Advocacy, Lobbying and the 501(h) Election

Advocacy, Lobbying and the 501(h) Election: An Introduction

The rules governing lobbying and advocacy are fairly simple. Usually, any confusion is based not on the complexity of the issue, but because of unfamiliarity. Some of the confusion may come about because of seemingly conflicting rules. For example, there is an absolute prohibition on partisan electioneering but nonprofits can participate in nonpartisan voter registrations campaigns.

Nonprofits that are involved in advocacy and lobbying should investigate making the federal 501(h) election. The h election is an expenditure test that answers the question of whether your organization is doing too much lobbying by examining how much you spend on lobbying (lobbying expenditures). Thus, the h election provides a simple and clear quantitative test of program expenditures. Helpful rules provide guidelines on what constitutes "lobbying expenditures" and how much may be spent on such activities.

In fact, there is virtually no reason not to consider making the h election. If an organization expects to spend so much money on lobbying that it would go above the limits, it should spin off a separate 501(c)(4) organization.

The 501(h) election is filed once, and can be retroactive to the previous year. It entails no additional record-keeping and can be rescinded should the nonprofit decide to do so.

The 501(h) election relates to an organization's federal income tax status as a tax-exempt organization. Lobbying activities may also give rise to registration and reporting requirements under state and local law.

NPCC has a paper outlining this issue in greater detail. NPCC members may click here to read it.

Revised May 2003