IRS Announcement on 501(h) Elections

According to the Charity Lobbying in the Public Interest (an offshoot of Independent Sector) the IRS has announced that by choosing to file the 501(h) election, a nonprofit will not be subject to an audit by the Internal Revenue Service solely because of that action.

In a letter to Charity Lobbying in the Public Interest, Marcus Owens, Director of the Exempt Organizations Divisions of the IRS stated, “The fact that an organization has made the election under IRC 501(h) is not a ground for an examination of the organization. This position has been set forth in the Internal Revenue Manual for our field offices.”

Readers of New York Nonprofits may be familiar with the circumstances surrounding advocacy, lobbying and the 501(h) election. NPCC has long encouraged organizations to consider making the 501(h) election and we have discussed it at length within these pages and in our memos.

Briefly, nonprofits that are regularly involved in advocacy and lobbying should make the 501(h) election. The h election is an expenditure test that addresses the question of whether your organization is doing too much lobbying by measuring the amount you spend on lobbying. It is filed once, and it entails no more record keeping than if the election was not made. For details about the h election, click here to read an introduction, or click here to read a detailed explanation.

To make the 501(h) election, organizations need to file IRS Form 5768. To download the form directly from the IRS's web site visit www.irs.gov.

Revised May 2003