An Administrator's Guide to California Private School Law

Chapter 18 – Political Activity

adopt a rule, or asking a committee to investigate wrong-doing, or asking the President to issue an executive order, all fall outside of the definition of lobbying because they do not relate to legislation. B. H OW M UCH L OBBYING C AN A S CHOOL D O ? 1. I NSUBSTANTIAL P ART T EST An entity qualifies for federal tax exemption only if “no substantial part of [its] activities…is carrying on propaganda, or otherwise attempting to influence legislation.” 2440 This standard can be difficult to measure, as the courts and the IRS have not delineated any clear standards for determining how much lobbying is “substantial.” A few early court cases attempted to devise a qualitative test, suggesting that conduct meant to influence legislation constituting 5% or less of an organization's total activities were not substantial. 2441 More recent court cases declined to follow any percentage test and instead sought to balance the activities of the organizations within the context of its objectives and circumstances. 2442 Yet other courts have attempted to find a middle ground between a percentage test and pure subjectivity by seeking to analyze the facts and circumstances of each case. They ultimately determined that between 16.6% and 20.5% of an organization's activities, devoted to lobbying, were substantial. 2443 A 1975 General Counsel Memo from the IRS attempted to summarize the law, and included the following among the relevant factors:  The percentage of time devoted to an activity.  The amount of volunteer time and other no-cost time devoted to an activity.  The percentage of a budget devoted to an activity.  The amount of publicity the organization assigns to the activity.  The continuous or intermittent nature of the activity. 2444 The IRS also looked at the overall impact and effect of the activity. So, while there is no definitive rule as to what a “substantial” amount of lobbying is, organizations do have some idea of what factors the IRS will use when assessing any particular case. 2. R EPORTING R EQUIREMENTS A charitable organization that lobbies must report its lobbying activities, including all expenses, on its annual IRS Form 990, Schedule C. To ensure full compliance with all reporting requirements, make sure to speak to the school’s tax professional about any lobbying activities the school has engaged in over the course of each year.

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 594