Nonprofit Accounting
Nonprofit Management
Form 990 Schedule C: Reporting Lobbying and Political Activities, With the 501(h) Election
Last updated: October 11, 2026 · Independent guide · We do not sell rankings or coverage.
Form 990 Schedule C is where a tax-exempt organization reports political campaign activity, lobbying and, for dues-funded groups, the lobbying share of member dues. You attach it if you answer “Yes” on Form 990, Part IV, line 3, 4 or 5. A 501(c)(3) with the 501(h) election completes Part II-A and tests spending against dollar limits, a 501(c)(3) without it completes Part II-B, and a dues-funded 501(c)(4), (5) or (6) completes Part III and may owe the proxy tax.
The rule in brief
- Who files it: any Form 990 filer answering “Yes” on Part IV, line 3 (political campaign activity), line 4 (a 501(c)(3) that lobbied or had a 501(h) election in effect) or line 5 (a 501(c)(4), (5) or (6) that receives dues). Form 990-EZ filers are triggered by Part V, line 35c or 46, or Part VI, line 47.
- Thresholds: a 501(h) electing charity may spend 20% of its first $500,000 of exempt purpose expenditures on lobbying, stepping down to 5% above $1,500,000 and capped at $1,000,000. Grassroots lobbying is limited to 25% of that amount. Dues-funded groups with $2,000 or less of in-house direct lobbying and no political spending skip Part III-B.
- Key dates: Form 990 is due on the 15th day of the fifth month after year end. For a calendar year 2025 return that was May 15, 2026, and the extended date is November 15, 2026, which moves to Monday, November 16 because it falls on a Sunday.
- Official source: IRS Instructions for Schedule C (Form 990), 2025, last updated April 30, 2026, and Internal Revenue Code sections 4911, 4912, 4955 and 6033(e). We checked every rule on October 11, 2026.
How we researched this
We read the 2025 Schedule C form and instructions, the Form 990 Part IV checklist, the Internal Revenue Code sections behind each part, and Treasury Regulation 56.4911-3 on allocating lobbying costs. We also read the pages that rank for “form 990 schedule c,” including an e-file vendor’s overview and a CPA firm’s summary; none explains how to code lobbying in the ledger. Software details come from Sage Intacct and Aplos documentation, a Blackbaud blog post and a Blackbaud Community thread.
Which Part IV questions trigger Schedule C
Form 990 (2025), Part IV, asks three questions that decide which parts of Schedule C you complete (IRS Form 990, 2025).
| Part IV line | Question | Who answers it | Schedule C part |
|---|---|---|---|
| Line 3 | Direct or indirect political campaign activity for or against a candidate | All filers | Part I |
| Line 4 | Lobbying activity, or a 501(h) election in effect during the year | 501(c)(3) only | Part II-A (electing) or II-B (not electing) |
| Line 5 | Receives membership dues, assessments or similar amounts as defined in Rev. Proc. 98-19 | 501(c)(4), (5) and (6) | Part III |
A 501(h) electing charity answers “Yes” on line 4 even in a year when it spent nothing on lobbying, because the question asks whether the election was in effect. Part IV of Schedule C holds the narrative answers that other parts require, and each entry must name the part and line it supports (IRS, April 30, 2026).
Part I: political campaign activity
A 501(c)(3) is “absolutely prohibited” from intervening in a campaign for or against a candidate, although nonpartisan voter education, candidate forums and get-out-the-vote drives are allowed when they show no bias (IRS, June 28, 2026). In July 2025 the IRS agreed to a consent decree allowing houses of worship to address electoral politics with their congregations (Holtzman Vogel, July 11, 2025). On March 31, 2026, the U.S. District Court for the Eastern District of Texas declined to approve it and dismissed the case for lack of jurisdiction (KPMG, April 2, 2026). The plaintiffs appealed, and the Fifth Circuit docketed the appeal on April 28, 2026 (Fifth Circuit docket 26-40237). None of these developments changes the rule for charities that are not houses of worship.
Part I-A asks every filer for a description, the amount spent and volunteer hours. Part I-B, for 501(c)(3)s only, reports the section 4955 tax: 10% of the expenditure on the organization and 2.5% on knowing managers, with the manager tax capped at $5,000 per expenditure, rising to 100% and 50% if not corrected, with the manager tax then capped at $10,000 (26 U.S.C. 4955). Part I-C, for 501(c)(4)s and other non-charity filers, totals section 527 exempt function spending and transfers to political organizations, which also go on Form 1120-POL, line 17b. Section 527(f) taxes the lesser of net investment income or those expenditures at the top corporate rate (26 U.S.C. 527), which is 21% under section 11(b).
Part II-A: the 501(h) expenditure test
A 501(c)(3) makes the 501(h) election by filing Form 5768 at any time during the first tax year it wants covered. Churches and private foundations cannot elect (IRS, June 28, 2026). The election gives you dollar limits, excludes unpaid volunteer time and simplifies reporting (National Council of Nonprofits, no date shown).
| Exempt purpose expenditures | Lobbying nontaxable amount (line 1f) |
|---|---|
| $500,000 or less | 20% of exempt purpose expenditures |
| Over $500,000 to $1,000,000 | $100,000 plus 15% of the excess over $500,000 |
| Over $1,000,000 to $1,500,000 | $175,000 plus 10% of the excess over $1,000,000 |
| Over $1,500,000 to $17,000,000 | $225,000 plus 5% of the excess over $1,500,000 |
| Over $17,000,000 | $1,000,000 |
Source: IRS, June 28, 2026 and 26 U.S.C. 4911(c). Exempt purpose expenditures include administrative costs and lobbying but exclude a separate fundraising unit.
Line 1a is grassroots lobbying, 1b direct lobbying, 1c their total, 1d other exempt purpose spending and 1e the sum. Line 1g is 25% of line 1f. An excess on line 1h or 1i means a 25% excise tax on the excess, reported on Form 4720 (26 U.S.C. 4911(a)). Line 2 is a four-year look-back: averaging more than 150% of the limits (lines 2b and 2e) costs the organization its exemption (IRS, April 30, 2026).
Direct lobbying is communicating with a legislator, legislative staff or an official who helps formulate legislation, or with the public about a ballot measure. Grassroots lobbying tries to sway public opinion on legislation and generally counts only with a call to action, such as telling people to contact legislators, giving their contact details, supplying a petition, or naming legislators who oppose the view, are undecided, represent the reader or sit on the committee (26 CFR 56.4911-2(b)). Nonpartisan research, technical advice given on a written request, and “self-defense” communications about your own tax status are excluded (26 U.S.C. 4911(d)).
Part II-B: the substantial part test
A 501(c)(3) that has not elected 501(h) may lobby only if lobbying is not “a substantial part of its activities” (IRS, June 28, 2026). There is no dollar limit, and volunteer time counts. Part II-B asks yes or no, with amounts, for volunteers (1a), paid staff (1b), media ads (1c), mailings (1d), publications (1e), grants to others for lobbying (1f), direct contact with legislators (1g), and rallies and similar events (1h), with line 1j totaling lines 1c through 1i. Part IV must also describe the activities, so you disclose more than under Part II-A.
If lobbying causes the charity to lose 501(c)(3) status, section 4912 adds a 5% tax on the lobbying expenditures and 5% on managers who agreed knowingly. That tax does not apply to 501(h) electing organizations or private foundations (26 U.S.C. 4912).
Part III: the 6033(e) notice and proxy tax
Under section 6033(e), a dues-funded 501(c)(4), (5) or (6) must tell members what share of dues is nondeductible under section 162(e), or pay a proxy tax at the top corporate rate on the amount not covered by notices (26 U.S.C. 6033(e)). Section 162(e) also covers campaign spending and contact with covered executive branch officials (26 U.S.C. 162(e)).
Part III-A exempts you from Part III-B if 90% or more of dues are nondeductible by members, if in-house direct lobbying was $2,000 or less excluding overhead with no political or foreign lobbying spending, or if you are carrying over the prior year’s agreed amount. For 501(c)(4) and (5) groups, the 90% test counts members who each paid $143 or less in 2025 (IRS, April 30, 2026). In Part III-B, line 1 is total dues, line 2c is total 162(e) spending including any carryover from last year, line 3 is the amount in member notices, line 4 is any excess carried over, and line 5 is the taxable amount reported on Form 990-T.
Illustration (constructed figures): a trade association collects $800,000 in dues and spends $150,000 on 162(e) activity. Its notices covered $120,000. If it does not agree to carry the $30,000 difference to next year’s notices, line 5 is $30,000 and the proxy tax is 21%, or $6,300.
Coding lobbying so Schedule C comes from the books
All costs of preparing a lobbying communication count, including the attributable share of employee compensation and an allocable share of overhead (26 CFR 56.4911-3(a)(1)). A communication that is both direct and grassroots is treated as grassroots unless you show it was made primarily for direct lobbying. For a mixed newsletter to nonmembers, include every part on the same subject as the bill.
Keep natural expense accounts unchanged so Form 990 Part IX still works, and add one tag with five values: direct lobbying, grassroots lobbying, political campaign, excluded advocacy (nonpartisan research, technical advice, self-defense) and none. Staff code lobbying hours on timesheets, and a monthly payroll allocation entry moves that share of salary and benefits to the tagged lines. Overhead follows the same staff-cost ratio. Log volunteer hours separately for Part I-A and Part II-B.
Illustration (constructed figures): a charity with $3,200,000 of exempt purpose expenditures has a lobbying nontaxable amount of $225,000 plus 5% of $1,700,000, or $310,000. Its grassroots limit is $77,500.
| Ledger line (tag) | Basis | Amount | Schedule C line |
|---|---|---|---|
| Policy director salary and benefits (direct) | 40% of $144,000 from timesheets | $57,600 | II-A 1b |
| Executive director (direct) | 10% of $216,000 | $21,600 | II-A 1b |
| Contract lobbyist and capitol travel (direct) | Invoices | $40,800 | II-A 1b |
| Overhead on direct staff cost | 12% of $79,200 | $9,504 | II-A 1b |
| Action alert ads and platform (grassroots) | Invoices for call-to-action campaigns | $21,600 | II-A 1a |
| Communications manager plus overhead (grassroots) | 25% of $96,000, plus 12% | $26,880 | II-A 1a |
Direct lobbying totals $129,504 and grassroots totals $48,480, so line 1c is $177,984, line 1d is $3,022,016 and lines 1h and 1i are zero. The 12% overhead rate is an example of a reasonable allocation method, not a prescribed rate.
Records you must keep
Keep a copy of Form 5768 and proof of filing, timesheets with lobbying codes, the payroll allocation workpapers, copies of each lobbying communication with its audience, and your overhead allocation method. For Part II-A line 2, keep lines 1a, 1c, 1f and 1g for each of the four years in the averaging period. Dues groups keep member notices and the 162(e) calculation.
Deadlines and penalties
A calendar-year return is due May 15, with an extended date of November 15 (IRS, June 28, 2026). The 2025 instructions set a late or incomplete filing penalty of $25 a day, up to the lesser of $13,000 or 5% of gross receipts, or $130 a day up to $65,000 above $1,309,500 of gross receipts (IRS Instructions for Form 990, no date shown). Sections 4911, 4912 and 4955 taxes go on Form 4720.
What to set up in your systems
Sage Intacct. Intacct offers standard dimensions such as Class, Department, Project and Employee, and you can create a user-defined dimension that works wherever dimensions appear. Sage warns that additional fees can apply and that names containing “event” or “restriction” can cause integration issues (Sage Intacct, October 8, 2026). An “Advocacy type” dimension on expense lines lets one report produce lines 1a and 1b. Our Sage Intacct for nonprofits guide covers modules and pricing.
Aplos. Aplos describes Tags as an optional add-on that extends the chart of accounts and fund accounting structure (Aplos, no date shown). Its pricing page, checked October 11, 2026, lists “Additional dimensions” among the items Custom plans may include and publishes no price for Tags (Aplos pricing). Confirm your plan can carry a lobbying tag before you rely on it.
Financial Edge NXT. Blackbaud says transaction codes let you analyze data across multiple dimensions (Blackbaud, September 30, 2025; Blackbaud sells the product). A Blackbaud Community answer says there are five transaction code categories, managed under Control Panel, Fields and Tables (Blackbaud Community, no date shown). If one is unused, it can hold the advocacy type.
For broader comparisons, see our guide to nonprofit accounting software. If you run action alerts on a separate platform, see our advocacy software guide.
Related guides
- Form 990 Schedule A: The Public Support Test Explained
- Form 990 Schedule O: Required Lines and Sample Wording
- Form 990 Preparation Software: From Ledger to E-File
Frequently asked questions
Do we have to file Schedule C if we only lobbied a little?
Yes, if you are a 501(c)(3). Form 990 Part IV, line 4 asks about any lobbying, with no minimum amount, so any “Yes” means completing Part II-A or Part II-B.
Is the 501(h) election worth making?
For most charities that lobby regularly, it gives clear dollar limits, excludes volunteer time and requires less detailed disclosure. A charity with $3,200,000 of exempt purpose expenditures could spend up to $310,000 on lobbying. Churches and private foundations cannot elect.
Does a 501(c)(4) report lobbying on Schedule C?
No. Part II applies only to 501(c)(3)s. A 501(c)(4) completes Part I if it did political campaign work and Part III if it receives member dues and has no Part III-A exemption.
Where is the proxy tax paid?
The taxable amount on Schedule C, Part III-B, line 5 is reported on Form 990-T. The rate is the top corporate rate under section 11, currently 21%.
Sources
- IRS, Instructions for Schedule C (Form 990), 2025, April 30, 2026. irs.gov
- IRS, Schedule C (Form 990), 2025, no date shown. irs.gov
- IRS, Form 990, 2025, Part IV, no date shown. irs.gov
- IRS, Instructions for Form 990, penalties, no date shown. irs.gov
- IRS, Measuring lobbying activity: expenditure test, June 28, 2026. irs.gov
- IRS, Lobbying, June 28, 2026. irs.gov
- IRS, The restriction of political campaign intervention by section 501(c)(3) organizations, June 28, 2026. irs.gov
- IRS, Return due dates for exempt organizations, June 28, 2026. irs.gov
- 26 U.S.C. 4911, 4912, 4955, 6033, 162, 527 and 11, Cornell Legal Information Institute, no date shown. 4911, 4912, 4955, 6033, 162, 527, 11
- 26 CFR 56.4911-3, Expenditures for direct and grass roots lobbying communications, Cornell Legal Information Institute, no date shown. law.cornell.edu
- 26 CFR 56.4911-2, Lobbying expenditures, direct lobbying communications, and grass roots lobbying communications, Cornell Legal Information Institute, no date shown. law.cornell.edu
- National Council of Nonprofits, Benefits of filing the 501(h) election, no date shown. councilofnonprofits.org
- Holtzman Vogel (law firm), IRS enters into consent decree limiting application of Johnson Amendment, July 11, 2025. holtzmanvogel.com
- KPMG, Federal court rejects deal that would allow churches to engage in political speech without losing tax-exempt status, April 2, 2026. kpmg.com
- U.S. Court of Appeals for the Fifth Circuit, National Religious Broadcasters v. Bessent, No. 26-40237, docket via Justia, checked October 11, 2026. dockets.justia.com
- Sage Intacct, Dimensions overview, October 8, 2026 (vendor documentation). intacct.com
- Aplos, Accounting Tags, no date shown (vendor documentation). help.aplos.com
- Aplos, Pricing, checked October 11, 2026 (vendor page). aplos.com
- Blackbaud, How to effectively segment your endowment funds, September 30, 2025 (vendor blog). blog.blackbaud.com
- Blackbaud Community, Transaction codes table, no date shown. community.blackbaud.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
