Schedule C - Political Campaign and Lobbying Activities

2011

Instructions for Schedule C
(Form 990 or 990-EZ)

Department of the Treasury
Internal Revenue Service

Political Campaign and Lobbying Activities
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
Note. Terms in bold are defined in the
Glossary of the instructions for Form 990.

Purpose of 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 (Form 990 or 990-EZ) to
furnish additional information on political
campaign activities or lobbying
activities, as those terms are defined
below for the various parts of this
schedule.

Who Must File
An organization that answered “Yes” on
Form 990, Part IV, Checklist of Required
Schedules, line 3, 4, or 5, must complete
the appropriate parts of Schedule C
(Form 990 or 990-EZ) and attach
Schedule C to Form 990. An organization
that answered “Yes” on Form 990-EZ,
Part V, line 46 or Part VI, line 47, must
complete the appropriate parts of
Schedule C (Form 990 or 990-EZ) and
attach Schedule C to Form 990-EZ. An
organization that answered ‘‘Yes’’ to Form
990-EZ, Part V, line 35c, because it is
subject to the section 6033(e) notice and
reporting requirements and proxy tax,
must complete Part III of Schedule C
(Form 990 or 990-EZ) and attach
Schedule C to Form 990-EZ.
If an organization has an ownership
interest in a joint venture that conducts
political campaign activities or
lobbying activities, the organization
must report its share of such activity
occurring in its tax year on Schedule C
(Form 990 or 990-EZ). See Instructions
for Form 990, Appendix F, Disregarded
Entities and Joint Ventures.
Part I. Political campaign activities.
Part I is completed by section 501(c)
organizations and section 527
organizations that file the Form 990 (and
Form 990-EZ). If the organization
answered “Yes” to Form 990, Part V, line
3a, or Form 990-EZ, Part V, line 46, then
complete the specific parts as follows.
• A section 501(c)(3) organization must
complete Parts I-A and I-B. Do not
complete Part I-C.
Dec 22, 2011

• A section 501(c) organization other

than section 501(c)(3) must complete
Parts I-A and I-C. Do not complete Part
I-B.
• A section 527 organization that files the
Form 990 or Form 990-EZ must complete
Part I-A. Do not complete Parts I-B and
I-C.
Part II. Lobbying activities. Part II is
completed only by section 501(c)(3)
organizations. If the organization
answered “Yes” to Form 990, Part IV, line
4, or Form 990-EZ, Part VI, line 47, then
complete the specific parts as follows.
• A section 501(c)(3) organization 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 2010, must
complete Part II-A. Do not complete Part
II-B.
• A section 501(c)(3) organization that
has not elected to be subject to the
lobbying expenditure limitations of section
501(h) (or has revoked such election by
filing Form 5768 for which the revocation
was valid and in effect for its tax year
beginning in the year 2010) must
complete Part II-B. Do not complete Part
II-A.
Part III. Section 6033(e) notice and
reporting requirements and proxy tax.
Part III is completed by section 501(c)(4),
section 501(c)(5), and section 501(c)(6)
organizations that received membership
dues, assessments, or similar amounts as
defined in Rev. Proc. 98-19, section 5.01,
and 1998-7 I.R.B. 30 as adjusted by Rev.
Proc. 2010-40, section 3.32, 2010-46
I.R.B. 663 and that answered “Yes” to
Form 990, Part IV, line 5 or ‘‘Yes’’ to Form
990-EZ, line 35c, regarding the proxy tax.
If an organization is not required to file
Form 990 or Form 990-EZ but chooses to
do so, it must file a complete return and
provide all of the information requested,
including the required schedules.

Definitions
Definitions in this section are applicable
throughout this schedule, except where
noted. The following terms are defined in
the Glossary.
• Joint venture.
• Legislation.
• Lobbying activities.
• Political campaign activities.
• Tax year.
Cat. No. 20374L

See Revenue Ruling 2007-41,
TIP 2007-25 I.R.B. 1421, for
guidelines on the scope of the tax
law prohibition of campaign activities by
section 501(c)(3) organizations.
Section 527 exempt function
activities. Section 527 exempt function
activities include 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
Vice-Presidential electors, whether or not
such individual or electors are selected,
nominated, elected, or appointed.
Political expenditures. Any
expenditures made 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.
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.

Definitions (Part II-A)
Definitions in this section are applicable
only to Part II-A.
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. In
general, an exempt purpose expenditure
is paid or incurred by an electing public
charity to accomplish the organization’s
exempt purpose.
Exempt purpose expenditures include:
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 (including
allocable overhead and administrative
costs) 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 direct
lobbying communications (direct lobbying
expenditures) plus grassroots lobbying
communications (grassroots lobbying
expenditures).
Direct lobbying communications
(direct lobbying expenditures). A
direct lobbying communication is any
attempt to influence any legislation
through communication with:
• A member or employee of a legislative
or similar body;
• A 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;
or
• The public in a referendum, initiative,
constitutional amendment, or similar
procedure.
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 lobbying

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.
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, or similar information;
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 item 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
of 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

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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).
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
items (1), (2), and (4), above (under
Grassroots lobbying communications),
but does not satisfy the requirements of
item (3), are treated as expenditures for
direct lobbying.
Expenditures for a communication
directed only to members that refers to,
and reflects a view on, specific legislation
and satisfies the requirements of items (1)
and (2) above, but does not satisfy the
requirements of item (4), are treated as
grassroots expenditures, whether or not
the communication satisfies the
requirements of item (3). See Regulations
section 56.4911-5 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 56.4911-3.
Affiliated groups. Members of an
affiliated group are treated as a single
organization to measure 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
Rev. Proc. 2011-4, 2011-1 I.R.B. 123 (or
latest annual update).
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.
• The controlling organization is charged
with its own lobbying expenditures and
the national legislation expenditures of
the affiliated organizations,
• The controlling organization is not
charged with other lobbying expenditures
(or other exempt-purpose expenditures)
of the affiliated organizations, and
• Each local organization is treated 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 for any of the
national legislation expenditures deemed
as incurred by the controlling
organization.

Definitions (Part III)
Definitions in this section are applicable
only to Part III.
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.
Covered executive branch official.
Covered executive branch officials
include the President, Vice-President,
officers and employees of the Executive
Office of the President, 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. This means
a:
1. Meeting,
2. Telephone conversation,
3. Letter, or
4. Similar means of communication
that is with a:
a. Legislator (other than a local
legislator), or
b. Covered executive branch official
and that is an attempt to influence the
official actions or positions of that official.
In-house expenditures include:
1. Salaries, and
2. 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 or any
dues paid to another organization that are
allocable to lobbying or political activities.

Specific Instructions
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
their direct and indirect political
campaign activities in Part IV. 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 their
exempt function activities in Part IV.
Line 2. Enter the total amount that the
filing organization has spent conducting
the activities described on line 1.
Line 3. If the organization used
volunteer labor for its political campaign
activities or section 527 exempt function
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 incurred during
the year under section 4955 (political
expenditures), unless abated. See
sections 4962 and 6033(b).
Line 1. Enter the amount of taxes
incurred by the organization itself under
section 4955, unless abated. If no tax was
incurred, enter -0-.

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Line 2. Enter the amount of taxes
incurred by the organization managers
under section 4955, unless abated. If no
tax was incurred, enter -0-.
Line 3. If the filing organization reported
a section 4955 tax on a Form 4720,
Return of Certain Excise Taxes Under
Chapters 41 and 42 of the Internal
Revenue Code, for the tax year, answer
“Yes.”
Line 4. Describe in Part IV the steps
taken by the organization to correct the
activity that subjected it 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 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 transfer them to that fund as
prescribed in Regulations section
1.527-6(e), do not report them on lines 1
or 2. Such amounts are reported on line
5e.
Line 1. Enter the amount of the
organization’s funds that it expended for
section 527 exempt function activities.
See Regulations section 1.527-6(b).
Line 2. Enter the amount of the
organization’s funds that it 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 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. In columns (a), (b), and (c), enter
the name, address and employer
identification number (EIN) of each
section 527 political organization to which
payments were made. In column (d),
enter the amount paid from the filing
organization’s funds. In column (e), enter
the amount of 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, enter information in Part IV.

Part II-A. Lobbying Activity
Only section 501(c)(3) organizations that
have filed Form 5768 (election under
section 501(h)) complete this section.
Part II-A provides a reporting format
for any section 501(c)(3) organization for
which the 501(h) lobbying expenditure
election was valid and in effect during the
2011 tax year, whether or not the
organization engaged in lobbying
activities during that tax year. 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.
Affiliated groups. If the filing
organization belongs to an affiliated
group, check Part II-A, box A and
complete lines 1a through 1i.
• Complete column (a) for the electing
member of the group.
• Complete column (b) for the affiliated
group as a whole.
If the filing organization checked box A
and the limited control provisions apply to
the organizations in the affiliated group,
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.
Affiliated group list. Provide in Part
IV 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.
Nonelecting 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.
Lines 1a through 1i. 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.
Lines 1a through 1i 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. Enter the amount the
organization expended for grassroots
lobbying communications.
Line 1b. Enter the amount the
organization expended for direct lobbying
communications.

Line 1c. Add lines 1a and 1b.
Line 1d. Enter all other amounts
(excluding lobbying) the organization
expended to accomplish its exempt
purpose.
Line 1e. Add lines 1c and 1d. This is
the organization’s total exempt purpose
expenditures.
Lines 1h and 1i. 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, 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.
In Part IV, provide the affiliated group list
described above. 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.
Any organization for which a lobbying
expenditure election under section 501(h)
was in effect for its tax year beginning in
2011 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 2011 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 2011 is the first year for which an
organization’s section 501(h) election is
effective, that organization must complete
line 2a, columns (d) 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 2011 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

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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
2011.
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. For 2008, 2009, 2010, and
2011, enter the amount from Schedule C
(Form 990 or 990-EZ), Part II-A, line 1f,
filed for each year.
Line 2c. For 2008, 2009, 2010, and
2011, enter the amount from Schedule C
(Form 990 or 990-EZ), Part II-A, line 1c,
for each year.
Line 2d. For 2008, 2009, 2010, and
2011, enter the amount from Schedule C
(Form 990 or 990-EZ), Part II-A, line 1g,
for each year.
Line 2f. For 2008, 2009, 2010, and
2011, enter the amount from Schedule C
(Form 990 or 990-EZ), Part II-A, line 1a,
for each year.
Enter the total for each line in column
(e).

Part II-B. Lobbying Activity
Only section 501(c)(3) organizations that
have not filed Form 5768 (election under
section 501(h)) or have revoked a
previous election can complete this
section.
Part II-B provides a reporting format
for any section 501(c)(3) organization that
engaged in lobbying activities during
the 2011 tax year but did not make a
section 501(h) lobbying expenditure
election for that year by filing Form 5768.
The distinction in Part II-A between direct
and grassroots lobbying activities by
organizations that made the section
501(h) election does not apply to
organizations that complete Part II-B.
Nonelecting 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 nonelecting organization will
generally be regarded as engaging in
lobbying activity if the organization either
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 advocates the
adoption or rejection of legislation.
Organizations should answer “Yes” or
“No” in column (a) to questions 1a
through 1i and provide in Part IV a
detailed description of any activities the
organization engaged in (through its
employees or volunteers) to influence
legislation. The description should include
all lobbying activities, whether expenses
were incurred or not. Examples of such
lobbying 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.
For lines 1c through 1i, enter in column
(b) the lobbying expenditures paid or
incurred. Enter total expenditures on
column (b), line 1j.
Line 1f. Grants to other organizations
are amounts from the organization’s
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. Rallies, demonstrations,
seminars, conventions, speeches, and
lectures are examples of public forums
conducted directly by the organization or
paid for out of the organization’s funds.
Line 1i. Answer “Yes” if the organization
engaged in any other activities to
influence legislation.
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. Enter the amount of taxes, if
any, imposed on the organization itself
under section 4912, unless abated.
Line 2c. Enter the amount of taxes, if
any, imposed on the organization
managers under section 4912, unless
abated.
Line 2d. 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
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 the section 6033(e) notice
and reporting requirements, and to 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. Answer “Yes” if any of the
following exemptions from the reporting
and notice requirements 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), section
501(c)(5), and section 501(c)(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), section 501(c)(5), and section
501(c)(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 section
501(c)(5) organizations that receive more
than 90% of their annual dues from:
a. Persons,
b. Families, or
c. Entities,
who each paid annual dues of $103 or
less in 2011 (adjusted annually for
inflation). See Rev. Proc. 2010-40,
section 3.23.
5. Any organization that receives a
private letter ruling from the IRS stating
that the organization satisfies the section
6033(e)(3) exception.

-5-

6. 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.
7. Any organization that is not a
membership organization.
Special rules treat affiliated social
welfare organizations, agricultural
CAUTION 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, section 5.03, 1998-1 C.B.
547.
Line 2. Answer “Yes” for line 2 if the
organization satisfies the following criteria
of the $2,000 in-house lobbying
exception.
1. The organization did not make any
political expenditures or foreign lobbying
expenditures during the 2011 reporting
year.
2. The organization made lobbying
expenditures during the 2011 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 2011
reporting year were $2,000 or less, but
the organization also paid or incurred
other lobbying or political expenditures
during the 2011 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 of Part III-B, line 2a.
Line 3. 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 Notices,
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 in Part III-B, line
2a. An organization that checked “Yes”
for Part III-A, line 3, and thus is required
to complete Part III-B, 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 in Part
III-B, line 2a.
Dues, Lobbying, and Political Expenses
IF ...

THEN ...

The organization’s
lobbying and political
expenses are more
than its membership
dues for the year,

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:
(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.

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.

significant judgment about lobbying
activities.

Proxy Tax
IF ...

THEN ...

The organization’s
The organization is
actual lobbying and
liable for a proxy tax
political expenses are on the excess.
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,

All the members’
dues remain eligible
for a section 162
trade or business
expense deduction.

The organization:
The IRS may permit a
(a) Makes a
waiver of the proxy
reasonable estimate tax.
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.

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 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) (section
162(e)(1)(A) and section 162(e)(1)(D)).
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.
For more information, see Regulations
sections 1.162-28 and 1.162-29. The
special rules and definitions for these
allocation methods are discussed under
Special Rules, later.
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

-6-

Special Rules
Ratio and gross-up methods. These
methods:
• May be used even if volunteers
conduct activities, and
• May disregard labor hours and costs of
clerical or support personnel (other than
lobbying personnel) under the ratio
method.
Alternative gross-up method. This
method may disregard:
• Labor hours, and
• Costs of clerical or support personnel
(other than lobbying personnel).
Third-party costs. These are:
• Payments 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 activity.
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 as direct contact lobbying
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.
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.
The purpose for engaging in an activity is
based on all the facts and circumstances.
If an organization’s lobbying
communication was for both a lobbying
and a non-lobbying purpose, the
organization must make a reasonable
allocation of cost to influence legislation.
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 1. Ratio method.
X Organization incurred:
1. 6,000 labor hours for all activities,
2. 3,000 labor hours for lobbying
activities (3 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
costs of
operations

Allocable Costs
thirdallocable to
party
lobbying
costs
activities

× $300,000 + $ -0- =

$150,000

Total
labor
hrs.

Example 2. Gross-up method and
alternative gross-up method.
A and B are employees of Y
Organization.
1. A’s activities involve significant
judgment about 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, it
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:
Basic lobbying
labor costs of A
+B
(175% ×
$65,000)

Costs
allocable
to
lobbying
activities

Allocable
third-party
costs
+

$100,000

=

$213,750

If Y Organization uses the alternative
gross-up method to allocate its lobbying
costs, it 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:
Basic lobbying
labor costs
of A
(225% ×
+
$50,000)

Allocable
third-party
costs
$100,000

Costs
allocable to
lobbying
activities
= $212,500

Section 263A cost allocation method.
The examples that demonstrate this
method are found in Regulations section
1.162-28(f).
Part III-B, Line 1. Enter the total dues,
assessments, and similar amounts
allocable to the 2011 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. Include on line 2a the total
amount of expenses paid or incurred
during the 2011 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; and
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); or
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.
Carryforward any amounts not used as
a reduction to subsequent years.
Include the following 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 Part III-B, line 5 for the
preceding tax year, if the organization
received a waiver of the proxy tax
imposed on that amount.
Line 3. Enter the total amount of dues,
assessments, and similar amounts
received, for which members were timely
notified of the nondeductibility under
section 162(e) that were allocable to the
2011 reporting year.
Example.
• Membership dues: $100,000 for the
2011 reporting year,
• Organization’s timely notices to
members: 25% of membership dues
nondeductible, and
• Line 3 entry: $25,000.
Line 4. 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

-7-

lobbying and political expenditure next
year and include the amount in Part III-B,
line 2b (carryover lobbying and political
expenses), or its equivalent, on the 2012
Schedule C (Form 990 or 990-EZ).
If the organization did not send notices
to its members, enter “-0-” on line 4.
Line 5. The taxable amount reportable
on line 5 is the amount of dues,
assessments, and similar amounts
received:
1. Allocable to the 2011 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,
assessments, and similar amounts) is
greater than the amount on line 2c (total
lobbying and political expenditures), then
subtract the nondeductible dues shown in
notices (line 3) and the carryover amount
(line 4) from the total lobbying and
political expenditures (line 2c) to
determine the taxable amount of lobbying
and political expenditures (line 5).
If the amount on line 1 (dues,
assessments, and similar amounts) is
less than the amount on line 2c (total
lobbying and political expenditures), then
subtract the nondeductible dues shown in
notices (line 3) and the carryover amount
(line 4) from dues, assessments, and
similar amounts (line 1) to determine the
taxable lobbying and political
expenditures (line 5).
Subtract dues, assessments, and
similar amounts (line 1) from lobbying and
political expenditures (line 2c) to
determine the excess amount to be
carried over to the following tax year and
reported on Part III-B, line 2b (carryover
lobbying and political expenditures), or its
equivalent, on the next year Schedule C
(Form 990 or 990-EZ) along with the
amounts the organization agreed to
carryover on line 4.
Underreporting of lobbying expenses.
An organization is subject to the proxy tax
for the 2011 reporting year for
underreported lobbying and political
expenses only to the extent that these
expenses (if actually reported) 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 Instructions for
Form 990 General Instructions H.
Failure-to-File Penalties, and Instructions
for Form 990-EZ General Instructions G.
Failure-to-File Penalties.
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)), and
3. Allocated dues to the tax year in
which they were received.
Organization A. Dues, assessments,
and similar amounts received in 2011
were greater than its lobbying expenses
for 2011.
Workpapers (for 2011 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

The amounts on lines 1, 2, 3, and
TIP 5 of the workpapers were entered
on lines 1, 2c, 3, and 5 of the 2011
Schedule C (Form 990 or 990-EZ), Part
III-B.
Because dues, assessments, and
similar amounts received were greater
than lobbying expenses, there is no
carryover of excess lobbying expenses to
Part III-B, line 2b, 2012 Schedule C (Form
990 or 990-EZ).
See the instructions for Part III-B, line
5, for the treatment of the $500.
Organization B. Dues, assessments,
and similar amounts received in 2011

were less than lobbying expenses for
2011.

Workpapers (for 2011 Form 990) —
Organization C

Workpapers (for 2011 Form 990) —
Organization B

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)

$400
$600
100

100

$300

$500

$300

The amounts on lines 1, 2, 3, and
TIP 5 of the workpapers were entered
on lines 1, 2c, 3, and 5 of the 2011
Schedule C (Form 990 or 990-EZ), Part
III-B.
Because dues, assessments, and
similar amounts received were less than
lobbying expenses, excess lobbying
expenses of $200 must be carried
forward to Part III-B, line 2b, of the 2012
Schedule C (Form 990 or 990-EZ)
(excess of $600 of lobbying expenses
over $400 dues, etc., received). The $200
will be included along with the other
lobbying and political expenses paid or
incurred in the 2012 reporting year.
See the instructions for Part III-B, line
5, for the treatment of the $300.
Organization C. Dues, assessments,
and similar amounts received in 2011
were greater than lobbying expenses for
2011 and the organization agreed to
carryover a portion of its excess lobbying
and political expenses to the next year.

-8-

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 line 3 and 4 from
both lines 1 and 2
6. Taxable amount of lobbying
expenses (smaller of the two
amounts on line 5)

$800
$600
100

100

100

100

$600

$400
$400

The amounts on lines 1, 2, 3, 4,
TIP and 6 of the workpapers were
entered on lines 1, 2c, 3, 4, and 5
of the 2011 Schedule C (Form 990 or
990-EZ), 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 enter narrative information
required in Part I-A, line 1, Part I-B, line 4,
Part I-C, line 5, Part II-A, line 1 (affiliated
group list), Part II-A, line 2, and Part II-B,
line 1. Also use Part IV to enter other
narrative explanations and descriptions.
Identify the specific part and line number
that the response supports, in the order in
which they appear on Schedule C (Form
990 or 990-EZ). Part IV can be duplicated
if more space is needed.