IRS Filing Requirements for a 501(c)(4)

by Andrew Latham

When the purpose of your nonprofit organization is purely to promote the social welfare of others, you shouldn't have to worry about paying taxes. That's the substance of section 501(c)(4), the part of the tax code that regulates tax-exempt nonprofits. However, just saying your nonprofit organization is a fearless advocate for the greater good of the community is not enough. You must meet the requirements of the IRS and file an application for recognition of exemption.

Organization Type

To qualify for tax-exemption under 501(c)(4), your organization must fall under one of two types of groups: social welfare organizations or local associations of employees. This is a broad definition that encompasses organizations as diverse as nature conservation organizations, war veterans' associations, and your local fire department.

Social Welfare Organizations Purpose Rule

Only organizations whose primary purpose is to promote the common good and welfare may qualify for tax-exempt status as a social welfare organization. In certain cases it is difficult to pin down what constitutes the "common good," such as with politically motivated groups. The IRS assesses each application on a case-by-case basis. The landmark case on the matter of 501(c)(4) eligibility is Erie Endowment v. United States, which stated, in nearly as ambiguous terms, that an eligible organization must "be a community movement designed to accomplish community ends."

Local Employee Associations Requirements

For a local association of employees to qualify for tax exemption it must restrict membership to people in a certain locality. Although the IRS definition of locality is not restricted to an official political division, such as a particular city or neighborhood, it cannot be so inclusive as to encompass an entire state The association must use its funds exclusively for educational, charitable or recreational purposes, never to benefit a particular shareholder or member.

Filing Forms

If your organization or association meets the requirements of 501(c)(4), you must file a Form 1024 Application for Recognition of Exemption Under Section 501(a). Fill in parts one, two and three and schedule B. The first three parts ask for information on the nature, structure, purpose, finances, contact details of the organization's governing body and its activities. Schedule C asks whether you have previously applied for tax exemption under section 501(c)(3), what services you perform to the community and whether access to property owned by the association is restricted in any way. Fill in a Form 8718 User Fee for Exempt Organization Determination Letter Request; attach it to your Form 1024 and send it to the address on page one of the the Form 8718 instructions.

About the Author

Andrew Latham has worked as a professional copywriter since 2005 and is the owner of LanguageVox, a Spanish and English language services provider. His work has been published in "Property News" and on the San Francisco Chronicle's website, SFGate. Latham holds a Bachelor of Science in English and a diploma in linguistics from Open University.

Photo Credits

  • Creatas/Creatas/Getty Images