Section 501(c)

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501(c) is a subsection of the United States Internal Revenue Code, which lists 28 types of tax exempt non-profit organizations.

1 Types
2 501(c)(3)
3 501(c)(4)
4 501(c)(6)
5 See also
6 External links

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Types

The most common 501(c) organizations include:

501(c)(1) - Corporations organized under acts of Congress such as Federal Credit Unions
501(c)(2) - Title holding corporations for exempt organizations
501(c)(3) - Various charitable, non-profit, religious, and educational organizations (see below)
501(c)(4) - Various political education organizations (see below)
501(c)(6) - Business league and chamber of commerce organizations (see below)
501(c)(7) - Recreational club organizations

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501(c)(3)

Section 501(c)(3) is just one of the tax law provisions granting exemption from the federal income tax to non-profit organizations. This exemption does not cover other federal taxes such as employment taxes.

501(c)(3) exemptions apply to corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety (described under 509(a)(4) of the code which makes the organization a public charity and not a private foundation, and contributions to 509(a)(4) organizations are not deductible to the donor for federal income, estate, or gift tax purposes), literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.

Another provision, provides a deduction, for federal income tax purposes, for some donors who make charitable contributions to 501(c)(3) organizations.

501(c)(3) status for charities and the related section 170 deduction for donors are important to many charitable groups. Some individuals and groups (and virtually all foundations) will not give to a charity if it does not have 501(c)(3) status. Therefore, loss of this status can be harmful to a charity's existence.

Organizations with this classification are prohibited from lobbying to influence elections and legislation. [1] However, these organizations are permitted to educate individuals about issues, or fund research that supports their political position without overtly advocating for a position on a specific bill. Often, 501(c)(4) organizations may create a 501(c)(3) that operates solely for "educational" purposes. The League of Women Voters advocates positions on issues as a 501(c)(4) and uses its 501(c)(3) arm to provide nonpartisan voter information. Similarly, think tanks such as the Cato Institute, Center for American Progress, and Heritage Foundation produce policy reports and recommendations on proposals that are not specific legislation. The organization's partisans then use 501(c)(4) organizations or political action committees to lobby for their ideas once they become bills.

Prominent 501(c)(3) organizations include:

American Red Cross
Goodwill Industries
Habitat for Humanity
Salvation Army
YMCA and YWCA

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501(c)(4)

501(c)(4) exemptions are given to 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.

The exemption does not apply "unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual."

Deductibility of donations to 501(c)(4) organizations:

Unlike donations to the more prevalent 501(c)(3) non-profit organizations, donations to a section 501(c)(4) organization are not deductible by the donor under section 170 of the code unless the recipient organization is a volunteer fire department as described in revenue ruling 80-77 or veteran organizations with at least 90% of its membership consisting of war veterans as described in revenue ruling 84-140.

Prominent 501(c)(4) organizations include:

AARP
National Rifle Association
League of Conservation Voters
America 21

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501(c)(6)

The 501(c)(6) is specifically reserved to Chamber of Commerce organizations, real estate boards, trade boards, professional football leagues (e.g., the NFL), and other types of business leagues. They are characterized by a common business interest, which the organization typically promotes. Organizations under this category are exempt from most federal income taxes. Donations to a 501(c)(6) are not tax deductible as charitable contributions, as is the case in the 501(c)(4) category.

501(c)(6) organizations may engage in limited political activities that inform, educate, and promote their given interest. They may not engage in direct expenditures advocating a vote for a political candidate or cause. Donations to 501(c)(6) organizations are not required to be disclosed.

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