However, there are circumstances where lobbying is allowed for certain eligible 501(c)(3)s. Under section 501(h), eligible 501(c)(3)s can elect to make lobbying expenses by filling out IRS Form 5768 Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation, which was revised in September 2009. Organizations making this election will have to pay an excise tax and cannot have lobbying expenditures that exceed the permitted amounts by more than 50% over a 4-year period without losing their tax-exempt status.

The extent of an organization’s lobbying activity will not jeopardize its tax-exempt status, provided its expenditures related to such activity do not normally exceed an amount specified in section 4911. This limit is generally based upon the size of the organization and may not exceed $1,000,000. For any tax year in which an election under section 501(h) is in effect, an electing organization must report the actual and permitted amounts of its lobbying expenditures and grass roots expenditures (as defined in section 4911(c)) on its annual return required under section 6033. See Part II-A of Schedule C (Form 990 or Form 990-EZ). When an organization that has elected to have 501(h) provisions apply to them no longer wishes to have the provisions apply, the election must be revoked by filing another Form 5768.

Types of 501(c)(3)s that are eligible for this election include the following:

• Section 170(b)(1)(A)(ii) (relating to educational institutions),
• Section 170(b)(1)(A)(iii) (relating to hospitals and medical research organizations),
• Section 170(b)(1)(A)(iv) (relating to organizations supporting government schools),
• Section 170(b)(1)(A)(vi) (relating to organizations publicly supported by charitable contributions),
• Section 509(a)(2) (relating to organizations publicly supported by admissions, sales, etc.), or
• Section 509(a)(3) (relating to organizations supporting certain types of public charities other than those section 509(a)(3) organizations that support section 501(c)(4), (5), or (6) organizations).

The form can be found at http://www.irs.gov/pub/irs-pdf/f5768.pdf and more information can be found in section 501 of the Internal Revenue Code.