The Office of Management and Budget is preparing new proposals to restrict the lobbying activities of government contractors and grant recipients, but although the most controversial elements have been watered down, affected groups still maintain there is no need for any rules at all.

The proposals, expected to be published formally this fall, have been opposed bitterly by business and activist groups across the political spectrum. Congress joined the fray this spring, with committee chairmen such as Jack Brooks (D-Tex.) siding with opponents of the proposals.

The original OMB proposal unveiled last winter was designed to ensure that government funds were not spent on political activities. Certain provisions, such as a requirement that lobbying activities be physically separated from an organization's other work, were criticized as impractical.

Groups also objected loudly to the broad sweep of the term "lobbying," which apparently could have included anything from efforts to influence a local zoning board to congressional lobbying.

The business community's opposition has been toned down, however, in the wake of lengthy negotiations between the OMB and defense and other contractors over the revisions. But the conservative reaction to the new limits on lobbying is still anything but enthusiastic.

The new draft was made public yesterday in a report by the National Health Council, a coalition organized to monitor development of the OMB rules. OMB general counsel Michael Horowitz said yesterday that there have been "two or three" versions since this one, but would not elaborate on any differences.

Among the changes in the revised proposal:

* The kinds of activity described as "lobbying" have been narrowed and friend-of-the-court briefs, "executive-branch contacts," and local government lobbying have been eliminated from the list of restricted activities. However, the most recent draft of the rule, according to an OMB source, would put efforts to organize grass-roots support or opposition to a federal regulation in the "lobbying" category.

* Groups that receive federal money but also do lobbying would not have to separate the two activities physically. Instead, the new proposals ask groups receiving federal aid to keep a record of how much of their resources are devoted to lobbying and prohibits charging any expenses associated with lobbying to government contracts.

* Groups that spend less than 25 percent of their resources on "lobbying" would be allowed to certify to the government the distribution of their resources without presenting an audit. "That is a real protection against harassment by audit," said an OMB source.

The nonprofit groups, however, consider the certification requirements an unwarranted paperwork burden. "This sets up an onerous and needless paperwork burden on nonprofit organizations," said Bob Smucker, vice president of Independent Sector, a coalition of nonprofit health and welfare groups.

Smucker also said that Internal Revenue Service rules against lobbying by nonprofit groups afford ample protection against the political misuse of federal funds.

"This new version is clearly not as onerous as the first version, but we continue to strongly maintain there has been no evidence of abuse by nonprofits, no conclusive evidence. There's no need for a further change in the laws we have now," Smucker added.

Horowitz disagreed. "Every time people have looked at the issue , problems have been discovered," he said. "Secondly, we need to have rules to provide guidance for everyone. People shouldn't run the risk of being audited and not have rules for clear guidance" on what is allowed.