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501c4s are a common type of non-profit organization that can engage in lobbying or political campaigning.
501(c)4s are tax-exempt non-profit organizations. More specifically, according to the Internal Revenue Code (IRC), 501(c)(4)s are:
- “civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare,
- "or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality,
- "and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.”
Comparing 501(c)3s and 501(c)4s
501c3 and 501c4 organizations are very similar in many respects. In fact, any organization that qualifies for a 501c3 tax-exemption would also qualify for a 501c4. There are, however, important differences.
Non-profit status:
- Both 501(c)(3)s and 501(c)(4)s must be run as not for profits.
- Neither 501(c)(3)s nor 501(c)(4) earnings may benefit a private shareholder or individual.
Tax-exemption:
- Both 501c3 and 501c4 organizations are exempt from paying federal income tax. State tax-exemption status varies by state.
Lobbying (trying to affect legislation):
- 501(c)3s are limited in the amount of time and/or money they can put into lobbying.
- 501(c)4s can do an unlimited amount of lobbying (but then become ineligible to receive federal monies like grants).
Political campaign activity:
- 501(c)3s cannot in any way support or oppose anyone running for public office, though they may be involved in political campaigns by way of non-partisan public forums, voter registration drives, etc.
- 501(c)4s can engage in political campaign activity, so long as this is consistent with the organization’s purpose and is not the organization’s primary activity.
Charitable Donations:
- Donations to 501(c)3s are deductible to the full extent of the law.
- Donations to 501(c)4s that are public entities (ie, state, local governments, volunteer fire stations) are deductible if they are used for public services. Donations to other 501(c)4s are not deductible.
Should your organization be a 501(c)3 or a 501(c)4?
If you are planning on doing limited or no lobbying and no campaigning, then you probably want the 501(c)3 tax-exemption so that people can benefit from donating to your organization (unless you represent the state or a political subdivision thereof). However, if your organization will be doing substantial lobbying or any campaigning, you should form a 501(c)4.
If you want the best of both worlds, you can have two separate but affiliated organizations – one a charitable 501(c)(3) and the other a 501(c)(4). Many trade organizations lobby extensively on behalf of their members, but have an affiliated 501c3 foundation for charitable giving.
The copyright of the article What Is a 501c4 Organization? in Non-Profit Management is owned by Estela Kennen. Permission to republish What Is a 501c4 Organization? in print or online must be granted by the author in writing.
Comments
Sep 11, 2007 4:37 PM
Bonnie Locchetta
:
I am a member of a community theatre group. Through bad management in the
past, we lost our 501c3 status. We re-filed for status, but now we are a
501c4. Why is this? We do not lobby, are completely non-profit, and have a
fairly small membership. Is it possible for us to switch? How difficult
would that be? Can anybody help me???
Sep 20, 2008 3:24 PM
Guest
:
Because you are a membership organization I think. Membership organization
belong to 501-c-4
Sep 30, 2008 9:08 PM
Guest
:
Hello,
A) I want to start a non-profit org online is that a
problem?
ex: you goto www.blank.org and it all starts there..
B) I really don't want anyone to recreate or duplicate or basically
copy/steal my orgs buisness plan when I'm solely an online org. How can I
protect myself?
thanks...
Oct 6, 2008 2:22 PM
Guest
:
Membership has nothing to do with it. Membership organizations are both c
3 and c 4--you need to contact the IRS to find out why. The letter should
have a name and phone number on it. The BIG difference is whether or not
those who give to you cn claim a tax deduction.
Oct 23, 2008 8:04 AM
Guest
:
A small group with no money is looking to form and run a non-profit to push
a conservative cause that we are very passionate about. There is a lot of
interest in this project but because we are not a non-profit that will
offer a deduction for charitable giving, the people who would like to help
us are holding back.
We are hoping we can find someone who is
knowledgeable about these matters who can help us. Any payment for services
would have to be delayed until after this project gets going. There is
money promised and I can show that there will be a lot more.
For
more information, write me at: ramup2@gmail.com
Nov 13, 2008 11:18 AM
Guest
:
The biggest difference between c3 and c4 is the public support tests. If
it does not meet public support tests but it is still a valid charity, the
government allows entities to keep their exempt status but contributions
are not deductible to individuals. See IRS Pub 557 for more information.
Nov 19, 2008 8:34 AM
Guest
:
Great Answer I am clear on the difference now
Dec 18, 2008 5:08 AM
Guest
:
Is a 501-C4 which has less than $25,000 required to file with the IRS?
Jan 8, 2009 5:27 PM
Guest
:
I want to start a web site which factually vets all US Senators, and
Congressmen, along with all State Senators and Congressmen...prior to all
US and State electtions. I will need to finance this cause via donations,
and would like to know which business model would be the best way to go.
Thanks
Jan 22, 2009 7:26 AM
Guest
:
Can a 501(c)(4) charge for education such as CPR or ACLS class through an
association of a county run paramedic group. And can we pay the
instructors?
Jan 24, 2009 5:49 PM
Guest
:
I am a member of a volunteer fire dept that is a 501c4 status. We applied
for a neighbor to neighbor kroger card and was turned down. They say they
only give to 501c3. We are non profit, operate on donations. I don't know
why we are a 501c4 status. Should we be a 501c3?
Jan 28, 2009 1:26 PM
Guest
:
I have a question - I am the new president of a non-profit sports
organization. The organization was set up with it's tax id over 15 years
ago - and was set up at s 501c4. Really our organization should have been
set up as a 501c3. Is there a way to change it?
Thanks!
Mar 15, 2009 5:16 AM
Guest
:
I am in the process of becoming a 501c4 but I think we should be a 501c3 we
from time receive donations from other orgs and would like for them to
receive tax-deductiable when giving to our association, should I talk to
the irs rep again and try to explain or should I fill out the other paper
work and become both 501c3 and c4?
Please help ASAP!
THANK YOU
ANNA HILL PRESIDENT/ of a neighborhood association.
Mar 16, 2009 5:15 PM
Estela Kennen
:
It is possible to change a 501c4 designation to a 501c3, or to have a
separate 501c3 arm. However, often times sports organizations or
neighborhood associations only benefit the people that are involved in the
team/league or are part of the neighborhood. These organizations are
therefore not eligible to be considered 501c4. Dues are not deductible, but
they benefit the dues-paying member by giving them access to the
organization. Hope that helps.
Mar 30, 2009 4:48 PM
Guest
:
I am starting a non-profit fishing club and we will host some fishing
tournaments for members only and do some clean up days at local lakes. I
want to discuss the issues that affect our local fisheries and then take
comments from club to a fishing advisory group I think I qualify for 501c3
status but wanting to make sure. We won't be lobbying but the advisory
group will.
May 9, 2009 8:48 AM
Guest
:
It appears that at least half of the 501(c) organizations are being run for
the private benefit of some individual or group of individuals. The purpose
of these entities claiming to be 501(c) is to evade the payment of federal
and state corporate taxes on for-profit income. Yes, evade - in a criminal
sense - not avoid.
Half of the 501(c) corporations should be
for-profit corpoartions and their claims of being non-profit are nothing
more than outright tax fraud.
The shame is that we as taxpayers
have to pay more to make up for the federal and state revenue lost due to
these non-profit criminal-fraud schemes.
May 26, 2009 1:24 PM
Guest
:
I curretnly sit on the board of a small company sponsored Park that is a
501 c4 organization. In the past only compnay employees were allowed to
sue the park however due to issues beyond our control the park will be open
to public camping use. Becasue we are no longer a sole company park can we
maintain our 501 c4 status?
May 26, 2009 1:46 PM
Estela Kennen
:
You should talk to a lawyer familiar with nonprofit tax law, but on the
face of it:
-- Will your park be government (state or local) owned?
Then it would fall under a different taxatin scheme.
-- If the park
would still be owned by the park's NGO, then it should still be eligible to
be a 501c4 (501c4s CAN be for the benefit of member groups, but they can
also be for the benefit of the public), or even a 501c3 (which would make
contributions to the park tax-deductible)
18 Comments
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