adoption of federal legislation
  • The formulation, modification, or adoption of a federal rule, regulation, Executive Order, or other program, policy or position of the United States government
  • The administration or execution of a federal program or policy (including the negotiation, award, or administration of a federal contract, grant, loan, permit or license)

The nomination or confirmation of a person for a position subject to confirmation by the Senate

There are a number of exceptions to these four categories. The following exceptions do not constitute "lobbying contacts" (and therefore preparation for such contacts does not constitute "lobbying activity") and are particularly relevant to nonprofit organizations:

  • Administrative requests, such as requests for a meeting or about the status of a matter
  • Testimony given before a committee or sub-committee of Congress
  • Speeches, articles, or publications made available to the public or distributed through radio, television or other methods of mass communication
  • Information provided in writing in response to a request by a covered official
  • Information required by subpoena, a civil investigative demand, or otherwise compelled by the federal government (including information compelled by a contract, grant, loan, permit or license)
  • Communications in response to a notice in the Federal Register and directed toward the official listed in the notice
  • Written comments filed in the course of a public meeting
  • Any communication that is made on the record in a public proceeding
  • Petitions for agency action made in writing and made part of the public record

"Covered legislative branch official" includes all elected Members of Congress and the Senate, as well as all employees and officers of Congress. "Covered executive branch officials" includes:

  • The President
  • The Vice President
  • Any member of the uniformed services whose pay or grade is at or above O-7
  • Any officer or employee, or any other individual functioning in the capacity of such an officer or employee, in the Executive Office of the President
  • Any officer or employee in a position listed in Levels I though V of the Executive Schedule
  • Schedule C political appointees

The "Executive Schedule" delineates the most senior positions in the administration. Schedule C posts are typically non-career policymaking or "political" appointees, and confidential secretaries and administrative assistants of key appointees within an agency.

Even if a communication is directed to a covered official – e.g., a Schedule C appointee at a government agency – it is not a lobbying contact if the communication is otherwise made part of the public record before the agency (e.g., through a formal docketing process).


Many organizations will be subject to both Code and LDA reporting requirements for lobbying. But a provision of the LDA permits organizations to track and disclose lobbying expenditures using the Section 4911 definition rather than the LDA definition. For many organizations, the LDA definition of "lobbying" is far narrower than what is described in the Code.

Nonprofit organizations that are sensitive to having high dollar amounts reported on their LDA reports may consider opting to track lobbying activities separately under both the Code and the LDA. This approach will increase recordkeeping obligations, but will likely allow an organization to report a lower, more accurate estimate of federal lobbying expenditures to the Clerk of the House and the Secretary of the Senate, because state lobbying and grassroots lobbying expenses are not reported under the LDA.

This article was featured in ACC QuickCounsel.