501(c)(4) Advocacy: Lobbying, Election Activity and a Related 501(c)(3)

1. What a 501(c)(4) is

The IRS says a 501(c)(4) must not be organized for profit and must be operated exclusively to promote social welfare. That means operating primarily to further the common good and general welfare of the community, such as civic betterment and social improvements. Its earnings may not benefit any private shareholder or individual.

Since 2015, section 506 of the Internal Revenue Code requires an organization to notify the IRS that it intends to operate as a 501(c)(4). The IRS uses Form 8976 for that notice.

Sources: IRS, Social welfare organizations

2. Lobbying by a 501(c)(4)

Seeking legislation germane to the organization's programs is a permissible way to promote social welfare. The IRS says a 501(c)(4) may further its exempt purposes through lobbying as its primary activity without putting its status at risk.

Two cautions come with that. An organization that lost 501(c)(3) status for substantial lobbying cannot then qualify as a 501(c)(4). And a 501(c)(4) that lobbies may need to tell members what share of their dues went to lobbying, or pay a proxy tax.

Sources: IRS, Social welfare organizations

3. Election activity by a 501(c)(4)

Promoting social welfare does not include taking part in a political campaign for or against a candidate. But the IRS says a 501(c)(4) may engage in some political activities, as long as that is not its primary activity.

Spending on political activity may be taxed under section 527(f). Track it separately from lobbying and program work, so you can show what share of your activity it was.

Sources: IRS, Social welfare organizations

4. How a 501(c)(3) differs

A 501(c)(3) faces tighter limits on both fronts. It may lobby only if lobbying is not a substantial part of its activities, or, if it elects under section 501(h), within dollar limits. And it is absolutely prohibited from intervening in any candidate's campaign.

Sources: IRS, Lobbying; IRS, Measuring lobbying: Substantial part test; IRS, Measuring lobbying activity: Expenditure test; IRS, Restriction of political campaign intervention by section 501(c)(3) tax-exempt organizations; IRS, Social welfare organizations

5. Running a 501(c)(3) and a 501(c)(4) together

Each organization's limits apply to its own activity. That only works if you can show which organization did what. Keep separate budgets, separate records of lobbying and political spending, and separate sign-off on communications.

Decide in advance which organization runs each campaign. A bill campaign that asks supporters to call legislators fits the 501(c)(4). A nonpartisan voter guide fits either. Anything that supports or opposes a candidate belongs only with the 501(c)(4), within its limits, or with a separate political committee.

Questions about shared staff, office space, donor lists and cost sharing are where groups most often need professional advice. The IRS pages cited here state each organization's limits, not how to divide shared resources.

Before the next campaign

For each planned campaign, name the organization that runs it, the budget it draws on, and who approves its messages. Review that list with your tax adviser once a year.