The Other Nonprofits – 501(c)(4), 501(c)(6) & 501(c)(7)
June 30th, 2009 | 
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The Alpha dog of the nonprofit world is the 501(c)(3). It has federal income tax exemption, contributions to it are tax deductible to the donor and it is potentially state sales & property tax exempt. Not bad.
The government provides incentives like these when an organization’s purpose is: religious, educational, charitable, scientific, literary, testing for public safety, to foster national or international sports competition or prevention of cruelty to children or animals. But what about the other nonprofit organizations? What are their purposes and what benefits do they get? We’ll talk a little about the three most popular nonprofits other than the more well known 501(c)(3).
The IRS identifies many categories of tax-exempt organizations, including 501(c) code sections 2-27. These categories encompass organizational purposes from mutual insurance to farming coops to cemetery associations. Three particular “501(c)” groups, however, make up the bulk of all non-501(c)(3) organizations. They can obtain federal income tax exemption, but contributions to these organizations are not tax deductible to the donor. They also have specific purposes that determine their classification and what they are allowed to do. And unlike 501(c)(3) organizations which apply for tax-exemption by filing Form 1023, these organizations have a very different filing application, Form 1024. Interestingly, the lack of tax-deductible donations often results in a slightly less-cumbersome IRS review process.
Here’s the big 3:
501(c)(4)
Civic Leagues, Social Welfare Organizations, etc.
These organizations tend toward advocacy work, political actions, lobbying, environmental purposes, homeowners’ associations and various community associations. Interestingly, it is not uncommon to find some organizations occupying the ranks of 501(c)(4) that would normally be considered 501(c)(3) if it were not for particular activities such as substantial lobbying or political candidate endorsements…things prohibited under 501(c)(3).
501(c)(6)
Business Leagues, Chambers of Commerce, etc.
Trade associations and professional associations are considered business leagues. These organizations typically promote higher business practices, better business methods, establish and maintain integrity within an industry and operate a trade publication to benefit an entire industry. Just like with 501(c)(4), some 501(c)(6) organizations have activities that are similar to 501(c)(3), such as educational programs, but are specifically geared toward promoting the business interests of companies or individuals.
501(c)(7)
Social and Recreation Clubs
These are clubs organized for recreation, pleasure, social activities and other similar nonprofit purposes. These organizations include college fraternities or sororities, country clubs, hobby clubs, garden clubs, etc.
These three 501(c) classifications have a use and provide a beneficial function for the nonprofit world. They provide an option for people to conduct activities that are not a for-profit business, but do not qualify for a 501(c)(3). For more information about the all the rest of the 501(c) family, see IRS Publication 557.
Posted in Education, Starting a nonprofit | 
Tags: 501(c)(4), 501(c)(6), 501(c)(7), Form 1024, IRS, Starting a nonprofit
I was wondering, if my church obtained a state tax exemption will I still need to obtain a 501(c)3 for my church… to be exempt as well as protecting the donors?…
According to what I have just learned this year as I understand it, if a church does not not obtain a 501(c)3 then their contributors will not be able to claim their contributions that were donated.
Not so. Churches are a unique category of 501(c)(3) in that they are considered federally tax-exempt even without obtaining a formal IRS letter of 501(c)(3) determination. In our opinion, relying on the statutory status is not a good long term plan. Active churches are better served from having an IRS determination letter. But, in the short run, there is no harm in not having it. Donations are still deductible to the donor.
We are currently in the process of starting a travel baseball team, we would like to know if we can register our team as a non-profit organization. Our goal is to eventually start doing some fund raising to cover some of the team’s expenses. Perhaps, we might not be qualified to pursue this avenue. Please advise.
Baseball mom,
Yes…youth sports programs can (usually) qualify as 501(c)(3) nonprofits on the basis of being educational. It is often a great way to go. The same steps are involved as is the case with most all 501(c)(3) organizations: nonprofit incorporation followed by seeking 501(c)(3) tax exemption from the IRS.
We have worked with hundreds of such programs. If you decide to go this route, we can make it easier for you. Good luck!
Does a 501c4 have to publish the minutes from its monthly board meetings? If so, is it sufficient to post them directly to the 501c4’s website?
There is no such specific requirement under IRS regulations, but it certainly is not a bad thing to do. Publishing them on the organization’s website is a great place to allow such visibility into the work the board is conducting.
Some of my girlfriends and I are wanting to start a social club. We will mostly do things that are for pleasure and social engagement. We do plan on doing a few charitable things like raising money for Relay for Life, helping with toy drives and food drives, and things of that nature. Is it necessary for us to register with the IRS as a 501 (c) 7?
Maybe…maybe not. Typically, if your operations will generate less than $5,000 gross revenue (not net), then you can essentially operate it as a “club” of sorts. You can assume 501(c)(7) classification, though you will be doing so without any official designation. If your club will normally receive more than $5k, from all sources, you should take steps to be officially recognized by the IRS, lest you be considered a taxable business.
I am a for-profit (tax status) consultant helping child welfare systems learn to use data to improve service delivery. I am getting killed on taxes, and wonder if I can change my status to a 501 c 4. Thanks! Love what I do, but can’t afford to continue with the tax situation!
It is tough out there for everybody right now…for-profits and nonprofits alike. Not a lot of details in your question, but it doesn’t sound like a 501(c)(4) activity to me. 501(c)(4)s are what’s called social welfare/public benefit organizations. A lot of c4s are advocacy groups like AARP or National Right to Life. Providing a paid consulting service, even if to an exclusively nonprofit client base, will not typically qualify as a tax-exempt purpose under any 501(c) code section. Sounds to me like you need the services of a good tax planning accountant more than you need tax exemption. More than likely, some restructuring of your compensation system will alleviate much of the tax problem. Plus, you probably do not want to give up the level you would have to do.
Good luck!
I have a c3 and a c4. Our c3 has a IRS determination letter with our 501c3 tax ID number on it. Should our c4 have a letter from the IRS, too?
Absolutely! I assume (hopefully) that the c4 is a separate, legal corporate entity. That would be a good start. But until you have applied for and received tax exemption from the IRS as a 501(c)(4), it isn’t a c4.