Following up on my prior posts:

• LSAC Jacks Up Fees 15-31% to Students in Light of Decline in LSAT Test Takers
• What Is Going on at the LSAC?
• LSAC Responds to Criticism

Tax Prof (and LSAC Board Member) Richard L. Schmalbeck (Duke) sent this email yesterday to the Tax Prof Discussion Group (reprinted here with Rich's permission):

I don't want to comment generally on Brian Tamanaha's criticisms of the LSAC (which have been referenced on the Tax Prof blog), especially in light of the fact that Steve Willborn, the LSAC chair, has already comprehensively done so.  But one apparently factual disagreement between them is easily reconciled:  Tamanaha reported that LSAC spent $1,000,000 per year on lobbying in recent years, while Willborn said that it was typically less than $25,000 per year.  Willborn is correct; Tamanaha's complaint appears to be based on a misunderstanding of LSAC's Form 990. 

As those of you who teach in the nonprofit area know, nonprofit organizations can elect to have their lobbying activities governed by section 501(h), which permits the organization to engage in limited lobbying without penalty.  (And LSAC has made such an election.)  The limitation is a sliding scale based on the total amount of exempt purpose expenditures, but in no case exceeding $1,000,000.  If the organization exceeds that amount (or whatever lower amount is determined by reference to its total exempt-purpose expenditures), it would be subject to an excise tax of 25% of the excess under section 4911.  

The important point is that Tamanaha picked up the amount shown on Line 2a of Part II-A of Schedule C of the Form 990 as the "Lobbying nontaxable amount," which will always be $1,000,000 for a large organization like LSAC.  But that number has nothing to do with the actual amount of lobbying that LSAC did in any particular year.  It is merely the amount they could have done without penalty.  As Willborn reported, the actual lobbying amounts (also shown on the 990, at line 2c of Part II-A of Schedule C) have in recent years been under $25,000, which is to say about .00045 of the LSAC budget of about $55 million.

One might ask why LSAC needs to do any lobbying at all.  I believe that the bulk of the modest expenditures consist of communications to state legislatures that are considering test-taker protection rules that would make it more difficult or more expensive for the LSAC to develop and administer the LSAT.  Its positions on such bills may be right or wrong in any particular case, but I think we would agree that the organization ought to be allowed to advance its arguments in favor of or (more commonly) in opposition to legislative initiatives that touch on testing. 

I should add in the interests of full disclosure that I am a member of the LSAC board, and so hardly a disinterested observer in the back-and-forth between Tamanaha and Willborn.  But I do know how to read a Form 990, and so do the readers of this listserv.  The forms are generally available on Guidestar, so any of you can check these for yourselves.