A 501(c)(3) can lobby — it just can't do it as a substantial part of its activities, and it can never support or oppose a candidate for public office. Those are two different rules that people constantly confuse:
- Political-campaign (electioneering) activity — endorsing, opposing, or financially supporting a candidate — is absolutely prohibited. There is no "small amount" exception; even minor intervention can cost you exemption (IRS).
- Lobbying — trying to influence specific legislation — is legal but limited. You measure that limit one of two ways: the vague substantial part test, or the clear, numbers-based 501(h) expenditure test you elect by filing Form 5768.
For most small and mid-sized charities, making the 501(h) election is the safer, simpler choice: it swaps a fuzzy "facts and circumstances" judgment call for bright-line dollar caps. This page explains the difference, walks the sliding-scale limits with a worked example, and shows why the election is usually worth the one-page form. This is general education, not legal advice — confirm specifics with a nonprofit attorney.
Two different rules: campaigns vs. lobbying
The single most important thing to internalize is that campaign activity and lobbying are governed by separate rules with separate consequences. Mixing them up is how well-meaning boards get into trouble.
| Political-campaign activity | Lobbying | |
|---|---|---|
| What it is | Supporting or opposing a candidate for elective public office (directly or indirectly) | Attempting to influence specific legislation |
| Allowed? | No — absolutely prohibited | Yes — within limits |
| How much | Zero. No de minimis exception | An "insubstantial" amount, or a measured dollar cap under 501(h) |
| Penalty for crossing the line | Excise taxes and possible loss of exemption | Excise tax on the excess; loss of exemption only if you blow past the cap repeatedly |
On the campaign side, the IRS states that all 501(c)(3) organizations are "absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office." That covers endorsements, donations to campaigns, and partisan voter-mobilization — but it does not prohibit nonpartisan voter education, candidate forums run even-handedly, or get-out-the-vote drives that don't favor a side. The lines around "nonpartisan" are genuinely tricky — get counsel before any election-season activity.
Lobbying is not a dirty word
Many boards over-correct and ban all advocacy out of fear. That's a mistake. Congress deliberately permits charities to lobby — the 501(h) rules exist precisely to give you a safe, generous allowance. Advocacy that shapes the laws affecting your mission is often among the highest-leverage work a nonprofit can do.
What counts as lobbying (and what doesn't)
Under the 501(h) rules, lobbying means spending money to influence specific legislation. It splits into two buckets, and the distinction matters because grassroots lobbying has a tighter sub-limit (covered below):
- Direct lobbying — communicating with a legislator (or their staff), or with the public on a ballot measure, about specific legislation and reflecting a view on it.
- Grassroots lobbying — trying to influence legislation by urging the general public to contact legislators (a "call to action").
Crucially, a long list of common activities does not count as lobbying at all under 501(h). According to IRS guidance and the underlying regulations, exceptions generally include:
- Nonpartisan analysis, study, or research — even if it takes a position, as long as it presents a full and fair exposition.
- Responding to a written request from a legislative body for technical advice.
- "Self-defense" communications about legislation that would affect your own existence, powers, tax-exempt status, or deductibility of gifts to you.
- Discussing broad social or policy problems without referencing specific legislation or a call to action.
- Communicating with your own members about legislation (with limits if it includes a call to action).
This is one of the underrated advantages of the 501(h) election: these exceptions are defined in the regulations, so you know in advance what's off the meter. Under the substantial part test, that clarity is murkier.
The vague "substantial part" test
If you do not make the 501(h) election, your lobbying is judged by the default substantial part test. The problem is right there in the name: there is no number. The IRS determines whether lobbying is a "substantial part" of activities "on the basis of all the pertinent facts and circumstances in each case," weighing the time devoted by both paid staff and volunteers and the money spent.
That creates three real headaches:
- No safe harbor. There's no dollar figure you can point to and say "we're under the line." Some practitioners cite an old rule-of-thumb of roughly 5% of activity, but the IRS has never adopted a fixed percentage — treat any such figure as folklore, not law.
- Volunteer time counts. Unpaid volunteer hours spent lobbying can push you toward "substantial," even though no money changed hands. For volunteer-heavy grassroots groups, that's a trap.
- Harsher penalty. An organization that conducts excessive lobbying in a year under this test can lose its exemption, and managers may face an excise tax of 5% of the lobbying expenditures (IRS) — a steeper, all-or-nothing risk than the 501(h) regime.
The takeaway
The substantial part test punishes uncertainty. You can't plan a campaign confidently when the rule is "we'll know it was too much after the fact." The 501(h) election exists to replace that ambiguity with arithmetic.
The 501(h) expenditure test & limits
By filing a one-page form, an eligible public charity can opt into the 501(h) expenditure test. Now your limit is purely about money spent on lobbying — volunteer time is ignored — and the cap is set by a published sliding scale based on your exempt purpose expenditures (roughly, most of what you spend on programs and operations). These figures are set by statute (IRC §4911) and are stable, but as of 2026 — verify current IRS guidance before relying on them:
| Exempt purpose expenditures | Lobbying nontaxable amount (your overall lobbying cap) |
|---|---|
| ≤ $500,000 | 20% of expenditures |
| $500,001 – $1,000,000 | $100,000 + 15% of the excess over $500,000 |
| $1,000,001 – $1,500,000 | $175,000 + 10% of the excess over $1,000,000 |
| $1,500,001 – $17,000,000 | $225,000 + 5% of the excess over $1,500,000 |
| Over $17,000,000 | $1,000,000 (the absolute cap) |
Source: IRS, "Measuring lobbying activity: Expenditure test." No matter how large the budget, total lobbying is capped at $1,000,000/year (as of 2026 — verify).
Two more rules complete the picture:
- The grassroots sub-limit. Of your overall lobbying cap, no more than 25% can be grassroots lobbying. So a charity with a $100,000 lobbying ceiling may spend the full $100,000 on direct lobbying, but only up to $25,000 of it on grassroots (National Council of Nonprofits).
- The penalties are gentler. Exceed a cap in a year and you owe a 25% excise tax on the excess — not loss of exemption. You only risk losing exemption if you normally exceed 150% of either cap, measured over a four-year average (26 CFR 1.501(h)-3). As of 2026 — verify.
Worked example: a $300k budget
Meet Riverside Housing Advocates, a 501(c)(3) that has filed Form 5768. Last year its exempt purpose expenditures were $300,000. Here's how its lobbying limits compute under the first tier of the table (20% of expenditures, with grassroots capped at 25% of that):
| Line | Calculation | Amount |
|---|---|---|
| Exempt purpose expenditures | given | $300,000 |
| Overall lobbying cap (lobbying nontaxable amount) | 20% × $300,000 | $60,000 |
| Grassroots sub-cap | 25% × $60,000 | $15,000 |
| Direct lobbying allowed (within the $60k) | up to the full cap | up to $60,000 |
Now suppose Riverside actually spent $40,000 on direct lobbying (meeting with city council on a zoning bill) and $12,000 on grassroots (a public "call your legislator" campaign). Total lobbying = $52,000.
Did Riverside stay legal? Yes — on both meters
- Total $52,000 vs. $60,000 cap — under the overall limit. ✓
- Grassroots $12,000 vs. $15,000 sub-cap — under the grassroots limit. ✓
- No excise tax owed — neither cap was exceeded.
- Exemption safe — nowhere near the 150% four-year-average danger zone ($90,000 / $22,500).
Contrast the failure case: had Riverside spent $20,000 on grassroots, it would be $5,000 over the grassroots sub-cap even though its total ($60,000) hit the overall ceiling exactly. It would owe a 25% excise tax on the $5,000 excess = $1,250 — a manageable, predictable cost, not a death sentence for the organization. Under the substantial part test, that same activity would have been a far murkier, scarier judgment call. Illustrative numbers; confirm your own figures with an accountant.
Why most small orgs should elect
For the great majority of small and mid-sized public charities that do any advocacy, the 501(h) election is a clear win. The advocacy-law specialists at Bolder Advocacy and the National Council of Nonprofits recommend it for most eligible groups. Here's why:
Benefits of the 501(h) election
- Clear dollar limits replace the vague "facts and circumstances" guesswork.
- Volunteer time doesn't count — only actual lobbying expenditures do, a huge relief for grassroots groups.
- Generous caps — 20% of a small budget is a lot of room; few small orgs come close to spending it.
- Gentler penalties — a 25% excise tax on the excess, not automatic loss of exemption.
- Defined exceptions — nonpartisan research, technical advice, and self-defense are clearly off the meter.
- Simple to elect and to exit — one form to opt in; one form to revoke if you ever change your mind.
Who should pause before electing? Mainly very large organizations whose budgets push them toward the $1,000,000 cap (the percentage scale may be less favorable than the substantial part test at scale), and organizations that genuinely never lobby and never will. And note two eligibility limits: churches and church-related organizations cannot make the election, and private foundations are not eligible (private foundations face their own separate, stricter lobbying rules). Good governance practices — see our board governance and compliance guides — pair naturally with a clear advocacy policy.
How to file Form 5768
Making the election is almost anticlimactically simple. You file IRS Form 5768, "Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation." Key mechanics (as of 2026 — verify on the current form):
- One page. Provide your name, EIN, and the first tax year the election should apply to, then sign.
- Effective for the whole year filed. If you file at any point during a tax year, the election is effective for that entire year (IRS, About Form 5768).
- It stays in effect automatically for every following year until you revoke it — you don't refile annually.
- Revocation uses the same form and generally takes effect the following tax year.
- Report on Form 990. Electing charities report lobbying expenditures on Schedule C of the Form 990, which is also where you'll track your numbers against the caps.
Before you file, set up a simple system to track lobbying expenditures (staff time on lobbying, materials, consultant fees, allocated overhead) separately from program spending — that recordkeeping is what makes the expenditure test easy to comply with. Solid financial management habits make this trivial.
When to bring in a lawyer
The election itself is DIY-friendly. But if you plan heavy lobbying, ballot-measure (initiative/referendum) work, or any election-season activity, get a nonprofit or election-law attorney involved early. Ballot measures count as direct lobbying, state "lobbyist registration" rules may also apply, and the campaign-intervention line is unforgiving — professional review is cheap insurance.
Fund the mission — including your advocacy — with unrestricted dollars
Lobbying within your 501(h) limits costs money, and grant funders often won't touch it. Good Circles gives you recurring, unrestricted revenue you can spend on advocacy: supporters pick your cause once, then a share of their everyday local spending funds you automatically — an estimated $72 per active supporter per year. That's roughly $36,000/year from 500 supporters (an estimate, not a guarantee), recurring and unrestricted, and free for nonprofits.
Claim a Founding Nonprofit spot →Sources & tools
Free first
- National Council of Nonprofits — Everyday Advocacy — Plain-language hub explaining what nonprofits can legally do in advocacy and lobbying, including the campaign-vs-lobbying distinction.
- National Council of Nonprofits — Taking the 501(h) Election — Step-by-step explainer of the 501(h) election, the expenditure limits, and the benefits over the substantial part test.
- Bolder Advocacy (Alliance for Justice) — Free, lawyer-vetted guides, fact sheets, and a Worry-Free Lobbying calculator and hotline for nonprofit advocacy questions.
- IRS — Measuring Lobbying: Substantial Part Test & Expenditure Test — Primary IRS guidance defining both lobbying tests, the sliding-scale dollar table, and the penalties.
- IRS — Form 5768 (and instructions) — The one-page form used to make (or revoke) the 501(h) election, plus IRS instructions on timing and effect.
Paid — optional labor-savers
- Nonprofit or election-law attorney — A lawyer who specializes in tax-exempt organizations and election law can vet advocacy plans, ballot-measure work, and state lobbyist-registration obligations. Worth it when You plan heavy lobbying, any ballot-measure or initiative campaign, or activity during an election season — the campaign-intervention line is unforgiving and worth professional review.
Last verified 2026-06-16. Figures and rules change — verify at the source before you act.
FAQ
Can a 501(c)(3) endorse a candidate for office?
No. All 501(c)(3) organizations are absolutely prohibited from participating or intervening, directly or indirectly, in any political campaign on behalf of or against a candidate for elective public office. There is no small-amount exception, and violating it can cost you your tax-exempt status. This is completely separate from lobbying, which is legal within limits. Nonpartisan activities like even-handed candidate forums or voter education are generally permitted, but get legal advice before any election-season activity.
What is the difference between the substantial part test and the 501(h) election?
The substantial part test is the default rule: the IRS decides whether lobbying is a 'substantial part' of your activities based on all the facts and circumstances, counting both paid staff time and volunteer time, with no fixed dollar threshold. The 501(h) election, which you make by filing Form 5768, replaces that vagueness with clear dollar caps based only on money spent on lobbying (volunteer time doesn't count). Most small and mid-sized charities prefer 501(h) because it provides certainty and gentler penalties.
How much can a nonprofit that made the 501(h) election spend on lobbying?
Under the sliding scale, the overall lobbying cap is 20% of the first $500,000 of exempt purpose expenditures, plus 15% of the next $300,000, and so on, up to an absolute maximum of $1,000,000 per year (as of 2026, verify). Separately, no more than 25% of that overall cap can be spent on grassroots lobbying. For example, an organization with $300,000 in exempt purpose expenditures has a $60,000 overall lobbying cap and a $15,000 grassroots sub-cap.
What happens if a nonprofit exceeds its 501(h) lobbying limits?
If an electing organization exceeds either its overall lobbying cap or its grassroots sub-cap in a given year, it owes an excise tax equal to 25% of the excess amount, but it does not automatically lose its exemption. Loss of exemption only happens if the organization 'normally' exceeds 150% of either cap, measured over a four-year average. That gentler, more predictable penalty structure is one of the main reasons most small organizations choose to make the election.