501(c)(4): Social Welfare Organizations
A 501(c)(4) organization is a social welfare organization. Its primary purpose is to provide social benefits to communities rather than charity. A 501(c)(4) engages in activities that deliver social improvement and civic betterment. Examples are political and advocacy groups. It must not prioritize private individuals, groups, or foundations.
A 501(c)(4) can engage in charitable activities. But these must be incidental to promoting social welfare. Contributions to 501(c)(3)s can be tax deductible. Contributions to 501(c)(4)s are not. After Citizens United, corporations and unions registered as 501(c)(4)s. This allowed them to spend unlimited, undisclosed amounts on politics. The IRS then saw an increase in 501(c)(4) applications. A 501(c)(4) can lobby to achieve its purpose. But income spent on politics is taxable.
501(c)(5): Labor and Agricultural Organizations
A 501(c)(5) organization is a labor, agricultural, or horticultural organization. Examples are labor unions, county fairs, and flower societies. A 501(c)(5) has a duty of providing service to its members first.
Key Differences and Similarities
There are key differences between 501(c)(3) and 501(c)(4) organizations. Both types of organizations are nonprofits and are exempt from paying income tax unless they engage in unrelated business.
Are labor unions 501(c)(3)?
No, labor unions are considered 501(c)(5) organizations.