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

Ribbon Cutting

Note:  This article was originally posted in June 2009.  It has been one of the most read articles we have ever written, averaging nearly 200 views per day 2 years after publication.  It also generates dozens of questions every week, only a few of which we are able to answer.  We apologize in advance if your question is not addressed.

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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Apostle Sam Martin
Guest

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.

Baseball Mom
Guest

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.

Helen Savage
Guest

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?

A. Banks
Guest

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?

Children Youth and Family Counseling & Consulting, Inc.
Guest
Children Youth and Family Counseling & Consulting, Inc.

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!

Gabe
Guest

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?

Vicki
Guest

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

Lee
Guest
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… Read more »
John C Leddy
Guest

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.

Mike
Guest

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?

Karissa Sullivan
Guest
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… Read more »
Jen
Guest

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!

Erin
Guest

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!

Thanks!

JM
Guest
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… Read more »
curious
Guest

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.

tom
Guest

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

KS
Guest

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?

AshleyK
Guest

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.

Thanks!

Scott
Guest

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.

Felicity
Guest

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?

Cindy
Guest

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?

Stacie
Guest

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

Susan
Guest

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?

Richard
Guest

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.

Gysele Clerizier
Guest

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.

ezra schwartz
Guest
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… Read more »
erick
Guest

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.

Kat
Guest
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… Read more »
Brian Vandersall
Guest

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?

martha davis
Guest

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.

Brenda Peters
Guest
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… Read more »
Phoebe Lee
Guest
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… Read more »
Karen
Guest

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?

Dave
Guest

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?

Thanks

Kevin Danby
Guest
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… Read more »
Danny
Guest
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… Read more »
Kelsey B.
Guest
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… Read more »
c.k. boyle
Guest

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?

Philip Navratil
Guest

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?

Sandra
Guest

Does a mom's stay at home group qualify for a 501c7 status?

Rob Cutchins
Guest
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… Read more »
Sandy Gibson
Guest

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?
Thanks,
Sandy

Jamie G
Guest

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.

Carlos Linares
Guest

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!

Matt Libhart
Guest
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… Read more »
Paul
Guest

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.

Lurina
Guest

Our geological club is a non-profit 501c7. Do we have to pay sales tax?

Basketball Dad
Guest

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!

Jay
Guest
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… Read more »
Jeremy
Guest

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).

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