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The Other Nonprofits – 501(c)(4), 501(c)(6) & 501(c)(7)

The Other Nonprofits – 501(c)(4), 501(c)(6) & 501(c)(7)


The king of the nonprofit world is the 501(c)(3) public charity.  This is what most people mean when talking about a nonprofit.  It has federal income tax exemption, contributions to it are tax deductible to the donor and it is potentially state sales & property tax exempt.  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?

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 usually 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 IRS Form 1023, these organizations have a very different filing application, Form 1024.

Let’s look at three of the most common nonprofits other than the more well known 501(c)(3).  Here’s they are:

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/or 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.  One of the most common types of 501(c)(7)  is the recreational sports league, though ones geared toward kids may qualify for 501(c)(3).

These three 501(c) classifications have a use and provide a beneficial function for the nonprofit world.  They provide a tax-exempt 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.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

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Kristin Robledo
Guest

If you switch from a 501(c)(6) to a 501(c)(3) can you keep your EIN

Justin Williamson
Admin

Hi Kristin, the answer to that question depends greatly on how you are going about the transition from one to the other. I recommend reaching out to our Nonprofit Advisors to discuss the details of your plans. You can submit an inquiry on the following web page, and one of our advisors can contact you: https://www.501c3.org/501c3-services/start-a-501c3-nonprofit/

SHARON
Guest

how does a 501(c)(4) create an auxiliary 501(c)(3) arm?

Justin Williamson
Admin

Hi Sharon, I would suggest giving our office a call. Our nonprofit advisors should be able to give you some direction on how to create the 501(c)(3). You can submit an inquiry on the following page, and one of our advisors will reach out to you: https://www.501c3.org/501c3-services/start-a-501c3-nonprofit/

Richard McTere III
Guest

Can a college fraternity that does not operate a chapter (frat) house qualify for 501(c)(7) tax-exempt status?

Justin Williamson
Admin

You may still qualify for 501(c)(7) status with the IRS without a chapter house. What really matters to obtain your status from the IRS is the fraternity’s overall purpose. If you deliver an application that meets the requirements the IRS has defined as a 501(c)(7), then it is likely to get approved. If you need help with the application process, give us a call. We have worked with numerous fraternities in the past.

Steph
Guest

Can a 501(c)(3) organization be tax exempt at hotels in any state? Example if they are based out of IL but traveling to MI?

Justin Williamson
Admin

Each state has specific laws regarding sales and corporate tax. You may have to reach out directly to the hotels for more information before booking.

Alicia
Guest

Hello! I am a member of a dance company in Chicago and we are considering 501 c3 status or 501 c7. Right now we are financially supported through membership dues. Would that need to change if we apply for 501c3? If we apply for 501c7, can we still fundraise to purchase costumes, rent dance space, etc?

Justin Williamson
Admin

There may be many tradeoffs in going forming a 501(c)(7) instead of a 501(c)(3), but there really isn’t a clear-cut answer. Membership dues, fundraising, and the overall purpose, along with several other factors, will determine the appropriate tax exempt status. My best advice is to reach out to our team here at Foundation Group. We can offer consultation to take a better look at your idea and advise you further from there.

Debbie
Guest

I have a 501 C (3) can I change it to a 501 C (7). Our purpose has changed. If so how do I go about doing that?

Justin Williamson
Admin

This is not a simple yes or no answer, as the situation may need to be assessed to determine if the 501(c)(3) entity even still qualifies for exempt status as a 501(c)(7). Expert consultation is the best recourse to help you in this case. The IRS does not have a form you can file to request reclassification from one section of c code to another. If you need help, give us a call.

Mary
Guest

I am part of a 501(c)(6) association supporting women in construction. We offer scholarships to encourage women to enter construction careers. Is it legal to limit our scholarships to women only?

Megan
Guest

It’s been great to read through this discussion. Thank you for help! I currently own an S corp with my mother, a dance studio being one of our businesses. We are looking to start a 501c3 to help fundraise for local dancers (all under 18, including ones that attend our own studio) to help promote arts education in our city. We are worried about conflict of interest? I’ve done a lot of reading but feel a bit stuck. Any direction you could provide would be appreciated.

Craig Claypool
Guest
Your travel baseball team plays under the umbrella 501c3 of an area league. We pay that league for the use of a field to hold our practices. The team is currently winding down its season with the last tournament in July. I just manage the teams checking account. The head coach is now say that the just prior to the last tournament, he wants the balance of the account to be distributed to the parents/families to be used to offset their expenses at the last tournament which is in TN. We live in FL. Is this allowed as a 501c3?… Read more »
brian weldon
Guest

can a 501c5 union use members dues to pay for a picnic for the union members

Carlos Mar
Guest

To Mr Mcgrey .
I would like to file 501(c)7 because I would like to build a Amateour Club building to instruct the kids community here in Laredo Texas . I would very much like for you to help me and guide me through what steps I need to get this done thank you.

Valerie Williams
Guest

Are the 501C 3,4,5,6 and 7 fall under Associations or are they truly non-profits that help other Associations. Not sure if I am asking the right question and the reason why I am asking is that I handle the non-profit 501c3 organizations in my hotel and I have another colleague that handles Associations only and lots of times there is confusion as to what is my Market. Can you clarify this for me?

Bill
Guest

Greg:
Is there any prohibition for a Permanent Resident to pay the lobbying portion of a 501 c 6 trade association dues?

Cindy White
Guest

I am on the board of a 501(c)(3) rowing organization. Our mission is to provide affordable and accessible recreational and competitive rowing programs for youth and adults. We are considering joining forces with another rowing organization, but they are proposing that our youth program be removed from the 501(c)(3) and combined with theirs under their existing corporate structure. Would this jeopardize our 501(c)(3) status? If so, are their any creative ways to have the youth programs be in a separate legal entity and still keep our 501(c)(3) status?

Rebecca
Guest

Hi, I am
In NYC and I just recently started an anti-bullying group and I am not sure which 501(c) to file for. I am also wondering if there is an application fee?

Justin Williamson
Admin

It sounds likely to be a 501(c)(3), but the type of 501(c) the group should apply for would depend on the type of activities it intends to carry out. There is an application fee of $275, $450 or $800 depending on the organization’s proposed revenue earnings. I recommend reaching out to our office to discuss how we can help navigate you through the filing process and guarantee your application’s approval: https://www.501c3.org/501c3-services/start-a-501c3-nonprofit/

Becka
Guest
I am founding a non profit organization that assists families dealing with pregnancy, infant and child loss. We Advocate, Raise Awareness and Support for Pregnancy Infant and Child Loss. We will be offering reference and Referrals to lnternational, National State and Local Government and privat,e non profit, and specialty groups that can offer assistance and services. We will be sponsoring events and fundraisers for our group and for special project like memorials to fallen law enforcement officers to float representing our organization in parades, offering speaking to the public at conferences and offering special assistance of funeral arrangements and free… Read more »
Justin Williamson
Admin

If you are seeking to incorporate this nonprofit and file for 501(c)(3) status, you will need a board of directors. Both state and federal law require a charitable organization to have a corporate board of directors. These directors are the group of people charged with overseeing the governance of the nonprofit and helps ensure that the nonprofit is operating in accordance with its purpose.

Maureen
Guest

Thanks for the article I have a client who would like to donate to a 501(c)(5) and is wondering if that contribution is tax deductible. Can you give some advice if that donation would be tax deductible?

Justin Williamson
Admin

Donations made to 501(c)(5) organizations are generally not tax deductible.

Jill
Guest

We are a non profit registered in FL., 501 c 7. At the time of inception we never had to file with IRS because we were under the 5 k limit. Fast forward 10 years and I filed a 990 postcard whic triggered our revocation. Can we use 1023 ez to file for reinstatement? What is the difference between 1023 ez, 1023 and 1024 regarding revocation reinstatement?

Justin Williamson
Admin

Hi Jill, As a 501(c)(7), the only filing option available is IRS Form 1024. Both versions of the 1023 are specific to qualifying 501(c)(3) organizations. The process for reinstatement will go along with your 1024 application. I highly recommend you reach out to our staff about your situation. We work with over 100 revocations every year. This isn’t a good DIY project. You can submit an inquiry on our website here: https://www.501c3.org/501c3-services/nonfiler-revocation-list/

simchuck
Guest
Hi Greg. Thanks for the informative articles and actively-managed replies. I am the Treasurer for a newly formed homebrew club, and looking to set up the proper legal paperwork for managing our finances. We do not yet have enough history for me to say where we will fall with annual revenues — I assume less than $5,000 in the first year, but we have already discussed activities which will help raise money for the club, some of which could conceivably push us over that limit. We have so far established our preliminary by-laws, and a member dues structure. All of… Read more »
John Datsko
Guest

Does our Volunteer Fire Department (a 501c4) have to file an annual 990?

Fern
Guest

Dear Greg:

We are starting up a merchant’s association to promote the business interests of the shopping development. Our thought is to form a not for profit corporation, with members to pay dues. Do we file as a 501(c)6?

Brian
Guest
Hi, great column. I started a memorial golf tournament last year in honor of my wife’s cousin who passed away. We raised $16,500 in donations, sponsors and golf fees. It cost $6000 to put the tournament on and we split the money raised, $5k to a charity and $5k to a 529 college savings plan set up for the 2 year old daughter who he left behind. $500 was kept for expenses this year. This year we look to grow stronger and raise more money. We would like to become a non-profit, but I believe the private donation piece makes… Read more »
Megan
Guest
My husband was injured at work last year and his mother has organized a benefit on our behalf in order to try to raise some money to help us with the medical bills. She told me to have a bank account set up to use as a donation account, which I did. I got an EIN number from the IRS and the account is up and active now. Now my mother in law is telling me that I have to get a tax-exempt status in order for anyone to donate money because they are going to want to use it… Read more »
Lisa
Guest

We are a family all volunteer 501 c 4, on a shoestring budget. We offer free prevention and education on tick-borne diseases.to schools and community/professional organizations whose activity place them at high risk for a devastating illness.

I am looking to apply for grants, but I noticed most say they offer to 501 c 3’s. Are we at a disadvantage by being a 501 c 4 in applying for grants?

Rebecca
Guest
Hi Greg, I work with a national sailing organization that includes both adult and youth members. We compete in local regattas, as well as national and international regattas. Members pay dues (this makes up about 75% of our budget) and we receive the rest in donations from one company. We don’t have any facilities, employees, equipment, or even an office. For the last 8 years, we have been a 501c7 organization with an EIN. I’d like to re-file and change our status to a 501c3. We seem to walk that fine line between the two, since we are both adult… Read more »
James
Guest
Hi Greg, We started a group of business owners with lucrative means, this group has a monthly fee that has to be paid by the members of the organization. I am trying to open a bank account to keep track of the money that’s coming in from membership fees, eventually we want to raise funds for projects that will be funded by the members and make a profit off of; We want to allocate some of the profits for charity or give scholarships to students. Would this apply to a 501© 6 or would this be considered a corporation? How… Read more »
Greg
Guest
Greg, I thought we had a group exemption from our national association. But as far as anyone can now tell, there was no formal exemption, simply oral declarations based on National’s rationale that under $5k in gross it didn’t matter (pre-2007). We finally discovered some old paperwork. It seems we were a 501c6 as of 1975 under a different name. But we haven’t filed a 990 post-2007, so the 501c6 status was revoked. (I finally searched using our EIN; it was listed as revoked under a truncated version of our present association name). Post-2007, gross revenues fell between $4k and… Read more »
Katie
Guest

Greg, thanks for bringing all the extra info to us in the comments!! Very useful.

Don
Guest

Greg,

There is a local baseball organization that has recently been in the news for potentially fraudlent activity. I have searched Guidestar and cannot locate anything about the organization. The organization listed on it’s website that it is “non-profit”, however I am wondering if they need to file any public information. It upsets me as I and several of my friends have paid signficant money to the organization for our kids to play ball. Is there any tax filing requirments for this organization? Form 990?

JLMealer
Guest

Sorry, I closed this prior to completing the comments…
This is all very minimal pay for the Company CEO and directors, et al., we simply need to get America back to work and my “other” campaign may flounder without massive support. so this is Americas best hope from the outside.

JLMealer
Guest
Hello, I am forming a non profit company to both allow for paid training for individuals in various jobs from construction, welding, Mfg., etc., while ALSO maintaining and offering them a business loan (once their business plans are drafted and worthy of investment) to put America back to work. I know the (c)(4) has this covered, but since I will be approaching large groups, wealthy people and corporations for donations as well as vacant building owners for lease write-offs, I must know the best route to take so THEY can write-off their donations. Can.Will you help me in figuring this… Read more »
Leslie
Guest

Greg,
Eight families in our neighborhood are going together to have a water well drilled and it is being paid for by the eight families. We are wondering if we can file a nonprofit corporation? None of the officers or members will be paid. The monthly dues of $30 per family will be used to pay for electric, any testing and maintanence needs. We are just now looking at the paperwork needed for this and are not sure what to do. Any help would be appreciated

Thanks you,
Leslie

Kristain
Guest
Dear Greg, I stumbled upon this while researching tax status for a summer swim team that I have recently become the Treasurer. We have not filed for any tax exempt status. We do have a tax id so that we could open a bank account. We take in ~$5k in sponsorship donations (which are not tax deductible) and ~$5k in other fundraisers, concession and merchandise sales. The remaining revenue is from registration for the team members. All of the coaches make more than $600. My questions are: Are we required to file FORM 1099-MISC for the coaches?, Can we keep… Read more »
Chuck Johnson
Guest

I would like to know if a 501 c3 can donate to another 501 c3. We are a group that obtains monies to give to our wounded when they come home from the war. There is a another 501 c3 group in the state that builds homes for some of our homeless vets. Are we able to donate to them to help them out?

Debbie
Guest

We are a lake improvement association with 501(c)4 status. Some have recently suggested we consider offering merit-based scholarships available to children of members who pursue undergraduate studies in fields such as environmental, conservation, botany, etc. I have searched online sites and irs.gov and it seems scholarships are covered in 501(c)3 organizations or by foundations separate from other tax exempt organizations. Can a 501(c)4 provide scholarships? Where do I find info on this?

Staci Hartfiel
Guest

I have been told in the past that you can only use tax-deductible contributions on certain items for the club. For example, if the player will get to keep something after the team is done, such as a uniform or bat bag, then tax-deductible contributions CAN NOT go towards these items. However, they do go towards “TEAM Expenses” like equipment, travel to games, lodging for games, food during games, etc. I really need clarification.

Tony
Guest

Dear Greg,

Really appreciate all the information in this thread!

Our question: we are a 501 c 3 church with a determination letter, and we tithe monthly to other 501 c 3 organizations. We have a non 501 c 3, but still a 501 c (other) entity on our requisition list. Can a 501 c 3 give to a non 501 c 3 if the non 501 c 3 is still a 501 c (other) organization? Couldn’t find an answer anywhere …

Many thanks,
Tony

Heather
Guest
Hi- first let me say this is such a great website because this is so confusing! I am the treasurer of my local Moms Group. I believe we meet all the requirements of 501(c)7. Our Gross revenues are around $6k. Annual expenses about half of that. All of our expenses are club related. We have been around for years but previously were a DBA set up under the founders name. Just this year I was told to get an EIN and incorporate in CT to protect the Board from liabiltiy. We are now officially a non-profit Connecticut corporation. However, what… Read more »
Maria
Guest

My daughter’s swim team is currently a 501(c)(7). We want to convert this to a 501(c)(3) – (all the participants are under age 18). What IRS forms should we use to accomplish this? Thank you.

Kathleen Walls
Guest

One other question that will affect our decision. If we do file a form 1023 for tax free IRS status, how often do we need to refile oris it a one time only expense? Thanks in advance.

Kathleen Walls
Guest

Thanks. You do clarify the situation for us. I will have to think about the options.

Kathleen Walls
Guest
Hi Greg, You are offering a real service here. I have been going crazy seeking answers. We are a small organization and filed for a 501c corporation in Florida. We work with feeding, neutering and when possible finding homes for abandoned and feral cats. There are only two of us actually working at this. Last year we took in less than $2000 and spent way more on food and neutering not even counting gas. We were told we need to register with the Fl Dept of Agriculture and Consumer affairs if we solicit donations. To fill out that form it… Read more »
frank capone
Guest

we have a runners club and fit all the criteria of a 501 c7. Are we allowed to receive grants as a 501 c 7?

Daniel spencer
Guest

We are starting a travel basketball game team and are looking into the 501c, but the price is like 400 to 500 dollars in TN to get one. If we dont get a 501c can sponsors still write off their donations and can we just pay the taxes on any donations we receive or or raise. Thanks

Chris
Guest

Greg,

I am starting up a travel basketball team in my community. My goal is to build up a county wide program in the near future. I wanted to know if my program could be registered as a 501(c)(3) or would it have to be registered as a 501(c)(7). We do plan on approaching local businesses to help with sponsorship. Also, would we have to file as a mutual or public benefit.

Thanks!

Teresa
Guest

Greg,

I am involved with a hobby model train club registered as a 501(c)7. What are our limitations on accepting donations (we understand they aren’t tax-deductible) to help cover the expenses of the club? How do donations fit into the 35% limitation? We want to be able to accept donations from visitors to our railroad displays and community supporters, but want to make sure it is allowed.

Thank you!

Randi
Guest

Greg,

I have read that Charities (501 c 3) have to register in any state in which they want to do fundraising. If a 501 c 7 is fundraising by, say selling a cookbook, does it have to do something similar if any of the sales are to people out of the home state?

Also, can two 501 c 7 organizations (separate, but with overlapping members and one with a budget below 5k and one over 5k) share/split monies from the same cookbook fundraiser?

Thanks

Al
Guest
I have several 501c7 questions, I apologize in advance. We are a car club with an EIN, but no official status. The club was formed in Nov 2009. If we choose to file for the 501c7 status, do we (or should we) file taxes for 2009 as well as 2010 & 2011? I know in 2009, the club did not have gross revenue of over $5000, but I do not know yet, about 2010 or 2011. Also, if we do need to file the 990 (or 990-N) form, which comes first? Filing taxes (990 or the 990-N) or filing for… Read more »
Loretta
Guest

Greg,
What is involved in converting a professional trade organization from its current status as a S-corp to a non-profit 501(c)6? I believe the organization’s corporation was registered in either Florida or Georgia. The founder currently resides in Georgia. Where is the best state to register the non-profit.? Typical cost?

Thank you

Jack
Guest
Greg, I am president of a newly minted 501(c)(3). Our purpose is to create feature films using local talent. Think community theater on a screen instead of a stage. We have been approved. A notion has come up from our board about awarding “work points” for the people who work on our productions and then ever so often taking a percentage of our net income from these films and using that as compensation for the people who contributed their time and talents. My question to you is: does doing this jeopardize our status? I see food co-ops and similar operations… Read more »
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