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What is a 501(c)(4)?

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  • Written By: Ken Black
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 October 2016
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A 501(c)(4) is a nonprofit organization that is capable of extensive lobbying activities, as opposed to a 501(c)(3), which is very limited in the amount of political lobbying it can do. They are so named by the chapter and section of the United States Code that defines what they are. With the increase in lobbying, 501(c)(4) organizations are becoming more common.

The goal of a 501(c)(4) is usually formed to promote social welfare. It may achieve this through a number of different means, but lobbying is a significant one. It seeks to achieve substantial change in U.S. law, thus effect a change for the benefit of all through a substantial policy change. However, while lobbying may be a very important factor in what the organization does, it cannot be its only factor. In fact, it cannot even be its main factor.

In order to be classified as a 501(c)(4), the organization must be all inclusive in its geographic region or throughout the entire country. For example, an organization formed to promote civic improvement may be limited to individual's within that area, but cannot otherwise limit its membership or scope. Those that do limit in such a way run the risk of losing their status as a 501(c)(4).

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The main benefit of being a 501(c)(4) is that it comes with a tax-exempt status. Thus, any money taken in is not taxed as income. Therefore, all of the organization's revenue can be put toward the stated purpose. However, in some cases, that tax-exempt status can be taken away.

Some 501(c)(4) organizations have tried to blur the line between lobbying as a primary activity and secondary activity. It is in these cases it is possible for the U.S. Internal Revenue Service to revoke the tax-exempt status of the organization. This has happened to a number of religious and politically-minded organizations, who have been perceived as primarily lobbyist organizations hiding under a different name. In many cases, it is up to the nonprofit group to prove they are not taking undue advantage because of their status.

One of the biggest differences between a 501(c)(3) and a 501(c)(4) is that donations to a 501(c)(4) are not tax deductible, unless they are part of a government or working on behalf of a recognized local or state government. Therefore, anyone donating to them must do so with the understanding there will be no tax benefits in many cases. This is the cost of being able to lobby significantly more than a 501(c)(3).

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sandyd2728
Post 1

Can I open up my own restaurant with my 501c3? I am a non-profit organization. What are the guidelines?

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