Similar to the more common 501(c)(3), a 501(c)(4) is also a nonprofit organization recognized as tax-exempt by the IRS. Here’s how they differ:
What is a 501(c)(4) organization?
The term 501(c)(4) is a tax-exempt status given to certain nonprofit organizations. It is not a business entity unto itself, but rather a status that can be issued by the IRS to certain qualifying business entities.
What’s the difference between 501(c)(3) & 501(c)(4)?
The main difference between 501(c)(3) and 501(c)(4) concerns the type of nonprofit organization it serves.
- 501(c)(3) – This the the most common type of tax-exempt nonprofit. It includes churches, schools, arts organizations, and other companies considered “charitable organizations” according to IRS Exemption Requirements.
- 501(c)(4) – This tax-exempt status applies to local associations of employees, as well as social welfare organizations. This can include homeowners associations or volunteer fire departments—it can even include organizations that engage in substantial lobbying activities (as defined by the IRS).
How do I form a 501(c)(4) company in Delaware?
Since 501(c)(4) is a tax status, not a business entity, you would first need to choose a business structure (i.e. Delaware Corporation or Delaware LLC), then file formation papers with the Delaware Division of Corporations. Your next step would be to apply for 501(c)(4) tax-exempt status with the IRS.
How do I get 501(c)(4) status?
Filing taxes with 501(c)(4) status requires two steps:
- Form 8976 – First, you’ll have to notify the IRS of your intent to operate as a Section 501(c)(4) organization. This requires submitting Form 8976, along with the accompanying $50 registration fee, using the IRS’s Electronic Notice Registration System. (Note: This form can ONLY be submitted online.)
- Form 1024-A – After submitting your notice to operate as a 501(c)(4), you can then submit your application for recognition of exempt status: Form 1024-A. This form can also ONLY be submitted online, this time using Pay.gov.
From there, you’ll need to file Form 990 or 990-EZ annually to maintain your tax-exempt status under Section 501(c)(4).
If you have questions about filing as a tax-exempt organization, or if you’re wondering whether 501(c)(4) status is right for your business, it’s a good idea to consult with an attorney or a CPA.