While public policy scholars are gaining a better understanding of the nonprofit sector's impact on the policy process, the sector's role in lobbying efforts has only been studied in a limited manner. Currently, nonprofit organizations' lobbying activities and expenditures are limited by federal regulations, which are often misunderstood by nonprofit leaders. This article uses 2003 IRS Form 990 data for all nonprofit organizations in the United States to examine the organizational determinants of 501(c)3 nonprofits taking the Internal Revenue Service's 501(h) election and whether organizations use h-election in a manner consistent with patterns of strategic behavior. Results show that nonprofit organizations that are reliant on direct public support are more likely to take the h-election, while those reliant on government grants are less likely to take the h-election. Examining lobbying expenditures, we find nonprofits associate with 501(h) election in a pattern consistent with strategic behavior. The findings suggest that nonprofit organizations with certain revenue streams and in specific subsectors respond differently to this election decision, and that organizations may respond strategically to mechanisms regulating their political activity.