Schedule C - Political Campaign and Lobbying Activities

2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
April 7, 2008

2008 Schedule C (Form 990 or 990-EZ) Instructions
Political Campaign and Lobbying Activities
Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions
Purpose of the Schedule
Schedule C (Form 990 or 990-EZ) is used by
• section 501(c) organizations, and
• section 527 organizations.
These organizations must use Schedule C to furnish additional information on political
campaign or lobbying activities.
Who Must File
Any organization that answered “Yes” on Form 990, Part IV, Checklist of Required Schedules,
lines 3, 4 or 5 must complete and attach Schedule C to Form 990, and complete the applicable
Parts relating to those lines. Any organization that answered “Yes” on Form 990-EZ, Part VI,
lines 46 or 47, must complete and attach Schedule C to Form 990-EZ, and complete the
applicable Parts relating to those lines.
If an organization has an ownership interest in a joint venture taxed as a partnership that
conducts political campaign or lobbying activities, the organization must report its share of such
activity on Schedule C.
If an organization is not required to file Form 990, it is not required to file Schedule C.

Specific Instructions
Schedule C is divided into four parts.
• Part I - Complete Part I if the organization had any political campaign activities and
answered “Yes” to Form 990, Part IV, line 3.
• Part II - Complete Part II if the organization had any lobbying activities and answered
“Yes” to Form 990, Part IV, line 4.
• Part III – Complete Part III if the organization is a section 501(c)(4), section 501(c)(5), or
section 501(c)(6) organization.
• Part IV – Complete Part IV for narrative information.
Definition of Terms
General Definition of Terms. (Definitions in this section are applicable throughout this
Schedule)
Political Campaign Activities: All activities that support or oppose candidates for elective
federal, state or local public office are political campaign activities. It does not matter whether
the candidate is elected. A candidate is one who offers himself or is proposed by others for the
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public office. Political campaign activity does not include any activity to encourage participation
in the electoral process, such as voter registration or voter education, provided that the activity
does not directly or indirectly support or oppose any candidate.
TIP: Revenue Ruling 2007-41 provides guidelines for exempt organizations on the
scope of the tax law prohibition of campaign activities by section 501(c)(3) organizations.
(See Rev. Rul. 2007-41, 2007-25 I.R.B. (June 18, 2007)).
Section 527 Exempt Function Activities: All functions that influence or attempt to influence
the selection, nomination, election, or appointment of any individual to any Federal, State, or
local public office or office in a political organization, or the election of Presidential or VicePresidential electors, whether or not such individual or electors are selected, nominated,
elected, or appointed.
Political Expenditures: Any expenditure for political campaign activities are political
expenditures. An expenditure includes a payment, distribution, loan, advance, deposit, or gift of
money, or anything of value. It also includes a contract, promise, or agreement to make an
expenditure, whether or not legally enforceable.
Lobbying Activities: All activities intended to influence foreign, national, state or local
legislation are lobbying activities. Such activities include direct lobbying (attempting to influence
the legislators) and grassroots lobbying (attempting to influence legislation by influencing the
general public).
Legislation: Legislation includes action by Congress, any state legislature, any local council, or
similar governing body with respect to acts, bills, resolutions, or similar items or by the public in
referenda, ballot initiatives, constitutional amendments or similar procedures. It does not include
actions by executive, judicial or administrative bodies.
Specific Legislation: Specific legislation includes (1) legislation that has already been
introduced in a legislative body and (2) specific legislative proposals that an organization either
supports or opposes.
Part II-A - Definition of Terms. (Definitions in this section are applicable only to Part IIA of this Schedule)
Expenditure Test: Under the expenditure test, there are limits both upon the amount of the
organization’s grassroots lobbying expenditures and upon the total amount of its direct
lobbying and grassroots lobbying expenditures. If the electing public charity does not meet this
expenditure test, it will owe a section 4911 excise tax on its excess lobbying expenditures.
Moreover, if over a 4-year averaging period the organization’s average annual total lobbying or
grassroots lobbying expenditures are more than 150% of its dollar limits, the organization will
lose its exempt status.
Exempt purpose expenditures: The amount an electing public charity may spend on
lobbying (without incurring tax) is a scaled percentage of the organization’s exempt purpose
expenditures. In general, an exempt purpose expenditure is paid or incurred by an electing
public charity to accomplish the organization’s exempt purpose.

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In general, exempt purpose expenditures are:
1.
The total amount paid or incurred for religious, charitable, scientific, literary, or
educational purposes, or for the prevention of cruelty to children or animals, or to
foster national or international amateur sports competition (not including
providing athletic facilities or equipment, other than by qualified amateur sports
organizations described in section 501(j)(2)),
2.
The allocable portion of administrative expenses paid or incurred for the above
purposes,
3.
Amounts paid or incurred to try to influence legislation, whether or not for the
purposes described in 1 above,
4.
Allowance for depreciation or amortization, and
5.
Fundraising expenditures, except that exempt purpose expenditures do not
include amounts paid to or incurred for either the organization’s separate
fundraising unit or other organizations, if the amounts are primarily for
fundraising.
See Regulations section 56.4911-4(c) for a discussion of excluded expenditures.
Lobbying expenditures: Lobbying expenditures are expenditures paid or incurred for the
purpose of attempting to influence legislation:
•
Through communication with any member or employee of a legislative or similar
body, or with any government official or employee who may participate in the
formulation of the legislation, and
•
By attempting to affect the opinions of the general public.
To determine if an organization has spent excessive amounts on lobbying, the organization
must know which expenditures are lobbying expenditures and which are not lobbying
expenditures. An electing public charity’s lobbying expenditures for a year are the sum of its
expenditures during that year for (1) direct lobbying communications (direct lobbying
expenditures) plus (2) grassroots lobbying communications (grassroots expenditures).
Direct lobbying communications (direct lobbying expenditures): A direct lobbying
communication is any attempt to influence any legislation through communication with any:
•
Member or employee of a legislative or similar body, or
•
Government official or employee (other than a member or employee of a
legislative body) who may participate in the formulation of the legislation, but only
if the principal purpose of the communication is to influence legislation.
A communication with a legislator or government official will be treated as a direct lobbying
communication, if, but only if, the communication:
•
Refers to specific legislation, and
•
Reflects a view on such legislation.
Grassroots lobbying communications (grassroots expenditures): A grassroots lobbying
communication is any attempt to influence any legislation through an attempt to affect the
opinions of the general public or any part of the general public.
A communication is generally not a grassroots lobbying communication unless (in addition to
referring to specific legislation and reflecting a view on that legislation) it encourages recipients
to take action about the specific legislation.
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A communication encourages a recipient to take action when it:
1.
States that the recipient should contact legislators;
2.
States a legislator’s address, phone number, etc.;
3.
Provides a petition, tear-off postcard, or similar material for the recipient to send
to a legislator; or
4.
Specifically identifies one or more legislators who:
a. Will vote on legislation;
b. Opposes the communication’s view on the legislation;
c. Is undecided about the legislation;
d. Is the recipient’s representative in the legislature; or
e. Is a member of the legislative committee that will consider the legislation.
A communication described in (4) above generally is grassroots lobbying only if, in addition to
referring to and reflecting a view on specific legislation, it is a communication that cannot meet
the full and fair exposition test as nonpartisan analysis, study, or research.
Exceptions to Lobbying: In general, engaging in nonpartisan analysis, study, or research
and making its results available to the general public or segment or members thereof, or to
governmental bodies, officials, or employees is not considered either a direct lobbying
communication or a grassroots lobbying communication. Nonpartisan analysis, study, or
research may advocate a particular position or viewpoint as long as there is a sufficiently full
and fair exposition of the pertinent facts to enable the public or an individual to form an
independent opinion or conclusion.
A communication that responds to a governmental body’s or committee’s written request for
technical advice is not a direct lobbying communication.
A communication is not a direct lobbying communication if the communication is an
appearance before, or communication with, any legislative body concerning action by that body
that might affect the organization’s existence, its powers and duties, its tax-exempt status, or
the deductibility of contributions to the organization, as opposed to affecting merely the scope
of the organization’s future activities.
Communication with members: For purposes of section 4911, expenditures for certain
communications between an organization and its members are treated more leniently than are
communications to nonmembers. Expenditures for a communication that refers to, and reflects
a view on, specific legislation are not lobbying expenditures if the communication satisfies the
following requirements:
1.
The communication is directed only to members of the organization,
2.
The specific legislation the communication refers to, and reflects a view on, is of
direct interest to the organization and its members,
3.
The communication does not directly encourage the member to engage in direct
lobbying (whether individually or through the organization), and
4.
The communication does not directly encourage the member to engage in
grassroots lobbying (whether individually or through the organization).
Expenditures for a communication directed only to members that refers to, and reflects a view
on, specific legislation and that satisfies the requirements of paragraphs 1, 2, and 4, but does
not satisfy the requirements of paragraph 3, are treated as expenditures for direct lobbying.
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Expenditures for a communication directed only to members that refers to, and reflects a view
on, specific legislation and satisfies the requirements of paragraphs 1 and 2, but does not
satisfy the requirements of paragraph 4, are treated as grassroots expenditures, whether or not
the communication satisfies the requirements of paragraph 3. See Regulations section 56.49115 for details.
There are special rules regarding certain paid mass media advertisements about highly
publicized legislation; allocation of mixed purpose expenditures; certain transfers treated as
lobbying expenditures and special rules regarding lobbying on referenda, ballot initiatives, and
similar procedures (see Regulations sections 56.4911-2 and -3).
Affiliated Groups: Members of an affiliated group are treated as a single organization to
measure lobbying expenditures and permitted lobbying expenditures. Two organizations are
affiliated if one is bound by the other organization’s decisions on legislative issues (control) or if
enough representatives of one belong to the other organization’s governing board to cause or
prevent action on legislative issues (interlocking directorate). If the organization is not sure
whether its group is affiliated, it may ask the IRS for a ruling letter. There is a fee for this ruling.
For information on requesting rulings, see annual revenue procedure.
Members of an affiliated group measure both lobbying expenditures and permitted lobbying
expenditures on the basis of the affiliated group’s tax year. If all members of the affiliated group
have the same tax year, that year is the tax year of the affiliated group. However, if the
affiliated group’s members have different tax years, the tax year of the affiliated group is the
calendar year, unless all the members of the group elect otherwise. See Regulations section
56.4911-7(e)(3).
Limited Control: Two organizations that are affiliated because their governing instruments
provide that the decisions of one will control the other only on national legislation are subject to
the following provisions:
•
Charge the controlling organization with its own lobbying expenditures and the
national legislation expenditures of the affiliated organizations,
•
Do not charge the controlling organization with other lobbying expenditures (or
other exempt-purpose expenditures) of the affiliated organizations, and
•
Treat each local organization as though it were not a member of an affiliated
group. For example, the local organization should account for its own
expenditures only and not any of the national legislation expenditures deemed as
incurred by the controlling organization.
Part III - Definition of Terms. (Definitions in this section are applicable only to Part III
of this Schedule)
Lobbying and Political Expenditures: For purposes of this section only, lobbying and
political expenditures do not include direct lobbying expenditures made to influence local
legislation. Nor does it include any political campaign expenditures for which the tax under
section 527(f) was paid. (see Part I-C). They do include any expenditures for communications
with a covered executive branch official in an attempt to influence the official actions or positions
of that official.

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Covered Executive Branch Official: The President, Vice-President, White House Office of the
Executive Office of the President officers and employees, the two senior level officers of each of
the other agencies in the Executive Office, individuals in level I positions of the Executive
Schedule and their immediate deputies, and individuals designated as having Cabinet level
status and their immediate deputies.
Direct contact lobbying is a
• Meeting
• Telephone conversation,
• Letter, or
• Similar means of communication that is with a
o Legislator (other than a local legislator), or
o Covered executive branch official and that otherwise qualifies as a lobbying
activity.
In-house expenditures include:
•
Salaries, and
•
Other expenses of the organization’s officials and staff (including amounts paid
or incurred for the planning of legislative activities).
In-house expenditures do not include:
•
Any payments to other taxpayers engaged in lobbying or political activities as a
trade or business.
•
Any dues paid to another organization that are allocable to lobbying or political
activities.
Directions to Complete the Schedule
1. If organization answered “Yes” to Form 990, Part IV, Line 3 (Political Campaign
Activities) then:
A section 501(c)(3) organization must complete Part I-A and Part I-B. Do not complete Part I-C.
A section 501(c) organization other than section 501(c)(3) must complete Part I-A and Part I-C.
Do not complete Part I-B.
A section 527 organization must complete Part I-A. Do not complete Parts I-B and Part I-C.
2. If organization answered “Yes” to Form 990, Part IV, Line 4 (Lobbying Activities),
then:
Section 501(c)(3) organizations that elected to be subject to the lobbying expenditure limitations
of section 501(h) by filing Form 5768 and for which the election was valid and in effect for its tax
year beginning in the year 2008 must complete Part II-A. Do not complete Part II-B.
Section 501(c)(3) organizations that have NOT elected (or have revoked such election by filing
Form 5768 for which the revocation was valid and in effect for its tax year beginning in the year
2008) must complete Part II-B. Do not complete Part II-A.
3. Political and Lobbying Activities (Part III).
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Section 501(c)(4), 501(c)(5), or 501(c)(6) organizations must complete Part III.

PART I-A Political Activity of Exempt Organizations
Note: Section 501(c) organizations other than those exempt under section 501(c)(3) may
establish section 527(f)(3) separate segregated funds to engage in political activity. Separate
segregated funds are subject to their own filing requirements. A section 501(c) organization that
engages a separate segregated fund to conduct political activity should report transfers to the
fund in Parts I-A and I-C. The separate segregated fund should report specific activities on its
own Form 990 if the fund is required to file.
Line 1. Section 501(c) organizations should provide a detailed description of its direct and
indirect political campaign activities. If the section 501(c) organization collects political
contributions or member dues earmarked for a separate segregated fund, and promptly and
directly transfers them to that fund as prescribed in Regulations section 1.527-6(e), do not
report them here. Such amounts should be reported in Part I-C, line 5e.
Section 527 organizations should provide a detailed description of its exempt function activities
in Part IV of this Schedule.
Line 2. The total amount that the filing organization has spent conducting the activities
described on line 1.
Line 3. If the organization used volunteer labor in the conduct of its political campaign activities,
provide the total number of hours. Any reasonable method may be used to estimate this
amount.
PART I-B Section 501(c)(3) Organizations: Disclosure of Excise Taxes Imposed
Under Section 4955
Section 501(c)(3) organizations must disclose any excise tax imposed during the year
under section 4955 (political expenditures), unless abated. See sections 4962 and
6033(b).
Line 1. Enter the amount of taxes imposed on the organization itself under section 4955,
unless abated.
Line 2. Enter the amount of taxes imposed on the organization managers under section
4955, unless abated.
Line 3. Form 4720 If the filing organization reported a section 4955 tax on a Form 4720 for
this year, answer “Yes.”
Line 4 Correction. Provide a detailed description in Part IV of this Schedule of the steps the
organization has taken to correct the activity which subjected the organization to the section
4955 tax. Correction of a political expenditure means recovering the expenditure to the extent
possible and establishing safeguards to prevent future political expenditures. Recovery of the
expenditure means recovering part or all of the expenditure to the extent possible, and, where
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full recovery cannot be accomplished, by any additional corrective action that is necessary. (The
organization that made the political expenditure is not under any obligation to attempt to recover
the expenditure by legal action if the action would in all probability not result in the satisfaction of
execution on a judgment.)
PART I-C Section 527 Exempt Function Activity of Section 501(c) organizations other
than Section 501(c)(3)
Note: Section 501(c) organizations that collect political contributions or member dues
earmarked for a separate segregated fund, and promptly and directly transfers them to that fund
as prescribed in Regulations section 1.527-6(e), should not report them on lines 1 or 2. Such
amounts should be reported on line 5e.
Line 1. Enter the amount of its own funds that the organization expended directly for section
527 exempt function activities.
Line 2. Enter the amount of its own funds that the organization transferred to other
organizations, including a separate segregated section 527(f)(3) fund created by the
organization, for section 527 exempt function activity.
Line 3. Total of direct and indirect exempt function expenditures. Add lines 1 and 2 and enter
on line 3 and on Form 1120-POL, line 17b.
Line 4. If the filing organization reported taxable political expenditures on Form 1120-POL for
this year, answer “Yes.”
.
Line 5. State the name, address and Employer Identification Number (EIN) of each section 527
political organization to which payments were made. Enter the amount paid and indicate if the
amount was paid from the filing organization’s own internal funds or were political contributions
received and promptly and directly delivered to a separate political organization, such as a
separate segregated fund or a political action committee (PAC). If additional space is needed,
provide information in Part IV of this Schedule.
PART II-A Lobbying Activity - Section 501(c)(3) organizations that filed Form 5768 (election
under section 501(h)) must complete this section.
A public charity that makes a valid section 501(h) election may spend up to a certain percentage
of its exempt purpose expenditures to influence legislation without incurring tax or losing its
tax-exempt status.
Complete lines 1a through 1i in column (a) for any organization required to complete Part II-A,
but complete column (b) only for affiliated groups.
If the filing organization belongs to an affiliated group, check Part II-A box A and complete lines
1a through 1i:
•
Column (a) for the electing member of the group, and
•
Column (b) for the affiliated group as a whole.

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Affiliated group list. Provide in Part IV of this Schedule a list showing each affiliated group
member’s name, address, EIN, and expenses. Show which members made the election under
section 501(h) and which did not.
Include each electing member’s share of the excess lobbying expenditures on the list.
Non-electing members do not owe tax, but remain subject to the general rule, which provides
that no substantial part of their activities may consist of carrying on propaganda or otherwise
trying to influence legislation.
If the filing organization checked box A and the limited control provisions apply to the
organizations, each member of the affiliated group should check box B and complete column (a)
only.
If the filing organization does not check box A, do not check box B.
Lines 1a-i are used to determine whether any of the organization’s current year lobbying
expenditures are subject to tax under section 4911. File Form 4720 if the organization needs
to report and pay the excise tax.
Line 1a. Grassroots Lobbying - Enter the amount of its own funds the organization expended
for grassroots lobbying communications.
Line 1b. Direct Lobbying - Enter the amount of its own funds the organization expended for
direct lobbying communications.
Line 1c. Total Lobbying – Add lines 1a and 1b.
Line 1d . Other Exempt Purpose Expenditures - Enter all other amounts (excluding lobbying)
the organization expended to accomplish its exempt purpose.
Line 1e. Exempt Purpose Expenditures - Add lines 1c and 1d. This is the organization’s total
exempt purpose expenditures.
If there are no excess lobbying expenditures on either line 1h or 1i of column (b), treat each
electing member of the affiliated group as having no excess lobbying expenditures. However,
if there are excess lobbying expenditures on either line 1h or 1i of column (b), treat each
electing member as having excess lobbying expenditures. In such case, each electing
member must file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of
the Internal Revenue Code, and must pay the tax on its proportionate share of the affiliated
group’s excess lobbying expenditures. Enter the proportionate share in column (a) on line 1h
or line 1i, or on both lines. Attach the list described above under Affiliated Group List. Show
what amounts apply to each group member. To find a member’s proportionate share, see
Regulations section 56.4911-8(d).
Line 1j. If the filing organization reported section 4911 tax on Form 4720 for this year, answer
“Yes.”
Line 2. Line 2 is used to determine if the organization exceeded lobbying expenditure limits
during the 4-year averaging period.
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Any organization for which a lobbying expenditure election under section 501(h) was in effect for
its tax year beginning in 2008 must complete columns (a) through (e) of lines 2a through 2f
except in the following situations.
1.
An organization first treated as a section 501(c)(3) organization in its tax year
beginning in 2008 does not have to complete any part of lines 2a through 2f.
2.
An organization does not have to complete lines 2a through 2f for any period
before it is first treated as a section 501(c)(3) organization.
3.
If 2008 is the first year for which an organization’s first section 501(h) election is
effective, that organization must complete line 2a, columns (a) and (e). The
organization must then complete all of column (e) to determine whether the
amount on line 2c, column (e), is equal to or less than the lobbying ceiling
amount calculated on line 2b and whether the amount on line 2f is equal to or
less than the grassroots ceiling amount calculated on line 2e. The organization
does not satisfy both tests if either its total lobbying expenditures or grassroots
lobbying expenditures exceed the applicable ceiling amounts. When this occurs,
all five columns must be completed and a re-computation made unless exception
1 or 2 above applies.
4.
If 2008 is the second or third tax year for which the organization’s first section
501(h) election is in effect, that organization is required to complete only the
columns for the years in which the election has been in effect, entering the totals
for those years in column (e). The organization must determine, for those 2 or 3
years, whether the amount entered in column (e), line 2c, is equal to or less than
the lobbying ceiling amount reported on line 2b, and whether the amount entered
in column (e), line 2f, is equal to or less than the grassroots ceiling amount
calculated on line 2e. The organization does not satisfy both tests if either its
total lobbying expenditures or grassroots lobbying expenditures exceed
applicable ceiling amounts. When that occurs, all five columns must be
completed and a re-computation made, unless exception 1 or 2 above applies. If
the organization is not required to complete all five columns, provide a statement
explaining why in Part IV. In the statement, show the ending date of the tax year
in which the organization made its first section 501(h) election and state whether
or not that first election was revoked before the start of the organization’s tax
year that began in 2008.
Note. If the organization belongs to an affiliated group, enter the appropriate affiliated group
totals from column (b), lines 1a through 1i, when completing lines 2a, 2c, 2d, and 2f.
Line 2a. Lobbying nontaxable amount. For 2005 through 2007, enter the amount from
line 41 of Schedule A, Part VI-A filed for each year. For 2008, enter the amount from line 1f of
Schedule C, Part II-A filed for each year.
Line 2c. Total lobbying expenditures. For 2005 through 2007, enter the amount from line 38
of Schedule A, Part VI-A filed for each year. For 2008, enter the amount from line 1c of
Schedule C, Part II-A filed for each year.
Line 2d. Grassroots nontaxable amount. For 2005 through 2007, enter the amount from
line 42 of Schedule A, Part VI-A filed for each year. For 2008, enter the amount from line 1g
of Schedule C, Part II-A filed for each year.

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Line 2f. Grassroots lobbying expenditures. For 2005 through 2007, enter the amount from
line 36 of Schedule A, Part VI-A filed for each year. For 2008, enter the amount from line 1a of
Schedule C, Part II-A filed for each year.
Add each row of column (a) through (d) and put the total in column (e)
PART II-B Lobbying Activity - Section 501(c)(3) organizations that have not filed Form 5768
(election under section 501(h))
Part II-B provides a reporting format for any section 501(c)(3) organization that engaged in
lobbying activities in its 2008 tax year but did not make a section 501(h) lobbying expenditure
election for that year by filing Form 5768. The Part II-A instructions defining direct and
grassroots lobbying activities by organizations that made the section 501(h) election do not
apply to organizations that complete Part II-B.
Non-electing section 501(c)(3) organizations must complete both columns (a) and (b) of
Part II-B to show lobbying expenditures paid or incurred.
NOTE:
A non-electing organization will generally be regarded as lobbying if the organization either:
(1) contacts, or urges the public to contact, members of a legislative body for the purpose of
proposing, supporting, or opposing legislation or the government’s budget process; or
(2) advocates the adoption or rejection of legislation.
Organizations should answer “Yes” or “No” in column (a) to questions 1a through 1i and
describe in Part IV of this Schedule the activities the organization conducted (either through its
employees or volunteers) attempting to influence legislation. Examples of activities include:
•
Sending letters or publications to government officials or legislators,
•
Meeting with or calling government officials or legislators,
•
Sending or distributing letters or publications (including newsletters, brochures,
etc.) to members or to the general public, or
•
Using direct mail, placing advertisements, issuing press releases, holding news
conferences, or holding rallies or demonstrations.
Additionally, organizations must provide lobbying expenditures paid or incurred in column
(b) for lines 1b through line 1i with the total expenditures provided on line 1j.
Line 1f. Grants to other organizations are amounts from the organization’s own internal funds
given to another organization for the purpose of assisting the other organization conducting
lobbying activities.
Line 1g. Direct contact is a personal telephone call or visit with legislators, their staffs, or
government officials.
Line 1h. Public forums include but are not limited to rallies, demonstrations, seminars,
conventions, speeches, and lectures conducted directly by the organization or paid for
out of the organization’s own internal funds.
Line 1i. Provide a detailed description of any other activity that the organization engaged in to
influence legislation. The description should include all lobbying activities, whether expenses
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are incurred or not (for example, even lobbying activities carried out by unreimbursed
volunteers). If additional space is needed, describe in Part IV of this Schedule.
Line 2a. Answer “Yes” if a section 501(c)(3) organization ceased to be described as a
section 501(c)(3) organization because the amount on line 1j was substantial.
Line 2b. For line 2a, enter the amount of taxes, if any, imposed on the organization itself under
section 4912, unless abated.
Line 2c. For line 2, enter the amount of taxes, if any, imposed on the organization
managers under section 4912, unless abated.
Line 2d. Form 4720 If the filing organization reported a section 4912 tax on a Form 4720 for
this year, answer “Yes.”
PART III - Section 6033(e) Notice and Reporting Requirements and Proxy Tax.
Reporting membership dues, lobbying, and political expenses under section 6033(e).
Only certain organizations that are tax-exempt under:
Section 501(c)(4) (social welfare organizations),
Section 501(c)(5) (agricultural and horticultural organizations), or
Section 501(c)(6) (business leagues)
are subject to (a) the section 6033(e) notice and reporting requirements, and (b) a potential
proxy tax. These organizations must report their total lobbying expenses, political expenses,
and membership dues, or similar amounts.
Section 6033(e) requires certain section 501(c)(4), (5), and (6) organizations to tell their
members what portion of their membership dues were allocable to the political or lobbying
activities of the organization. If an organization does not give its members this information, then
the organization is subject to a proxy tax. This tax is reported on Form 990-T.
PART III-A
Line 1. Section 6033(e)(3) exceptions for organizations whose dues are nondeductible.
Answer “Yes” if any of the following exemptions apply. By doing so, the organization is
declaring that substantially all of its membership dues were nondeductible.
1.
Local associations of employees’ and veterans’ organizations described in
section 501(c)(4), but not section 501(c)(4) social welfare organizations.
2.
Labor unions and other labor organizations described in section 501(c)(5), but
not section 501(c)(5) agricultural and horticultural organizations.
3.
Section 501(c)(4), (5), and (6) organizations that receive more than 90% of their
dues from:
a. Organizations exempt from tax under section 501(a), other than
section 501(c)(4), (5), and (6) organizations,
b. State or local governments,
c. Entities whose income is exempt from tax under section 115, or
d. Organizations described in 1 or 2, above.
4.
Section 501(c)(4) and (5) organizations that receive more than 90% of their
annual dues from:
a. Persons,
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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5.
6.

7.

b. Families, or
c. Entities,
who each paid annual dues of $$$ or less in 2008 (adjusted annually for
inflation). See annual revenue procedure.
Any organization that receives a private letter ruling from the IRS stating that the
organization satisfies the section 6033(e)(3) exception.
Any organization that keeps records to substantiate that 90% or more of its
members cannot deduct their dues (or similar amounts) as business expenses
whether or not any part of their dues are used for lobbying purposes.
Any organization that is not a membership organization.

CAUTION! Special rules treat affiliated social welfare organizations, agricultural and
horticultural organizations, and business leagues as parts of a single organization for purposes
of meeting the nondeductible dues exception. See Rev. Proc. 98-19, 1998-1 C.B. 547.
Line 2. Section 6033(e)(1) $2,000 in-house lobbying exception. Answer “Yes” for line 2 if the
organization satisfies the following criteria of the $2,000 in-house lobbying exception.
1.
Did not make any political expenditures or foreign lobbying expenditures during
the 2008 reporting year, and
2.
Made lobbying expenditures during the 2008 reporting year consisting only of
in-house direct lobbying expenditures totaling $2,000 or less, but excluding:
a. Any allocable overhead expenses, and
b. All direct lobbying expenses of any local council regarding legislation of direct
interest to the organization or its members.
If the organization’s in-house direct lobbying expenditures during the 2008 reporting year were
$2,000 or less, but the organization also paid or incurred other lobbying or political expenditures
during the 2008 reporting year, it should answer “No” to question 2. If the organization is
required to complete PART III-B, the $2,000 or less of in-house direct lobbying expenditures
should not be included in the total on line 2a.
Line 3. Lobbying and Political Expenses Carryover. Answer “Yes” for line 3 if the
organization on its prior year report agreed to carryover an amount to be included in the current
year’s reasonable estimate of lobbying and political expenses.
Complete PART III-B only if the organization answered “No” to BOTH Line 1 and Line 2 OR if
the organization answered “Yes” to Line 3.
PART III-B – Dues Notice, Reporting Requirements, and Proxy Tax
Dues notices. An organization that checked “No” for both PART III-A, lines 1 and 2, and is thus
responsible for completing Part III-B, must send dues notices to its members at the time of
assessment or payment of dues, unless the organization chooses to pay the proxy tax instead
of informing its members of the nondeductible portion of its dues. These dues notices must
reasonably estimate the dues allocable to the nondeductible lobbying and political expenditures
reported on line PART III-B, line 2a. An organization that checked “Yes” for PART III-A, line 3,
must send dues notices to its members at the time of assessment or payment of dues and
include the amount it agreed to carryover in its reasonable estimate of the dues allocable to the
nondeductible lobbying and political expenditures reported on line PART III-B, line 2a.

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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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IF…
The organization’s lobbying and political
expenses are more than its membership dues
for the year,

The organization:
(a) Had only de minimis in-house expenses
($2,000 or less) and no other nondeductible
lobbying or political expenses (including any
amount it agreed to carryover); or
(b) Paid a proxy tax, instead of notifying its
members on the allocation of dues to lobbying
and political expenses; or
(c) Established that substantially all of its
membership dues, etc., are not deductible by
members.

THEN…
The organization must: (a) Allocate all
membership dues to its lobbying and political
activities, and (b) Carry forward any excess
lobbying and political expenses to the next tax
year.
The organization need not disclose to its
membership the allocation of dues, etc., to its
lobbying and political activities.

Members of the organization cannot take a trade or business expense deduction on their tax
returns for the portion of their dues, etc., allocable to the organization’s lobbying and political
activities.
Proxy Tax
IF…
The organization’s actual lobbying and political
expenses are more than it estimated in its
dues notices,
The organization:
(a) Elects to pay the proxy tax, and
(b) Chooses not to give its members a notice
allocating dues to lobbying and political
campaign activities,
The organization:
(a) Makes a reasonable estimate of dues
allocable to nondeductible lobbying and
political activities, and
(b) Agrees to adjust its estimate in the
following year*.
(*A facts and circumstances test determines
whether or not a reasonable estimate was
made in good faith.)

THEN…
The organization is liable for a proxy tax on the
excess.
All the members’ dues remain eligible for a
section 162 trade or business expense
deduction.

The IRS may permit a waiver of the proxy tax.

Allocation of costs to lobbying activities and influencing legislation. An organization that is
subject to the lobbying disclosure rules of section 6033(e) must use a reasonable allocation
method to determine its total costs of its direct lobbying activities; that is, costs to influence:
Legislation, and
The actions of a covered executive branch official through direct communication
(for example, President, Vice President, or cabinet-level officials, and their
immediate deputies) (sections 162(e)(1)(A) and (D)).
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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Reasonable methods of allocating costs to direct lobbying activities include, but are not limited
to:
The ratio method,
The gross-up and alternative gross-up methods, and
A method applying the principles of section 263A.
See Regulations sections 1.162-28 and 1.162-29 and the special rules and definitions for these
allocation methods given below.
An organization that is subject to the lobbying disclosure rules of section 6033(e) must also
determine its total costs of:
De minimis in-house lobbying,
Grassroots lobbying, and
Political campaign activities.
There are no special rules related to determining these costs.
All methods. For all the allocation methods, include labor hours and costs of personnel whose
activities involve significant judgment with respect to lobbying activities.
Special rules:
Ratio and gross-up methods.
1.
May use even if volunteers conduct activities.
2.
May disregard labor hours and costs of clerical or support personnel (other than
lobbying personnel) under the ratio method.
Alternative gross-up method.
•
Disregard labor hours, and
•
Costs of clerical or support personnel (other than lobbying personnel).
Third-party costs are those paid to:
•
Outside parties for conducting lobbying activities,
•
Dues paid to another membership organization that were declared to be
nondeductible lobbying expenses, and
•
Travel and entertainment costs for lobbying activities.
Direct contact lobbying: Treat all hours spent by a person in connection with direct contact
lobbying as labor hours allocable to lobbying activities.
Do not treat the hours spent by a person who engages in research and other background
activities related to direct contact lobbying, but who makes no direct contact with a legislator, or
covered executive branch official, as direct contact lobbying.
De minimis rule. If less than 5% of a person’s time is spent on lobbying activities, and there is
no direct contact lobbying, an organization may treat that person’s time spent on lobbying
activities as zero.
Purpose for engaging in an activity is based on all the facts and circumstances. If an
organization’s lobbying communication was for a lobbying and a non-lobbying purpose, the
organization must make a reasonable allocation of costs to influencing legislation.
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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Correction of prior year lobbying costs. If in a prior year, an organization treated costs
incurred for a future lobbying communication as a lobbying cost to influence legislation, but after
the organization filed a timely return, it appears the lobbying communication will not be made
under any foreseeable circumstance, the organization may apply these costs to reduce its
current year’s lobbying costs, but not below zero. The organization may carry forward any
amount of the costs not used to reduce its current year’s lobbying costs to subsequent years.
Example: Ratio method. X Organization incurred:
1.
6,000 labor hours for all activities,
2.
3,000 labor hours for lobbying activities (three employees),
3.
$300,000 for operational costs, and
4.
No third-party lobbying costs.
X Organization allocated its lobbying costs as follows:
Lobbying
labor hrs.
3,000
×
6,000
Total labor
hrs.

$300,000
Total
costs of
operations

+

0

=

Allocable
third-party
costs

$150,000
Costs
allocable to
lobbying
activities

Examples: Gross-up method and Alternative gross-up method.
A and B are employees of Y Organization.
1.
A’s activities involve significant judgment with respect to lobbying activities.
2.
A’s basic lobbying labor costs (excluding employee benefits) are $50,000.
3.
B performs clerical and support activities for A.
4.
B’s labor costs (excluding employee benefits) in support of A’s activities are
$15,000.
5.
Allocable third-party costs are $100,000.
If Y Organization uses the gross-up method to allocate its lobbying costs, Y multiplies 175%
times its basic labor costs (excluding employee benefits) for all of the lobbying of its personnel
and adds its allocable third-party lobbying costs as follows:
175% × $65,000
+
$100,000
=
$213,750
Basic lobbying labor
Allocable
Costs allocable
costs of A + B
third-party costs
to lobbying
activities
If Y Organization uses the alternative gross-up method to allocate its lobbying costs, Y
multiplies 225% times its basic labor costs (excluding employee benefits) for all of the lobbying
hours of its lobbying personnel and adds its third-party lobbying costs as follows:
225% × $50,000
+
$100,000
=
$212,500
Basic lobbying labor
Allocable
Costs allocable
costs of A
third-party costs
to lobbying
activities
Section 263A cost allocation method.
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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The examples that demonstrate this method are found in Regulations section 1.162-28(f).
Line 1. Dues, Assessments, And Similar Amounts Received
Enter the total dues, assessments, and similar amounts allocable to the 2008 reporting year.
Dues are the amounts the organization requires a member to pay in order to be recognized as a
member.
Payments that are similar to dues include:
1.
Members’ voluntary payments,
2.
Assessments to cover basic operating costs, and
3.
Special assessments to conduct lobbying and political activities.
Line 2. Lobbying and Political Expenditures
Include on line 2a the total amount of expenses paid or incurred during the 2008 reporting year
in connection with:
1.
Influencing legislation;
2.
Participating or intervening in any political campaign on behalf of (or in opposition
to) any candidate for any public office;
3.
Attempting to influence any segment of the general public with respect to
elections, legislative matters, or referendums; or
4.
Communicating directly with a covered executive branch official in an attempt to
influence the official actions or positions of such official.
Do not include:
1.
Any direct lobbying of any local council or similar governing body with respect to
legislation of direct interest to the organization or its members.
2.
In-house direct lobbying expenditures, if the total of such expenditures is $2,000
or less (excluding allocable overhead).
3.
Political expenditures for which the section 527(f) tax has been paid (on
Form 1120-POL).
Reduce the current year’s lobbying expenditures, but not below zero, by costs previously
allocated in a prior year to lobbying activities that were cancelled after a return reporting those
costs was filed.
Carry forward any amounts not used as a reduction to subsequent years.
Include on line 2b:
1.
Lobbying and political expenditures carried over from the preceding tax year.
2.
An amount equal to the taxable lobbying and political expenditures reported on
line 85f for the preceding tax year, if the organization received a waiver of the
proxy tax imposed on that amount.
Line 3. Dues Declared Nondeductible In Notices To Members
Enter the total amount of dues, assessments, and similar amounts received, allocable to the
2008 reporting year that members were notified were nondeductible under section 162(e).
Example:
•
Membership dues: $100,000 for the 2008 reporting year,
•
Organization’s timely notices to members—25% of membership dues
nondeductible, and
•
Line 3 entry—$25,000.
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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Line 4. Carryover Lobbying and Political Expenditure to Next Year.
If the amount on line 2c exceeds the amount on line 3 and the organization sent dues notices to
its members at the time of assessment or payment of dues, include the amount on line 4 that
the organization agrees to carryover to the reasonable estimate of nondeductible lobbying and
political expenditure next year and include the amount on PART III-B, line 2b (carryover
lobbying & political expenses), or its equivalent, on the next year Form 990, Schedule C.
If the organization did not send notices to its members, enter zero on line 4.
Line 5. Taxable Lobbying and Political Expenditures (Proxy Tax)
The taxable amount reportable on line 5 is the amount of dues, assessments, and similar
amounts received:
1.
Allocable to the 2008 reporting year, and
2.
Attributable to lobbying and political expenditures that the organization did not
timely notify its members were nondeductible.
Report the tax on Form 990-T.
If the amount on line 1 (dues, etc.) is greater than the amount on line 2c (lobbying & political
expenses), then:
Line 2c (lobbying & political expenses)
Less
Line 3 (dues shown in notices)
Less
Line 4 (carryover)
Equals
Line 5 (taxable lobbying & political expenses)
If the amount on line 1 (dues, etc.) is less than the amount on line 2c (lobbying & political
expenses), then:
Line 1 (dues, etc.)
Less
Line 3 (dues shown in notices)
Less
Line 4 (carryover)
Equals
Line 5 (taxable lobbying & political expenses), and
Line 2c (lobbying & political expenses)
Less
Line 1 (dues, etc.)
Equals
The excess amount to be carried over to the following tax year and reported on PART III-B,
line 2b (carryover lobbying & political expenses), or its equivalent, on the next year Form 990
along with the amounts the organization agreed to carryover in line 4.
Underreporting of lobbying expenses.
An organization is subject to the proxy tax for the 2008 reporting year for underreported
lobbying and political expenses only to the extent that these expenses (if actually reported)
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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would have resulted in a proxy tax liability for that year. A waiver of proxy tax for the tax year
only applies to reported expenditures.
An organization that underreports its lobbying and political expenses is also subject to the
section 6652(c) daily penalty for filing an incomplete or inaccurate return. See Form 990
General Instruction H.
Examples
Organizations A, B and C:
1.
Reported on the calendar year basis.
2.
Incurred only grassroots lobbying expenses (did not qualify for the under $2,000
in-house lobbying exception (de minimis rule)).
3.
Allocated dues to the tax year in which received.
For Organization A — Dues, assessments, and similar amounts received in 2008 were greater
than its lobbying expenses for 2008.
Workpapers (for 2008 Form 990) — Organization A
1.
Total dues, assessments, etc., received
2.
Lobbying expenses paid or incurred
3.
Less: Total nondeductible amount of dues notices
4.
(Subtract line 3 from both lines 1 and 2)
5.
Taxable amount of lobbying expenses
(smaller of the two amounts on line 4)

$800
$600
100 100
$700 $500
$500

TIP: The amounts on lines 1, 2, 3, and 5 of the workpapers were entered on lines 1, 2c, 3, and 5
of the 2008 Form 990, Schedule C, Part III-B.
Because dues, etc., received were greater than lobbying expenses, there is no carryover of
excess lobbying expenses to PART III-B, line 2b of the year 2008 Form 990.
See the instructions for Part III-B, line 5 for the treatment of the $500.
For Organization B— Dues, assessments, and similar amounts received in 2008 were less
than its lobbying expenses for 2008.
Workpapers (for 2008 Form 990) — Organization B
1.
2.
3.
4.
5.

Total dues, assessments, etc., received
Lobbying expenses paid or incurred
Less: Total nondeductible amount of dues notices
(Subtract line 3 from both lines 1 and 2)
Taxable amount of lobbying expenses
(smaller of the two amounts on line 4)

$400
100
$300

$600
100
$500

$300

TIP: The amounts on lines 1, 2, 3, and 5 of the workpapers were entered on lines 1, 2c, 3, and 5
of the 2008 Form 990, Schedule C, Part III-B.
Because dues, etc., received were less than lobbying expenses, excess lobbying expenses of
$200 must be carried forward to PART III-B, line 2b of the next year Form 990 Schedule C
(excess of $600 of lobbying expenses over $400 dues, etc., received). The $200 will be
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2008 Schedule C (Form 990 or 990-EZ) Instructions - Draft
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included along with the other lobbying and political expenses paid or incurred in 2009 reporting
year.
See the instructions for Part III-B, line 5 for the treatment of the $300.
For Organization C — Dues, assessments, and similar amounts received in 2008 were greater
than its lobbying expenses for 2008 and the organization agreed to carryover a portion of its
excess lobbying and political expenses to the next year.
Workpapers (for 2008 Form 990) — Organization C
1. Total dues, assessments, etc., received
2. Lobbying expenses paid or incurred
3. Less: Total nondeductible amount of dues notices
4. Less: Amount agreed to carryover
5. (Subtract lines 3 and 4 from both lines 1 and 2)
6. Taxable amount of lobbying expenses
(smaller of the two amounts on line 5)

$800
100
100
$600

$600
100
100
$400
$400

TIP: The amounts on lines 1, 2, 3, 4, and 5 of the workpapers were entered on lines 1, 2c, 3, 4
and 5 of the 2008 Form 990, Schedule C, Part III-B.
See the instructions for Part III-B, line 5 for the treatment of the $400.
Part IV Supplemental Information
Use Part IV to provide narrative information required in Part I-A, line 1, Part I-B, line 4, Part I-C,
line 5, and Part II-B, line 1i. Also use Part IV to provide other narrative explanations and
descriptions. Identify the specific part and line number that the response supports.

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