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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:


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).


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.


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 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.

This Post Has 228 Comments

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

    1. 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.

  2. 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?

    1. 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.

  3. 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?

    1. 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.

  4. 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?

    1. 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.

  5. 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?

    1. Absolutely. Scholarships can usually be as targeted as you want them to be, so long as the purpose of the restriction is not with the intention of being discriminatory.

  6. 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.

    1. Great question, Megan…we hear a variation of this quite often. Basically, you cannot set up a nonprofit to specifically underwrite costs for participants of your own business. While you may motivated by good intentions, the IRS sees it as growing your customer base via tax-deductible donations. It won’t work. If, however, your nonprofits raises funds to give scholarships to any area dancers, and you legitimately do not attempt to influence which dance studio that scholarship is used, you may be able to do it. To really pass the smell test on situations like this, it’s helpful to install a scholarship committee that even includes other studio representatives. Good luck with it!

  7. 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? I say it is not, but I am trying to confirm from a legal source?

    1. I’d have to know a little more detail, but it doesn’t sound kosher to me. 501c3 assets are permanently dedicated to a charitable purpose, no matter how they were originally obtained, whether by donation or service fee. As such, giving money back to families to offset their voluntary expenses (travel, food, etc.) shouldn’t be done. If the team is routinely having money left over at the end of the season, maybe you need to lower your participation fees.

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

  9. 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.

    1. Hi, Carlos. We’d be happy to talk with you. Go to our “Start a Nonprofit” page on our website and simply submit a request for consultation.

  10. 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?

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

  12. 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?

  13. 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?

    1. 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:

  14. 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 infant caskets and burial gowns to families meeting funding to help families that meet financial requirements.Do I have to have a board of directors for my organization as no one will be paid and I will be running the organization with the assistance of volunteers.

    1. 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.

  15. 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?

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

  16. 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?

    1. 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:

  17. 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 this is intended to promote education and social interaction for the members.

    Do we need to file for not-for-profit 501(c)(7) status in order to get an EIN? I assume we need the EIN to get a bank account in the club’s name. If we do not file for 501(c)(7), will we have to pay taxes on member dues, etc?

    Also, as our club’s functions necessarily involve alcoholic beverages, does the not-for-profit status help (or hurt) us in any with regards to liability issues, etc? Do we need to explore some other form of legal protection or insurance?


    1. Sorry for the delay in replying. You do not need 501c7 status to get an EIN. Moreover, assuming your average annual revenue is under $5,000 (calculated on a 5 year average), you can operate as a self-declared 501c7 without actually seeking IRS approval. If you anticipate your average exceeding $5,000, you will need IRS approval lest you find your organization considered taxable.

      I can’t see how the alcohol issue affects much. You might want to get the opinion of someone you trust in insurance on that one.

      If your home-brew is great stuff, be sure to send us a sample! I nice hoppy IPA, a high gravity Russian stout… 🙂

  18. 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?

  19. 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 that a challenge. We would like to keep the private donation to the daughter’s college fund going as well as the donation to the charity. Any help would be greatly appreciated

    1. Your instinct is correct, Brian. Pretty much everything works except for donation to the daughter’s college fund. The IRS would consider this private benefit because it targets a single individual and not an overall cause. Plus, the money is going to a future possibility, not a current benevolent need. It’s a wonderful thing you are doing, but it wouldn’t get approved by the IRS.

      1. That is what I thought, If we were to drop the donation to the family and just donate all proceeds to charity, which 501c would you recommend we form? Thanks for your help. We would be interested in using your firm if we go that route.

  20. 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 as a tax deduction. I have been trying to figure out what I need to do; I don’t want to make this a business, but I can’t figure out any other way.

    1. Unfortunately, you cannot make this into a tax-exempt charity. Such funds designed for the benefit of a specific person or family can never qualify for IRS charity status and gifts are never deductible to the donor.

  21. We are a family all volunteer 501 c 4, on a shoestring budget. We offer free prevention and education on tick-borne 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?

    1. Without a doubt. Typically, charitable foundations cannot fund non-charitable nonprofits. Public (government) grants are difficult for any nonprofit. For a 501c4, it’s extremely unlikely.

  22. 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 AND youth, but we also train and compete in national competitions. What do you think?
    Thanks for your help!

    1. It may be possible to qualify as a 501c3, but I would certainly have to know more about what you’re doing. One thing for sure is that your donor base would have to expand substantially in order to qualify as a public charity. Also, you cannot reclassify the existing 501c7. You would have to form a new organization in order to be a 501c3.

  23. 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 do I go about opening a bank account do I need a tax ID if so what do I register this organization as?

    Thanks in advance for the feedback.


    1. This is not really what a 501c6 is about. To qualify as a 501c6, you must be a “business league”, generally defined as a group of businesses coming together to promote each other and improve business conditions. There should be some unifying quality, such as geography (think Chamber of Commerce) or similar line of work (think North Florida Association of Auto Dealers). An interesting side note is that a business league cannot be a group of franchise owners of the same company. Midas Muffler shop owners tried this and the failure ended up the subject of an IRS Revenue Ruling. Your description is more of joint venture, which would not qualify.

  24. 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 $7k. I’m assuming we can reapply (via Transitional Relief before 12/2012), and that should square things with the IRS. Is that correct?

    I think we would rather be a 501c3 like our sister local affiliates (our “meetings” consist of a presenter on an economic topic–education); but under the circumstances of having been revoked, that looks like an even bigger mess.

    Thoughts? And how much does something like that cost to have sorted out by a firm such as yours (reapplication to 501c6; new application to 501c3)? [Illinois; We’re not incorporated]

    1. You would qualify for transitional relief only if you were reapplying as a 501c6. But that shouldn’t necessarily matter. The process is pretty much the same whether you are pursuing 501c6 reinstatement or a new status of 501c3. Your revenues aren’t high enough to warrant having to file prior year Form 990s. The only problem I see with pursuing 501c3 status is that you may have some taxable revenue issues for the period of time you were operating after revocation. But again, with such small revenue totals, it shouldn’t be a big problem. You should definitely pursue 501c3 if that is a better fit.

      Call our office and speak with Ken or Mick. They can better evaluate your situation and help you determine what you need and how we can help.

  25. 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?

    1. It depends. “Nonprofit” doesn’t mean they ever applied for and received tax-exempt status from the IRS. Even if they did, they may not have had to file a full information return (Form 990) if they had gross revenue under $50,000 per year. If you cannot find it on Guidestar, try the IRS website…you can search there to. If it isn’t in either place, it is not tax-exempt.

      1. You could also check with the state to see if they ever registered as a non profit depending if they incorporated or not.

  26. 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.

    1. Donations to 501c4 organizations are not tax-deductible to the donor. The only way is with a 501c3, which might be possible. I highly recommend getting our assistance with this formation if you go forward.

  27. 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 one out. We also run a non profit Cancer housing charity, that is being rebuilt as we work with a local Oncology group.

    Thank you.
    JL Mealer

    This is all very minimal pay

  28. 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,

    1. This sounds like a candidate for 501c4 status. You could incorporate as a nonprofit and operate as a provisional 501c4 without filing for IRS recognition if gross revenue will always be less than $5,000 per year. I wouldn’t do anything without more consultation on the specifics of your plan, though. Too many variables to answer here.

  29. 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 operating this way or should we be seeking tax exempt status?, How involved is tax work for a 501(c) organization? I’m thinking 501(c)(3) vs. 501(c)(7) based on what I’ve read. We want to ensure we are operating properly, but don’t want to add unnecessary financial or tax burdens for a summer league.
    Thanks so much for any advice you can provide!

    1. If you are bringing in more than $5,000 annually, you must apply for tax-exemption or else be considered for-profit and liable for corporate tax returns. It’s either one or the other…and the tax work is comparable. As far as 501c3 vs. 501c7, that depends upon the ages of the participants. Any participants over 17 will likely necessitate 501c7. The coaches should probably be paid as employees unless they are freelance coaches who bill for their services.

      1. Thank you Greg. I wanted to clarify that the rule is on “gross revenue” and not net revenue. Each year we have less than $5,000 in NET revenue. Our gross revenue is more, but always offset by expenses for the team.

        We do have a few swimmers that are 18. Would that prevent us from getting 501(c)(3) status? This seems better than 501(c)(7) since 501(c)(3) allows for donations to be tax deductible. Are there any other big advantages or disadvantages to one or the other?

  30. 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?

  31. 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 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?

  32. 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.

  33. 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,

    1. Tony…A 501c3 can give to a non-501c3, so long as it is designated for an exclusively charitable purpose. The donating 501c3 must have a complete accounting of the use of funds by the non-501c3, as it is accountable for making sure the expenses qualify as charitable.

  34. 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 are my tax filing requirements? Do I need to do an 1120? We are also on the fence about trying to get the official Tax-Exempt status since the $850 fee is prohibitive and the form itself is daunting. Also, I was told I Would need to prepare 3 years of financial statements which will be a huge process since the only records I have for the years before I took over are basically bank statements.

    1. Sounds like you do qualify for 501(c)(7) status. Because your expenses are over $5,000, you have to decide whether to file Form 1120 and pay taxes or apply for IRS tax-exemption. The good news is that your filing fee is not $850…it’s $400 since your revenue is under $10,000. The form is indeed daunting, but we provide this service if you go that route. We can make it pretty easy for you. Give us a ring for more info.

      1. Thank you Greg! $400 is much more reasonable then $850. However, now i have another question. I was speaking to a tax accountant I know this morning and she indicated that if we applied for the exemption status and tell the IRS we have been around for almost 10 years (operating as a DBA before 2011) then we would automatically be denied because we have never filed a 990 in the past. She said we would then be required to re-apply for exemption going forward only and we would be on the hook for preparing 1120s for the past years for which I really have no records. We did get a brand new EIN effective 1/1/11 and incorporated in 10/11 so she suggested we just complete the 1023 as if we have only been existance since 2011. Do you agree? We are such a small group and are all volunteers but my name and SSN are on the EIN aplication so I don’t want to end up having this come back and bite me for trying to do the right thing.

        1. Your accountant is well-meaning, but very misinformed. It IS possible to get status all the way back, but you have to know what to do. We do this all the time. I do NOT recommend using a new corporate entity, lest your old one find itself on the hook for corporate taxes and penalties/interest. In addition, the law requires disclosure that the new organization is a successor organization, which guarantees tax problems. The safest bet is to use the old organization and apply for status that is retroactive. We can help you do that.

  35. 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.

  36. 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.

    1. It’s a one-time filing, but your organization will have to report annually to the IRS with Form 990. We have quite a few articles on the website here that deal with that.

  37. 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 looks like we need either a tax exempt status with the IRS or some letter of determination recognizing us as a 501 c. I see mention on one “help” publication at IRS of a “Letter application” but nothing about what form to use for that. Then I see a form 1023 which costs $400. Other places say we do not need to file this if we collect less than $5000. We desperately need the little we do get in contributions. How do I get this letter recognizing our 501 C status? Any advice you can offer will be appreciated.

    1. It is true that if you consistently take in less than $5000 gross revenue per year, you can operate as a 501c3 without actually applying for and receiving official tax exemption determination with the IRS, so long as your activities qualify as charitable. What you are describing seems to do that. The only problem with this statutory status is that no donor can consider their gift tax deductible. And, it still likely doesn’t relieve you from filing with the state of Florida in order to solicit donations. The best way to get official IRS recognition is to hire a professional firm like ours to shepherd you through the process. That being said, if you do not foresee your organization growing much beyond the current $ levels, it’s hard to justify the expense of getting (and maintaining) official determination. It’s a tough call…if you expect to grow, invest in the official status. Otherwise, you are probably better off operating as you are.

  38. 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?

  39. 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

  40. 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.


    1. Your status as a 501c3 vs 501c7 has everything to do with the age of the participants. If it’s kids under 18, then 501c3 is likely the way to go. Adults or mixed groups would likely need 501c7 status. Public benefit with regard to corporate status. We can help with all of this if you need it.

  41. 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!

  42. 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?


    1. The answer to the first question is very fact and state-dependent. Call our office and speak to a representative to help you figure this out. Some states require 501c7 orgs to register, some don’t.

      As to revenue splitting, that’s OK. Just make sure your recordkeeping fully reflects the respective portions of income and expense for each organization.

  43. 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 the 501c7 status?

    The club currently sells items to members; tee shirts, hats, stickers, etc. Is this allowed as a 501c7?

    Also, I see some of the questions above refer to sponsors, I need to elaborate on one and ask my own. We also have sponsors and we give them sponsor acknowledgement. But, on the forum, they are allowed to come and post their sales or whatever via the forum post. Is this allowed under the 501c7 status?

    1. OK…990N would be the appropriate return, but it is too late for 2009 and 2010. Given that you don’t yet have status, this will not be a big deal. Get 501c7 status first. We’d be happy to help with that if you need it. As to member trinket sales, no problem there. Sponsors posting ads in the forum of your website is a big deal and should be stopped. Allowing promotional activity goes beyond the bounds of gift acknowledgement.

  44. 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

    1. You can’t really “convert”…you pretty much have to start with a new nonprofit corporation. The other part of your question is too fact-dependent to really answer here. Call our office and one of our reps can help you figure out what’s best for you.

  45. 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 do something similar with their members. I know there is a separate category for farm coops but the food coops I’ve looked at mostly have 501c3 status. If people are “members” of our organization AND also work on our productions, can we not also compensate them (I know we can) but if we use the formula of sharing in our proceeds are we running afoul of the “inurement to the benefit” of members concept? If so, should we NOT have actual members and simply have people work for the compensation (based on this point system) so we are ‘sending profits to members’? We’d prefer to have actual members of the organization for a variety of other reasons.

    1. Honestly, there are way too many variables and pitfalls here to give you an actionable answer. You should consider calling us for an in-depth consultation. You could indeed fall afoul of inurement rules if you approach this the wrong way.

  46. Hi, we’re currently in the process of forming a 501(c)(7) supporters club for our local sports team with more than $5k in total receipts anticipated. While our initial year’s income will be nearly all member dues income, next year as our renewal fees lower we’ll be looking for other sources of revenue to fund activities. We normally do fundraisers like tailgates (selling food) and selling merchandise for our club at a small up-mark. My question is two-fold:

    1. Say we spend $5 on a shirt and sell it for $10. Do we report $5 in fundraising revenue or $5 of expenses and $10 of fundraising revenue? Is there a way to be able to account for the expenses of making the item or whatever the revenue goes for (we’re not pocketing any of it) and deducting that from any fundraising revenue?

    2. Would it be possible for one of our members to individually order and sell merchandise on their own and then donate the proceeds at the end so we’re not having to handle the full cost of the items and the donations as non-member income?

    1. And I guess as a clarifying follow-up, if it’s our members who are buying the merchandise from our club, does that count as member income? Thanks!

  47. I asked this question above but it looks like I should have posted it here instead of replying to one of your answers. So I’m going to ask again.
    We have a 501 c 7. We are a swim team that participates in meets, parties, other fun stuff.

    1.This year we had some sponsors. Sponsors at the highest level have their logo put on a banner at our functions, have a link on our website, and appear on our Tshirts.

    The middle level gets put on the banner and website.

    The lowest level gets put on the banner.

    Should any or all of these be reported on the 990-T or are they exempt function?

    If they are taxable can we deduct the T shirt expense from the income (or only the screening fee)?

    2. We also sell concessions at our home meets. This is all done by volunteers. Since it is done by volunteers is it exempt function income. We sell to members and non members. Is any part of the profit taxable?

    I appreciate your help on this.

    1. Tough question to answer in this space, but here’s the nutshell. As long as you are merely providing sponsor acknowledgment and not ad space, you should be fine. The difference is important. Avoid calls-to-action (Go buy from Bob’s flowers!) and superlatives (Bob’s Flowers is the best florist shop in town). If in doubt, notice the difference between public radio/tv sponsor acknowledgments vs. commercials on commercial radio/tv. Concessions should be fine, too.

  48. Thanks. Would that mean if a 501c7 obtains funds from charging admission to parties related to the purpose of the 501c7 and donates the funds collected throughout the year to 501c3 organizations those donations would be deductible from 501c7 gross revenue?

  49. How are the contributions donated to 501c3 organizations by 501c7 organizations handled/viewed by the IRS? How are documented contributions by 501c7 organizations to organizations such as schools, community centers etc handled/viewed by the IRS?

    1. There is typically no problem with a 501c7 donating to a 501c3. Just make sure that the majority of the 501c7’s expenditures are for 501c7 purposes. That being said, the reverse is usually not OK…that is, a 501c3 donating to a 501c7.

  50. I help run an adult baseball league. We filed as a non-profit corporation in our state 3 years ago but have not submitted our application for tax exempt status. Are we required to file for tax exemption or can we continue to operate in this manner? And, if we do decidet to file for tax exempt status, it looks as if C7 is the way to go, correct?

  51. We have been operating an adult vintage base ball club for three years and have not registered with the IRS because our annual earnings are far below $5,000. We have not applied for an EIN, nor have we filed anything with the IRS. We obtained a non-interest bearing checking account using our president’s Social Security number. Basically the club’s costs are covered by its membership dues.

    1) Do we have to file for an EIN with the IRS?
    2) Do we have to file a Form 990-N annually with the IRS?
    3) Can you confirm that we are not required to register as a 501(c)7 with the IRS? Our club is on a tight budget and we don’t want to incur any costs unless it’s absolutely necessary.

    Thank you so much in advance for your help. It’s been difficult for us to get straight answers from anyone.

    1. If your club’s gross revenue stays below $5,000, you are not required to do anything other than what you are currently doing. No EIN nor 990-N filing is necessary.

      1. Greg, your advice is very much appreciated. No one at the IRS would tell us that our club didn’t have to register an EIN or do a filing, given that we’re below the $5K threshold. We also couldn’t find a statement like that in any of the IRS’s literature.

        Thanks again.

  52. My hobby club is thinking about filing for 501(c)(7) status. Would be be limited to 35% of our total annual income if we sold advertisement space on our club's fourm website? What are our options if the club doesn't earn more than $5,000 annually?

    1. Be careful about selling advertising on your website. The IRS considers that unrelated business income (UBI). Because it is generated from a business activity that does not directly further your exempt purpose, it is taxable revenue. That's a complication you do not need. Also, if you believe gross revenues will consistently be less than $5,000 each year, you are not required to seek 501c7 status to be considered tax exempt. Just keep in mind that donations to 501c7s are not tax deductible to the donor either way.

  53. Can a Chamber of Commerce that is a 501(c)(6) solicit donations from non-members so long as it includes the disclaimer that such donations are not tax deductible?

  54. Your articles are excellent and very helpful. Thank you for publishing them.

  55. We already have a trust set up for a friend that was killed by a hit and run driver. The trust gives out high school scholarships to his Alma Mater. His sisters are in charge of the trust. I would like to make it an official charitable trust, but I do not think they will want to diversify the board. It seems as though by default it would have to be a private foundation versus a public charity. Is this the way to go?

    Also, how many hours would you say a 990PF takes to prepare?

    Many thanks.

    1. If the sisters will constitute all or most of the board, then private foundation is pretty much the default choice. As to the 990PF, preparation time depends greatly on the degree of investment activity and scholarship distribution. The most complex and/or voluminous the transactions, the more complicated the return. In general, anything other than a 990-N is not a do-it-yourself project.

  56. I am on the Board of our local Rotary Club (501c4). We have been rolling around the idea of starting a separate account/fund, a sort of endowment fund, and seeking exemption under 501c3. Have you ever heard of just creating a separate fund for a purpose like this? It would enable us to receive monies left by passing members who wish to give part of their estate to the Club. We would use it solely for charitable purposes (scholarships, etc).

    1. Actually, yes. We have been working with Lions Club, International for about 4 years, assisting local 501(c)(7) chapters to establish separate 501(c)(3) foundations for their charitable works. This allows people to donate tax-deductibly to the charitable activities of a particular Lions Club, while the social activities continue in the c7.

  57. I live in a small town where most families are not very well off. I would like to start a travel basketball team for (7-10)5th graders. I am thinking about trying to raise between $1,000 – $3,000 dollars for the team. I was wanting to open a separate checking account (we will call the account XYZ Basketball) to keep track of the funds(that I will be in charge of). I really do not want the hassle of becoming an official nonprofit or group but I am curious if I am liable for the claiming the money on my taxes since the bank account will be in my name. All of the money will be used and spent on travel basketball. What will be the easiest way for me to fund raise money and keep myself out of any-sort of major financial liability?

    1. Great question, Jay. Actually, as long as you are bringing in less than $5,000 per year in gross revenue, you can operate this as a tax-exempt "club". People cannot claim any tax deductions, but the IRS will let you operate without a formal structure. And no, it should not affect your taxes. Just make sure you keep accurate records and don't co-mingle ANY club funds with your own.

  58. We are currently in the process of changing the status of our travel youth basketball club, and are looking into any constraints that prohibit us from filing 501c3. We currently only raise funds from team dues, but the absence of reasonably priced practice facilities is killing us! One of our board members is considering erecting a gymnasium barn for this club of 6 teams. If the club chooses to pay facility fees for this gym, does this raise a conflict with us obtaining and maintaining 501c3 status? Please advise – and thanks for all the helpful posts!

    1. There is a huge conflict of interest here. If the board member wanted to do this, then let the club use if for free, then its not a problem. Once rental fees come into place, things change quickly. If you decide to pursue 501(c)(3) status, these are the type of issues we can help you navigate.

    1. That totally depends upon your state law. Some states grant sales tax exemption to all nonprofits, other states only to charities…and some states not at all.

  59. My friend and i are starting a non-profit to fund grassroots organization to fight for more employment. I'm not sure whether to go 501c(4) or 501(c)5. There just isn't much written about 501(c)5s.

  60. Hi Greg,
    Thanks for giving out all this free advice…it's great.
    I'm the VP of a local hobby club. We're clearly a 501c7 and easily have less than 5K in gross receipts. The club goes way back, and the "books" have been passed from treasurer to treasurer for years and years. We've just recently been contemplating a name change, on which we'd have a vote at one of our meetings.
    We have a bank account, and our current treasurer just took over from the previous. No one has any record of us having an EIN. Apparently though that's just missing records from many years past, because the bank does in fact have an EIN. I realize the IRS allows us to change our name w/o having to change our EIN, but my guess is that no one has filed anything with the IRS like a 990 for a very long time….if ever. We can't even verify the EIN the bank has because no one really offers a search, at least for free. Would you recommend that if we change our name that we simply get a new EIN and open a new bank account, closing the old one, and then beginning filing 990s as we should, or should we keep the old one, assume it's correct, realizing that if we send a letter to the IRS that we're changing our name that they then may begin looking at the fact that we haven't filed anything for a very long time. Thanks.

    1. Do NOT change your EIN if you think you actually have 501(c)(7) status. It will invalidate your tax exemption…though you likely have bigger problems. Given your revenue numbers, your organization was not even required to file a Form 990 prior to 2007. Now, it is liable for 990-N. Your problem is that the same law that created Form 990-N for small nonprofits made nonfiling of Form 990 for three consecutive years result in automatic loss of tax exemption. The IRS is set to publish its first Nonfiler Revocation List sometime in April 2011. I expect your organization is on the list. This means you will likely have to refile for 501(c)(7) status. Keep in mind that the IRS allows small nonprofits with under $5k in revenue can operate as tax exempt without formal status.

  61. Hi Greg,

    I've been thoroughly enjoying reading your comments to several interesting questions and thought I'd throw my inquiry into the mix. I'm in the process of establishing a Chamber of Commerce 501c6 in my local area. Am I required to have a board of directors? Or could I get away with simply having a board of advisors? Thanks Greg!

    1. IRS regulations will require that you have a functioning, voting board of directors. You may choose to call them something else…advisors, trustees, etc…but they must have voting authority. Also, your state nonprofit corporate law likely requires at least 3 directors. Obviously, you may be on the board. Just watch out about hiring board members as employees. It can be done, but be sure that person abstains from voting on their own compensation.

  62. I work for a 501C3 and we are making a grant to a 501C4, are there any issues with that? The grant is not for lobbying or political activity.

    1. This is very likely a problem. As a 501c3, your activities and financial support are limited to charitable purposes. A 501c4, while tax exempt, is not charitable. It is a public or social benefit organization and it shouldn't normally be considered for such funding.

  63. Good afternoon,
    I row with a rowing club which currently has a 501c7 status. We are a competitive club and also have a youth program which is rapidly growing. We feel that achieving a 501c3 status will enable greater donations to the club. Is this accurate? Can we have both a 501c7 and 501c3 status?

    1. You can't have both. It is possible to convert a 501c7 to a 501c3, but you may have a problem if the competition involves adults. This could be overcome if the adult competition qualifies to be considered national or international amateur meets. We can assist with a reclassification if that is what is needed.

    2. n the discussion
      Can I file both 501c3 and 501c7 status

      1. Not for one organization. There’s no such thing as dual 501(c) status. Best practice would be 2 separate nonprofits. Short of that, it is possible to have a 501(c)(7) that operates a 501(c)(3)-compliant program that is segregated from the other activities. It doesn’t (necessarily) require separate IRS approval, and donations strictly to that program may be tax-deductible. But, exercise extreme caution here. Without direct 501(c)(3) designation, the program cannot guarantee donor deductibility, plus the rules and restrictions associated with trying to be dual-purpose within one organization are very strict. That’s why 2 organizations in these situations are usually the way to go.

  64. We have a unique situation here. In 1999, we organized a group of owners of vintage Chris-Craft boats. We focus on one model (the "Commander"). We are internet-based. In 2006, we formally incorporated the group. We charge no dues. Our mission (as stated in our bylaws) is to educate the owners of these classic vessels in the maintenance, restoration and upkeep of their boats. We archive the exchanged information into a very organized and yearly CD, which is sold to members. We also derive funds from registration dues at our annual event, and other sales (shirts, flags, etc.). Our coffers currently hold approximately $10,000. We are getting nailed on taxes. The governing board has decided to explore non-profit status based on our mission of "educating" the owner. Initially, it was thought our group would best be classified under 501c7 status, however, learning that contributions to the organization would NOT be tax deductible, we began looking into 501(c3) status. Given this very brief rundown of our organization, do you think we would qualify for c3 status?

    1. A 501c7 seems the more obvious choice, but a 501c3 might be possible under the right circumstances. There's not enough detail here to say definitively. You may want to consider calling us to discuss it.

    1. Too broad of a question, really. It all depends on what the purpose of the group is. If it is a social club, it may very well qualify. The need for such depends upon a number of factors, so you may wish call for more discussion.

  65. I am part of a grass-roots petition drive aimed at dissolving a local taxing authority. Although there is no candidate or election involved, there is a political component to our advocacy. We are considering organizing to accept donations. Can we organize as a 501(c)3? Should we organize as 501(c)4 – or other?

      1. Are you aware of any grants available for 501 (c) 7 organizations? If so, where may I find them?

        Thank you.

        1. Not very likely, Corrie. Foundations cannot give to 501c7s. Practically all gov't programs would exclude them, also. Individual donors can support a 501c7, but not tax-deductibly.

  66. our municipality (small 30,000+ city) has on its tax rolls over 67 religious organizations, along with 2 tax exempt colleges, tax exempt railroad, etc. Needless to say, the assessor must verify that they actually are eligible for tax exempt status. Will current forms 1023 be sufficient or is there anything additional (in newyork state) as proof. with a 71% tax increase, taxpayers are up in arms. does the tax exempt status of one property carry over to as many properties as the religious organization owns?

    1. I assume your question relates to real estate taxes. This varies greatly state-to-state…even city-to-city. It is common to see nonprofits pay property taxes on real estate not being actively used for an exempt purpose. Check with your local assessors office to be sure.

  67. I was on your website because I am looking into making an organization in my community. It is a non-partisan, pro-education group looking to enhance education in the schools. We would like to be able to endorse candidates, help them, and also raise money to promote the candidates along with our school budget. What are the steps of what I should do? From what I read it seems as though a 501(c)(4) is the best way to go, but because I am new to this I would like to check with someone that has a better knowledge about the topic to make sure everything is being done correctly.

    Thanks in advance

    1. Based on what little you mentioned, it does sound like a 501c4 might fit the bill. I recommend calling our office and discussing your plan in more detail with one of our sales consultants. They can help you figure out the best way to go.

  68. I'm the new Vice President of a professional firefighters' association in the state of Virginia and I'm trying to learn the ropes… We are registered as a 501(c)5, but we are not technically a union because we are in a right-to-work state. I know that donations to our organization are not tax-deductible, but do you know if there are limitations on the funds we can raise to support some of the programs we might sponsor in the future? (we would like to provide fire safety and prevention programs, seek out community partnerships to raise funds for other nonprofits, and fund specialized training for our firefighters where city government funding falls short)


    1. Your only limitations might be based on what you solicited the donations for (see our article of misappropriation of funds). The bigger issue to me is why you are a 501c5. Sounds like you might be better suited to 501c6.

  69. I am the GM of a 2600 lot recreational development. We have an 8 acre area with amenities for dues paying members including a pool, clubhouse, and RV sites. We maintain roads within the subdivision and enforce C, C, & R's. We are still engaged in lot sales. We are not responsible for maintaining an owner's lot or structures. All moneys go toward the operation of the POA. We are owned by the members. We have a few permanent homes that are occupied but most of the activity is seasonal recreation. Am I right in assuming that we are a 501 (c) (4)?

    1. Maybe or maybe not. You may qualify to be a 501c4, but that is only true if your organization applied for and received such status from the IRS by filing Form 1024. HOAs and similar orgs can usually operate as either a quasi for-profit that pays taxes via Form 1120-H or as a 501c4.

  70. I am on a committe that is attempting to raise funds for the purchase and installation of a handicap lift for the disabled to have access to a local VFW Post. The Post is a 501c 4 organization and we are considering applying for grants under the Posts classification. Is this possible and also are grants available for 501c 4 orgs?


    1. You wouldn't likely qualify for a grant from a 501c3, but that doesn't mean someone couldn't donate (or "grant") you the funds. It just wouldn't be a tax deductible gift given your 501c4 status.

  71. We are part of a snowmobile club which is a 501(c)7. A question was recently raised in one of our club monthly meetings. Can we legally pay a member of the volunteer club for the use of their personal equipment such as a 4-wheeler for doing work on the trails? If so, what would be the limit that could be paid?

    1. Karen, reimbursement of direct expenses is probably the best way to go. Gas, oil, repairs arising out of activity for the club, etc. If the member is in the business of providing such service to the public, it's even OK to pay his fee as long as it is in the best interest of the club to use him instead of someone else…assuming, that is, that he has no say in picking himself for the job.

  72. We are members of an adult amateur golf association that takes membership of $200 a year and $120 for each golf tournament. All fees are used for tournaments and the meals of the players. Non members can join the tournaments without getting the trophy awards. Our gross receipts each year is more than $25,000. Are we grouped as 501(c)(4) or 501(c)(7)?

    We set up the corporation in 1986 and has been filed as a regular c corporation. Should we convert the existing organization to non-profit for tax purpose? Should we set up a new organization and apply for non-profit status and close the existing corporation?


    1. Sounds like you need help. If you inc'd as a c-corp, then chances are you do not have 501c4 or c7 tax exemption. A c-corp is by its very nature a for-profit entity. It cannot become tax-exempt. Your association sounds like it would qualify as a 501c7 if it were nonprofit. You might want to give us a ring on this one.

  73. I am a new board member for a regional professional organization registered as a 510c6. We are all volunteer, no employees, no office, no equipment — even the gavel used to conduct the annual meeting is borrowed when we can find one. Membership dues and registration fees are used to provide semiannual educational conferences and host a web page for publishing minutes and membership news items. I believe we are exempt from filing tax returns as our budget is so small.

    I'm finding some online information confusing. In reading IRS Publication 557 (rev Oct 2010) I note on page 21 that our organization could establish a separate 501c3 fund specifically for education purposes that would then be eligible for some low cost services for providing additional educational opportunities to our members that we are unable to qualify for as a 501c6. However, other documents (e.g. ) seem to indicate that there has to be a financial separation of the two such that the c6 could not provide the funds to the c3.

    Can a 501c6 provide startup and maintenance funds to an affiliated 501c3 directly, sharing Board members, and are there any issues to be careful of in doing so? Or would we be required to somehow get funds for the c3 entirely separate from the c6 and essentially run it as a separate organization with a separate Board? Or would it be advisable or even possible to change our c6 into a c3 given the educational activities of the association?

    1. That's a lot of questions, Brenda! Here's the nutshell…Substantially all financial income and expeditures within a 501c organization must be in the conduct of the activity the org is approved to do by the IRS. This means that a 501c6 should not typically be directly funding the startup or maintenance of a 501c3. In addition, even with the same board, the 501c3 must be functionally independent. It may be closely associated with the c6, but not subordinate. It is possible to create a 501c3 "fund", but this is tricky. I highly recommend calling us about some consulting time before you go much further on this. Good luck!

  74. We are a senior residents council with a 501c7. We do not tip the help. The help were given $500 each from our yearly appreciation fund. Must we give them a tax form with the gift? Isn't that their responsibility to include the the money with their tax returns? We should have nothing to do with their tax. Please comment and help us.

    1. If this payment is considered to be coming from their employer, it should be included on their W2. Otherwise, it would be good to provide a 1099-MISC even though it's below the $600 threshold.

  75. I work for an organization of unpaid volunteers who do community assistance through local Emergency Management Agencies and also the County Sheriff's Offices. We pay dues and conduct regular monthly administration/training to assist in these areas. We are looking for a 501c status that would allow members and outside people to donate (money, goods) to us as a tax write off. We don't do political campaigning.

    Can you advise which would be the best 501c status to adopt?

    1. The only status that will allow for tax deductible donations is 501c3. What you are describing might qualify, but sounds more like a 501c4 from your description. Your association with the government agencies might be your loophole into 501c3. I highly recommend getting some council on this one. We can help if you need it.

  76. i was recently elected to an officer's position at my tax-exempt sportsman's club. we have not updated our tex exempt status since we incorporated 65 years ago. we are trying to decide which to update our sttatus to: 501c7 or 501c3. maybe you can help? while we absolutely qualify for tax exemption status as a "social club" (pursuant to a 501c7), i believe we could also qualify as a charitable organization (501c3) for the following exempt requirements "fostering national or international amateur sports competition" (we had one of our girls place in among teh top 3 in the National Skeet Shooting Assoc's 2009 championship event), and "advancement of education or science" (we already offer state-sanctioned hunter safety courses and technical skills courses). The reason we'd like to be a 501c3 is for the ability to accept tax deductible contributions, and to get around having to pay sales and property tax. Can we qualify?

    1. Maybe. Your organization is riding the fence between c7 and c3. In order to qualify for c3, you would have to have very, very little social elements for the members. We have dealt with many such borderline cases. You may wish to call and speak with one of our reps. We should be able to help.

  77. I started a dance club and want to donate the profits to needy indivduals also selling a cookbook and making profit to donate. We have no employees and everything is volunteers. We are seniors and just trying to help others and we were told we should be 501(C)(4) is the best fit, do you agree. We are a non profit corp as of right now in our state.

    1. A 501c4 might work, but it sounds like a 501c7 may be the better fit. A 501c7 designation is for social and recreational organizations, whereas a 501c4 is a public benefit org.

  78. I currently run an organization, which we have recently applied for 501c3 status. What we do is run adult basketball leagues, and the remaining funds or donations left over are given to local charities. In the future we are planning to run youth leagues and instructional leagues as well

    IRS replied to our application saying that since we are an adult-baed league, we are a social welfare org, and we only qualify under 501C4. To qualify under 501c3, the majority of the organizations time must be spent on youth activity.

    Is this true? This poses a big issue for us as far as receving donations from outside sources


    1. Unfortunately, Ezra, it is true. Sports programs can qualify under 501c3, c4 or c7. I'm surprised you were told c4 for your adult leagues…that would usually be a c7 recreational nonprofit. 501c3 status for sports programs is typically reserved for kids and national/international level amateur competition.

  79. Mr. McRay,
    I would like a non profit organization to help the orphans who lost their parents during the January 12th earthquake. Will a 501(c) (3) organization be suitable for me to start it? How do I start it? or do you know anywhere I can get some assistance in filling out the paper work? I am located in north carolina. Thanks a lot for the update.

    1. Hi, Gysele. From what little you wrote, it sounds like it could work. The devil is in the details, as they say. We provide assistance with what you are talking about…give us a call and speak with one of our reps. They can help you out.

  80. We are a homeowner's association part of a historic district. Our HOA is a 501c4. A neighbor wants to donate a small partial of land to us to develop as we see fit ie. small social gathering/park area. Since we are not a 501c3, I presume they cannot classify us as a tax deduction so are there any benefits that he can gain or write off. I checked the tax records and it appears the property is owned by him, and not a business of his.

  81. My long standing womens sailing group a 501c4 has a couple of also lonstanding questions. Can we make a contribution to a charity ie. a kids sailing organization that is definitely non-profit? Also can we make a profit on ways and means articles we sell (only to each other) in order to fund what we do–fix boats, buy refreshments,etc?

    1. There is nothing keeping a 501c4 from donating to a 501c3. Such giving should represent a very small part of your organization's activities, though. And yes, you can "profit" on the articles sales. Nothing in the code requires you to break even or take a loss.

  82. We are a 501 c6. Are we ineligible to apply for any grants from any organization (grant programs from 501c3, city grants, etc)?

    1. Eligibility is in the eye of the funder. In other words, it's up to the funder to specifically exclude 501c6 orgs or not. That being said, grants to 501c6s do not usually qualify as a charitable activity by the funder. That's the reason you rarely see it happen.

  83. I started a support group for prisoners families. Is there any type of funding to help with this cause. I do have plenty of support, but no funding. What would be the best way to raise funds or the best route to take?

  84. I know that as a 501c6 my organization is not eligible for federal grants, but I’m wondering if we can apply for grants from state agencies?

    1. Depends on the state and/or agency involved and what your organization is trying to accomplish. Many non-c3s receive some funding from government sources, but it is usually very, very targeted.

  85. What is the best 501 to file under for a competitive cheer team who have parents who want to do fundraising and have the money earned go towards individual accounts of the people who did the fundraising.

    1. If it is restricted to those 18 and under, I would tend to recommend 501(c)(3). This IRS will view this as eduational. If it involves adult participants over 18, it would have to be strictly amateur and involve strictly structured tournament play to be c3. Anything that bends toward social or recreational would need to file as a 501(c)(7).

  86. My organization is currently a c3, but we are hoping to also start a c4 so that we can get involved in more political advocacy. Is there any sort of checklist available for me to follow so that I can ensure we do everything correctly? I do not want to overlook anything in the process as we form at the state level (California) and then move on to the federal c4 application.


  87. My organization is a 501 (c) (6) status. Are we allowed to request and accept donations as long as the donors are not writing them off as a tax exempt donation?

  88. Greg- i’m on the board of a small private golf club. Our status is 501(c) as per our tax returns. I would think it should be a 501(c) (7). One – does that matter, and two,what are some of the benefits that we should be taking advantage of with that classification? Is there an easy to understand site that I can go to that has a list of benefits? Thanks- tom

    1. Your status is almost certainly 501c7. Go to and click on the Charities and Nonprofits tab. Once there, click on Search for Charities on the left sidebar…you should be able to look up the status there. As far as understanding 501c7, start with IRS Publication 557. Good luck!

  89. Are 501(c)7 organizations subject to the same private benefit test as 501(c)3 organizations. For instance, could a 501(c)7 organization members sell holiday wrapping paper to offset each individuals cost of travel to tournaments? I understand that this practice, although common, is illegal.

    1. Great question. With a 501c7, you do not have tax deductibility of contributions like you do with a 501c3, so the rules are usually more flexible. That being said, private inurement rules still apply. Your example of the wrapping paper sale is NOT acceptable in the eyes of the IRS. You’re right…it happens all the time, but improperly.

  90. Greg – great post and lot of good info in your comments

    I am thinking of starting a business league to improve business conditions in my state for a particular industry. It would conduct mostly advocacy, but would also lobby during the state’s regular session(s); however, it would not give directly to candidates for office. From what I’ve been reading here and elsewhere, it seems to be best suited as a (c)6. Agree?

    Subsequently, would business donors possibly be able to deduct as a business expense their dues, or a portion thereof, on their tax returns if the “league” does get (c)6 status? Same question for sponsors/donors who give over any dues amount.

    1. Sounds like a 501(c)(6) would indeed be the way to go. You are correct that dues, while not deductible as a charitable donation, can be considered a deductible business expense. Voluntary donations above the cost of dues may not be deductible, however, due to the lack of attributable expense category. You might be able to consider it a lobbying expense if it were designated toward such efforts. Sort of a gray area…

  91. I am trying to help an amature adult baseball team get off the ground. We find that alot of local businesses require that organizations have a non-profit id to participate in their programs. I don’t belive we can file as a 501(c) (3) since we are not a youth team, but can we file as a 501(c)(7) org? I have also read that if your organization budget is under $5,000 you may not have to register, but can still be function as a 501(c)(7) how does that work?

    Any information would greatly help!


    1. Erin…Your organization most likely would qualify as a 501(c)(7) given its recreational nature. “Adult” is the key here. Children’s sports programs can usually qualify as 501(c)(3)s due to it being considered educational. Having said that, your organization can operate as a defacto 501(c)(7) without having to apply to the IRS if it has less than $5k in revenue per year. You basically fly under the radar and get left alone by Uncle Sam. The problem with that lies with the businesses, though. Most will want to see official IRS recognition of your tax-exempt status. For many of them, just saying we are will not be enough.

  92. Can you use a 501(c)(6) status to apply for grants, or do you need to have a 501(c)(3)? Which status would you recommend as best suited for a farmers’ market? Thank you!

    1. 501(c)(6) organizations can apply for grants if the grant maker allows for that in its criteria. Having said that, most grants are intended for charitable organizations.

      As to your farmer’s market question, most do not qualify for 501(c)(3). You are more likely to find them organized as 501(c)(5) or 501(c)(6).

  93. I am also a baseball mom and we are putting together some summer ball leagues. We are fixing to file for our 501c3 as an educational organization. Currently we only have funds from parents as registration fees. We plan to do some fundraising and also taking donations. My question is that we might in the future pay experienced coaches to coach the players. If we do this do we need to file for a 501c7? What are the differences between the two? I read somewhere that are donations would not be a tax write off for our donars if we are a 501c7. Can we be a 501c3 and pay a coach?

    Karissa Sullivan

    1. You absolutely CAN pay a coach as a 501(c)(3). Not a problem. A c7 is a recreational organization and some sports groups file under this…especially adult groups. Kids’ sports are usually filed under c3, however, because it is considered educational to promote athletics to children. And, you are correct. Donations to c7 groups are not tax deductible.

  94. We have a non-profit that has been filing as a 501(c)3. During 2009, we realized that our activities lent to us being a better fit as a 501(c)6. We filed with the IRS in December, and in February they accepted us as being a 501(c)6.

    My question is, for our tax return due for 2009, do we file as a 501(c)6 for the entire year? Do we need to do a partial year, or are we not allowed to file the 990 as a 501(c)6 until 2010?

    1. I’m not sure how to answer this one without more info. Look at the effective date on your IRS determination letter. If it is backdated into 2009, you probably need to file as a 501c6, but there are other factors. I recommend you seek assistance with this to make sure you do it right. We prepare hundreds of 990s every year, so let us know if you need help.

  95. We completed and submitted our 1023 Form requesting tax exempt status as a 501c3 organization. We got a brief reply from the IRS stating that we are exempt as a 501c4 organization. This letter came without explanation or even acknowledgement of our 501c3 application. I’m not confident that we’ll be able to grow as a nonprofit since virtually all funding for nonprofits excludes 501c4’s. Their decision feels arbitrary and capricious. Have you ever heard of such treatment? What are the chances that they would change their determination? I’m on hold with the IRS waiting to speak with someone.

    1. I have often seen organizations that thought they qualified for 501c3, but were better suited to another code section like 501c4. I don’t think we have ever seen the IRS just issue a determination letter as something other than what you filed for. That should have required that you reapply via Form 1024. Are you sure that what you got wasn’t a response letter from your case reviewer that you are better suited for 501c4?

  96. I’m currently considering creating a non-profit tax-exempt 501(c)(something) organization that would support the income and benefits of a certain government workers for up to 12 months should they get released due to staff reductions, downsizing or contract termination. Interested workers could join, contributing monthly in support of the organization and in order to benefit…this would be the main sounce of organization revenue besides grants and outside donations. Having this program could alleviate state and federal government being burdened with unemployement benefits. The program would also use the released workers to educate high school students on government careers. Would like to know the most beneficial 501(c) to register this under.

    1. What you are describing is really a form of insurance and, as such, would not qualify. Plus, the only way to alleviate state and federal obligations under current labor law would be to change federal law. Not likely to happen. Great idea, though.

  97. I am curious, I am investigating as much as I can. After reading your reply on July 6, 2009. I have a ministry that helps parents of children who have died. I raise money to bury these children. Do I or do I not need a 501 (c) 3.
    And is it expensive to apply for this exemption. Do I also need the (c) 4.
    Thank you, Vicki

    1. I don’t see any reason you would need a 501(c)(4). And, unless your contributors are expecting a tax deduction, you likely do not need to formalize into a 501(c)(3). I recommend having a financial means-test to determine who to help. If your donors want tax deductibility, of course, you will need to have a 501(c)(3) determination.

  98. 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?

    1. 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.

  99. 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!

    1. 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!

  100. 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?

    1. 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.

      1. Can our social club have a fundraiser and receive substantial income (>35% total club income) from non-members? We will ultimately use a large portion of the income to support other charitable groups.

  101. 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?

    1. 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.

  102. 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.

    1. 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!

  103. 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.

    1. 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.

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