May 15, 2003 | Read Time: 2 minutes
Nonprofit leaders who met with an IRS official last month to express concerns about the revenue service’s project to audit groups with high levels of lobbying expenses say the tax agency has decided to bring the audit program to a close.
Officials from Alliance for Justice, Charity Lobbying in the Public Interest, Independent Sector, and the National Committee for Responsive Philanthropy say they met with IRS Exempt Organizations Director Steven T. Miller to discuss their fears that the audits could have a chilling effect on groups that are considering whether to lobby the federal government.
The charity officials had notified the IRS that some of their members appeared to have been chosen for audits because of the way they reported lobbying expenses on the Form 990 informational returns they file annually with the IRS. Charities that lobby may elect one of two ways to report their expenses. Itemizing the expenses, to show exactly what proportion of an organization’s total budget its lobbying costs represent, is known as a “501(h) election.” Otherwise, charities may declare that their lobbying costs represent “no substantial part” of their budgets.
Some charity officials at the meeting with Mr. Miller had previously urged charities to make the 501(h) election because it is more precise.
The IRS declined to comment on the meeting or on the state of the lobbying audits. But charity officials who attended say Mr. Miller told them that lobbying is a legitimate nonprofit activity and that the revenue service would not audit groups just because they have made a 501(h) election.
Mr. Miller said the IRS was looking at a sample of all charities that had significant lobbying expenses to measure how well such groups comply with the law, according to those who attended the meeting. They said he told them that the lobbying audits so far had uncovered no significant violations. Charity officials also said Mr. Miller told them that the revenue service does not plan to start any new audits of lobbying activities.
