News Column

Political Nonprofits: What's the Difference?

May 13 2013 10:01PM

Fredreka Schouten

irs

The controversy over the IRS targeting conservative groups for additional scrutiny has focused new attention on tax-exempt organizations, known by the section of the tax-code under which they are organized:

501(c)(3)

These are charitable organizations and include educational institutions, religious groups, private foundations and think tanks.

These groups are prohibited from taking partisan stands or working to elect or defeat candidates for elective office. They can participate in non-partisan activities, such as get-out-the-vote drives.

Donations to these groups are tax-deductible on individual federal income tax returns.

501(c)(4)

This is the designation for civic leagues and social-welfare organizations.

These groups can participate in partisan politics, as long as the activity is not the group's "primary" focus. Neither the tax code nor regulators have clearly defined what that means.

Donations to these groups generally are not tax-deductible.

501(c)(5)

This is the designation for labor unions and agricultural groups.

Labor groups have broad authority to lobby and engage in politics and have deployed millions of dollars -- along with thousands of their members -- to aid candidates who support their positions.

Donations to these groups are not tax-deductible on individual federal tax returns.

501(c)(6)

This is a designation used by business groups and trade associations, such as local chambers of commerce. Professional football leagues use this designation.

These groups have broad leeway to lobby for policies that advance their business interests.

Donations to these groups are not tax-deductible on federal tax returns. Businesses can deduct trade association dues, but not any portion that supports political activity.






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Source: Copyright USA TODAY 2013


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