Back to Basics: Comparing Tax-Exempt Organizations

With school back in session and fall in the air, it's the perfect time to get back to basics on the Rules of the Game podcast. On today's episode, we'll review how the advocacy rules differ across the various types of tax-exempt organizations, including 501(c)(3)s, 501(c)(4)s, and PACs. Whether you're a seasoned advocate or just starting out, understanding these fundamentals is crucial for crafting bold advocacy plans that maximize your capacity and comply with the appropriate rules. Join us for a quick refresher!

 

Attorneys for this Episode

Melissa Marichal Zayas

Natalie Ossenfort

Susan Finkle Sourlis

 

Comparison of tax-exempt organizations

There are many different types of tax-exempt organizations – our federal tax code offers 29 different types of tax exemptions to choose from!

501(c)(3)s

501(c)(3) organizations are tax-exempt, and donations to 501(c)(3)s are tax deductible. With this favorable treatment come some restrictions related to lobbying and election season advocacy.

· Public Charities (including Community / Public Foundations)

o Prohibited from supporting or opposing candidates for public office

o Allowed to lobby so long as they stay within certain lobbying limits and use unrestricted dollars to pay for lobbying activities

o May also conduct nonpartisan election-related activities including voter outreach, voter education, voter registration, etc.

· Private Foundations

o Prohibited from supporting or opposing candidates for public office

o Effectively barred from lobbying due to a steep excise tax that applies to private foundation lobbying expenditures

o Should also be aware of specific rules related to voter registration activities

 

501(c)(4) social welfare organizations, 501(c)(5) unions, and 501(c)(6) trade associations

These organizations enjoy tax exempt status, but donations to them are not tax-deductible for the donor. However, they can engage in a wider array of advocacy activities than 501(c)(3)s.

· They are allowed to lobby without tax code lobbying limits.

· They can engage in some partisan political activity as a secondary purpose (for example, express advocacy).

· When engaging in partisan activities, they need to be aware of campaign finance regulations and reporting thresholds.

· At the federal level (and in most states), corporations - including tax-exempt organizations - are prohibited from making monetary or in-kind contributions to candidates or political parties.

 

527 – political organizations

527 political organizations include pol