Understanding 501(c)(6) Organizations

You’ve probably heard the term 501(c)(3), which is probably the most common type of tax-exempt status for nonprofits in the US. But a 501(c)(6), while still relevant to the nonprofit sector, is a little different. Here’s what you need to know:

What is a 501(c)(6)?

Organizations that qualify for 501(c)(6) tax exemptions are characterized by the IRS as “business leagues.” They exist to promote businesses—not to generate profits. Examples of such organizations include: chambers of commerce, real estate boards, boards of trade, and even—believe it or not—professional football leagues.

What’s the difference between a 501(c)(3) and a 501(c)(6)?

The basic difference between a 501(c)(3) and a 501(c)(6) nonprofit is that the former usually focuses on bettering communities at-large (focusing on art, education, health, religion, public safety, etc.), while the latter focuses on bettering business communities. According to the IRS, a 501(c)(6) is an association of people with a common business interest, “the purpose of which is to promote such common interest.”

Are donations to a 501(c)(6) tax deductible?

No. As the IRS stipulates, donations to 501(c)(6) organizations are not tax deductible.

How do I obtain 501(c)(6) status?

Once you’ve registered your business with your state, you’ll have to reach out to the IRS to get your tax-exempt status. This requires filing both Form 1024 and Form 8718, and paying the associated fee (usually $600). If the IRS accepts your application, you’ll receive a Letter of Determination, which can be used to apply for any available state tax exemptions.