501(c)(4) is a non-profit organization with extensive lobbying capabilities, unlike 501(c)(3). Its goal is to promote social welfare, but lobbying cannot be its only factor. It must be comprehensive in its geographic region or throughout the country to be classified as a 501(c)(4). The main benefit is tax-exempt status, but it can be revoked if the organization primarily engages in lobbying. Donations to 501(c)(4) are not tax-deductible, but it allows for more lobbying than 501(c)(3).
A 501(c)(4) is a non-profit organization capable of extensive lobbying, as opposed to a 501(c)(3), which is very limited in the amount of lobbying it can engage in . They are so named after the chapter and section of the United States Code that defines what they are. As lobbying increases, 501(c)(4) organizations are becoming more common.
The goal of a 501(c)(4) is usually formed to promote social welfare. It can achieve this through a number of different means, but lobbying is significant. Seek to achieve a material change in US law, then effect a change that benefits all through a material policy change. However, while lobbying can be a very big factor in what the organization does, it cannot be its only factor. In fact, it may not even be its main factor.
To be classified as a 501(c)(4), the organization must be comprehensive in its geographic region or throughout the country. For example, an organization formed to promote civic betterment may be limited to individuals within that area, but may not otherwise limit its membership or scope. Those who restrict in this way run the risk of losing their 501(c)(4) status.
The main benefit of being a 501(c)(4) is that it comes with a tax exempt status. Therefore, any money you withdraw is not taxed as income. Therefore, all revenues of the organization can be used for the stated purpose. However, in some cases, this tax exempt status can be revoked.
Some 501(c)(4) organizations have tried to blur the line between lobbying as a primary activity and a secondary activity. It is in these cases that the US Internal Revenue Service can revoke the organization’s tax exempt status. This has happened to a number of religious and political organisations, which have been perceived primarily as lobbying organizations hiding under a different name. In many cases, it is up to the non-profit group to demonstrate that they are not taking advantage of their status.
One of the major differences between a 501(c)(3) and a 501(c)(4) is that donations to a 501(c)(4) are not tax deductible, unless part of a government or work on behalf of a recognized local or state government. Therefore, anyone who makes a donation to them must do so with the knowledge that in many cases there will be no tax benefits. That’s the cost of being able to lobby significantly more than a 501(c)(3).
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