Difference between a 501(c)3 and 501(c)4.... 501(c)(3) — Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations 501(c)(4) — Civic Leagues, Social Welfare Organizations, and Local Associations of Employees huffingtonpost/alan-b-morrison/irs-501c4-scandal_b_3353468.html In order to understand the real scandals involving (c)(4) groups, it is necessary to see how that section fits into the tax-exempt universe that includes section 501(c)(3) groups that consist of charitable, educational, and religious organizations, and those that are political organizations exempt under section 527. If an organization fits under any of the three sections -- plus other parts of section 501 that deal with other tax-exempt groups -- the organization does not have to pay any income tax. What is important about that benefit is that it does not save much if any money for most of these groups. That is because most of what they receive are gifts, and the IRS does not treat gifts as taxable income to the recipient. Moreover, most legitimate social welfare groups would probably have enough deductible expenses to offset whatever taxable income they had and so would still owe nothing. However, there are two other benefits that do matter. If the organization is exempt under section 501(c)(3), contributions to it are tax deductible by the donor, and private charitable foundations are allowed to give to it. Being able to assure donors that the IRS has found the organization to fall under section 501(c)(3) is, as a practical matter, essential to raise tax-deductible money. But since contributions to 501(c)(4) groups are not tax deductible, advance assurance is of no significance. Indeed, those groups need not apply for exempt status, but only have to file an annual Form 990 tax return as a (c)(4).
Posted on: Sat, 02 Nov 2013 13:48:09 +0000
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