Differences between 501(c)⁠(3) and 501(c)⁠(4)

501(c)(3) entities are public charities or private foundations, and they are organized specifically for charitable, religious, educational, or scientific purposes. 501(c)(4) organizations are broadly categorized as “social welfare” organizations, and their primary purpose is to advocate and promote specific causes and issues. An example of a 501(c)(3) would be your local mosque or food bank, which uses its resources to provide services and programing that benefit the community it serves. An example of a 501(c)(4) would be an organization whose primary purpose is to promote environmental welfare by educating the public, influencing public policy, and lobbying elected officials. 

501(c)(3) organizations are tax exempt, and their donors can also receive a tax deduction for their contributions. Donors also remain private, as 501(c)(3) entities are not required to publicly disclose the names and addresses of contributors in their annual 990 filings with the IRS. On the other hand, while 501(c)(4) organizations are also exempt from paying taxes, their donors do not receive a tax deduction for their contributions. Further, the IRS does require a 501(c)(4) to disclose its donors, however, it redacts this information from the public. 

Another distinction between 501(c)(3) and 501(c)(4) organizations is the amount of lobbying they are permitted to engage in. Direct Lobbying is the act of contacting an elected official or their staff for the purpose of influencing legislation at a local, state, or federal level. Grassroots lobbying is the act of urging the public to support or oppose policies or contact their elected officials for the purpose of influencing legislation. Both types of organizations are permitted to lobby as long as the lobbying is within the scope of their stated purpose. The limitation placed on 501(c)(3) is that lobbying cannot be a “substantial part” of the activities a 501(c)(3) uses its resources for. A good rule of thumb for 501(c)(3) organizations is to spend no more then 10-12% of its resources on lobbying activities. 501(c)(4) organizations can engage in unlimited lobbying activities as long as they remain within their stated purpose in doing so.

Finally, 501(c)(3) and 501(c)(4) are treated very differently with regard to whether they are permitted to engage in political activity. Political activity is the act of supporting or opposing a political candidate. A 501(c)(3) is strictly prohibited from engaging in any activity which supports or opposes a political candidate. There are no exceptions to this rule. On the other hand, A 501(c)(4) is permitted to engage in political activities which support or oppose a candidate for public office. However, they can only do so if it furthers their nonprofit mission, is not the primary activity the organization engages in, and they may not work directly with a candidate but must remain independent.