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 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.
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.
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.