What a 501(c)(3) May and May Not Do Politically: Lobbying Limits and the 501(h) Election

Political activity is one of the most misunderstood areas of nonprofit compliance. Some nonprofit leaders believe a 501(c)(3) organization cannot discuss legislation, contact lawmakers, encourage people to vote, or take a position on a controversial public issue. Others assume that because their mission involves public policy, almost any form of advocacy is permitted. Neither view accurately reflects the federal tax rules. A 501(c)(3) organization can engage in a meaningful amount of advocacy and some lobbying, but political campaign intervention is prohibited.

Understanding that distinction is essential for charities that want to influence public policy without putting their tax-exempt status at risk. The rules become easier to manage once an organization separates three categories: political campaign intervention, lobbying, and general advocacy or education. Campaign intervention for or against candidates is prohibited. Lobbying is permitted within limits. Many forms of nonpartisan education and advocacy can also be conducted without being treated as lobbying at all. Organizations eligible to make a Section 501(h) election have another important option because the election replaces the less precise substantial part test with an expenditure-based framework for measuring lobbying.

The First Distinction: Lobbying Is Not the Same as Campaign Activity

The most important point for nonprofit leaders is that lobbying and political campaign intervention are not interchangeable terms. Under federal tax law, organizations described in Section 501(c)(3) are absolutely prohibited from directly or indirectly participating or intervening in a political campaign on behalf of, or in opposition to, a candidate for elective public office. This includes obvious activities such as making campaign contributions or issuing an organizational endorsement of a candidate. It can also include less direct activities when the facts show that the organization is attempting to favor or oppose a candidate.

Lobbying is different. A 501(c)(3) may attempt to influence legislation as long as lobbying does not become excessive under the rules applicable to the organization. The IRS specifically recognizes that charitable organizations may engage in some lobbying. Legislation can include actions by Congress, state legislatures, local councils, and similar legislative bodies, as well as referenda, ballot initiatives, constitutional amendments, and similar measures submitted to voters. The distinction matters because an organization may legally urge a legislature to pass a bill while being prohibited from telling voters to support the legislator who introduced it.

What Counts as Political Campaign Intervention?

Political campaign intervention generally involves activity intended to support or oppose a candidate for elective public office. A straightforward endorsement is an obvious example. If a charity publishes a statement saying that Candidate A should be elected, the organization has crossed the line. The same problem can arise when a charity contributes organizational funds to a candidate’s campaign, distributes partisan campaign material, solicits contributions for a candidate, or uses nonprofit resources to influence an election.

The restriction is not limited to messages containing the words “vote for” or “vote against.” The IRS evaluates the surrounding facts and circumstances. A message may potentially identify a candidate without stating the person’s name by using a photograph, party affiliation, campaign slogan, distinctive biography, or another recognizable reference. Timing can also matter. An issue advertisement released immediately before an election and written in a way that clearly identifies one candidate may receive different scrutiny from routine educational material the charity has consistently published for years. Nonprofits therefore need to evaluate the substance, timing, context, and audience of communications rather than relying on the absence of an explicit endorsement.

What Political Activities Can a 501(c)(3) Still Conduct?

The prohibition on campaign intervention does not require charities to disappear from civic life during election season. A 501(c)(3) may conduct genuinely nonpartisan voter education, voter registration, and get-out-the-vote activities. It may also organize candidate forums when those events are structured in a neutral manner. For example, an organization can invite candidates to discuss issues relevant to its mission if it uses objective participation criteria, gives candidates a fair opportunity to participate, covers a sufficiently broad range of issues, and avoids indicating which candidate the organization prefers.

A charity can also continue discussing public policy issues even when candidates disagree strongly about those issues. The IRS states that an organization may take positions on public policy matters, including issues that divide candidates, as long as its communication does not favor or oppose a candidate. This distinction gives nonprofits significant room to educate communities, publish research, explain social problems, discuss policy solutions, and advocate for their missions. Problems arise when issue advocacy is transformed into electoral advocacy by connecting the organization’s preferred position to a candidate or upcoming vote for public office.

What Is Lobbying for a 501(c)(3)?

At a basic level, lobbying involves attempting to influence legislation. A nonprofit might contact legislators to support a proposed housing bill, ask city council members to reject an ordinance, or encourage members of the public to contact lawmakers about pending legislation. These activities are not automatically prohibited merely because the organization is tax exempt. Instead, the amount and type of lobbying need to be measured under the applicable federal rules.

The nonprofit lobbying rules 501c3 organizations follow depend partly on whether an eligible public charity has made the Section 501(h) election. Without the election, lobbying is generally evaluated under what is known as the substantial part test. An eligible organization that makes the 501(h) election instead uses an expenditure test with specific dollar thresholds. This choice can have a major practical effect because one approach relies heavily on facts and circumstances while the other provides a mathematical framework for measuring lobbying expenditures.

Direct Lobbying Versus Grassroots Lobbying

Organizations considering a 501(h) election should understand the difference between direct and grassroots lobbying. Under the expenditure-test rules, direct lobbying generally involves communications with legislators or certain other government officials involved in the legislative process when the communication refers to specific legislation and reflects a view on that legislation. A communication asking a state senator to vote for a named bill is a straightforward example.

Grassroots lobbying generally involves communications directed to the public that refer to specific legislation, reflect a view on that legislation, and encourage recipients to take action. A charity might publish a message telling supporters to contact their representatives and demand passage of a particular bill. That call to action is important when analyzing grassroots lobbying. The distinction matters because organizations making the 501(h) election have both an overall lobbying expenditure limit and a smaller limit for grassroots lobbying expenditures.

What Is the Substantial Part Test?

If a 501(c)(3) organization has not made a valid 501(h) election, the IRS generally determines whether its lobbying is excessive using the substantial part test. The challenge is that there is no single percentage that automatically defines “substantial” for every organization. Instead, the IRS considers all relevant facts and circumstances. Factors can include the amount of money spent on lobbying and the time devoted to lobbying by both paid staff and volunteers.

That uncertainty can make planning difficult. An organization may know exactly how much it spent but still need to evaluate whether its overall lobbying activities have become substantial relative to its other activities. The consequences can also be serious. The IRS explains that an organization conducting excessive lobbying under the substantial part test may lose its federal tax-exempt status. Certain organizations and managers may also face excise taxes in connection with excessive lobbying expenditures. For eligible public charities that regularly advocate on legislation, this uncertainty is one reason the 501(h) election deserves careful consideration.

What Is the 501(h) Election?

Section 501(h) allows certain eligible 501(c)(3) organizations to elect to have their lobbying activity measured under an expenditure test rather than the substantial part test. The election does not give an organization permission to participate in candidate campaigns. The prohibition on political campaign intervention remains in place. Instead, the election changes how permitted lobbying activity is measured for federal tax purposes.

The election is made using IRS Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation. The form itself is short. An eligible organization provides identifying information and elects to have Section 501(h) apply. The IRS states that the election must be made during the tax year for which it is to be effective. Once made, the election generally remains effective for subsequent tax years until it is revoked.

Why Many Public Charities Consider the 501(h) Election

The primary attraction of the 501(h) election is predictability. Instead of trying to determine whether lobbying represents a “substantial part” of the organization’s overall activities based on facts and circumstances, an electing charity can work with defined expenditure limits. That makes it easier to create a lobbying budget, monitor spending throughout the year, and explain compliance expectations to board members and employees.

The election can be particularly useful for organizations whose missions naturally involve legislation. Environmental charities, health organizations, education nonprofits, civil rights groups, community organizations, animal welfare charities, and many other nonprofits may need to communicate with lawmakers as part of advancing their missions. The nonprofit lobbying rules 501c3 organizations face should not automatically discourage that work. Instead, eligible organizations can evaluate whether the expenditure test offers a clearer framework for conducting it responsibly.

How the 501(h) Lobbying Limit Is Calculated

The expenditure test does not give every nonprofit the same lobbying allowance. The lobbying nontaxable amount is calculated using the organization’s exempt purpose expenditures. Under the IRS formula, an organization with exempt purpose expenditures of $500,000 or less generally has a lobbying nontaxable amount equal to 20 percent of those expenditures. If exempt purpose expenditures are above $500,000 but not more than $1 million, the amount is $100,000 plus 15 percent of the excess over $500,000.

For exempt purpose expenditures above $1 million but not more than $1.5 million, the calculation is $175,000 plus 10 percent of the excess over $1 million. When exempt purpose expenditures exceed $1.5 million, the formula becomes $225,000 plus 5 percent of the amount above $1.5 million. The overall lobbying nontaxable amount is capped at $1 million. This maximum is reached once exempt purpose expenditures reach $17 million. These figures provide something the substantial part test does not: an objective dollar framework that organizations can use for planning.

A Practical Example of the 501(h) Calculation

Suppose an eligible public charity has $800,000 in exempt purpose expenditures for the year. The first $500,000 produces a $100,000 lobbying amount because 20 percent of $500,000 is $100,000. The organization then has $300,000 of expenditures above the $500,000 threshold. Fifteen percent of that additional $300,000 equals $45,000. The charity’s lobbying nontaxable amount would therefore be $145,000.

That does not mean the organization has $145,000 available exclusively for grassroots lobbying. The grassroots nontaxable amount is 25 percent of the overall lobbying nontaxable amount. In this example, 25 percent of $145,000 equals $36,250. Understanding both numbers is essential. A charity could remain within its total lobbying limit while still exceeding its separate grassroots limit if too much of its spending is directed toward mobilizing the public to influence legislation.

What Are Exempt Purpose Expenditures?

Because the 501(h) calculation depends on exempt purpose expenditures, nonprofits need to understand what goes into that figure. It is not simply the organization’s revenue or annual budget. IRS guidance generally defines exempt purpose expenditures as amounts paid or incurred to accomplish the organization’s exempt purposes, including certain administrative expenses and lobbying expenditures themselves. Depreciation and amortization are generally included, while capital expenditures are excluded from the calculation.

Certain fundraising expenditures are also excluded. This distinction is important because using total annual revenue as a shortcut can produce an inaccurate lobbying limit. A charity with $2 million in revenue does not automatically calculate its lobbying allowance using $2 million. Its actual exempt purpose expenditures must be determined under the applicable rules. Organizations making the election should therefore coordinate advocacy tracking with their accounting and Form 990 processes instead of treating lobbying compliance as an isolated responsibility of the communications team.

What Happens If a 501(h) Organization Goes Over the Limit?

One advantage of the 501(h) framework is that exceeding a yearly expenditure limit does not necessarily mean immediate loss of tax-exempt status. If an electing charity exceeds the applicable lobbying expenditure limits, it may be subject to an excise tax on excess lobbying expenditures. The rules also examine lobbying over a multiyear period when determining whether exemption is ultimately at risk.

IRS guidance explains that an electing organization can lose its exemption if, over the applicable four-year averaging period, its lobbying or grassroots lobbying expenditures exceed the relevant ceiling amounts. The ceiling generally involves 150 percent of the organization’s applicable nontaxable amounts. This does not make overspending harmless. It does, however, illustrate an important difference between the expenditure-test framework and the potentially severe consequences of excessive lobbying under the substantial part test. Organizations approaching their limits should obtain professional tax advice rather than relying on rough internal estimates.

501(c)(3)

Who Cannot Use the 501(h) Election?

The 501(h) election is not available to every organization described in Section 501(c)(3). Churches and certain organizations closely connected with churches cannot make the election. Private foundations are also excluded and operate under separate rules governing lobbying expenditures. Other statutory exclusions can apply as well.

This is why an organization should confirm eligibility before filing Form 5768 or restructuring its advocacy program around the expenditure test. The election is particularly associated with eligible public charities, but nonprofit status alone does not establish eligibility. Organizations that are uncertain about their classification should review their IRS determination information and obtain professional advice where necessary. The rules applicable to a private foundation, for example, should not be inferred from an article describing lobbying limits for an electing public charity.

Ballot Measures Are Legislation, Not Candidate Campaigns

Ballot initiatives and referenda create an important distinction that nonprofits frequently miss. A public vote on a ballot measure is generally treated as legislation for these purposes. It is not treated the same way as an election between candidates. As a result, a 501(c)(3) may support or oppose a ballot measure, but the activity is counted as lobbying and must remain within the organization’s applicable lobbying limits.

The IRS has specifically explained that a 501(c)(3) may contribute to a ballot measure committee, with the contribution included in its lobbying calculations. This is very different from contributing to a candidate committee, political party committee, or political action committee, which a 501(c)(3) may not do. For organizations active in state and local policy, understanding this distinction can prevent two opposite mistakes: avoiding lawful ballot-measure advocacy unnecessarily or treating candidate contributions as though they were ordinary lobbying.

Public Policy Education Is Not Automatically Lobbying

A charity can discuss public policy without every communication becoming a lobbying expenditure. The IRS recognizes that organizations may conduct educational meetings, distribute educational materials, and discuss public policy issues in an educational manner without necessarily engaging in lobbying. A homelessness charity, for example, can publish research explaining housing shortages and policy approaches without automatically creating lobbying activity merely because lawmakers are debating housing legislation.

The details of the communication matter. Referring to specific legislation, expressing a view on it, communicating with legislators, and encouraging public action can change the analysis. Organizations that regularly publish policy content should therefore train employees to distinguish education from lobbying rather than labeling everything “advocacy.” Accurate classification can protect the organization while also preventing it from unnecessarily restricting legitimate educational work.

Advocacy, Lobbying, and Education Should Be Tracked Separately

One practical way to make these rules easier to manage is to create clear internal categories for communications and activities. Not every advocacy project needs the same level of review. A research report, a general educational webinar, a letter to a legislator about a specific bill, and a public campaign asking supporters to contact lawmakers may all relate to the same issue, but they can have different tax-law treatment.

A simple internal review can ask:

  • Is the activity about a candidate or about legislation?
  • Does the communication refer to a specific bill, ordinance, referendum, or other legislative proposal?
  • Does it express a view on that legislation?
  • Is the communication directed to lawmakers or to the general public?
  • Does it ask members of the public to contact lawmakers or otherwise take action?
  • Is there any election-related language or context that could make the activity look like candidate intervention?

These questions do not replace professional legal or tax advice, but they can help staff recognize when an ordinary communication needs additional review. They also make it easier for finance and communications teams to work from the same understanding of what the organization is doing.

Candidate Forums Require Careful Neutrality

Hosting a candidate forum can be a legitimate nonpartisan activity, but the structure of the event matters. A charity should avoid designing the event to promote one candidate, giving preferred candidates materially different opportunities, or framing questions to demonstrate the organization’s approval or disapproval. Candidate selection criteria, topics, moderator behavior, event promotion, and the overall presentation can all affect whether the forum remains genuinely nonpartisan.

A similar issue arises with candidate questionnaires and voter guides. A neutral educational guide can be permissible, but rating candidates or selectively presenting answers in a way that favors particular candidates can create campaign intervention concerns. Organizations should be especially careful about voter guides that compare candidate positions with the nonprofit’s own preferred positions. The closer the material comes to telling readers which candidate aligns with the organization’s agenda, the greater the compliance risk.

Social Media Can Create the Same Problems as Formal Publications

A nonprofit’s political compliance policy should cover social media, not just official press releases and printed materials. A post from the organization’s official Instagram, Facebook, LinkedIn, X, YouTube, or other account can constitute an organizational communication. An employee managing the account should not assume that an informal tone or a quick repost eliminates the campaign intervention rules.

This is particularly important when staff share candidate content, campaign slogans, endorsements, fundraising links, or partisan messages from an organizational account. The nonprofit lobbying rules 501c3 organizations follow apply to communications regardless of whether they appear in a formal letter or a social media post. Nonprofits should identify who can publish from official accounts, create an approval process for sensitive election-period content, and train social media staff to distinguish issue advocacy from candidate advocacy.

Leaders May Have Personal Political Views

Board members, executives, employees, and volunteers do not surrender their personal political rights because they work with a 501(c)(3). They may support candidates and participate in campaigns in their individual capacities. The important issue is avoiding the appearance that the nonprofit itself is endorsing or opposing a candidate.

A nonprofit leader speaking personally should avoid using organizational resources and should make it clear when a political position is personal rather than organizational. Titles can create complications because a statement from “Jane Smith, Executive Director of Community Charity” may be interpreted differently from a statement made solely as a private citizen. Organizations should establish internal guidance covering personal political activity, organizational email addresses, logos, mailing lists, office facilities, websites, and social media accounts so employees and directors understand the separation.

Candidate Use of Nonprofit Resources Can Be Risky

Political campaign intervention can occur through the use of organizational resources even when the charity does not issue a formal endorsement. Providing a candidate with free office space, mailing lists, staff assistance, advertising, facilities, or other benefits can potentially amount to prohibited support. Business transactions with candidates require particular care.

The IRS considers factors such as whether goods, services, or facilities are offered to candidates in the same election on an equal basis, whether they are also available to the general public, whether customary rates are charged, and whether the transaction is part of the organization’s ordinary activities. A nonprofit that regularly rents an auditorium at standard market rates presents a different situation from one that suddenly provides free event space exclusively to a favored candidate. Written procedures can help organizations avoid making these decisions inconsistently during an election.

Keep Lobbying Records That Match the Rules

A nonprofit cannot manage its lobbying limit if it does not know what it is spending. Organizations making the 501(h) election should establish accounting categories that distinguish lobbying expenditures from other program expenses and, importantly, distinguish grassroots lobbying from other lobbying. Payroll allocations may also matter when employees spend part of their working time on lobbying activities.

Documentation should be created during the year rather than reconstructed when Form 990 is due. Advocacy staff can identify the legislation involved, audience, purpose of the communication, staff time, outside consultant costs, advertising expenditures, and other relevant expenses. Finance staff can then reconcile those records with the organization’s accounting system. Electing organizations report lobbying information on Schedule C of Form 990 or Form 990-EZ, making accurate classification and recordkeeping a practical reporting requirement as well as a compliance safeguard.

Build an Internal Review Process Before Election Season

A written political and lobbying policy can prevent mistakes that are difficult to correct after publication. The policy should explain the difference between candidate campaign activity, direct lobbying, grassroots lobbying, and non-lobbying advocacy. It should also identify who can approve legislative communications and who reviews election-related materials.

Organizations do not need to send every routine policy document to outside counsel. They do need a process for identifying higher-risk communications. Candidate references, election timing, voter guides, candidate forums, ballot measures, paid advertising, large advocacy campaigns, and messages containing calls to action deserve additional attention. Training should include realistic examples so employees understand how the rules apply to newsletters, websites, social media, public events, testimony, and direct communications with lawmakers.

What About Events, Petitions, and Public Statements?

Nonprofits often run advocacy events, circulate petitions, publish open letters, or invite community members to sign statements. These activities should be reviewed based on what they actually seek to accomplish rather than simply being labeled “advocacy.” A petition asking a city council to adopt a particular ordinance may involve lobbying. A general petition asking the public to support a broad social cause may raise different questions.

The same principle applies to public statements from nonprofit executives. A statement can discuss a serious public issue without becoming campaign intervention simply because candidates are also talking about that issue. The concern increases when the organization compares candidates, praises or criticizes a candidate in an election context, or urges people to support or oppose a particular candidate.

It is also useful to remember that advocacy work can involve several different activities at once. An organization might publish an educational report, meet with legislators, hold a public event, and ask supporters to contact elected officials. Each component should be reviewed separately. Treating the entire campaign as one undifferentiated activity can make accurate lobbying tracking more difficult.

Should Your Nonprofit Make the 501(h) Election?

There is no single answer for every charity. An eligible organization that rarely engages in lobbying may be comfortable operating under the substantial part test. A public charity that expects regular legislative advocacy may value the clarity of defined expenditure thresholds. The organization’s size, advocacy strategy, accounting systems, staffing, and expected lobbying activity should all be considered.

The election should not be viewed as an admission that the nonprofit is becoming political. It is a tax-law mechanism for measuring permissible lobbying expenditures. Nor does making the election loosen the prohibition on candidate campaign intervention. Before filing Form 5768, an organization should confirm eligibility, estimate its exempt purpose expenditures, calculate the likely lobbying and grassroots limits, and make sure its accounting system can track relevant expenditures accurately.

A Practical Compliance Test Before Publishing Political Content

Before a politically sensitive communication is released, the organization should first identify what the message is trying to influence. If it supports or opposes a candidate for elective public office, the organization should stop because campaign intervention is prohibited. If it attempts to influence legislation, the organization should determine whether it constitutes direct or grassroots lobbying and track the associated expenditures under the applicable test. If it simply educates the public about an issue without crossing into lobbying or candidate intervention, it may fall within permissible advocacy.

That simple sequence can help staff avoid one of the most common compliance errors: treating every politically relevant communication as though it were governed by the same rule. A bill, a ballot proposition, a candidate election, and a general public-policy debate can all involve politics in an everyday sense, but federal tax law does not treat them identically. Identifying the activity correctly is therefore the starting point for determining what the nonprofit can legally do.

A useful internal checklist before publication is:

  • Identify whether a candidate is mentioned, pictured, quoted, or otherwise recognizable.
  • Determine whether specific legislation is being discussed.
  • Identify whether the communication expresses a position on that legislation.
  • Determine whether the audience is lawmakers, the general public, or both.
  • Check whether the communication asks the public to take action.
  • Record related staff time, contractor costs, advertising costs, and other expenses when the activity may constitute lobbying.
  • Escalate unusual election-related communications for additional review.

Having this process in place can be especially helpful when several departments contribute to one advocacy project. Communications staff may understand the message, program staff may understand the policy issue, and finance staff may understand the expenditures. Bringing those pieces together before publication can reduce avoidable classification problems.

Common Mistakes 501(c)(3) Organizations Should Avoid

One common mistake is believing that a charity can never lobby. Another is assuming the 501(h) election permits candidate endorsements. Some organizations mistakenly treat a ballot measure as a candidate campaign, while others make the opposite error and assume a candidate endorsement is merely lobbying. Nonprofits also get into trouble when employees use official social media accounts casually, organizational resources are provided to candidates without appropriate review, or advocacy expenditures are not tracked until the annual return is being prepared.

Another risky assumption is that avoiding a candidate’s name automatically makes a message nonpartisan. Context matters. Party references, photographs, campaign slogans, distinctive policy positions, election timing, and other facts can identify a candidate indirectly. The nonprofit lobbying rules 501c3 organizations must navigate are therefore best managed through classification, documentation, and consistent procedures rather than relying on a list of supposedly safe words.

Another mistake is waiting until the end of the year to determine how much lobbying has taken place. By then, staff may have difficulty reconstructing who worked on a project, how much time was spent, which expenses belonged to the campaign, or whether a particular communication was grassroots lobbying. Regular tracking is much easier than trying to recreate months of activity from memory.

Finally, nonprofits sometimes assume that having a political or public-policy mission gives them broader campaign rights. A strong mission does not change the basic prohibition on political campaign intervention. The organization can be active, vocal, and engaged while still maintaining a clear line between advocacy for an issue and support for a candidate.

Final Thoughts

A 501(c)(3) does not have to remain silent on public policy. It can educate communities, conduct nonpartisan voter engagement, discuss controversial issues, communicate with lawmakers, and engage in lobbying within federal limits. What it cannot do is use the organization to support or oppose candidates for elective public office. For eligible public charities, the 501(h) election can provide clearer expenditure-based lobbying limits, but careful classification and recordkeeping still matter. Organizations should use current IRS guidance and applicable forms when developing procedures and seek qualified tax or legal advice when an activity falls into a gray area.