In 2009, the IRS released a private letter ruling in response to a request from the Alliance for Justice to clarify that public charities, including community foundations, may rely on the private foundation rules about grants to groups that engage in lobbying. Under this letter, general support grants would not be counted as lobbying expenditures as long as the grant is not earmarked for lobbying.
While the letter only applies directly to the Alliance for Justice, it provides an indication of how the IRS will likely view other grantmaking by public charities that have elected to track their lobbying expenditures according to Section 501(h) of the tax code.
The ruling clarifies that:
1. A charity that has made the 501(h) election may treat general support grants to public charities as non-lobbying expenditures as long as the grant is not earmarked for lobbying.
2. Grants to a public charity for a specific program or project will not be considered as lobbying expenses if the grant does not exceed the amounts budgeted for non-lobbying activities.
3. Any amount in excess of the total non-lobbying portion of the project budget must be treated as a lobbying expenditure.
See an Alliance for Justice fact sheet (PDF) for more information.
Text of the private letter ruling (PDF).
Last Updated: October 6, 2009