Foundation Vs. 501(c)(4)

By Ellis Roanhorse

According to the Internal Revenue Code, a foundation qualifies as a 501(c)(3) nonprofit organization. The Internal Revenue Code identifies 501(c)(4) organizations as nonprofits as well. However, these two types of nonprofits are distinct from each other in that they provide different services and are organized for different purposes.

According to the Internal Revenue Code, a foundation qualifies as a 501(c)(3) nonprofit organization. The Internal Revenue Code identifies 501(c)(4) organizations as nonprofits as well. However, these two types of nonprofits are distinct from each other in that they provide different services and are organized for different purposes.

Foundations

Foundations can be public or private and are created for charitable purposes. These 501(c)(3) organizations receive donations from individuals, corporations or other foundations; they grant funds to specific recipients. Private foundations generally do not solicit funds from the public; rather, the foundation's founders and other charitable organizations make contributions. Foundations may support a particular cause or offer funding to other nonprofits through grants.

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501(c)(4) Organizations

A 501(c)(4) organization exists to promote the social welfare of the community in which it is located. These organizations are associations of local employees or civic leagues with strong ties to the community. A 501(c)(4) generally contributes to the social welfare of a community by providing recreational facilities and other services. These organizations may organize community cleanup projects or facilitate other projects that benefit the community's health and welfare.

Tax Deductible Contributions

One difference between 501(c)(3) foundations and 501(c)(4) organizations is the way the Internal Revenue Service treats charitable contributions. Contributions made to 501(c)(4) organizations are not tax deductible. However, charitable contributions of $250 or more to 501(c)(3) organizations may be deducted from a donor's federal income tax.

Political Influence

A 501(c)(4) organization is not restricted from participating in political campaigns; it is also allowed to lobby for legislation. However, a 501(c)(4) organization's primary purpose cannot be lobbying or campaigning. On the other hand, 501(c)(3) organizations are prohibited from influencing political campaigns, lobbying for legislation or donating funds to political candidates.

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The Purposes of a 501(c)(4)

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501(c)(3) Types

Federal taxes are a significant expense for many businesses, but not for exempt non-profits. Non-profit charities that are organized under Internal Revenue Code Section 501(c)(3) are generally tax-exempt, and their donors usually get tax breaks for supporting them. The IRS divides these charities into two categories: public charities and private foundations.

Non-Profit C4 Vs. C3

Title 26, Section 501(c) of the Internal Revenue Code recognizes several different types of nonprofit organizations. Nonprofit corporations, trusts and foundations have several advantages over for-profit organizations, including an exemption from paying federal income taxes. Two classes of 501(c) nonprofits, known as “C3” and “C4” organizations, are similar in some respects. However, they have different eligibility requirements, and the IRS places different restrictions on their activities and donations. When deciding whether to structure your nonprofit as a C3 or a C4, these distinctions should be considered.

What Are 501(c)4 Organizations?

Under federal tax law, an organization that promotes social welfare, and operates as a non-profit, can identify itself as a 501(c)(4) for tax purposes. The Internal Revenue Service sets the rules and guidelines for these groups, reviewing their statuses from time to time to ensure they are meeting legal requirements.

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