1. Ted Waters, Managing Partner Feldesman Tucker Leifer Fidell LLP December 2, 2014 © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 1 Say What? Lobbying Do’s and Don’ts

2. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 2 TOPICS COVERED TODAY  What is Lobbying? What isn’t  Lobbying Restrictions for Federal Grantees focus here is on Health Centers*  Changes in the Uniform Grants Guidance  Correlation to IRS  Membership Dues  Section 503 of the Labor/HHS Appropriations Act or Equivalent  Section 330 and the Budget PIN *Remember: Section 330 has more flexibility on use of program income, doesn’t apply to other funding!

3. FEDERAL GRANTS: THE MAKING OF PUBLIC POLICY Authorizing Statute (such as the Section 330, Ryan White Act, ACA) Federally Funded Program (use of federal funds governed by Circulars of the Office of Management and Budget unless changes from above) Appropriations Statute (e.g., Consolidated Appropriations Act of 2014) 3

4. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 4 SOURCES OF RESTRICTIONS ON FEDERAL SPEECH Under the U.S. Constitution, the Federal government (with some exceptions) cannot restrict speech per se, but can condition spending (e.g. through grants) on limitations on expression Sources of lobbying restrictions: 1.Appropriations riders (condition on Federal spending) 2.Office of Management and Budget (OMB) Circulars (condition on use of Federal grant funds) 3.Internal Revenue Code (condition for nonprofit to maintain its Federal tax-exempt status)

5. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 5 SO, WHO IS PAYING DRIVES THE TRAIN… Non-Federal funds Non-Grant Funds/Program Income/Match Federal Funds IRS Rules for Charitable Corps. IRS plus Budget PIN for FQHCs, all else add OMB IRS plus OMB & Approps (503)

6. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 6 FOR NON-FEDERAL FUNDS, IRS RULES ALLOW LOBBYING UP TO A POINT Allowable lobbying limits –Two tests: Substantial part or Expenditure –Expenditure test (IRC Section 501(h)) Clearer standard Allows 501(c)(3) organizations to elect to have their allowable lobbying measured by amounts expended for lobbying –Funds may be spent within certain limits, up to $1 million a year »(e.g. 20% of first $500 thousand of “exempt purpose expenditures”) –No more than 25% of organization’s allowable lobbying expenses may be used for grass-roots lobbying Applies only if organization elects 501(h) treatment In short, the “real” restrictions apply to Federal Grant Dollars

7. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 7 BUT REMEMBER: NO ELECTIONEERING!!! A 501(c)(3) organization (and its affiliates, directors, employees, and agents acting on behalf of the organization) cannot engage in or conduct any political campaign activities Political campaign activities –Making contributions to candidate or party –Endorsing/promoting candidates –Activities that favor/disadvantage candidates – appearances are important –Publishing candidate statements

8. WHAT IS ALSO AN EXCEPTION: THE PIN’S CLARIFICATION OF NONGRANT REVENUE “Section 330(e)(5)(D) of the PHS Act provides health centers with discretion to use their non-grant funds... either “as permitted” under section 330 or “for such other purposes …not specifically prohibited” under section 330 “if such use furthers the objectives of the project.”” “Health centers can meet the standard of “furthering the objectives of the project” by ensuring that the uses of non-grant funds benefit the individual health center’s patient/target population.” “Consistent with Health Center Program requirements, and the governing board’s responsibilities, health center governing boards must approve, among other things, the health center’s annual budget, its Health Center Program application as well as provide oversight and monitoring of health center expenditures to ensure consistency with the health center’s mission, goals and objectives and the board-approved budget and project.” 8

9. PRACTICAL CONSIDERATIONS: CONSTRUCTING A HEALTH CENTER BUDGET Decision Time: Clearly Identify what you will pay with Nongrant funds because of difficulties of paying such costs with federal funds, such as: –Lobbying costs (rest of today’s discussion) –Equipment –Fundraising –Incentive compensation –Reserves –Marketing What Costs? Salaries, Fringe Benefits, Supplies, Equipment, Space used in Lobbying must be properly tracked and accounted for! And yes, Time and Effort documents employee time!!! 9

10. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 10 On to the Main Event: Lobbying Restrictions for Federal Grantees

11. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 11 WHAT ARE WE TALKING ABOUT WHEN YOU ARE TALKING LOBBYING?  “Lobbying” under Circulars is an attempt to influence  the introduction of Federal or State legislation or  the enactment or modification of pending Federal or State legislation  “Lobbying” includes communication that is  written or oral  for or against the legislation

12. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 12 The Circulars make unallowable costs for:  Direct lobbying: making a direct appeal to Congress or State legislature to introduce legislation or act on pending legislation  Per OMB, does NOT bar “normal informational interchange” between legislators and grantees  Grassroots lobbying: the preparation, distribution or use of “publicity or propaganda” to make a direct appeal to the general public  Limited to “efforts to obtain concerned actions on the part of the public,” e.g. by calling legislator; does NOT bar “attempts to affect the opinions of the general public”  “Legislative liaison activities” (preparing for lobbying) RESTRICTIONS ON “LOBBYING” UNDER OMB CIRCULARS

13. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 13 CONTINUING APPROPRIATIONS ACT (CAA) OF 2012, SECTION 503 EXPANDED Restrictions on Using Federal funds: Lobbying on state-level executive actions (regulations, administrative actions, executive orders), as well as lobbying on regulations, administrative actions, executive orders proposed or pending before Congress or a local legislature Lobbying on the local level (before city councils, county commissions, etc.) Advocacy related to proposed, pending, or future (1) tax increases and (2) regulation of any legal consumer product esp. Guns!

14. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 14 WHAT IS NOT “LOBBYING”? “Lobbying” typically does not include sharing factual information with the public Activities that are not lobbying: –Educating the public on personal health behaviors and choices, available services, unmet needs in your community and so on –Working with other organizations, public agencies to achieve institutional or systems changes that do not require governmental action –Communicating with the public about health risks and their consequences Put another way, educational activities could result in changes to the law due to increased awareness but that doesn’t make it lobbying!

15. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 15 THE NEW UNIFORM GRANTS GUIDANCE AND LOBBYING –WHAT’S THE IMPACT? Consolidated lobbying rules at 2 C.F.R.§ 200.450: New exception to the prohibition on use of grant funds for lobbying – any activity excepted from definition of “lobbying” under Internal Revenue Code New provision - grantor agencies must establish procedures for resolving in advance with individual grantees any significant questions concerning interpretation or application of the lobbying rules Plus, Explicit limitation on Membership Dues to organizations with a “primary purpose” of lobbying, see 2 C.F.R.§ 200.454

16. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 16 Exceptions in Grey Areas…

17. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 17 Section 503 and OMB Circulars contain exceptions to “lobbying,” applicable to different types of grantees. We are focusing today on #2 and #5. 1.Section 503: “normal and recognized executive-legislative relationships” and “participation... in policymaking and administrative processes within the executive branch of that government” (applicable to state, local, and tribal governments) 2.OMB Circulars: “technical and factual presentations on topics directly related to the performance of a grant” (all grantees) 3.OMB Circulars: “any activity specifically authorized by statute” to be undertaken under the award (all grantees) 4.OMB Circulars: “any lobbying.. to influence state legislation... To avoid material impairment of the [grantee’s] authority to perform the grant” 5.OMB Circulars: any activity “specifically excepted from the definitions of ‘lobbying’ or ‘influencing legislation’ by the Internal Revenue Code provisions [on tax-exempt status] (nonprofit organizations) QUALIFICATIONS/EXCEPTIONS TO LOBBYING PROHIBITION

18. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 18 Exceptions to Lobbying Prohibitions --Technical and Factual Presentations to Legislative Body

19. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 19 “TECHNICAL AND FACTUAL PRESENTATION” DEFINED The following are excepted from the scope of the “lobbying” restriction under the OMB Circulars: Technical and factual presentations on topics directly related to the performance of a grant... (through hearing testimony, statements, or letters...) in response to a documented request... made by the non-Federal entity’s member of congress, legislative body or a subdivision, or a cognizant staff member thereof, provided such information is readily obtainable and can be readily put in deliverable form....

20. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 20 WHY IS THIS ALLOWED? This is an exception to the direct lobbying prohibition Encourages utilization of grantee expertise Narrow exception Limited to circumstances when grant funds can be used to provide a presentation that does contain a direct appeal to government decision makers to take action on a law OMB revised the scope of this exception in 1984, in response to concerns that it was worded too narrowly and unduly limited freedom of speech

21. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 21 “DOCUMENTED” REQUEST May be written or oral (oral request documented after fact) Request need not be specific but must be “bona fide” and “may not be open-ended or indeterminate” No specific requirements for “documenting” the request Recommend maintaining a written record of request in files

22. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 22 MAY INCLUDE ADVOCATORY CONCLUSION The exception does not preclude communication of an advocatory conclusion Advocatory conclusion must “clearly and naturally flow[] from the technical and factual data presented” and be a “distinctly minor aspect of the overall presentation”

23. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 23 Exceptions to Lobbying Prohibitions --IRS Rules

24. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 24 2 C.F.R.§ 200.450(c)(2) (iv) Any activity excepted from the definitions of ‘‘lobbying’’ or ‘‘influencing legislation’’ by the Internal Revenue Code provisions that require nonprofit organizations to limit their participation in direct and ‘‘grass roots’’ lobbying activities in order to retain their charitable deduction status and avoid punitive excise taxes, I.R.C. §§ 501(c)(3), 501(h), 4911(a), including:

25. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 25 2 C.F.R.§ 200.450(c)(2) (iv)(A) Nonpartisan analysis, study, or research reports; (B) Examinations and discussions of broad social, economic, and similar problems; and (C) Information provided upon request by a legislator for technical advice and assistance, as defined by I.R.C. § 4911(d)(2) and 26 CFR 56.4911–2(c)(1)–(c)(3). UPSHOT: Largely the Same but with more Examples/Guidance

26. © 2014 Feldesman Tucker Leifer Fidell LLP. All rights reserved. | www.ftlf.com 26 QUESTIONS?