When Congress enacted the LDA in 1995, it included a provision that lobbying expenses can NOT be deducted by for-profit companies and/or individuals as “ordinary and necessary business expenses,” as that term is defined in the tax code. Not-for-profit organizations must also track their lobbying expenditures and disclose such expenses on their Form 990 tax returns for purposes of generating information related to the “proxy tax.” Because of the tax issues related to tracking and reporting lobbying expenditures, the Internal Revenue Code (“IRC”) has promulgated regulations and issued numerous pamphlets and circulars explaining the IRC definitions and interpretations of the tax code provisions related to lobbying expenditures.
The LDA allows companies, associations and nonprofit organizations to keep one set of books and records, rather than two. Therefore, each entity reporting lobbying expenditures (not income) is permitted to choose whether to track its lobbying activities and, hence, its expenditures in accordance with the IRC or the LDA. HLOGA made no changes to this aspect of the LDA.
The option of using the IRC definitions is not available to lobbying consultants, lobbying firms or individual lobbyists, because those individuals and entities report income under the LDA rather than expenditures.
The LD-2 reporting form directs a filer reporting its lobbying expenditures to indicate which method it is using to calculate its lobbying activities and costs:
- Method A – The LDA definitions
- Method B vigrx plus price – Section 6033(b)(8) of the IRC – charitable organizations making the 501(h) election for lobbying activities
- Method C – Section 162(e) of the IRC – for profit entities, trade associations, labor unions and other not-for-profit entities
Key Points to Remember in Choosing a Reporting Method
There are several important principles to bear in mind regarding the choice of the IRC (rather than the LDA) method.
- Whatever method is chosen, it must be used for all reports during the same calendar year.
- Regardless of whether Method B or C is the chosen reporting method, the tracking and definitional issues are identical.
It is not permissible for a registrant making the IRC election for calculating its lobbying expenditures to change reporting methods during a reporting (calendar) year. Once the election is made regarding the definition for calculating and tracking lobbying expenditures for LDA reporting purposes, the election should be reflected on the first quarterly report filed in April and followed for the remainder of the calendar year.
- Whatever method is chosen, it must be used consistently for all purposes.
The definitions of the method chosen must be used for all purposes related to LDA reporting. In other words, it is NOT permissible for a registrant to mix-and-match definitions from the IRC and the LDA when tracking, calculating and reporting lobbying expenditures.
For more information or to purchase the Lobbying Compliance Handbook click here.
Tags: IRC, IRS, LDA, lobbying expenditures, taxes