Nonprofit groups struggle against proposed IRS law changes. Charities argue that if they can't lobby, public policymakers will lose

Charities and foundations throughout the country have mounted a vigorous campaign to dismantle proposed Internal Revenue Service regulations that they say could quiet their voice in helping shape public policy. Nonprofit organizations ranging from the Sierra Club to People for the American Way are asking for the withdrawal of the proposed regulations, which are intended to clarify 1976 legislation concerning charitable groups' right to lobby.

``These are not regulations to define limits of lobbying; these are regulations to prevent charities from being involved in public-policy issues,'' says John Edie, counsel for the Council on Foundations. Charitable organizations, he says, are on the front line, close to issues that local, state, and federal officials are addressing. Their expertise, he adds, is critical in formulating policy. Some lobbying by these groups should be encouraged, without endangering the tax-exempt status of the nonprofits, he says.

At the same time, nonprofits are seeking to make a clear distinction between lobbying and actual partisan political activity, which is illegal. Several instances of abuse have made headlines recently. For example, there is the case of right-wing tax-exempt organizations that have allegedly used money siphoned from Iran arms deals to pay for advertising in political campaigns where funding for the Nicaraguan contras was an issue.

Rep. J.J. Pickle, (D) of Texas, and chairman of the House Ways and Means Oversight Committee, held hearings last week examining the lobbying and political activities of tax-exempt organizations.

``Some organizations are running fast and loose out there without regulation or control,'' said Congressman Pickle. ``This not only taints the activities of the responsible, straight-shooting organizations, but inhibits legitimate charitable and educational activities.''

Nonprofits respond that when abuses do occur, the answer is to enforce the law and prosecute. They worry that the proposed IRS regulations - which legal experts say would expand the definition of lobbying - will be seen as a blanket solution to these illegal activities.

``Lobbying and political activity are two separate things,'' says Steven Katz, legislative counsel for People for the American Way.

Lawyers say the proposed regulations have already had a chilling effect. If they are approved, many nonprofits' tax-exempt status would be jeopardized.

For example, when a charity sends out a newsletter that mentions specific issues, it could be considered grass-roots lobbying. Under current regulations, charities cannot spend more than five percent of their total spending outlay on grass-roots lobbying, and not more than 20 percent on lobbying government agencies.

A group like Mothers Against Drunk Driving could ``blow its wad'' on a fundraising drive, observes one attorney, noting that the group would obviously mention legislation in its literature, which would make it grass-roots lobbying under the proposed regulations.

``It's a grass roots gag order,'' says attorney Katz.

Why should tax-exempt organizations be lobbying when it seems that government tax dollars are being used to represent a political point of view?

``There are certain values inherent in democracy - freedom of expression and the ability to petition government are among the most important,'' says Katz. He sees many nonprofits as citizen groups, and agrees with others that they should, using current IRS guidelines, be encouraged to put forth information on public policy.