The Purposes of a 501(c)(4)

By A.L. Kennedy

A "501(c)(4)" is a tax-exempt organization that falls under section 501(c)(4) of the Internal Revenue Code. Like other classifications in the IRC, 501(c)(4) specifies that this type of organization is restricted to certain purposes. The IRC also spells out what acts the organization is allowed to engage in when it raises money or is involved in political activities.

Social Welfare

A primary purpose of 501(c)(4) organizations is to serve as "civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare," according to the IRC. These organizations may have a wide range of social welfare aims, from teaching literacy to helping the homeless.

Employee Associations

Employee associations may also be designated as 501(c)(4) organizations under the IRC. In order to receive 501(c)(4) tax-exempt status, the employee association must be limited to employees of a particular business that is within a particular location and be "devoted exclusively to charitable, educational, or recreational purposes," according to the IRC.

Ready to start your LLC? Start an LLC Online Now

Political Activities

Some organizations choose a 501(c)(4) designation rather than a similar designation, like 501(c)(3), because 501(c)(4) organizations are allowed to engage in political activities in ways that other tax-exempt organizations are not. For example, a 501(c)(4) may spend as much money as it wants on lobbying activities. It may also endorse or oppose any political candidates of its choosing, and participate in campaigns by offering money, time or the use of its facilities.

Public Benefit

A 501(c)(4) must be able to demonstrate to the Internal Revenue Service that its activities benefit the community in some way, even if they are not accessible to all community members. For example, a 501(c)(4) that offers low-income housing to its members may be able to show that it benefits the community as a whole by making it possible for its members to find safe and sanitary housing, which they could not do otherwise. A 501(c)(4) that does not have any public benefit as part of its purpose may lose its tax-exempt status.

Ready to start your LLC? Start an LLC Online Now
What Are the Benefits of a 501(c)(7) Tax-exempt Club?



Related articles

How Can a Church Lose Its 501(c) Status?

The IRS generally recognizes any distinct legal organization with a recognized creed and form of worship, a formal religious doctrine, a religious history, or a defined ecclesiastical government as a church. Churches like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3). Contributions to an IRC section 501(c) organization are deductible for the donor to a certain extent. By taking certain actions or participating in certain activities, a church can lose its 501(c)(3) status.

What Is a 501C Non Profit?

Many nonprofit organizations pursue 501(c), or exempt, status from the Internal Revenue Service for tax benefits, and in some cases, to increase donations to the nonprofit. While there are 28 different types of exempt organizations, among the most common include 501(c)(3), 501(c)(4), and 501(c)(7) organizations. In most cases, nonprofits are formed under state law, while the IRS independently grants exempt status to qualified organizations.

Non-Profit Vs. Incorporation

When we think of corporations, the image that comes to mind is usually a for-profit venture. However, nonprofits can also benefit from incorporation, particularly if the organization is interested in pursuing federal tax exempt status. Yet, the formalities of being incorporated under state law may not be desirable for all organizations operating in the public interest. Smaller nonprofits that receive limited contributions may choose to remain an unincorporated association. Knowing the benefits and drawbacks to incorporation can help you decide whether it makes sense to pursue a corporate structure for your nonprofit.

LLCs, Corporations, Patents, Attorney Help

Related articles

Foundation Vs. 501(c)(4)

According to the Internal Revenue Code, a foundation qualifies as a 501(c)(3) nonprofit organization. The Internal ...

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 ...

What is the Difference Between a 501C3 & 501C4?

Many nonprofit organizations are created for the purposes of providing some benefit to the public. Depending on the ...

What Is a 501-C 7 Corporation?

The Internal Revenue Code recognizes special types of entities that are exempt from taxes. These organizations fall ...

Browse by category
Ready to Begin? GET STARTED