What is the 501(h) expenditure test (h election)?
The 501(h) expenditure test, a result of changes Congress made to the lobbying laws in 1976, provides a clearer set of rules for lobbying making it preferable to the insubstantial part test. Nonprofits must elect to be governed by this test. The h election creates clear and measurable guidelines for lobbying activity. A nonprofit can elect to report lobbying activities in this format by simply completing the h election form (Form 5768 — Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures to Influence Legislation). The penalty for exceeding allowable lobbying expenditures, an excise tax, is less severe.
