As a busy election season heats up, with several high-profile ballot measures such as Florida’s Amendment 4 attracting attention, it is a good time for a refresher on the key legal considerations for nonprofits interested in working to support or oppose a ballot measure. Of course, by “ballot measures” we are referring to initiatives, referenda, or similar direct democracy measures in which voters decide whether to enact a particular provision of law.

Ballot measures are treated differently under federal (tax) and state and local (campaign finance) laws. It is important for nonprofits to be mindful of both of these sources of law and to consult with legal counsel prior to beginning ballot measure work in any new state or local jurisdictions.

Federal Tax Law: Ballot Measure Work as Lobbying Activity

From the perspective of the Internal Revenue Service (IRS), a nonprofit advocating for or against a ballot measure is engaging in lobbying activity. Thus, because 501(c)(3) organizations can engage in limited lobbying activities, 501(c)(3)s are permitted to support or oppose specific ballot measures and can even specifically encourage voters to vote for or against them (so long as doing so is consistent with their charitable purposes and not restricted by applicable grant agreements). In other words, despite being prohibited from intervening in any candidate election, 501(c)(3)scan intervene in elections to support or oppose a ballot measure, so long as they treat all applicable expenditures as lobbying expenditures.

Because 501(c)(4) organizations are permitted to engage in unlimited lobbying activity, they can spend as much as they want to support or oppose ballot measures. And because 501(c)(4)s can count ballot measure work as part of their social welfare “primary purpose” activities, amounts spent on ballot measure work can actually increase the amount that a 501(c)(4) can spend to support or oppose candidates as part of its secondary political activities.

State and Local Campaign Finance Law: Ballot Measure Work as Political Activity

While federal law views ballot measure work through a lobbying rather than campaign finance lens, at the state and local level ballot measure work typically is regulated similarly to electoral activity supporting candidates. Laws vary state by state (and in some cases even between cities or counties within a state), but most jurisdictions require anyone spending above a certain threshold for or against any ballot measure to register as a political committee (or ballot measure committee) and report at least some of the contributions and expenditures going toward their ballot measure activities.

A counterintuitive result is that nonprofit organizations—even including 501(c)(3)s—advocating for or against ballot measures are often required to register as political committees under state laws. They may be required to establish a separate ballot committee, or even a segregated bank account, in order to comply with state contribution and expenditure disclosure rules without having to disclose all contributions to the entire organization.

In addition, nonprofits should be aware that state political committee status may be triggered by raising funds intended to support ballot work in the state. It is critical that nonprofits consult with legal counsel before engaging in any ballot measure work or receiving any funds intended to support such work.

The message that “nonprofits are allowed to support (or oppose) ballot measures” has been widely received. But to avoid complications, organizations also need to ensure that they are familiar with and in a position to comply with all applicable registration and reporting requirements.