[Code of Federal Regulations]
[Title 26, Volume 17]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR53.4945-2]

[Page 163-173]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 53_FOUNDATION AND SIMILAR EXCISE TAXES--Table of Contents
 
                 Subpart F_Taxes on Taxable Expenditures
 
Sec. 53.4945-2  Propaganda influencing legislation.

    (a) Propaganda influencing legislation, etc.--(1) In general. Under 
section 4945(d)(1) the term ``taxable expenditure'' includes any amount 
paid or incurred by a private foundation to carry on propaganda, or 
otherwise to attempt, to influence legislation. An expenditure is an 
attempt to influence legislation if it is for a direct or grass roots 
lobbying communication, as defined in Sec. 56.4911-2 (without reference 
to Sec. Sec. 56.4911-2(b)(3) and 56.4911-2(c)) and Sec. 56.4911-3. 
See, however, paragraph (d) of this section for exceptions to the 
general rule of this paragraph (a)(1).
    (2) Expenditures for membership communications. Section 56.4911-5, 
which provides special rules for electing public charities' 
communications with their members, does not apply to private 
foundations. Thus, whether a private foundation's communications with 
its members (assuming it has any) are lobbying communications is 
determined solely under Sec. 56.4911-2 and without reference to Sec. 
56.4911-5. However, where a private foundation makes a grant to an 
electing public charity, Sec. 56.4911-5 applies to the electing public 
charity's communications with its own members. Therefore, in the limited 
context of determining whether a private foundation's grant to an 
electing public charity is a taxable expenditure under section 4945, the 
Sec. 56.4911-5 membership rules apply. For example, if the grant is 
specifically earmarked for a communication from the electing public 
charity to its members and the communication is, because of Sec. 
56.4911-5, a nonlobbying communication, the grant is not a taxable 
expenditure under section 4945.
    (3) Jointly funded projects. A private foundation will not be 
treated as having paid or incurred any amount to attempt to influence 
legislation merely

[[Page 164]]

because it makes a grant to another organization upon the condition that 
the recipient obtain a matching support appropriation from a 
governmental body. In addition, a private foundation will not be treated 
as having made taxable expenditures of amounts paid or incurred in 
carrying on discussions with officials of governmental bodies provided 
that:
    (i) The subject of such discussions is a program which is jointly 
funded by the foundation and the Government or is a new program which 
may be jointly funded by the foundation and the Government,
    (ii) The discussions are undertaken for the purpose of exchanging 
data and information on the subject matter of the programs, and
    (iii) Such discussions are not undertaken by foundation managers in 
order to make any direct attempt to persuade governmental officials or 
employees to take particular positions on specific legislative issues 
other than such program.
    (4) Certain expenditures by recipients of program-related 
investments. Any amount paid or incurred by a recipient of a program-
related investment (as defined in Sec. 53.4944-3) in connection with an 
appearance before, or communication with, any legislative body with 
respect to legislation or proposed legislation of direct interest to 
such recipient shall not be attributed to the investing foundation, if:
    (i) The foundation does not earmark its funds to be used for any 
activities described in section 4945(d) (1) and
    (ii) A deduction under section 162 is allowable to the recipient for 
such amount.
    (5) Grants to public organizations--(i) In general. A grant by a 
private foundation to an organization described in section 509(a) (1), 
(2) or (3) does not constitute a taxable expenditure by the foundation 
under section 4945(d), other than under section 4945(d)(1), if the grant 
by the private foundation is not earmarked to be used for any activity 
described in section 4945(d) (2) or (5), is not earmarked to be used in 
a manner which would violate section 4945(d) (3) or (4), and there does 
not exist an agreement, oral or written, whereby the grantor foundation 
may cause the grantee to engage in any such prohibited activity or to 
select the recipient to which the grant is to be devoted. For purposes 
of this paragraph (a)(5)(i), a grant by a private foundation is 
earmarked if the grant is given pursuant to an agreement, oral or 
written, that the grant will be used for specific purposes. For the 
expenditure responsibility requirements with respect to organizations 
other than those described in section 509(a) (1), (2), or (3), see Sec. 
53.4945-5. For rules for determining whether grants to public charities 
are taxable expenditures under section 4945(d)(1), see paragraphs 
(a)(2), (a)(6) and (a)(7) of this section.
    (ii) Certain ``public'' organizations. For purposes of this section, 
an organization shall be considered a section 509(a)(1) organization if 
it is treated as such under subparagraph (4) of Sec. 53.4945-5(a).
    (6) Grants to public organizations that attempt to influence 
legislation--(i) General support grant. A general support grant by a 
private foundation to the organization described in section 509(a) (1), 
(2), or (3) (a ``public charity'' for purposes of paragraphs (a) (6) and 
(7) of this section) does not constitute a taxable expenditure under 
section 4945(d)(1) to the extent that the grant is not earmarked, within 
the meaning of Sec. 53.4945-2(a)(5)(i), to be used in an attempt to 
influence legislation. The preceding sentence applies without regard to 
whether the public charity has made the election under section 501(h).
    (ii) Specific project grant. A grant, by a private foundation to 
fund a specific project of a public charity is not a taxable expenditure 
by the foundation under section 4945(d)(1) to the extent that--
    (A) The grant is not earmarked, within the meaning of Sec. 53.4945-
2(a)(5)(i), to be used in an attempt to influence legislation, and
    (B) The amount of the grant, together with other grants by the same 
private foundation for the same project for the same year, does not 
exceed the amount budgeted, for the year of the grant, by the grantee 
organization for activities of the project that are not attempts to 
influence legislation. If the grant is for more than one year, the 
preceding sentence applies to each

[[Page 165]]

year of the grant with the amount of the grant measured by the amount 
actually disbursed by the private foundation in each year or divided 
equally between years, at the option of the private foundation. The same 
method of measuring the annual amount must be used in all years of a 
grant. This paragraph (a)(6)(ii) applies without regard to whether the 
public charity has made the election under section 501(h).
    (iii) Reliance upon grantee's budget. For purposes of determining 
the amount budgeted by a prospective grantee for specific project 
activities that are not attempts to influence legislation under 
paragraph (a)(6)(ii) of this section, a private foundation may rely on 
budget documents or other sufficient evidence supplied by the grantee 
organization (such as a signed statement by an authorized officer, 
director or trustee of such grantee organization) showing the proposed 
budget of the specific project, unless the private foundation doubts or, 
in light of all the facts and circumstances, reasonably should doubt the 
accuracy or reliability of the documents.
    (7) Grants to organizations that cease to be described in 
501(c)(3)--(i) Not taxable expenditure; conditions. A grant to a public 
charity (as defined in paragraph (a)(6)(i) of this section) that 
thereafter ceases to be an organization described in section 501(c)(3) 
by reason of its attempts to influence legislation is not a taxable 
expenditure if--
    (A) The grant meets the requirements of paragraph (a)(6) of this 
section,
    (B) The recipient organization had received a ruling or 
determination letter, or an advance ruling or determination letter, that 
it is described in sections 501(c)(3) and 509(a),
    (C) Notice of a change in the recipient organization's status has 
not been made to the public (such as by publication in the Internal 
Revenue Bulletin), and the private foundation has not acquired knowledge 
that the Internal Revenue Service has given notice to the recipient 
organization that it will be deleted from such status; and
    (D) The recipient organization is not controlled directly or 
indirectly by the private foundation. A recipient organization is 
controlled by a private foundation for this purpose if the private 
foundation and disqualified persons (defined in section 4946(a)(1) (A) 
through (H) with reference to the private foundation, by aggregating 
their votes or positions of authority, can cause or prevent action on 
legislative issues by the recipient.
    (ii) Examples. The provisions of paragraphs (a)(6) and (a)(7) of 
this section are illustrated by the following examples:

    Example (1). W, a private foundation, makes a general support grant 
to Z, a public charity described in section 509(a)(1). Z informs W that, 
as an insubstantial portion of its activities, Z attempts to influence 
the State legislature with regard to changes in the mental health laws. 
The use of the grant is not earmarked by W to be used in a manner that 
would violate section 4945(d)(1). Even if the grant is subsequently 
devoted by Z to its legislative activities, the grant by W is not a 
taxable expenditure under section 4945(d).
    Example (2). X, a private foundation, makes a specific project grant 
to Y University for the purpose of conducting research on the potential 
environmental effects of certain pesticides. X does not earmark the 
grant for any purpose that would violate section 4945(d)(1) and there is 
no oral or written agreement or understanding whereby X may cause Y to 
engage in any activity described in section 4945(d) (1), (2), or (5), or 
to select any recipient to which the grant may be devoted. Further, X 
determines, based on budget information supplied by Y, that Y's budget 
for the project does not contain any amount for attempts to influence 
legislation. X has no reason to doubt the accuracy or reliability of the 
budget information. Y uses most of the funds for the research project; 
however, Y expends a portion of the grant funds to send a representative 
to testify at Congressional hearings on a specific bill proposing 
certain pesticide control measures. The portion of the grant funds 
expended with respect to the Congressional hearings is not treated as a 
taxable expenditure by X under section 4945(d)(1).
    Example (3). M, a private foundation, makes a specific project grant 
of $150,000 to P, a public charity described in section 509(a)(1). In 
requesting the grant from M, P stated that the total budgeted cost of 
the project is $200,000, and that of this amount $20,000 is allocated to 
attempts to influence legislation related to the project. M relies on 
the budget figures provided by P in determining the amount P will spend 
on influencing legislation and M has no reason to doubt the accuracy or 
reliability of P's budget figures. In making the grant, M did not 
earmark any of the funds from the grant to

[[Page 166]]

be used for attempts to influence legislation. M's grant of $150,000 to 
P will not constitute a taxable expenditure under section 4945(d)(1) 
because M did not earmark any of the funds for attempts to influence 
legislation and because the amount of its grant ($150,000) does not 
exceed the amount allocated to specific project activities that are not 
attempts to influence legislation ($200,000-$20,000=$180,000).
    Example (4). Assume the same facts as in example (3), except that 
M's grant letter to P provides that M has the right to renegotiate the 
terms of the grant if there is a substantial deviation from those terms. 
This additional fact does not make M's grant a taxable expenditure under 
section 4945(d)(1).
    Example (5). Assume the same facts as in example (3), except that M 
made a specific project grant of $200,000 to P. Part of M's grant of 
$200,000 will constitute a taxable expenditure under section 4945(d)(1). 
The amount of the grant ($200,000) exceeds by $20,000 the amount P 
allocated to specific project activities that are not attempts to 
influence legislation ($180,000). M has made a taxable expenditure of 
$20,000.
    Example (6). Assume the same facts as example (3), except that M 
made a specific project grant of $180,000, and received from P an 
enforceable commitment that grant funds would not be used in connection 
with attempts to influence legislation. M's grant is not a taxable 
expenditure under section 4945(d)(1).
    Example (7). Assume the same facts as in example (3) except that M 
directed P to hire A, an individual, to expend $20,000 from the grant to 
engage in direct lobbying (within the meaning of Sec. 56.4911-2(b)) and 
grass roots lobbying (within the meaning of Sec. 56.4911-2(c)). P does 
not expend any other grant funds for lobbying activities. The $20,000 
that is earmarked for direct lobbying and grass roots lobbying is a 
taxable expenditure under section 4945(d)(1).
    Example (8). R, a public charity described in section 509(a)(1), 
requested N, a private foundation, to make a general purpose grant to it 
to aid R in carrying out its exempt purpose. In making this request, R 
notified N that it had elected the expenditure test under section 501(h) 
and that it expected to attempt to influence legislation in areas 
related to its exempt purpose. Since its formation, R generally has had 
exempt purpose expenditures (as defined in Sec. 56.4911-4) in excess of 
$7,000,000 in each of its taxable years, and has budgeted in excess of 
$7,000,000 of exempt purpose expenditures for the year of the grant. N 
made a grant of $200,000 to R. N did not earmark the funds for R's 
attempt to influence legislation. The general purpose grant by N does 
not constitute a taxable expenditure under section 4945(d)(1).
    Example (9). Assume the same facts as in example (8), except that N 
learns that R has had excess lobbying expenditures (within the meaning 
of Sec. 56.4911-1(b)) in some prior years. N also learns that in no 
year has R's lobbying or grass roots expenditures (within the meaning of 
Sec. 56.4911-2 (a) and (c)) exceeded the corresponding ceiling amount 
(within the meaning of Sec. 1.501(h)-3(c) (3) and (6)). N then makes 
the grant to R. After receiving the grant, R spends a large portion of 
its funds on influencing legislation and, as a consequence, is denied 
exemption from tax, as an organization described in section 501(c)(3), 
under section 501(h) and Sec. 1.501(h)-3. No disqualified person with 
respect to N controlled, in whole or in part, R's attempts to influence 
legislation. The general purpose grant will not constitute a taxable 
expenditure under section 4945(d)(1).
    Example (10). X, a private foundation, makes a specific project 
grant to Y, a public charity described in section 509(a). In requesting 
the grant, Y stated that it planned to use the funds to purchase a 
computer for purpose of computerizing its research files and that the 
grant will not be used to influence legislation. Two years after X makes 
the grant, X discovers that Y has also used the computer for purposes of 
maintaining and updating the mailing list for Y's lobbying newsletter. 
Because X did not earmark any of the grant funds to be used for attempts 
to influence legislation and because X had no reason to doubt the 
accuracy or reliability of Y's documents representing that the grant 
would not be used to influence legislation, X's grant is not treated as 
a taxable expenditure.
    Example (11). G, a private foundation, makes a specific project 
grant of $300,000 to L, a public charity described in section 509(a)(1) 
for a three-year specific project studying child care problems. L 
provides budget material indicating that the specific project will 
expend $200,000 in each of three years. L's budget materials indicate 
that attempts to influence legislation will amount to $10,000 in the 
first year, $20,000 in the second year and $100,000 in the third year. G 
intends to pay its $300,000 grant over three years as follows: $200,000 
in the first year, $50,000 in the second year and $50,000 in the third 
year. The amount of the grant actually disbursed by G in the first year 
of the grant exceeds the nonlobbying expenditures of L in that year. 
However, because the amount of the grant in each of the three years, 
when divided equally among the three years ($100,000 for each year), is 
not more than the nonlobbying expenditures of L on the specific project 
for any of the three years, none of the grant is treated as a taxable 
expenditure under section 4945(d)(1).
    Example (12). P, a private foundation, makes a $120,000 specific 
project grant to C, a public charity described in section 509(a) for a 
three-year project. P intends to pay its

[[Page 167]]

grant to C in three equal annual installments of $40,000. C provides 
budget material indicating that the specific project will expend 
$100,000 in each of three years. C's budget materials, which P 
reasonably does not doubt, indicate that the project's attempts to 
influence legislation will amount to $50,000 in each of the three years. 
After P pays the first annual installment to C, but before P pays the 
second installment to C, reliable information comes to P's attention 
that C has spent $90,000 of the project's $100,000 first-year budget on 
attempts to influence legislation. This information causes P to doubt 
the accuracy and reliability of C's budget materials. Because of the 
information, P does not pay the second-year installment to C. P's 
payment of the first installment of $40,000 is not a taxable expenditure 
under section 4945(d)(1) because the grant in the first year is not more 
than the nonlobbying expenditures C projected in its budget materials 
that P reasonably did not doubt.
    Example (13). Assume the same facts as in Example (12), except that 
P pays the second-year installment of $40,000 to C. In the project's 
second year, C once again spends $90,000 of the project's $100,000 
annual budget in attempts to influence legislation. Because P doubts or 
reasonably should doubt the accuracy or reliability of C's budget 
materials when P makes the second-year grant payment, P may not rely 
upon C's budget documents at that time. Accordingly, although none of 
the $40,000 paid in the first installment is a taxable expenditure, only 
$10,000 ($100,000 minus $90,000) of the second-year grant payment is not 
a taxable expenditure. The remaining $30,000 of the second installment 
is a taxable expenditure within the meaning of section 4945(d)(1).
    Example (14). B, a private foundation, makes a specific project 
grant to C, a public charity described in section 509(a), of $40,000 for 
the purpose of conducting a study on the effectiveness of seat belts in 
preventing traffic deaths. B did not earmark any of the grant for 
attempts to influence legislation. In requesting the grant from B, C 
submitted a budget of $100,000 for the project. The budget contained 
expenses for postage and mailing, computer time, advertising, consulting 
services, salaries, printing, advertising, and similar categories of 
expenses. C also submitted to B a statement, signed by an officer of C, 
that 30% of the budgeted funds would be devoted to attempts to influence 
legislation within the meaning of section 4945. B has no reason to doubt 
the accuracy of the budget figures or the statement. B may rely on the 
budget figures and signed statement provided by C in determining the 
amount C will spend on influencing legislation. B's grant to C will not 
constitute a taxable expenditure under section 4945(d)(1), because the 
amount of the grant does not exceed the amount allocated to specific 
project activities that are not attempts to influence legislation.

    (b)-(c) [Reserved]
    (d) Exceptions--(1) Nonpartisan analysis, study, or research--(i) In 
general. A communication is not a lobbying communication, for purposes 
of Sec. 53.4945-2(a)(1), if the communication constitutes engaging in 
nonpartisan analysis, study or research and making available to the 
general public or a segment or members thereof or to governmental 
bodies, officials, or employees the results of such work. Accordingly, 
an expenditure for such a communication does not constitute a taxable 
expenditure under section 4945(d)(1) and Sec. 53.4945-2(a)(1).
    (ii) Nonpartisan analysis, study, or research. For purposes of 
section 4945(e), ``nonpartisan analysis, study, or research'' means an 
independent and objective exposition of a particular subject matter, 
including any activity that is ``educational'' within the meaning of 
Sec. 1.501(c)(3)-1(d)(3). Thus, ``nonpartisan analysis, study, or 
research'' may advocate a particular position or viewpoint so long as 
there is a sufficiently full and fair exposition of the pertinent facts 
to enable the public or an individual to form an independent opinion or 
conclusion. On the other hand, the mere presentation of unsupported 
opinion does not qualify as ``nonpartisan analysis, study, or 
research''.
    (iii) Presentation as part of a series. Normally, whether a 
publication or broadcast qualifies as ``nonpartisan analysis, study, or 
research'' will be determined on a presentation-by-presentation basis. 
However, if a publication or broadcast is one of a series prepared or 
supported by a private foundation and the series as a whole meets the 
standards of subdivision (ii) of this subparagraph, then any individual 
publication or broadcast within the series will not result in a taxable 
expenditure even though such individual broadcast or publication does 
not, by itself, meet the standards of subdivision (ii) of this 
subparagraph. Whether a broadcast or publication is considered part of a 
series will ordinarily depend on all the

[[Page 168]]

facts and circumstances of each particular situation. However, with 
respect to broadcast activities, all broadcasts within any period of 6 
consecutive months will ordinarily be eligible to be considered as part 
of a series. If a private foundation times or channels a part of a 
series which is described in this subdivision in a manner designed to 
influence the general public or the action of a legislative body with 
respect to a specific legislative proposal in violation of section 
4945(d)(1), the expenses of preparing and distributing such part of the 
analysis, study, or research will be a taxable expenditure under this 
section.
    (iv) Making available results of analysis, study, or research. A 
private foundation may choose any suitable means, including oral or 
written presentations, to distribute the results of its nonpartisan 
analysis, study, or research, with or without charge. Such means include 
distribution of reprints of speeches, articles, and reports (including 
the report required under section 6056); presentation of information 
through conferences, meetings, and discussions; and dissemination to the 
news media, including radio, television, and newspapers, and to other 
public forums. For purposes of this paragraph (d)(1)(iv), such 
communications may not be limited to, or be directed toward, persons who 
are interested solely in one side of a particular issue.
    (v) Subsequent lobbying use of certain analysis, study, or 
research--(A) In general. Even though certain analysis, study or 
research is initially within the exception for nonpartisan analysis, 
study, or research, subsequent use of that analysis, study or research 
for grass roots lobbying may cause that analysis, study or research to 
be treated as a grass roots lobbying communication that is not within 
the exception for nonpartisan analysis, study, or research. This 
paragraph (d)(1)(v) of this section does not cause any analysis, study, 
or research to be considered a direct lobbying communication. For rules 
regarding when analysis, study, or research is treated as a grass roots 
lobbying communication that is not within the scope of the exception for 
nonpartisan analysis, study, or research, see Sec. 56.4911-2(b)(2)(v).
    (B) Special rule for grants to public charities. This paragraph 
(d)(1)(v)(B) of this section applies where a public charity uses a 
private foundation grant to finance, in whole or in part, a nonlobbying 
communication that is subsequently used in lobbying, causing the public 
charity's expenditures for the communication to be treated as lobbying 
expenditures under the subsequent use. In such a case, the private 
foundation's grant will ordinarily not be characterized as a lobbying 
expenditure by virtue of the subsequent use rule. The only situations 
where the private foundation's grant will be treated as a lobbying 
expenditure under the subsequent use rule are where the private 
foundation's primary purpose in making the grant to the public charity 
was for lobbying or where, at the time of making the grant, the private 
foundation knows (or in light of all the facts and circumstances 
reasonably should know) that the public charity's primary purpose in 
preparing the communication to be funded by the grant is for use in 
lobbying.
    (vi) Directly encouraging action by recipients of a communication. A 
communication that reflects a view on specific legislation is not within 
the nonpartisan analysis, study, or research exception of this Sec. 
53.4945-2(d)(1) if the communication directly encourages the recipient 
to take action with respect to such legislation. For purposes of this 
section, a communication directly encourages the recipient to take 
action with respect to legislation if the communication is described in 
one or more of Sec. 56.4911-2(b)(2)(iii)(A) through (C). As described 
in Sec. 56.4911-2(b)(2)(iv), a communication would encourage the 
recipient to take action with respect to legislation, but not directly 
encourage such action, if the communication does no more than 
specifically identify one or more legislators who will vote on the 
legislation as: opposing the communication's view with respect to the 
legislation; being undecided with respect to the legislation; being the 
recipient's representative in the legislature; or being a member of the 
legislative committee or subcommittee that will consider the 
legislation.

[[Page 169]]

    (vii) Examples. The provisions of this paragraph may be illustrated 
by the following examples:

    Example (1). M, a private foundation, establishes a research project 
to collect information for the purpose of showing the dangers of the use 
of pesticides in raising crops. The information collected includes data 
with respect to proposed legislation, pending before several State 
legislatures, which would ban the use of pesticides. The project takes 
favorable positions on such legislation without producing a sufficiently 
full and fair exposition of the pertinent facts to enable the public or 
an individual to form an independent opinion or conclusion on the pros 
and cons of the use of pesticides. This project is not within the 
exception for nonpartisan analysis, study, or research because it is 
designed to present information merely on one side of the legislative 
controversy.
    Example (2). N, a private foundation, establishes a research project 
to collect information concerning the dangers of the use of pesticides 
in raising crops for the ostensible purpose of examining and reporting 
information as to the pros and cons of the use of pesticides in raising 
crops. The information is collected and distributed in the form of a 
published report which analyzes the effects and costs of the use and 
nonuse of various pesticides under various conditions on humans, 
animals, and crops. The report also presents the advantages, 
disadvantages, and economic cost of allowing the continued use of 
pesticides unabated, of controlling the use of pesticides, and of 
developing alternatives to pesticides. Even if the report sets forth 
conclusions that the disadvantages as a result of using pesticides are 
greater than the advantages of using pesticides and that prompt 
legislative regulation of the use of pesticides is needed, the project 
is within the exception for nonpartisan analysis, study or research 
since it is designed to present information on both sides of the 
legislative controversy and presents a sufficiently full and fair 
exposition of the pertinent facts to enable the public or an individual 
to form an independent opinion or conclusion.
    Example (3). O, a private foundation, establishes a research project 
to collect information on the presence or absence of disease in humans 
from eating food grown with pesticides and the presence or absence of 
disease in humans from eating food not grown with pesticides. As part of 
the research project, O hires a consultant who prepares a ``fact sheet'' 
which calls for the curtailment of the use of pesticides and which 
addresses itself to the merits of several specific legislative proposals 
to curtail the use of pesticides in raising crops which are currently 
pending before State legislatures. The ``fact sheet'' presents reports 
of experimental evidence tending to support its conclusions but omits 
any reference to reports of experimental evidence tending to dispute its 
conclusions. O distributes 10,000 copies to citizens' groups. 
Expenditures by O in connection with this work of the consultant are not 
within the exception for nonpartisan analysis, study, or research.
    Example (4). P publishes a bi-monthly newsletter to collect and 
report all published materials, ongoing research, and new developments 
with regard to the use of pesticides in raising crops. The newsletter 
also includes notices of proposed pesticide legislation with impartial 
summaries of the provisions and debates on such legislation. The 
newsletter does not encourage recipients to take action with respect to 
such legislation, but is designed to present information on both sides 
of the legislative controversy and does present information fully and 
fairly. It is within the exception for nonpartisan analysis, study, or 
research.
    Example (5). X is satisfied that A, a member of the faculty of Y 
University, is exceptionally well qualified to undertake a project 
involving a comprehensive study of the effects of pesticides on crop 
yields. Consequently, X makes a grant to A to underwrite the cost of the 
study and of the preparation of a book on the effect of pesticides on 
crop yields. X does not take any position on the issues or control the 
content of A's output. A produces a book which concludes that the use of 
pesticides often has a favorable effect on crop yields, and on that 
basis argues against pending bills which would ban the use of 
pesticides. A's book contains a sufficiently full and fair exposition of 
the pertinent facts, including known or potential disadvantages of the 
use of pesticides, to enable the public or an individual to form an 
independent opinion or conclusion as to whether pesticides should be 
banned as provided in the pending bills. The book does not directly 
encourage readers to take action with respect to the pending bills. 
Consequently, the book is within the exception for nonpartisan analysis, 
study, or research.
    Example (6). Assume the same facts as Example (2), except that, 
instead of issuing a report, X presents within a period of 6 consecutive 
months a two-program television series relating to the pesticide issue. 
The first program contains information, arguments, and conclusions 
favoring legislation to restrict the use of pesticides. The second 
program contains information, arguments, and conclusions opposing 
legislation to restrict the use of pesticides. The programs are 
broadcast within 6 months of each other during commensurate periods of 
prime time. X's programs are within the exception for nonpartisan 
analysis, study, or research. Although neither program individually 
could be regarded as nonpartisan, the series of two programs constitutes 
a balanced presentation.

[[Page 170]]

    Example (7). Assume the same facts as Example (6), except that X 
arranged for televising the program favoring legislation to restrict the 
use of pesticides at 8 p.m. on a Thursday evening and for televising the 
program opposing such legislation at 7 a.m. on a Sunday morning. X's 
presentation is not within the exception for nonpartisan analysis, 
study, or research, since X disseminated its information in a manner 
prejudicial to one side of the legislative controversy.
    Example (8). Organization Z researches, writes, prints and 
distributes a study on the use and effects of pesticide X. A bill is 
pending in the U.S. Senate to ban the use of pesticide X. Z's study 
leads to the conclusion that pesticide X is extremely harmful and that 
the bill pending in the U.S. Senate is an appropriate and much needed 
remedy to solve the problems caused by pesticide X. The study contains a 
sufficiently full and fair exposition of the pertinent facts, including 
known or potential advantages of the use of pesticide X, to enable the 
public or an individual to form an independent opinion or conclusion as 
to whether pesticides should be banned as provided in the pending bills. 
In its analysis of the pending bill, the study names certain undecided 
Senators on the Senate committee considering the bill. Although the 
study meets the three part test for determining whether a communication 
is a grass roots lobbying communication, the study is within the 
exception for nonpartisan analysis, study or research, because it does 
not directly encourage recipients of the communication to urge a 
legislator to oppose the bill.
    Example (9). Assume the same facts as in Example (8), except that, 
after stating support for the pending bill, the study concludes: ``You 
should write to the undecided committee members to support this crucial 
bill.'' The study is not within the exception for nonpartisan analysis, 
study or research because it directly encourages the recipients to urge 
a legislator to support a specific piece of legislation.
    Example (10). Organization X plans to conduct a lobbying campaign 
with respect to illegal drug use in the United States. It incurs $5,000 
in expenses to conduct research and prepare an extensive report 
primarily for use in the lobbying campaign. Although the detailed report 
discusses specific pending legislation and reaches the conclusion that 
the legislation would reduce illegal drug use, the report contains a 
sufficiently full and fair exposition of the pertinent facts to enable 
the public or an individual to form an independent conclusion regarding 
the effect of the legislation. The report does not encourage readers to 
contact legislators regarding the legislation. Accordingly, the report 
does not, in and of itself, constitute a lobbying communication.
    Copies of the report are available to the public at X's office, but 
X does not actively distribute the report or otherwise seek to make the 
contents of the report available to the general public. Whether or not 
X's distribution is sufficient to meet the requirement in Sec. 53.4945-
2(d)(1)(iv) that a nonpartisan communication be made available, X's 
distribution is not substantial (for purposes of Sec. Sec. 53.4945-
2(D)(1)(v) and 56.4911-2(b)(2)(v)) in light of all of the facts and 
circumstances, including the normal distribution pattern of similar 
nonpartisan reports. X then mails copies of the report, along with a 
letter, to 10,000 individuals on X's mailing list. In the letter, X 
requests that individuals contact legislators urging passage of the 
legislation discussed in the report. Because X's research and report 
were primarily undertaken by X for lobbying purposes and X did not make 
a substantial distribution of the report (without an accompanying 
lobbying message) prior to or contemporaneously with the use of the 
report in lobbying, the report is a grass roots lobbying communication 
that is not within the exception for nonpartisan analysis, study or 
research. Thus, the expenditures for preparing and mailing both the 
report and the letter are taxable expenditures under section 4945.
    Example (11). Assume the same facts as in Example (10), except that 
before using the report in the lobbying campaign, X sends the research 
and report (without an accompanying lobbying message) to universities 
and newspapers. At the same time, X also advertises the availability of 
the report in its newsletter. This distribution is similar in scope to 
the normal distribution pattern of similar nonpartisan reports. In light 
of all of the facts and circumstances, X's distribution of the report is 
substantial. Because of X's substantial distribution of the report, X's 
primary purpose will be considered to be other than for use in lobbying 
and the report will not be considered a grass roots lobbying 
communication. Accordingly, only the expenditures for copying and 
mailing the report to the 10,000 individuals on X's mailing list, as 
well as for preparing and mailing the letter, are expenditures for grass 
roots lobbying communications, and are thus taxable expenditures under 
section 4945.
    Example (12). Organization M pays for a bumper sticker that reads: 
``STOP ABORTION: Vote NO on Prop. X!'' M also pays for a 30-second 
television advertisement and a billboard that similarly advocate 
opposition to Prop. X. In light of the limited scope of the 
communications, none of the communications is within the exception for 
nonpartisan analysis, study or research. First, none of the 
communications rises to the level of analysis, study or research. 
Second, none of the communications is nonpartisan because none contains 
a sufficiently full and

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fair exposition of the pertinent facts to enable the public or an 
individual to form an independent opinion or conclusion. Thus, each 
communication is a lobbying communication.

    (2) Technical advice or assistance--(i) In general. Amounts paid or 
incurred in connection with providing technical advice or assistance to 
a governmental body, a governmental committee, or a subdivision of 
either of the foregoing, in response to a written request by such body, 
committee, or subdivision do not constitute taxable expenditures for 
purposes of this section. Under this exception, the request for 
assistance or advice must be made in the name of the requesting 
governmental body, committee or subdivision rather than an individual 
member thereof. Similarly, the response to such request must be 
available to every member of the requesting body, committee or 
subdivision. For example, in the case of a written response to a request 
for technical advice or assistance from a congressional committee, the 
response will be considered available to every member of the requesting 
committee if the response is submitted to the person making such request 
in the name of the committee and it is made clear that the response is 
for the use of all the members of the committee.
    (ii) Nature of technical advice or assistance. ``Technical advice or 
assistance'' may be given as a result of knowledge or skill in a given 
area. Because such assistance or advice may be given only at the express 
request of a governmental body, committee or subdivision, the oral or 
written presentation of such assistance or advice need not qualify as 
nonpartisan analysis, study or research. The offering of opinions or 
recommendations will ordinarily qualify under this exception only if 
such opinions or recommendations are specifically requested by the 
governmental body, committee or subdivision or are directly related to 
the materials so requested.
    (iii) Examples. The provisions of this subparagraph may be 
illustrated by the following examples:

    Example (1). A congressional committee is studying the feasibility 
of legislation to provide funds for scholarships to U.S. students 
attending schools abroad. X, a private foundation which has engaged in a 
private scholarship program of this type, is asked, in writing, by the 
committee to describe the manner in which it selects candidates for its 
program. X's response disclosing its methods of selection constitutes 
technical advice or assistance.
    Example (2). Assume the same facts as Example (1), except that X's 
response not only includes a description of its own grant-making 
procedures, but also its views regarding the wisdom of adopting such a 
program. Since such views are directly related to the subject matter of 
the request for technical advice or assistance, expenditures paid or 
incurred with respect to the presentation of such views would not 
constitute taxable expenditures. However, expenditures paid or incurred 
with respect to a response which is not directly related to the subject 
matter of the request for technical advice or assistance would 
constitute taxable expenditures unless the presentation can qualify as 
the making available of nonpartisan analysis, study or research.
    Example (3). Assume the same facts as Example (1), except that X is 
requested, in addition, to give any views it considers relevant. A 
response to this request giving opinions which are relevant to the 
committee's consideration of the scholarship program but which are not 
necessarily directly related to X's scholarship program, such as 
discussions of alternative scholarships programs and their relative 
merits, would qualify as ``technical advice or assistance'', and 
expenditures paid or incurred with respect to such response would not 
constitute taxable expenditures.
    Example (4). A, an official of the State Department, makes a written 
request in his official capacity for information from foundation Y 
relating to the economic development of country M and for the opinions 
of Y as to the proper position of the United States in pending 
negotiations with M concerning a proposed treaty involving a program of 
economic and technical aid to M. Y's furnishing of such information and 
opinions constitutes technical advice or assistance.
    Example (5). In response to a telephone inquiry from Senator X's 
staff, organization B sends Senator X a report concluding that the 
Senate should not advise and consent to the nomination of Z to serve as 
a Supreme Court Justice. Because the request was not in writing, and 
also because the request was not from the Senate itself or from a 
committee or subcommittee, B's report is not within the scope of the 
exception for responses to requests for technical advice. Accordingly, 
B's report is a lobbying communication unless the report is within the 
scope of the exception for nonpartisan analysis, study or research.
    Example (6). Assume the same facts as in Example (5), except that 
B's report is sent in

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response to a written request that Senator X sends to B. The request 
from Senator X is a request from the Senator as an individual member of 
the Senate rather than from the Senate itself or from a committee or 
subcommittee. Accordingly, B's report is not within the scope of the 
exception for responses to requests for technical advice and is a 
lobbying conmmunication unless the report is within the scope of the 
exception for nonpartisan analysis, study or research.
    Example (7). Assume the same facts as in Example (6), except that 
B's report is sent in response to a written request from the Senate 
committee that is considering the nomination for an evaluation of the 
nominee's legal writings and a recommendation as to whether the 
candidate is or is not qualified to serve on the Supreme Court. The 
report is within the scope of the exception for responses to requests 
for technical advice and is not a lobbying communication.

    (3) Decisions affecting the powers, duties, etc., of a private 
foundation--(i) In general. Paragraph (c) of this section does not apply 
to any amount paid or incurred in connection with an appearance before, 
or communication with, any legislative body with respect to a possible 
decision of such body which might affect the existence of the private 
foundation, its powers and duties, its tax-exempt status, or the 
deductibility of contributions to such foundation. Under this exception, 
a foundation may communicate with the entire legislative body, 
committees or subcommittees of such legislative body, individual 
congressmen or legislators, members of their staffs, or representatives 
of the executive branch, who are involved in the legislative process, if 
such communication is limited to the prescribed subjects. Similarly, the 
foundation may make expenditures in order to initiate legislation if 
such legislation concerns only matters which might affect the existence 
of the private foundation, its powers and duties, its tax-exempt status, 
or the deductibility of contributions to such foundation.
    (ii) Examples. The provisions of this subparagraph may be 
illustrated by the following examples:

    Example (1). A bill is being considered by Congress which would, if 
enacted, restrict the power of a private foundation to engage in 
transactions with certain related persons. Under the proposed bill a 
private foundation would lose its exemption from taxation if it engages 
in such transactions. W, a private foundation, writes to the 
congressional committee considering the bill, arguing that the enactment 
of such a bill would not be advisable, and subsequently appears before 
such committee to make its arguments. In addition, W requests that the 
congressional committee consider modification of the 2 percent de 
minimis rule of section 4943(c) (2) (C). Expenditures paid or incurred 
with respect to such submissions do not constitute taxable expenditures 
since they are made with respect to a possible decision of Congress 
which might affect the existence of the private foundation, its powers 
and duties, its tax-exempt status, or the deduction of contributions to 
such foundation.
    Example (2). A bill being considered in a State legislature is 
designed to implement the requirements of section 508(e) of the Internal 
Revenue Code of 1954. Under such section, a private foundation is 
required to make certain amendments to its governing instrument. X, a 
private foundation, makes a submission to the legislature which proposes 
alternative measures which might be taken in lieu of the proposed bill. 
X also arranges to have its president contact certain State legislators 
with regard to this bill. Expenditures paid or incurred in making such 
submission and in contacting the State legislators do not constitute 
taxable expenditures since they are made with respect to a possible 
decision of such State legislature which might affect the existence of 
the private foundation, its powers and duties, its tax-exempt status, or 
the deduction of contributions to such foundation.
    Example (3). A bill is being considered by a State legislature under 
which the State would assume certain responsibilities for nursing care 
of the aged. Y, a private foundation which hitherto has engaged in such 
activities, appears before the State legislature and contends that such 
activities can be better performed by privately supported organizations. 
Expenditures paid or incurred with respect to such appearance are not 
made with respect to possible decisions of the State legislature which 
might affect the existence of the private foundation, its powers and 
duties, its tax-exempt status, or the deduction of contributions to such 
foundation, but rather merely affect the scope of the private 
foundation's future activities.
    Example (4). A State legislature is considering the annual 
appropriations bill. Z, a private foundation which had hitherto 
performed contract research for the State, appears before the 
appropriations committee in order to attempt to persuade the committee 
of the advisability of continuing the program. Expenditures paid or 
incurred with respect to such appearance are not made with respect to 
possible decisions of the State legislature which might affect the 
existence of

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the private foundation, its powers and duties, its tax-exempt status, or 
the deduction of contributions to such foundation, but rather merely 
affect the scope of the private foundation's future activities.

    (4) Examination and discussions of broad social, economic, and 
similar problems. Examinations and discussions of broad social, 
economic, and similar problems are neither direct lobbying 
communications under Sec. 56.4911-2(b)(1) nor grass roots lobbying 
communications under Sec. 56.4911-2(b)(2) even if the problems are of 
the type with which government would be expected to deal ultimately. 
Thus, under Sec. Sec. 56.4911-2(b) (1) and (2), lobbying communications 
do not include public discussion, or communications with members of 
legislative bodies or governmental employees, the general subject of 
which is also the subject of legislation before a legislative body, so 
long as such discussion does not address itself to the merits of a 
specific legislative proposal and so long as such discussion does not 
directly encourage recipients to take action with respect to 
legislation. For example, this paragraph (d)(4) excludes from grass 
roots lobbying under Sec. 56.4911(b)(2) an organization's discussions 
of problems such as environmental pollution or population growth that 
are being considered by Congress and various State legislatures, but 
only where the discussions are not directly addressed to specific 
legislation being considered, and only where the discussions do not 
directly encourage recipients of the communication to contact a 
legislator, an employee of a legislative body, or a government official 
or employee who may participate in the formulation of legislation.

[T.D. 7215, 37 FR 23161, Oct. 31, 1972; 37 FR 23918, Nov. 11, 1972, as 
amended by T.D. 8308, 55 FR 35594, Aug. 31, 1990]