501(h) election
A 501(h) election or Conable election is a procedure allowing a 501(c)(3) non-profit organization to participate in legislative lobbying that is limited only by the financial expenditure on that lobbying, regardless of its overall extent.[1]
Provisions
By default, 501(c)(3) organizations are subject to a provision that "no substantial part of the activities [may be] carrying on propaganda, or otherwise attempting, to influence legislation". This test, called the substantial part test, is subjective and not precisely defined by the Internal Revenue Service, making it difficult for organizations engaging in policy advocacy to determine whether they are in compliance with the law. The 501(h) election provides an objective expenditure test based only on the annual financial expenditure, and places no other limits on the actual extent of the lobbying activities.[2][3]
The limit on lobbying expenditure is calculated as a fraction of the organization's total tax-exempt expenditures. For organizations with $500,000 or less of tax-exempt expenditures in a given year, no more than 20% of that amount may be spent on lobbying. Decreasing percentages are allowed for total expenditures beyond this point, up to an absolute spending cap of $1,000,000. Lobbying expenses above the allowed amount are subject to a 25% excise tax, and excessive lobbying over a four-year period may lead to loss of tax-exempt status.[1] Additionally, "grassroots lobbying" that is directed towards the public rather than government officials is limited to one quarter of the total lobbying limit, while still counting towards the total lobbying limit.[3]
The 501(h) election is not available to churches or to private foundations.[1]
History
Lobbying restrictions on non-profits date to Department of the Treasury regulations in 1919.[4] The substantial part test was enacted as part of the Revenue Act of 1934.[5] The 501(h) election was introduced in the Tax Reform Act of 1976[3] which was introduced by Representative Barber Conable.[5]
References
- ^ a b c "Measuring Lobbying Activity: Expenditure Test". U.S. Internal Revenue Service. 2016-03-28. Retrieved 2016-12-03.
- ^ "Taking the 501(h) election". National Council of Nonprofits. 2015-01-17. Retrieved 2016-12-03.
- ^ a b c Sorrells, R. Michael (2014-02-10). "Lobbying by Public Charities: The 501(h) Safe Harbor". Nonprofit Accounting Basics. Greater Washington Society of CPAs Educational Foundation. Retrieved 2016-12-03.
- ^ Berry, Jeffrey M. (November 30, 2003). "The Lobbying Law Is More Charitable Than They Think". The Washington Post. p. B1.
- ^ a b Manny, Jill S. (2012). "Nonprofit Legislative Speech: Aligning Policy, Law, and Reality". Case Western Reserve Law Review. 62 (3): 762, 776 – via CWRU School of Law Scholarly Commons.