Charitable organizations are probably the best known of the IRS's 501(c) tax-exempt statuses, but entities such as business leagues and professional associations may qualify for tax-exempt status despite not having a charitable purpose.
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by Belle Wong, J.D.
Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...
Updated on: August 19, 2024 · 3 min read
For many people, the term "tax-exempt 501(c) organization" brings to mind a charitable entity that's exempt for tax purposes under section 501(c)(3) of the Internal Revenue Code (IRC). But nonprofit organizations eligible for exemption under 501(c) don't have to be charitable organizations, and the IRC offers a number of exemptions for nonprofits under 501(c), including those that qualify for exemption under 501(c)(6).
A 501(c)(6) is a nonprofit membership organization that falls within one of the following categories:
Other requirements of a 501(c)(6) organization include:
While 501(c)(6) organizations and charitable organizations, such as a 501(c)(3), are not operated for profit, they have significant differences:
While contributions or donations to a 501(c)(3) organization are tax-deductible, dues, fees, or other contributions made to a 501(c)(6) organization are not considered charitable donations and are only deductible if they qualify as a business expense on the part of the individual or entity making the contribution.
Political activities, including lobbying, are generally off limits for charitable organizations, but a 501(c)(6) does not face similar limitations and can normally engage in such activities. However, 501(c)(6) organizations are required to disclose the percentage of the membership fees that go toward lobbying activities.
Organizations applying to the IRS for exempt status under 501(c)(6) will need to fill out and submit:
Organizations applying for either 501(c)(3) or 501(c)(4) status have a different form to fill out. If your organization meets IRS requirements for exemption under 501(c)(6), you can apply for recognition of exempt status using Form 1024.
You also need an Employer Identification Number (EIN) for your organization before applying. If you don't have an EIN, obtain one before you file your completed Form 1024. To apply for an EIN, submit Form SS-4, or apply by phone or online.
Once you've received tax-exempt status, your organization will be required to have available to the public the approval of your application for recognition of exemption, any supporting documents, and the last three annual information returns filed by your organization.
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