Political or lobbying expenses are expenditures that attempt to influence politics. They include donations to political campaigns, efforts to influence lawmakers on potential legislation, or any other communications that attempt to influence politicians or political functions. Political and lobbying expenses are not tax-deductible as business expenses, nor as personal expenses.
Here's a full explanation of what the government considers political or lobbying expenses.
What Are Political or Lobbying Expenses?
Anytime an entity uses resources to try to influence politics, it could be an example of a political or lobbying expense. These expenses are part of a broad category that includes all forms of political influence. Even simply talking to a politician and trying to convince them to better understand your viewpoint could be a form of political or lobbying expense. However, most examples have a more direct form of monetary value, like a political campaign donation.
The Internal Revenue Service (IRS) defines political and lobbying expenses as part of Code section 162(e). It says political or lobbying expenses are any expenditures paid or incurred in connection with:
- Influencing legislation
- Participating or intervening in any political campaign on behalf of (or in opposition to) any candidate for public office
- Attempting to influence the general public's opinion on political issues or elections
- Any direct communication with a covered executive branch official with the goal of influencing that person's official actions or positions
"Covered executive branch officials" include the president, vice president, an officer or executive of the White House, Cabinet-level officials, and deputies of those Cabinet officials.
How Do Political or Lobbying Expenses Work?
The IRS defines political and lobbying expenses so explicitly because it doesn't want entities to try to write these off as business or personal expenses. Any expenses tied to any form of political influence aren't meant to be deducted on taxes. Expenses for doing research, preparing for lobbying activities, and travel to and from these types of activities are nondeductible, as well.
The Lobbying Disclosure Act
Lobbying—attempting to influence politicians, legislation, and political opinions—is largely regulated under the Lobbying Disclosure Act (LDA). There's nothing wrong with lobbying, as far as the government is concerned, but the IRS doesn't want those activities to come at the taxpayer's expense.
The LDA requires businesses to report to the federal government quarterly, detailing their lobbying efforts. However, some of the expenses that are disclosed as part of LDA compliance are deductible.
An expense is typically deductible if it's not associated with lobbying efforts or any type of bid to influence legislation. For example, money spent monitoring and reviewing government affairs and complying with legislation—either current law or proposed legislation—is acceptable, and these expenses can be deducted.
It can be confusing to figure out which LDA expenses are deductible and which aren't. Consider a consult with a tax professional if you're required to submit an LDA to be sure that you understand your company's responsibilities and rights.
Other Political Expenses and Contributions
Some types of lobbying are easy to identify as nondeductible expenses, but others are less clear. Some miscellaneous, nondeductible political activities include expenses for political activities such as campaign dinners and events for political parties or candidates. They include political contributions or gifts to political candidates. Even if you didn't explicitly tie these expenditures to a specific issue, they're still considered nondeductible.
You cannot deduct donations to political action committees (PACs) or any portion of dues to professional organizations that are designated for political lobbying. Union dues aren't deductible if they're used for lobbying or political activities. Charitable donations are often deductible, but they aren't if the group you donated to conducts lobbying activities that have a direct effect on your business.
- Political or lobbying expenses are expenses incurred in the process of trying to influence politicians, political views, legislation, or any other political workings.
- These expenses cannot be deducted on either personal or business taxes.
- Some expenses that are disclosed as part of compliance with the Lobbying Disclosure Act are deductible, though most aren't.