Civic leagues and social welfare organizations are exempt under section 501(c)(4) of the Internal Revenue Code. Social welfare organizations generally fall into one of the following categories:
Organizations that may be performing some type of public or community benefit but whose principal feature is lack of private benefit or profit;
Organizations that would qualify for exemption under section 501(c)(3) but for a defect in their organizing documents or if they were not “action organizations”; and
Nonprofit organizations that traditionally have been labeled in common parlance as social welfare organizations.
During its existence, a social welfare organization has numerous interactions with the IRS from filing an application for recognition of tax-exempt status, to filing the required annual information returns, to making changes in its mission and purpose. New legislation enacted at the end of 2015 added Section 506 to the Internal Revenue Code that requires an organization to notify the IRS of its intent to operate as a Section 501(c)(4) organization. Organizations should use Form 8976 to provide this notification. This requirement only applies to organizations intending to operate under Section 501(c)(4).
The IRS provides information, explanations, guides, forms and publications on all of these subjects through this IRS Web site. The illustration below provides an easy-to-use way of linking to the documents most organizations will need as they proceed though the phases of their “life cycle.”
Donations to Section 501(c)(4) Organizations
Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer’s business. However, see Nondeductible Lobbying and Political Expenditures for more information. Also, the organization may be required to disclose that contributions are not deductible when it solicits contributions.
Donations to volunteer fire companies are deductible as charitable contributions on the donor’s federal income tax return, but only if made for exclusively public purposes. Similarly, contributions to certain war veterans organizations are deductible. If the contributions are deductible as charitable contributions, substantiation and disclosure requirements may apply.