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Non-Profit Organizations

Characteristics of Tax Exempt Organizations

By August 29, 2013No Comments

Exempt organizations have been in the news a lot lately. All this talk about 501(c)(4) organizations may have you confused about what exactly an exempt organization can and can’t do when it comes to political activities. The following chart summarizes the general guidelines. It has been adapted from an article by Matt Bernius, who analyzes the distinctions in greater detail http://www.outsidethebeltway.com/501c4-vs-501c3-vs-527/.

If you have specific questions about the types of activities allowed in your nonprofit organization, please do not hesitate to call us.

Characteristics of Certain Common Types of Tax-Exempt Organizations
Characteristics 501(c)(3) 501(c)(4), (c)(5), (c)(6) Section 527 Organization  
Contributions Accepts unlimited tax deductible donations Accepts unlimited non tax deductible donations Accepts limited* non tax deductible donations  
Donor Reporting Anonymous Anonymous Publically reported  
General types of activities Religious, educational, charitable, scientific, literacy, etc. Civic leagues, social welfare organizations, local associates of employees Political activities  
Ability to engage in politics Not supposed to engage in any political activities, though some voter registration activities are permitted May engage in political activities, provided it is not the primary** purpose of the organization Allowed and required  
Endorse Candidates Prohibited Allowed CAN endorse and field candidates  
Campaign Spending Prohibited Permitted, but taxed Required  
Lobbying Some lobbying Substantial lobbying No direct lobbying  
General Political Advocacy Yes (as an educational activity) Yes, provided it is not the primary** activity of the organization Allowed  
Apply with IRS? Yes No Yes  
Form Application 1023 1024 8871  
Tax Exempt? Yes Yes Yes  
**This is generally taken to mean less then 50% of the group’s activities * A Section 527 organization is governed by the Federal Election Campaign Act of 1974 which limits the amount of money any individual donor can give directly to any single candidate or Section 527 organization/ Political Action Committee (PAC) in a federal election. These donations are referred to as “hard money” donations and face limitations of $1,000 to any candidate and $5,000 to any PAC.

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