April 18, 2017
College Sports: What does it have to do with Lobbying?
A change by the National Collegiate Athletic Association (NCAA) to remove NCAA tournament games from North Carolina sparked one State Representative to raise some interesting questions surrounding lobbying activities of 501(c)(3) organizations.
501(c)(3) organizations are strictly limited on the amount of political and lobbying activities they can engage in. Political activity, or attempting to influence the outcome of an election, is strictly prohibited and can cause a 501(c)(3) organization to lose its tax-exempt status. Lobbying activity, or attempting to influence legislation, is allowed, but may not be a “substantial” part of an organization’s activities.
Representative Mark Brody of North Carolina’s 55th House District filed a bill which would direct the North Carolina House and Senate leaders to file a Tax-Exempt Organization Complaint with the IRS. The complaint would allege that the NCAA and Atlantic Coast Conference (ACC), both 501(c)(3) organizations, engaged in excessive lobbying related to an ongoing boycott over North Carolina’s Public Facilities Privacy & Security Act (known popularly as “House Bill 2” or “HB2”) which, among other things, prohibits transgender individuals from using bathrooms that do not correspond to the gender listed on their birth certificate.
In September 2016, the NCAA and ACC announced they would relocate collegiate championship events out of North Carolina in response to HB2. The NCAA’s decision to move these events was pushed back several times, ostensibly to allow time for the State to repeal HB2. In February, the NCAA began removing the bids from North Carolina cities to host NCAA events through the year 2022 after the state failed to repeal HB2.
Rep. Brody’s bill specifically alleges the decisions by the NCAA and ACC to move games out of North Carolina constitute an attempt to influence legislation, and the amount of lobbying exceeds the “substantial” threshold. It is unclear how the amount of lobbying expenditures related to the NCAA and ACC’s relocating of games out of North Carolina should be calculated or whether that amount would constitute a “substantial” part of those organizations’ overall activities. For the year ending August 31, 2015, the NCAA reported approximately $909 million in total expenses on Form 990, including $560,000 of disclosed total lobbying expenses and the ACC reported $104 million in expenses and no lobbying expenses.
On its face, the move to relocate the games from North Carolina could be construed as an attempt to influence legislation. However, the NCAA insists that the decision to move the games is strictly a matter of assuring “that our events are held in an environment that is safe, healthy, and free from discrimination for all those watching and participating in our events,” and not an attempt to influence legislation.
If a 501(c)(3) organization devotes a “substantial” part of its activities to lobbying, it may have its exempt status revoked and be subject to a 5% excise tax if they knowingly allowed lobbying expenditures to be made which would likely result in the loss of the organization’s exempt status.
All of which underscores the importance of carefully analyzing your 501(c)(3) organization’s activities to identify potential lobbying expenses. Lobbying is not simply limited to direct contact with legislators or traditional grassroots movements. Participation in boycotts, rallies, picketing, encouraging acts of civil disobedience, publications, and public statements, and grants to other organizations must be examined to determine if they constitute an attempt to influence legislation.