501(c)(4) COMPILED FROM IRS.GOV

Social Welfare Organizations

To be tax-exempt as a social welfare organization described in Internal Revenue Code (IRC) section 501(c)(4), an organization must not be organized for profit and must be operated exclusively to promote social welfare. The earnings of a section 501(c)(4) organization may not inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any managers agreeing to the transaction.

To be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). For example, an organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community and, therefore, does not qualify as a section 501(c)(4) organization. Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, because its activities benefit the member-tenants and not all tenants in the community, while an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. An organization is not operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations operated for profit.

Seeking legislation germane to the organization’s programs is a permissible means of attaining social welfare purposes. Thus, a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status. An organization that has lost its section 501(c)(3) status due to substantial attempts to influence legislation may not thereafter qualify as a section 501(c)(4) organization. In addition, a section 501(c)(4) organization that engages in lobbying may be required to either provide notice to its members regarding the percentage of dues paid that are applicable to lobbying activities or pay a proxy tax.

The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditure it makes for political activities may be subject to tax under section 527(f).

To be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). An organization whose purposes are charitable within the meaning of Code section 501(c)(3) may also be a social welfare organization under section 501(c)(4).

An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community and, therefore, does not qualify as a section 501(c)(4) organization. Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community, while an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. An organization is not operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations operated for profit.

The language of both the statute and the regulations describes a broad category of organizations. As stated in an internal training article:

Although the Service has been making an effort to refine and clarify this area, [section] 501(c)(4) remains in some degree a catch-all for presumptively beneficial non-profit organizations that resist classification under the other exempting provisions of the Code.  Unfortunately, this condition exists because “social welfare” is inherently an abstruse concept that continues to defy precise definition.

Civic leagues and social welfare organizations are exempt under section 501(c)(4) of the Internal Revenue Code. Social welfare organizations generally fall into one of the following categories:

Organizations that may be performing some type of public or community benefit but whose principal feature is lack of private benefit or profit;
Organizations that would qualify for exemption under section 501(c)(3) but for a defect in their organizing documents or if they were not “action organizations”; and
Nonprofit organizations that traditionally have been labeled in common parlance as social welfare organizations.

  1. To qualify as a social welfare organization under IRC section 501(c)(4), an organization must be operated exclusively for the promotion of social welfare. An organization is considered to be operated exclusively for the promotion of social welfare if it is primarily engaged in activities which in some way promote the common good and general welfare of the community.
  2. Political activities, operation of a social club for members, and the conduct of business with the general public in a manner generally similar to for-profit organizations are not considered to be activities for the promotion of social welfare. Therefore, an organization which is primarily engaged in these nonqualifying activities, does not qualify as a social welfare organization under IRC section 501(c)(4).
  3. Social activities for the benefit, pleasure, or recreation of members do not promote accomplishment of social welfare purposes and thus are not qualifying social welfare activities. However, such social activities do not preclude exemption under IRC section 501(c)(4) so long as those social activities, along with any other activities that do not promote social welfare purposes, are not the primary activities of the organization.
  4. Treas. Reg. section 1.501(c)(4)-1(a)(2)(ii) specifically provides that an organization will not qualify for exemption as a civic organization described in IRC section 501(c)(4) if its primary activity is the operation of a social club for the benefit, pleasure, or recreation of its members.
  5. The conduct of business with the general public in a manner similar to for-profit organizations does not promote the accomplishment of social welfare purposes. However, such conduct of business with the general public on a for profit basis, does not preclude exemption under IRC section 501(c)(4) so long as such business with the general public, along with any other activities that do not promote social welfare purposes, are not the primary activities of the organization.
The Service provides in Rev.Proc.95-35,§4.01,that,pursuant to IRC6033(e)(3),the requirements of IRC6033(e )shall not apply to organizations recognized by the Service as exempt from taxation under IRC501(a),other than(1) IRC501(c)(4) social welfare organizations that are not veterans organizations. 
An exempt organization subject to IRC 6033(e) has several options. It may provide a
notice to its members when they pay dues that contains a reasonable estimate of the amount
allocable to lobbying expenditures. If it does not give notification, it must pay a proxy tax at the
highest rate imposed by IRC 11 (currently 35 percent) on its lobbying expenditures (up to the
amount of dues and other similar payments received by the organization) during the taxable year.
In addition, if the organization does provide notices to its members but underestimates the actual
amount of lobbying expenditures, it is subject to the proxy tax on the excess lobbying
expenditures paid during the applicable year that were not included in the notices. However, this
tax may be waived if the organization agrees to include the excess lobbying expenditures in the
following year’s notices.
This mechanism allows a membership organization to elect not to provide its members
with a disallowance notice in which case the organization will be required to pay the tax. If an
organization elects the proxy tax option, no portion of any dues or other payments made by
members of the organization will be deemed nondeductible as a result of the organization’s
lobbying activities.
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https://www.irs.gov/pub/irs-tege/eotopicl03.pdf
http://www.nolo.com/legal-encyclopedia/what-section-501c4-social-welfare-organizations.html
https://www.gpo.gov/fdsys/granule/USCODE-2011-title26/USCODE-2011-title26-subtitleA-chap1-subchapF-partI-sec501/content-detail.html
https://www.irs.gov/Charities-&-Non-Profits/Other-Non-Profits/Social-Welfare-Organizations
https://www.irs.gov/pub/irs-tege/eotopici03.pdf
https://www.irs.gov/Charities-&-Non-Profits/Other-Non-Profits/Social-Welfare-Purposes
https://www.irs.gov/Charities-&-Non-Profits/Other-Non-Profits/Life-Cycle-of-a-Social-Welfare-Organization
https://www.irs.gov/Charities-&-Non-Profits/Other-Non-Profits/Donations-to-Section-501%28c%29%284%29-Organizations
https://www.irs.gov/pub/irs-tege/eo_disclosure_faqs.pdf
http://www.guidestar.org/rxa/news/articles/2015/charities-must-file-unredacted-donor-information-in-california.aspx
https://www.irs.gov/pub/irs-pdf/f990ezb.pdf