Self-defense Lobbying Exception for Private Foundations
Internal Revenue Code § 4945(e) allows private foundations to appear or communicate with a legislative body concerning a decision of that body that might affect the existence of the foundation, its powers and duties, its tax-exempt status, or the deductibility of contributions to it.
What exactly does this mean?
When the exception applies, it allows a private foundation to communicate— through e-mail, phone, letters, or in-person visits—with an entire legislative body (such as Congress or a state legislature), its committees or subcommittees, individual legislators, members of their staffs, or representatives of the executive branch who are involved in the legislative process, to oppose or support specific legislation. It also allows the foundation to spend money to support or oppose the specific legislation, and these expenses will not be taxable expenditures.
When does legislation impact a foundation’s existence, powers and duties, tax-exempt status, or the deductibility of charitable contributions?
While the answer will depend on the content of each specific bill, the regulations at § 53.4945-2(d)(3) provide some useful examples including:
1) a proposed bill that would require private foundations to make certain amendments to their governing documents, and
2) legislation that would result in the loss of tax-exempt status for a private foundation engaging in certain transactions with related parties.
In addition to these examples, legislation that would expand, reduce, or eliminate the available charitable deduction for certain contributions to a private foundation would qualify for self-defense communications.
What is not included under the self-defense exception?
Appropriations bills, even if directly affecting the funding of a foundation, are generally not considered legislation that would impact the existence, powers and duties, tax-exempt status or the deductibility of charitable contributions.
The self-defense exception also only applies to direct communications with a legislative body or its committees, individual legislators and their staffs, or executive branch representatives engaged in the legislative process. It does not cover grassroots lobbying, which means that a private foundation may not attempt to influence the general public to take action in support of or against specific legislation, even if that legislation might affect the existence of the foundation, its powers and duties, its tax-exempt status, or the deductibility of contributions to it.
For more details and examples of these permissible advocacy activities, we encourage you to turn to the Treasury Regulations at § 53.4945-2, or IRS Publication 5590.
More Information
Free for Council members and available for purchase for nonmembers, download the complete A Guide to Advocacy, Lobbying & Election-Related Activity: Navigating the Rules.
The information in the document is not exhaustive and should not take the place of formal legal advice from counsel.
