Exempt Organizations Advisory - Private Letter Ruling on Public Charity Grants and Lobbying

Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)

In a private letter ruling for Alliance for Justice, the IRS provided guidance on a public charity’s grants to organizations for projects that may involve lobbying. Current regulations for private foundations relating to lobbying provide that grants from foundations to public charities for specific projects are not taxable to the extent that grants are not earmarked to be used in lobbying and the grants do not exceed the amount budgeted by the organization for non-lobbying activities. However, regulations for public charities do not provide comparable guidance for determining whether a public charity’s grant to an organization counts as a lobbying expenditure. The ruling determines that the standard for public charities should not be more stringent than the one for private foundations. Therefore, general support grants to an organization will not be considered lobbying expenditures so long as they are not earmarked for lobbying, and grants to a specific program will not be considered earmarked for lobbying as long as grants from the organization do not exceed the program’s budget for non-lobbying activities.

Private letter rulings only apply to the organization that receives it; however, this ruling does provide insight on how the IRS might evaluate grants from public charities. The ruling is available from Alliance for Justice here.