The function is ignored unless the member is being designed per AISC's "Direct Analysis Method". If the member if defined as lateral, then it will receive stiffness adjustements per that method. If it is defined as gravity then it will not receive those adjustments.
The idea is that if the member does not participate in the lateral force resisting system (say a simply supported beam for example) then there is no need to reduce the stiffness of the member to account for the DAM stability effects.