Provided by:  Jennifer Kirschenbaum, Esq.

 March 16, 2023

Question:

Hi Jennifer,

I am trying to set up a tax exempt nonprofit to receive contributions and offer on a tax-free basis, but I cannot determine whether I need a 501c3 or a 501c6. Please let me know what the differences are.

Appreciate your guidance. 
 
-Dr. G


Answer:

Thanks to Clorissa Winters, Esq., one of our healthcare corporate associates for the below - 

Hi Dr. G, thank you for reaching out! It can definitely be difficult to distinguish against the two, but hopefully my guide below can help you select the structure that is right for you.
 
A 501c3’s mission must be for the “greater good” and either charitable, religious, educational, scientific, and literary, testing for public safety, fostering national or international amateur sports, or preventing cruelty to children or animals, and every action done by the organization will be to further the mission. A 501c6 may have an industry based broader mission that is not necessarily charitable, like business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues, and they have more freedom when programming activities and events.  More details below –
 
501c3
Contributions to a 501c3 are considered charitable tax deductions, whereas contributions to a 501c6 are neither charitable or tax deductions.
 
501c3s must report donor information to the IRS for gifts of $5,000 or more, whereas 501c6s do not need to report donor information. Private 501c3s must disclose donor information to the public, whereas public 501c3s and 501c6s do not have to.
 
501c3s must file form 1023 ($600) or 1023-EZ ($275) with the IRS to be exempt from federal, state, and local taxes. 501c6s must file the 1024 Form ($600) to receive their Letter of Determination making them exempt from federal taxes, but they may not be exempt from state and local taxes.
 
501c6
501c6s can participate in lobbying and campaigning as long as they notify their members of the percentage of their dues to be used for such causes (which must remain under 49%) and pay a proxy tax. Contrarily, while 501c3s can lobby without limit, they may not participate in political campaigning. This means that they may advocate for causes and legislation that impacts their mission, but they may not back a political party or candidate or donate to their campaigns.
 
We are happy to assist you with this process.  Feel free to email or call me any questions to CWinters@kirschenbaumesq.Com or 516-747-6700 x. 308.