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Why Public Charities Should Take the 501(h) Election [Part 2]

March 2, 2016 at 11:00 AM

While the process of taking the 501(h) election might seem confusing, it is actually quite simple. Nonprofits elect to be covered by the newer regulations simply by filling out Form 5768 and sending it to the IRS.

501(h) Spending Limits

Once an organization takes the 501(h) election, they will be subject to the following generous spending limits on lobbying activities:

nonprofit lobbying data

Why Nonprofits Should Take the 501(h) Election

Any 501c3 that is involved in lobbying or legislative advocacy will benefit in a number of ways from taking the 501(h) election.

Aside from clearer guidelines and greater freedom to lobby, public charities also face less-cumbersome reporting to the IRS. All 501c3s that participate in lobbying must provide descriptions of their lobbying activities on their annual Form 990. While organizations that fall under the insubstantial part test must report on thetime that unpaid volunteers have spent lobbying, electing organizations only have to report on any lobbying expenditures. For most organizations, reporting on expenditures is straightforward and easily-accessible information, while documenting volunteer lobbying hours can be painstaking.

Another important protection of the 501(h) election is that a nonprofit cannotlose its tax-exempt status for exceeding lobbying expenditures in a single year. On the other hand, organizations that fall under the "insubstantial" regulation, are subject to losing tax-exempt status if the IRS determines they have participated in "substantial" lobbying activities in a single year.

nonprofit lobbying data

Conclusion

By taking the 501(h) election and staying within your legal limitations, you can ensure your organization can take full advantage of permitted lobbying activities. Getting involved in legislative advocacy is perhaps one of the best ways nonprofits can give a voice to those people and causes who need it most. Organizations that do not take advantage of lobbying miss an opportunity to shape legislation and advance policies that will make a lasting impact to their cause.

*In addition to the federal regulations on nonprofit lobbying, each state has additional regulations that may affect your nonprofit. Please seek legal counsel to determine the best solution for your organization's specific circumstances. 

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Abby Curcio

Written by Abby Curcio

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