501(h) Election

Benefits of the 501(h) Election
  1. Clear definitions
  2. Generous and defined spending limits
  3. Easy record-keeping and reporting
  4. No single-year penalty for excessive lobbying
  5. Protection for officers and directors
  6. No increased risk of audit
Total Expenditures Total Lobbying Ceiling Total Grassroots Lobbying Ceiling
Up to $500,000     20%     5%
$500,000 - $1,000,000     $100,000 + 15% of excess over $500,000 $25,000 + 3.75% of excess over $500,000
$1,000,000 - $1,500,000     $175,000 + 10% of excess over $1,000,000     $43,750 + 2.5% of excess over $1,000,000
$1,500,000 - $17,000,000     $225,000 + 5% of excess over $1,500,000     $56,250 + 1.25% of excess over $1,500,000
Over $17,000,000     $1,000,000     $250,000

 

 

Taking The 501(h) Election

While the 501(h) election offers nonprofits numerous benefits, it may not be the best option for every organization. For example, churches and private foundations are not allowed to file the 501(h) election.  Large organizations with large direct lobbying budgets may be ineligible to file, or may find the substantial part test more advantageous.

Nonprofits should seek professional legal counsel to determine the right solutions for their specific circumstances.

Nonprofits may take the 501(h) election by filing Form 5768, Election/Revocation of Election by an Eligible IRC Section 501(c)(3) Organization to Make Expenditures to Influence Legislation.

The election may be taken at any time during the tax year for which it is to be effective.

Download Form 5768.

This web page does not constitute legal advice.  If you have questions about your organization and taking the 501(h) Election, we recommend you seek legal counsel.