State Service Commission. Advocacy Methodologies. Highly supportive regulation and policy. Low High. Leadership and Organization Structure

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1 Advocacy and State Commissions American Association of State Service Commissions Presented by: Kyle Caldwell, ConnectMichigan Alliance Based on presentation created by: Erin Skene, Michigan Nonprofit Association Overview State Commissions and Advocacy Seven Steps to Effectiveness Types of State Commission Advocacy Advocacy Matrix Nonprofit Lobbying Rules and Regs. 501(c)(3) and types of filing status State Government Agencies and Lobbying Strategies for Advocacy and Lobbying Focus One of five types of community relations carried out by commissions: Advocacy Commission Advocacy Methodology Lobbying and the Law (nonprofits) State Commission Effective Practices Collaboration Partnership Public Relations Coalitions 1

2 7 Effective Steps 1. Work with the staff to identify need/ability 2. Determine your type of state commission 3. Identify your state methodology 4. Understand the law 5. Build your strategies 6. Practice your strategies 7. Share what you learn from your strategy 1. Work with staff Work with Exec. Director to determine: What are the advocacy needs of the organization? What are the boundaries for the commission to engage in advocacy? What should be the strategies for advocacy? Whom should the commission engage in advocacy strategies? How will you communicate the results of your efforts? 2. Determine Type of Commission Examine the commission s construction Is the commission a government agency? Is the commission autonomous? Is the commission a nonprofit organization? Does the commission have a nonprofit companion organization? What is the IRS filing status of the nonprofit? Substantial Part Test or Expenditure Test? 2

3 Types of State Commissions Commissions Vary in Constructs State Government Agencies Nonprofits w/ Governor Appointed Boards State Government Agencies with Nonprofit Components Commissions Vary in Operations Staffed by state appointees Staffed outside state government Staffed both inside and outside state gov. 3. State Commission Advocacy Methodology Once you understand the construct, determine the advocacy methodology Examine factors that influence ability to advocate. Build strategy around that methodology. Advocacy Methodology Factors Regulations and Policy Funding guidelines Type of work engaged Homeland security Mentoring Governor s Office Directives State Laws Bylaws 3

4 Advocacy Methodology Factors Leadership and Structure Commissioners Support of Governor, Lt. Governor, Legislature Nonprofit or State Agency or Both Flexible Funding State Service Commission Advocacy Methodology Matrix Supportive Regulation and Policy Low High Limited/Rigid Leadership and Organization Structure Engaged/Flexible Advocacy Methodologies Passive Limited/rigid leadership and org. structure Low supportive regulation and policy Positioned Limited/rigid leadership and org. structure Highly supportive regulation and policy Constrained Engaged/flexible leadership and org. structure Low supportive regulation and policy Proactive Engaged/flexible leadership and org. structure Highly supportive regulation and policy 4

5 Supportive Regulation and Policy Low High State Service Commission Advocacy Methodology Matrix Positioned Limited/Rigid Passive Proactive Constrained Leadership and Organization Structure Engaged/Flexible Advocacy Methodologies Passive (general promotion) Provide information when requested Celebrate work of grantees Positioned (promotion/education) Staff driven communications Board development efforts Constrained (education/advocacy) Provide commissioners, partners, etc. with tools to advocate Educate all on the limitations due to policies and regulations Proactive (advocacy/lobbying) Empower commissioners and others with information and strategies. State Service Commission Advocacy Methodology Matrix Supportive Regulation and Policy Low High Positioned Limited/Rigid (Education) Passive (Promotion) Proactive (Lobbying) Constrained (Advocacy) Leadership and Organization Structure Engaged/Flexible 5

6 7 Effective Steps 1. Work with the staff to identify need/ability 2. Determine your type of state commission 3. Identify your state methodology 4. Understand the law 5. Build your strategies 6. Practice your strategies 7. Share what you learn from your strategy 4. Understand the Law Lobbying and Nonprofits Advocacy/public education involves identifying, embracing and promoting a cause. Lobbying is a specifically focused form of advocacy to influence legislation. Only some of the methods mentioned earlier are considered lobbying. Definition of Lobbying Lobbying is defined as any direct contact with a lobbyable public official, whether face to face, by telephone, letter, electronic media or any other means, the purpose of which is to influence the official s legislative or administrative actions. 6

7 Why should you care? Although the terms are often used interchangeably, you need to make sure that you record and report lobbying as defined by the federal and state governments. IRS Definition of Lobbying Lobbying is an attempt to influence legislation through direct contact with public officials at the local, state and federal levels (direct lobbying) or indirectly by appealing to officials through the general public (grassroots lobbying) There are several common myths about the laws on lobbying by charitable nonprofits Lobbying is not legal Even if lobbying is legal it will make an organization subject to audit by the IRS There are no clear definitions of what is lobbying, and what is not lobbying Reporting is burdensome and complicated 7

8 Is lobbying legal? YES! Lobbying by charitable nonprofits -- tax-exempt under section 501(c )(3) of the Internal Revenue Code -- is absolutely legal. What do I need to know to follow the IRS rules for lobbying by 501(c)(3)s? Organizations have a choice between two sets of rules to follow The Substantial Part Test and the Expenditure Test, also known as the 501h election One set of rules is generally preferable for most charities The Expenditure Test enacted in 1976 Charities must affirmatively elect the Expenditure test rules Lobbying expenditures are to be reported annually on tax Form 990 Schedule A What is the substantial part test? Lobbying cannot be a substantial part of your organization s activities. If it is, your organization may lose its tax exemption and with it the right to receive tax deductible contributions. 8

9 What is the expenditure test? The Expenditure test was enacted in 1976 and implemented by IRS rules in 1990 to provide clear ceilings for lobbying expenditures by 501(c)(3)s and clear definitions of what is and is not lobbying. Frequently known as the 501(h) lobby election, the expenditure test did not replace the older substantial part test but is an alternative to it. Who does the expenditure test apply to? Only charitable nonprofits that elect to come under it (or section 501(h) of the Internal Revenue Code). The Choice: Substantial Part vs. Expenditure Test Substantial Part Expenditure Test No certain and definitely allowable amounts of lobbying expenditures A single year violation may result in the loss of tax- exempt status Importance of an issue is a relevant factor in determining permissible lobbying activity Possible additional reporting burden on tax form 990 Clear and specific definitions of lobbying Certain and definitely allowable amount of lobbying expenditures Safe harbor exceptions No jeopardy to tax-exempt status for a single year violation Importance of an issue is not a factor in measuring permissible lobbying activities Possibly less reporting burden than substantial part test 9

10 Expenditure Test rules in detail As stated before the expenditure test rules are preferable because they provide clear expenditure limits and definitions of lobbying for 501(c)(3) organizations. By default, 501(c)(3) organization are under the vague, substantial part test until they affirmatively elect the expenditure test. How much can my organization spend on lobbying under the expenditure test? A generous amount: 20 percent of the first $500,000 of annual expenditures; 15 percent of the next $500,000; And so on up to $1 million a year. Grassroots lobbying expenditures Charitable nonprofits may spend 1/4 of the total amount of their lobbying budget on grassroots lobbying. 10

11 Example of ABC charity ABC charity has annual expenditures of $250, % of $250,000 = $50,000 = Direct lobbying limit 25% of $50,000 = $12,500 = Grassroots lobbying limit Nonprofits can spend a significant amount on lobbying under the expenditure test. What is Direct Lobbying? Direct Lobbying is when an organization attempts to influence specific legislation by stating its position or urges a legislator to support, oppose or otherwise take action on a bill or proposed legislation. Direct Lobbying: Examples A state association of human service organizations takes a position to support legislation to increase the state s budget for human service programs. Staff of the association then met with members of the legislature and encouraged them to support the pending legislation. 11

12 What is Grassroots Lobbying? When an organization urges the public to take action on specific legislation Key elements of grassroots lobbying are: Refer to specific legislation; Reflect a point of view on its merits; Encourage the general public to contact legislators; and Supply the public with legislative contact information. Ballot Initiatives and Referenda When a nonprofit urges the public to vote for or against a ballot initiative or referendum. Lobbying communications for or against ballot initiatives may be conducted through the media or other means. Lobbying for or against ballot initiatives and referenda is considered direct lobbying, not grassroots, because the public becomes the legislature. Grassroots lobbying examples A state arts organization sends a letter to people and organizations who are not their members, asking them to contact their Representatives to urge them to support a bill that would expand state funded arts education programs. The cost of the time it took to create and disseminate the letter would count against the lobbying budget of the organization. 12

13 Grassroots lobbying examples An association of land trust organizations prepares sample letters and a fact sheet and uses them to send out an action alert by to landowners in several counties asking them to and call their elected officials to oppose a new bill related to property taxes. The expense of the time it took to prepare the materials and send out the message count toward the association s lobbying budget. How can a 501(c)(3) organization elect? Simply fill out IRS form 5768 that informs the IRS that you have elected to follow the expenditure test for lobbying. It is only one-page and need only be filed once. Will IRS red flag a 501(c)(3) for an audit if it elects? Absolutely not. A recent IRS letter to Charity Lobbying in the Public Interest states clearly that election does not expose nonprofit s to an increase audit risk. See a copy of this important letter at 13

14 Will a 501(c )(3) organization s tax status be affected if we elect the expenditure test? NO Unlike the substantial part test, there is no jeopardy to tax-exempt status for a single year s violation under the expenditure test. May nonprofits use federal funds to lobby? No. Except in certain situations, federal grants cannot be used to lobby on legislative matters at the federal or state levels. Federal contract funds cannot be used to lobby at the federal, state or local levels. Federal funds also cannot be used for electioneering purposes. May nonprofits use private foundation funds to lobby? Yes. Nonprofits may use non-earmarked or general purpose funds to lobby. However, private foundations cannot earmark grant funds for lobbying. Community foundations can earmark grants for lobbying (they are exempt under 501(c)(3) and not private foundations). 14

15 Important exclusions to lobbying Most public policy work is not lobbying. The IRS regulations on lobbying further exclude key legislative related activities: Not Lobbying Self-Defense Lobbying: Matters affecting a nonprofit s own tax status, powers or lobbying rights Contacts with elected officials or executive branch about proposed regulations (note this is lobbying in Michigan) Lobbying by volunteers (org expenses do count) Communication with the orgs members on legislation as long as there is no call to action Not Lobbying A nonprofit s responses to written requests from a legislative body for technical advice on pending legislation Disseminating results of nonprofit research and analysis if presented in a fair and full way so that the audience could form an independent opinion. 15

16 Is it lobbying? A local nonprofit dedicated to education issues organizes a breakfast at which various public leaders are invited. The nonprofit s board chairperson makes a presentation about school reform that includes a recommendation in opposition to school vouchers. There is a Congressional bill currently pending to implement school vouchers. Is it lobbying? Answer: No, it is not lobbying as long as the board chairperson was making general policy recommendation but not necessarily urging support or opposition to specific legislation. Is it lobbying? The same nonprofit runs an ad in the local newspaper calling for parents in the community to speak up and oppose the proposed school vouchers legislation. The ad instructs citizens to call specific members of Congress today and gives the legislators phone numbers. Is it lobbying? 16

17 Answer... Yes, it is lobbying. The ad referred to specific legislation and contained a call to action. Recording Lobbying Activity Internally you should record your lobbying activity broken down into direct and grassroots lobbying. In these two sections, keep track of (for each employee): Type of Activity Date Hours Expenses (materials, postage and travel) Tips During an Election Year 501(c)(3) organizations are prohibited from intervening in any political campaign on behalf of or in opposition to any candidate for public office. The following are a few suggestions regarding election-year advocacy. 17

18 Do not endorse candidates for public office Do not make contributions to political parties or individual candidates If registering people to vote, do so with the intention of getting out the vote As a representative of a nonprofit, you cannot participate in political campaigns (you as an individual can) Candidate forums and voter guides are allowed, however, you must include candidates from all parties and can not rate the candidates Who s Lobbyable? Only state-level public officials are lobbyable State officials include officials in the executive and legislative branches of government (including agency reps) You can get a complete list of lobbyable officials from the Bureau of Elections in the Office of the Secretary of State Reporting Requirements You must register as a lobbyist if you spend more than $1,975 to lobby a number of public officials or in excess of $500 to lobby a single official You must register as a lobbyist agent if you are paid more than $500 a year to lobby on behalf of employers or clients. To register as a lobbyist you need to file form LR-1, to register as a lobbyist agent you need to file LR-2 18

19 Reporting Requirements Once registered you must submit a financial report twice a year showing your lobbying expenditures and activities. IRS vs. State Regulations There may be differences between IRS and State lobbying rules and regulations. Some may define lobbying and who is lobbyable. There may also be additional forms to fill out. IRS vs. State Regulations Check out who can be lobbied You might be able to get a complete list of lobbyable officials from the Bureau of Elections in the Office of the Secretary of State 19

20 Lobbying and State Agencies State Commissions are often agencies of the Executive Branch Executive Branch Agencies often must adhere to Exec. Branch policies Interaction with Legislators Governor s Budget Role of service and volunteerism in government Lobbying and State Agencies Factors to Consider State Agencies Advocacy Methodology (Matrix) State Regulations of State Government Agencies Funding Regulations (Federal, State and Private) CNCS Regulations CNCS Regulations While charging time to the AmeriCorps program, accumulating service or training hours towards and education award, or otherwise performing activities supported by the AmeriCorps program, staff and members may not (1) attempt to influence legislation or (2) participate in, or endorse, political events or activities. 20

21 7 Effective Steps 1. Work with the staff to identify need/ability 2. Determine your type of state commission 3. Identify your state methodology 4. Understand the law 5. Build your strategies 6. Practice your strategies 7. Share what you learn from your strategy 5. Build your Strategies Step One: Determine your methodology Step Two: Determine the targets for your strategies Step Three: Determine who can/should do what your tools Step Four: Utilize all the possible resources and tools allowable within your methodology. Lobbying and State Agencies Three major tools of State Agencies Commissioners Grantees Volunteers Leveraged 21

22 Tools of State Agencies Commissioners Must be aligned with staff Volunteers and not staff Have individual or organizational connections May be able to provide access May be able to carry messages Tools of State Agencies Grantees Have the on the ground stories and experiences. Often have contacts with policy makers Have volunteer boards of their own Tools of State Agencies Volunteers leveraged Impacted or worked side-by-side with grantees Are not staff of the grantee or commission Multiply the number of advocates 22

23 Strategies for State Agencies Communicate with tools Provide the facts without spin Be clear about boundaries Engage tools Be concise as what you need and give goals Inform and then direct tools toward action Give feedback to tools Give status of actions toward goals Celebrate successes and share defeats 7 Effective Steps 1. Work with the staff to identify need/ability 2. Determine your type of state commission 3. Identify your state methodology 4. Understand the law 5. Build your strategies 6. Practice your strategies 7. Share what you learn from your strategy 6. Practice your Strategies Step One: Stress advocacy s link to your organization s mission Step Two: Reassure your staff and board that you understand the organization s limitations Step Three: Dispel the myths regarding nonprofit and foundation advocacy and lobbying Step Four: Establish an internal structure for addressing public policy. Take action! 23

24 Key Elements to a Visit Do your homework Know your issue Know your key policy maker (and the staff) Know who can get to a policy maker Determine what you want Awareness and relationship-building Information on an issue Specific action Key Elements to a Visit Set up an appointment District or Capitol office Try to get meeting with member or staff Include a constituent or someone who can tell your story Write and confirm purpose, date, time, place and participants Keep the appointment Arrive early The Visit Introduce the issue and those present (business cards help) Be brief, brilliant and eager to listen Provide any materials (leave behind) for staff to review detailing the issue Be sure to summarize the issue and any agreements Offer to follow up 24

25 7. Share your Strategies Step One: Create feedback loops for those who advocate Step Two: Create methods for analyzing what you learn from those who advocate. Step Three: Determine who needs the information you gather. Step Four: Share your information in the quickest and most effective way possible. The Follow Up Send a letter to the member/staff Thank for the visit Review what was discussed Confirm any agreements Offer to follow up or opporutnity for a site visit Keep records Share information to coordinate advocacy plan 7 Effective Steps 1. Work with the staff to identify need/ability 2. Determine your type of state commission 3. Identify your state methodology 4. Understand the law 5. Build your strategies 6. Practice your strategies 7. Share what you learn from your strategy 25

26 Practice Scenerio Your state commission s budget is proposed by the Governor at full funding, but the State House decides that is must eliminate your funding to support the volunteer fire fighters fund. The State Senate is willing to look at restoring funding, but times are tough and the Senate leadership makes clear that it will be a tough sell. What do you do? Practice The recent federal budget Congressional proposals call for significant cuts to programs administered by your commission. Your state delegation to Congress has three of the key appropriation committee members. What do you do? Practice Your two-term term governor is term limited and serving her/his final year. The two candidates running from the Democratic and Republican Parties have no history with your commission and have not spoken on service or volunteerism in their policy statements. What do you do and when to reach out to the candidates? 26

27 Practice A ballot initiative is proposed to: require 500 hours of community service to receive a high school diploma requires court-mandated service for all drivers convicted of drunk driving ban any compensation to volunteers for service Your commission opposes the initiative. What do you do? Sources for Presentation The Lobbying and Advocacy Handbook for Nonprofit Organizations. Marcia Avner, Minnesota Council of Nonprofits Advocacy Institute, Charity Lobbying in the Public Interest, ASC Commissioner Leadership Development, Web Sources

28 Advocacy and State Commissions Kyle Caldwell President and CEO ConnectMichigan Alliance Web: Erin Skene, Michigan Nonprofit Association Michigan Public Policy Initiative Web: 28