I work for a trade association exempt from federal taxes under Internal Revenue Code § 501(c)(6), and we would like to lobby Congress for some loopholes from certain regulations. If we do not get the loopholes we are seeking, we are going to fund campaigns against all of the congresspersons who voted against them. Will either the lobbying or the political campaign funding be illegal?
Most likely both will be legal. 501(c)(6) organizations can engage in an unlimited amount of lobbying, provided that the lobbying is related to the organization’s exempt purpose. If the regulatory loopholes you are seeking are related to your business purpose, then such lobbying is allowed.
501(c)(6) organizations may also engage in political campaigns on behalf of or in opposition to candidates for public office, provided that the engagement does not constitute the organization’s primary activity. Assuming the primary activity of your organization is to advance the interests of your business sector, your organization is not in danger of losing its tax-exempt status if it comes out in opposition to or in support of a political candidate.
You should make sure your members know that while dues or contributions to 501(c)(6) organizations are generally deductible as business expenses under Internal Revenue Code § 162, amounts paid for direct legislative lobbying expenses at the federal and state level may not be deducted as a business expense. Similarly, expenses directed at participating in a political campaign may not be deducted as a business expense.
The rules regarding 501(c)(6) organizations are tricky. If you are a member of a trade association, please contact me today at Gary.Ross@JacksonRossLaw.com for an analysis of whether your organization is in compliance with the relevant regulations.