In April 2020, Philanthropy California virtually convened over 600 funders from across the state for a day dedicated to philanthropy's role in strengthening our democracy and civic engagement during this unprecedented moment. SCG is excited to launch our Policy Blog Series to elevate critical lessons from the Summit and further our conversations and learning.
Philanthropy and advocacy have long been considered to be incompatible – a match not made in heaven. However, philanthropic organizations are increasingly playing a more active civic leadership role through public policy to advance their missions. Philanthropic advocacy is becoming more critical as the nonprofit sector continues to influence local, state, and federal policies to respond to COVID-19, dismantle systemic racism, and support anti-racist movements.
At the 2020 Philanthropy California Virtual Policy Summit, we invited a panel of experts to help funders of all stripes take the leap from funding to advocacy. Among them was Nona Randois, California Director of Alliance for Justice’s Bolder Advocacy program, who provided our funders with an introduction to advocacy and the generous legal rules that allow effective systems change work while remaining compliant with their 501(c)(3) status. Bolder Advocacy is a program of the Alliance for Justice led by national experts on the legal framework for nonprofit advocacy that empowers foundations and their grantees to engage in and maximize their advocacy work. In collaboration with Nona, SCG has created this Primer on Advocacy for Funders interested in entering public policy work.
Adovcacy 101
Defining Advocacy
Advocacy refers to the championing of a cause or a goal to change policies or systems. A common misconception is that advocacy always has a lobbying or political dimension, and therefore, funders cannot engaging in it. This belief is not the case. There is no specific legal definition of advocacy— it is a broad concept focused on making an impactful change that everyone can participate in.
Why Should Funders Engage in Advocacy Work?
Funders are drawn to advocacy’s power to leverage resources. The National Committee for Responsive Philanthropy conducted a study and found that the average return on investment for advocacy grantmaking was $115 in community benefits for every $1 spent by a foundation. This study’s returns and benefits consisted of new government programs and services, increased government spending, budgetary savings, and new public revenue. These benefits often accrue to the most marginalized people in our society. Given how the current pandemic has exacerbated existing inequities, advocacy is even more crucial today.
Another example of advocacy’s potential for leverage and scale is the Schools and Communities First ballot measure, which will be on the California ballot in November. If the measure passes, it will generate $12 billion in annual revenue for K-12 schools, community colleges, and local communities by closing existing commercial property tax loopholes that will require corporations to pay their fair share of property taxes. Even if hundreds of funders banded together to directly fund schools, community colleges, and the other programs in the Schools and Communities First ballot measure, they wouldn’t come close to providing $12 billion in funding per year for those programs. However, if those funders came together to support advocacy efforts around this ballot measure, they could increase the probability that it will pass and that communities will receive these funds.
Types of Advocacy
All funders can engage in advocacy work, and all funders can fund nonprofits that lobby. However, funders have specific rules related to the kinds of advocacy work they can do depending on their tax status as a private foundation, public foundation, limited liability company (LLC), government agency, individual donor, etc. Funders can use the visual below to familiarize themselves with the different forms of advocacy.
This resource is reprinted with the express permission of Bolder Advocacy under the Creative Commons International 4.0 License BY-NC-ND.
The advocacy activities listed in green are unrestricted for funders of any tax status and can be engaged in at any time. Green activities include building relationships with government officials, research, litigation, and working to influence executive action or administrative agency rules. Lobbying and voter registration are listed in yellow because some restrictions apply to these activities, and funders should be aware of the regulations before funding or engaging in these activities. Finally, any form of partisan political activity -- meaning to support or oppose a candidate for elected office -- is restricted for all 501(c)(3) organizations, including private foundations, community foundations, and nonprofit grantees.
Breakdown of Advocacy Activities
This resource is reprinted with the express permission of Bolder Advocacy under the Creative Commons International 4.0 License BY-NC-ND.
There are different restrictions and limitations for different types of 501(c)(3) organizations. On the left of the stoplight graphic are the rules that apply to public foundations, community foundations, and most nonprofit grantees. On the right, you’ll see the laws that apply to private foundations. None of the restrictions on this image would apply to individuals or LLCs because they're not tax-exempt organizations. Government funders have their own rules, which vary depending on the jurisdiction. The following breakdown will provide further clarity for funders looking to understand the nuances of these activities.
Red: Partisan Poltiical Activitiy
Partisan political activity means supporting or opposing candidates for office. Whether it's the president, a local sheriff, a judge, or a school board member, no 501(c)(3) organization is allowed to support or oppose the election of individuals whose names are on a ballot. SCG has long endorsed the Johnson Amendment, the basis of this prohibition, as it preserves nonprofits’ ability to remain a trusted voice in civil society.
Yellow: Lobbying
Lobbying is just one type of advocacy, although it may be the first one that comes to mind for many people. Lobbying attempts to influence specific legislation by communicating views to legislators or asking people to contact their legislators. Communicating an opinion on a ballot measure to the general public is also considered lobbying by the IRS. Community foundations and other public charities can lobby up to a limit, and most public charities have a choice about how to measure their lobbying limit. Affirmatively choosing to use the “501(h) expenditure test” will provide public charities a generous lobbying limit that is determined primarily based on their annual expenditures and tends to be advantageous to groups with budgets under $17M. Public charities must report all their lobbying on their annual 990s.
However, the IRS explicitly prohibits private foundations from lobbying with a few exceptions, such as in issues of “self-defense” -- legislation affecting the existence, powers, duties, deductibility of contributions, or tax-exempt status of an organization such as the private foundation excise tax. As grantmakers, private foundations cannot earmark funds for lobbying. Earmarking is an oral or written agreement that a grant will be used for specific purposes. However, private foundations can fund organizations that lobby either through general support grants or specific project grants.
Many activities are often confused as lobbying but fall outside of the IRS definition, such as influencing executive orders or agency regulations and publicly expressing support or opposition to legislative proposals without a specific call to action. For instance, a private foundation can tell the general public that they support a state bill as long as they don’t ask people to contact their legislators, provide contact information or a mechanism to contact legislators, or mention legislators in specific ways. Foundations are also allowed to communicate with Governor Newsom to weigh in on the executive actions he’s considering in response to the COVID-19 pandemic. These activities are not considered lobbying and are safe for all funders.
Yellow: Voter Registration
Public charities and community foundations are permitted to hold voter registration drives. Private foundations have to navigate special rules if they’d like to earmark funds for a voter registration drive. In addition to voter registration, there are many other ways funders can get involved in elections that don’t include supporting or opposing candidates, such as educating voters around the voting process and ballot measures. Governor Newsom has recently taken emergency executive action to ensure that California’s November 2020 election will be as safe and inclusive as possible for voters. Many public and private foundations weighed in with the Governor on what to do to safeguard our democracy during the pandemic.
Green: Nonpartisan Political Activity & Other Types of Advocacy
Policy and systems change through collaboration and coalition building. There are a variety of roles needed for efforts to be successful. Funders have many opportunities to engage in advocacy. The image below outlines some advocacy options for funders.
This resource is reprinted with the express permission of Bolder Advocacy under the Creative Commons International 4.0 License BY-NC-ND.
Funders can also support advocacy by rethinking their grant agreements. Funders don’t need to restrict public charity grantees from lobbying. Restrictive grant clauses limit grantees’ flexibility to accomplish their missions and their ability to lobby within their limits. This flexibility is especially critical right now as grantees are rapidly responding to the COVID-19 pandemic. Instead, grants can state that they are “not earmarked for lobbying” instead of “not allowed to be used for lobbying.” The only time a funder would need to prohibit a group from lobbying with its funds would be a private foundation making an expenditure responsibility grant to a non-501(c)(3) organization.
Additional Resources for Funders
Funders frequently ask themselves, How do I know what kind of advocacy will be effective? How do I know whether the grantee I'm thinking of funding can make a difference? To help funders answer these questions, the Alliance for Justice has created various capacity assessment tools. These tools break down advocacy and community organizing into parts to help groups assess their strengths, identify where they want to grow stronger, partner more effectively, and increase their readiness to act. Funders may find these tools helpful when deciding what kind of advocacy investments they would like to make.
Bolder Advocacy has also created a library of publications and resources – such as the Philanthropy Advocacy Playbook – in addition to operating a technical assistance hotline to help answer any specific questions funders might have about safely and appropriately engaging in advocacy work.