SUBJECT: Simplification of Lobbying Expenditure Limitation
DATE: APRIL 8, 2005

     This week, the broad-based coalition of nonprofit organizations met to re-start its effort to change the federal tax code as it relates to lobbying by nonprofits.


     The federal tax code currently allows charities to spend only 25% of their lobbying budget on grass roots lobbying. This means that charities must keep detailed records to distinguish between funds spent on grass roots lobbying and funds spent on direct lobbying. This distinction also requires the expenditure of significant staff or legal time to assure proper categorization of the lobbying activities. This distinction between direct and grass roots lobbying serves no valid purpose and results in considerable unnecessary expenditure of funds by the nonprofits. FSC has joined with many other nonprofit groups across the philosophical spectrum to seek removal from the tax code of the artificial distinction between grass roots expenditures and direct lobbying expenditures. The Congressional Joint Committee on Taxation has reviewed this issue and concluded that the complexity caused by the distinction justifies elimination of the grass roots expenditure limitation.


     We have been involved working with this coalition on this issue for the past three years. Last year, we thought we had a good chance of success, as our desired provision was included in the CARE Act, which passed both houses of Congress. However, when the CARE Act went to conference committee, political squabbling over unrelated provisions in the bill, led to the death of the bill. There is no known Congressional opposition to our provision. The estimated revenue cost is minimal, only $15 million over ten years.


     The coalition has decided that in this new Congress we will seek a “stand alone” bill. We will seek a primary sponsor in each house, and then seek co-signers. It is possible that as our bill and other legislation moves along, it will make sense to attach ours to some other bill. However, we will be attentive to the problem faced last year and seek to avoid tying our bill to a bill with controversial provisions.


     Last year, Rep Jim Ramstad (R-MN) sponsored our provision (called the Simplification of Lobbying Expenditure Limitation) in the House. We will be approaching him again this year. If you have any contact with nonprofit organizations in his district, it would be helpful if they would contact his office and encourage him to once again sponsor this legislation.

     In the Senate, we have not yet identified a potential sponsor. If you could help find a prime sponsor, we would welcome your suggestions.

     If you need any further information, such as talking points on the merits of this bill, or specific legislative language for our provision, please let me know.