Professional Point

The development of a 501(c)(6) tax-exempt companion organization, as authorized by APA's Council of Representatives and slated for implementation in January, has significant potential to bolster the Practice Directorate's advocacy capabilities (see article, May Monitor, page 12).

To understand what this organization can do, it is necessary first to understand the advocacy limitations of a "501 (c)(3) tax-exempt organization," which is how the IRS categorizes APA.

Overcoming limitations

First, as a 501(c)(3) organization, the APA may not spend more than $1 million dollars on lobbying expenses in any one year. "Lobbying" activities are specifically defined by the IRS and do not include all types of advocacy, generally those directly connected to lobbying legislative proposals. But the limit applies to all of APA, not just the Practice Directorate. To put this amount in perspective, by some reports, the American Medical Association, a 501(c)(6) organization, spends about $6 million annually on lobbyists alone.

In addition to the $1 million limitation on lobbying expenditures, 501 (c)(3) organizations may not do more than an "insubstantial amount" of promotion on behalf of members' professional interests. "Insubstantial" is one of those murky legal concepts that is a ratio between professional interest advocacy activities and all other activities undertaken by a (c)(3) organization, and is only determined in the final analysis by a tax court or an IRS hearing officer. In any event, the realities of the evolving health-care environment dictate that we will need to do an increasing amount of professional advocacy on behalf of our practitioner members in future years.

Lastly, (c)(3) organizations are absolutely prohibited from engaging in activities related to political giving and political action committees (PACs). This "zero tolerance" policy by the IRS towards 501 (c)(3)s prevents the Practice Directorate from even discussing with members the role political giving plays in the legislative and political process and APA cannot contribute to or solicit money for candidates for political office.

By contrast, 501(c)(6) organizations have none of these limitations or prohibitions. Such organizations are not limited in lobbying expenditures or in their ability to advocate for and promote the professional interests of their members. And, importantly, (c)(6) organizations can be involved with PAC activities.

APA considered several ways of creating a 501(c)(6). After much study and legal analysis, a companion organization structure sharing leadership with the (c)(3) was seen as both legally permissible and the most feasible way to proceed. Since (c)(3) entities are not legally permitted to transfer resources to (c)(6)s, future special assessment resources (beginning in 2001) will be used to fund the (c)(6) companion organization. The result is a tax-exempt organization without actual members (who remain part of APA) whose primary purpose will be to promote and advocate for the professional interests of practitioners and funded by the special assessment. Importantly, it is precisely this purpose for which the special assessment originally was created.

A boost for all APA members

Among the foremost benefits of the companion organization is that there will be no lobbying expenditure cap as there is on APA. It is important to note that creating the (c)(6) will benefit all constituencies in APA. Because the $1 million annual lobbying limit that applies to APA will no longer include lobbying expenses for practice--which will be funded through the (c)(6)--there will be additional "room" available for all the other constituencies to do more lobbying through the (c)(3) while remaining within the legal limit.

Further, the companion organization will have no limit to the amount of promotion and advocacy on behalf of practitioner interests. Of course, one practical limitation will be the amount of resources available--the more resources we have, the more advocacy we can accomplish. As a result, strategic planning for the companion organization includes possible revenue-enhancing activities to supplement the special assessment.

Lastly, the companion organization will be able to work closely with the various PACs within psychology such as the Association for the Advancement of Psychology, Women in Psychology for Legislative Action and state psychological association PACs. This should allow for greater strategic coordination between our advocacy efforts and political contributions on behalf of the profession. Importantly, the companion organization will now be able to do considerable education with psychologists around the country about the central role that political giving plays in the legislative process in a badly needed effort to increase the profession's participation.

While there likely will continue to be questions as the companion organization is implemented, the bottom line is that this structure will enable us to do more on behalf of practitioners and the patients we serve.