501(h) election
This allows organizations taking the 501(h) election to potentially perform a large amount of lobbying if it is done using volunteer labor or through inexpensive means.
The first, direct lobbying, occurs through communication with any member or staff of Congress, or of a state or local legislature, or any government official participating in the formulation of legislation.
The second, grassroots lobbying, is attempting to affect the opinion of the general public on legislation, although some communications to an organization's own members are excluded from this classification.
[3][5] Regardless of their 501(h) status, 501(c)(3) organizations may not participate in electoral campaigns or support specific candidates for office, a prohibition that has been in effect since the passage of the Johnson Amendment in 1954.
Senator Edmund Muskie said of an early version of a lobbying reform bill in 1971 that "it is fundamental to our constitutional system that [tax-exempt organizations] should have equal access along with business groups and others in presenting views to Congress.
[14] Subsequent cases important to political advocacy by non-profits include Seasongood v. Commissioner, Speiser v. Randall, and Cammarano v. United States.
In 1966, the Sierra Club's tax-exempt status was revoked in a high-profile case due to its publications of advertisements in The New York Times and The Washington Post opposing the construction of dams in the Grand Canyon.
There were several justifications given for the mechanics of the new option: correcting the vagueness of the substantial part test; ensuring that small organizations were not more restricted than large ones; providing a tax penalty for initial infractions rather than immediate loss of tax-exempt status; and increasing the lobbying influence of non-profit organizations relative to for-profit ones, the later of which were at the time able to deduct their lobbying expenses.
[10][11] An initial 1987 proposal of regulations was criticized for being overly broad in what constituted grassroots lobbying, such as including mention of legislation in a fundraising letter, or allowing audience members at public forums to publicly express opinions about legislation, which would cause the entire cost of these activities to be applied as lobbying expenses.
The final 1990 regulations were less stringent, excluding fundraising communications from lobbying activities and establishing the four-year window for violations before tax-exempt status would be revoked.
