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Back to Newsletter Archive
Winter 2012
Volume 4, Issue 1
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 In today’s heated national discourse, “change” has become a loaded term. Calls for change, from
the political right or from the political left, often sound like rallying cries for revolution, rather than a
desire for reasoned debate. This polarization of the public debate is a large part of the reason
many in the nonprofit sector have chosen to stay out of the discussion about change that now
dominates the national political arena. Yet while politics is not the business of nonprofits, change is,
which makes the resounding silence from the sector a matter of concern. Almost all nonprofits have
guiding missions that, if achieved, will bring greater levels of social justice, opportunity, and health
into their communities. These missions demand that nonprofits not only serve their constituents,
but function as advocates for their causes as well.
But what, exactly, should change? The odd thing about the current 99% and OCCUPY movements,
which many commentators have already observed, is that their calls for change seem disjointed
and lack focus around any singular agenda. Some protestors call for tax reform, others to end “free
enterprise and corporate greed.” Others have been unemployed, uninsured, or underemployed for
too long. Some are just mad at the banks, with new grassroots challenges rising up directly aimed
at the continuing high rates of foreclosures nationwide. In sum, there is no clear consensus about
what needs to be done to effect change. But what protestors do seem to agree on is the nature of
the problem; what unifies these disparate
agendas is a strong sense that “the system”– that important structure that we cannot see,
but that we know is a critical underpinning of
American democracy – just isn’t working.
 With this increased national cry for real policy
change comes a heightened sensitivity about
advocacy in nonprofit circles, its relationship
to lobbying, and its potential impact on an
engaged nonprofit’s 501(c)(3) tax status. In other words, where is the line that, once crossed,
jeopardizes a nonprofit’s exemption and position in the sector?
Nonprofits hold a peculiar position between the private and public domains. On the one hand, nonprofits
are private organizations run by private citizens. On the other, all donations come from the “public” and must be transparent. The ultimate stakeholders for nonprofit organizations are the donating public
and the larger community. As private organizations holding a public trust, nonprofits often feel caught
between their obligation to be careful stewards of contributed dollars, and their obligation to advocate
loudly on behalf of constituents who too often cannot speak on their own behalf.
Caution and serious discussion over what kind of advocacy is allowable and effective during
these volatile times is certainly warranted. In addition, nonprofits must realize that those who do
not engage in advocacy on behalf of their core mission may miss a critical opportunity to more
effectively serve their constituents and impact important contemporary debates.
What are the facts? Advocacy vs. Lobbying
Discussions within the nonprofit sector about advocacy often conflate “advocacy” and “lobbying” as one and the same. While there are strict laws governing the lobbying efforts of nonprofit
organizations, advocacy encompasses a much broader set of allowable activities. Advocacy aims to influence public policy and resource allocation decisions broadly within political,
economic, and social spheres. Advocacy can include media  campaigns, public speaking,
commissioning and publishing research or polls or
the filing of friend of the court briefs. Other
advocacy actions include publishing voter guides,
facilitating voter registration, hosting public forums,
rallies or meetings calling for attention to be given
to an issue or providing educational material.
Lobbying is a specific form of advocacy that can
be defined as “legislative advocacy,” such as
making policy recommendations to legislators or
championing a particular piece of legislation. In
this sense, lobbying is under the umbrella of advocacy, but maintains its own distinction.
Presenting a congressperson with objective information about healthcare (e.g., the prevalence
of a disease) is a form of advocacy. Recommending that congressperson vote for or against a
specific bill designed to address that issue is lobbying. Both involve communicating with the
legislator, but lobbying implies a course of action to be taken, rather than letting that person
make up his or her own mind. Lobbying can also be directed at the general public when
recommendations are made to sway public opinion. Contributions to partisan organizations,
political rallies, functions, or campaigns constitute lobbying, as these promote a specific
viewpoint or ideology. The hard line between advocacy and lobbying lies where an organization
shifts from bringing an issue to the public’s attention to making recommendations about
specific legislative action.
If we stopped here, the distinction would be easy to remember. As in many areas of the law,
however, there is considerable ambiguity around this issue. The IRS does allow 501(c)(3)s to
participate in some lobbying. Lobbying is permitted provided the organization passes either
the “Insubstantial Part Test” or the “Expenditure Test,” whereby a substantial amount of the
501(c)(3)s time and money is not devoted to lobbying. The measurement of this effort begins
immediately once the 501(c)(3) has decided to politicize a cause by advocating on behalf of a
particular political party, legislation, ballot measure, or judicial nomination. The time it takes to
compile or disseminate literature, and any costs therein, are counted toward the two tests.
When the time, money, or purpose of a 501(c)(3) passes a majority of its activity, the
501(c)(3) risks losing its tax-exempt status.
*A 501(c)(3) may perform these actions if they do not “constitute a substantial part of its overall activities”, but excessive activity
can result in loss of (c)(3) designation
†501(c)(4),(5),(6), may engage in all forms of advocacy in addition to lobbying
Source: IRS (www.irs.gov) and Alliance for Justice (www.afj.org)
How close your organization gets to the hard distinction
between advocacy and lobbying – or said differently,
how comfortable your organization feels functioning in the
grey area of “allowable” lobbying activity – depends on
your nonprofit’s mission, culture, board leadership, and,
hopefully, close relationship to your legal and accounting advisors.
But here is the point: EVERY nonprofit should be having these discussions,
and there is a wealth of advocacy activity that can be engaged in for every
cause, that is clearly within legal reach of 501(c)(3) organizations.
We Are Advocates
Most articles related to advocacy in the nonprofit sector are filled with cautionary tales and
scare tactics designed to keep nonprofits from even entering into the activity at all. While
there is a clear distinction to be made between general advocacy and legislative advocacy,
often these articles gloss over such differences and refer to advocacy and lobbying activities
in the same breath. This conflation leads nonprofits to believe that any advocacy can result in
penalties, fines, revocation of exempt status, and ultimately organizational death! What has
been made clear over and over again is that LOBBYING is not really acceptable behavior on
the part of a 501(c)(3).
Certainly nonprofit organizations must be made aware of the risks and should exercise
caution. But it remains that nonprofits have an obligation to move beyond their commitment
to service and toward advocacy for change that will result in significant systemic
improvement of community ills. In the face of increasing numbers of displaced families
throughout the region, one poignant example is the issue of homelessness. If we provide the
homeless with temporary shelter and food, but do not advocate for more permanent affordable
housing or supportive services, then we are not contributing to the full array of solutions that
this particular problem demands. And while homelessness, like other social challenges, may
never completely go away, this reality should not preclude advocacy taken on behalf of its
ultimate eradication. In Southern California and communities throughout the nation, that
advocacy to truly end homelessness is taking root.
The inclusion of advocacy efforts alongside a nonprofit’s service mission is not going to be an
easy change for many nonprofits to make. Most nonprofit organizations are born out of a desire
to SERVE a group of people, rather than a desire to CHANGE a system. And it is this practical
ability to see and address emerging needs that is the hallmark of the industry. Nonprofit
organizations have demonstrated this critical skill time and again, along with a stalwart
commitment to their causes even in the face of severe reductions in revenue. This ability to
stay focused on core community challenges regardless of the political or economic environment
highlights the main reason why nonprofits should embrace advocacy as a significant tool in
their efforts. For nonprofit organizations to exclude themselves from public debate
over society’s critical challenges deprives our democracy of a vital expertise and
vantage point that can help redirect conversations and inform important decisions.
The more nonprofits understand and exercise their right to advocate for their mission, the
broader the results of that advocacy will be. Given the entrenched anti-advocacy culture in
the nonprofit sector, the move toward advocacy cannot occur overnight. With a better
understanding of the legal limitations on lobbying and the distinctions between lobbying and
advocacy, nonprofits (inclusive of staff, boards, clients, and stakeholders) must begin the
discussion on how to become better advocates for their communities and truly fulfill the change
mandate spelled out in their organizational missions. Stretching the “advocacy” muscle in a
nonprofit may cause some growing pains, but exercising this important right will also grow the
capacity of the organization. A sector that moves beyond service – that moves right up to the
legal line between advocacy and lobbying – is a sector that is fully exercising its right to
educate and advocate for our communities.
An Obligation to do More than Serve
For more information on nonprofits & advocacy ideas,
visit
Alliance for Justice
at www.afj.org/for-nonprofits-foundations |
 Nonprofits are working to meet increasing community needs
with substantially less contributed and earned income than
they have had in recent years. And in this environment,
staying the course – or doing business “the way we’ve always
done it” – just isn’t enough to get the job done.
This challenge is forcing many nonprofits to look not just at their
financial statements, or whether or not they are diversified across
several types of revenue, but even deeper, to whether or not their business
model is even viable as an avenue to achieving their mission.
A business model describes the rationale of how an organization creates, delivers, and
captures value. It is the foundation under the strategies that determine how a business
operates. Many nonprofits have not grappled with the rationale behind their delivery of
service, instead creating strategies that are responsive to community need, and reflective
of their missions. But focusing on the mission without grappling with the business model
can land a nonprofit in trouble, quickly. A small nonprofit, for example, who has focused
for years on providing food and clothes to the poor, may find themselves on the sidelines
if funding streams shift dramatically away from basic needs support to focus on the
underlying issues of poverty, such as lack of employment or affordable housing. Shifting
priorities and shrinking funds make ongoing discussion about business models a critical
component of an organization’s financial health and sustainability.
It’s not a simple task. And challenging the business viability of a MISSION can be a painful
process. But board members and executives who merely review financial reports on a
monthly basis are probably NOT doing enough to examine whether or not their business
is pursuing the right funding…for the right model…in pursuit of the right mission… where “right” is no longer defined by a moral imperative or a specific lens on
community need, but by what the social sector market values, and will support. |
Once again, state budget cuts are here. Nonprofits that rely on public funding to serve
individuals and families living in poverty are again facing long delays in their
reimbursements and significant cuts to their budgets.
The Nonprofit Finance Fund Loan Program provides several types of
loan funds to financially viable nonprofits, among them bridge loans to
provide working capital during periods of declining or
delayed public sector funding.
For more information on this service and
others of the Nonprofit Finance Fund,
go to http://nonprofitfinancefund.org/west-coast/los-angeles or call local
lender Fathia Macauley at 213.623.7001,
extension 7. |
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Agency
in Action -
Voice of OC
 Attracting up to 40,000 unique visitors each month, Voice of OC is an online news source
dedicated to investigative news coverage that keeps government and other power brokers
accountable, and to being a catalyst for community discourse on critical issues in Orange
County. In addition to public service journalism, Voice of OC is also developing models for
tracking inside government/politics news, and sponsors public policy forums and
election debates to engage residents and policymakers together.
This combination of news coverage and civic
involvement creates opportunities for residents to
participate in the governing process – a rare platform
for engagement in the County. Through these services,
their vision is to create an environment where citizens
are empowered to hold their government accountable and
improve their communities through a civic engagement model
that is financially independent and sustainable. This makes
the Voice of OC an especially valuable resource for community
based organizations addressing critical challenges.
Since launching in 2010, Voice of OC has established itself as
a well read and well respected player in the local media scene,
publishing more than 1,300 articles focused on politics and
government. Traffic on its site has increased to 4,000 daily page
views from 1,500 2,000 unique visitors with daily peaks as high as
11,000. For these visitors, Voice of OC provides daily access and insights into the policies
and decisions made by government officials in key slots such as the county government.
In an era of dueling 24/7 cable news shows and shrinking traditional media, many Americans
seem to have forgotten the true role of journalism in a thriving democracy. Since March
2010, Voice of OC has reminded us that journalism is an important component of keeping
democracy strong.
The Voice of OC’s core values are at the heart of their operations: A belief in community
engagement, advocacy for first amendment rights and accountability.
To learn more about the Voice of OC, visit: www.voiceofoc.org or email info@voiceofoc.org. |
A December press conference from Governor Brown announced severe cuts to the California
budget across education, social services, and public safety programs. The state is expected
to fall short by approximately $2.2 billion, triggering the automatic mid-year spending cuts of
$1 billion needed to balance the budget in the absence of revenues.
Effective January 1, 2012:
• $248 million elimination of school bus funding.
• $100 million cut from Department of Developmental Services
• $100 million cut from In-Home Supportive Services
• $100 million cut from University of California
• $100 million cut from California State University
• $100 million cut from California Community Colleges
• $68 million cut from Juvenile Justice
• $23 million cut from state-subsidized child care, which will eliminate 7,500 child care slots
• $20 million cut from the Department of Corrections and Rehabilitation
• $15.8 million elimination of state grants to local libraries
• $79.6 million cut from K-12 education (effective Feb. 1, 2012)
The governor acknowledged that these devastating cuts are the result of the legislature's
failure to pass revenue generating measures. Brown now is focusing on getting his tax plan
on the 2012 ballot which, if passed, would generate about $7 billion annually for five years.
Source: California Family Resource Association (CFRA) – December 14, 2011 |
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