Hi,
Most nonprofits think they aren’t allowed to lobby, that speaking up on a bill could put their tax-exempt status at risk.They’re half right: without one form you’re judged by a vague test nobody at the IRS has ever defined. The fear is real, but it comes from the wrong test. By default, your lobbying is measured against whether it is a “substantial part” of your activities – and nobody, not Congress, not the IRS, has ever defined “substantial.” But filing the 501(h) election can make things clear immediately. If any of this is you, it is costing your mission:
- You’ve skipped testifying, commenting on a bill, or asking supporters to contact legislators because you weren’t sure it was allowed
- You have a clear stake in legislation that affects the people you serve, but you stay quiet to be safe
- Nobody can tell you how much lobbying is “too much,” so you do none of it
- You assumed lobbying and endorsing candidates are the same thing
Here is how it actually works once you make the 501(h) election by filing Form 5768:
- You swap the vague test for a clear dollar limit – 20% of your first $500,000 of spending, on a sliding scale, capped at $1,000,000 a year. A nonprofit spending $500k can put up to $100,000 toward lobbying
- Only money counts. Volunteer and board-member advocacy on their own time is free and doesn’t count against your limit at all
- Go over in a single year and the penalty is a 25% excise tax on the overage – not loss of your status. You’d have to blow past the limit for years to actually risk exemption
- No personal liability for your managers, and simpler lobbying reporting on your 990
- It’s one page, filed once – it stays in effect until you revoke it, no annual refiling
One hard line stays no matter what: this covers lobbying on legislation, not endorsing candidates. Campaign activity is still off-limits for every 501(c)(3), election or not. But on the bills and policies that decide your mission, you have far more room than you’ve been using.
That is what we set up: we confirm you’re eligible, file the election, calculate your actual limits down to the dollar, and put simple tracking in place so you can advocate with confidence instead of guessing where the line is.
Reply to this email by Friday and we will set up a free 15-minute call with one of our senior nonprofit specialists. Tell us the one issue or bill you’ve been holding back on, and we will show you exactly how much you’re allowed to spend fighting for it. Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com