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Maximize Your Lobbying Limit
Elect to Measure Y our Lobbying Using the 501(h) Expenditure Test
501(c)(3) public charities can lobby within generous limits allowed by federal tax law. How much
lobbying the organization can use depends upon which of two tests the organization uses to measure
its lobbying — the “501(h) expenditure” test or the “insubstantial part” test. Most organizations will
benefit from electing to measure their lobbying using the 501(h) expenditure test because the rules
governing lobbying under Section 501(h) are clearer than those that apply under the insubstantial part
standard.
Electing the 501(h) Expenditure Test
Choosing the 501(h) expenditure test is as simple as filing a one page form with the IRS and will take
only a few minutes to complete.
Step 1 - Complete Form 5768
The first step in electing to be governed by the 501(h) expenditure test is to complete the simple half-
page form, IRS Form 5768 Election/Revocation of Election by an Eligible Section 501(c)(3)
Organization To Make Expenditures To Influence Legislation.’ An organization simply supplies its
name, address, and the first tax year to which it wants the election to apply. The form needs to be
signed by an authorized officer, usually the president or treasurer. The election applies retroactively to
the first day of the fiscal year in which the form is filed and to all subsequent years. For example, a
form filed in December 2012 will bring an organization under section 501(h) from J anuary 1, 2012
forward (assuming the organization has a fiscal year that runs from J anuary through December).
Step 2 - Make A Copy
Next, the organization should make a copy of its completed From 5768 and keep it with the other
records of the organization.
If at some point in the future the organization finds it can do more lobbying under the insubstantial part
test, the organization can revoke the 501(h) election. To revoke your organization’s 501(h) election,
follow steps 1 and 2, filling out the revocation portion of Form 5768. Revocation becomes effective on
the first day of the organization's next tax year.
Step 3 - Calculate Your Lobbying Limit
Under Section 501(h), the overall limit on lobbying starts as high as 20% of those expenditures for
small charities and diminishes to a smaller percentage of the expenditures for larger organizations,
with a maximum cap of $1,000,000 on an organization’s annual lobbying expenditures.“ In addition to
> Churches (which is how the IRS defines all houses of worship) cannot file the Form 5768 because they have exempted
themselves from the scope of the 501(h) expenditure test.
You can use our online calculator to determine your organization's annual lobbying limit.
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this overall limit, the 501(h) test imposes a limit on grassroots lobbying, calculated as one-quarter of
the overall lobbying limit. For example, a 501(c)(3) that has made the 501(h) election, with an annual
budget of $500,000, would have an overall lobbying limit of $100,000 and a grassroots lobbying limit
of $25,000.
Step 4 - Track Lobbying Expenditures
For charities that have made the 501(h) election, the law requires the charity to maintain records
showing expenditures for grassroots and direct lobbying (including expenditures for preparation for
such lobbying). The expenses that must be tracked include staff salaries and benefits; costs of
communications (e.g. printing and postage); a portion of overhead expenses attributable to lobbying;
and grants, payments, or reimbursements made to others for lobbying. These expenditures are
reported on Schedule C of Form 990. Organizations not required to complete schedules should still
track their lobbying in case of audit.
The information contained in this fact sheet and any attachments is being provided for informational purposes only and not
as part of an attorney-client relationship. The information is not a substitute for expert legal, tax, or other professional advice
tailored to your specific circumstances, and may not be relied upon for the purposes of avoiding any penalties that may be
imposed under the Internal Revenue Code. Alliance for J ustice publishes plain-language guides on nonprofit advocacy
topics, offers educational workshops on the laws governing the advocacy of nonprofits, and provides technical assistance for
nonprofits engaging in advocacy. For additional information, please feel free to contact Alliance for | ustice at 866-NPLOBBY
www.bolderadvocacy.org | www.allianceforjustice.org
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