Welcome to CPA at Law, helping individuals and small businesses plan for the future and keep what they have.

This is the personal blog of Sterling Olander, a Certified Public Accountant and Utah-licensed attorney. For over thirteen years, I have assisted clients with estate planning and administration, tax mitigation, tax controversies, small business planning, asset protection, and nonprofit law.

I write about any legal, tax, or technological information that I find interesting or useful in serving my clients. All ideas expressed herein are my own and don't constitute legal or tax advice.

Introduction to Forming a 501(c)(4)

In a prior post, I introduced how to form a 501(c)(3) charitable organization. This post introduces how to form a 501(c)(4) organization. Such organizations must be operated exclusively to promote social welfare, or further the common good of the community. This encompasses a much broader range of permissible activities than those in which charities may engage, but the trade off is that contributions to a 501(c)(4) do not qualify for a charitable deduction as do contributions to charities. Another difference is that a social welfare organization, unlike a charity, can have lobbying, or attempting to influence legislation, as its primary activity; it may not, however, have influencing elections as its primary activity.

The first step in establishing a 501(c)(4) organization is to create a legal entity under state law. While a trust and a limited liability company can be used, it usually makes the most sense to form a nonprofit corporation. After the legal entity is formed, the organization's directors need to appoint officers, adopt bylaws, and apply for an employer identification number. While a 501(c)(4) organization is not required to file an exemption application (historically, such applications were submitted on Form 1024, but they are now submitted on Form 1024-A), it must notify the IRS within 30 days of formation of its intent to operate as a Section 501(c)(4) organization by electronically filing Form 8976.

A few final steps and ongoing requirements are worth noting. Prior to soliciting the public for donations, the organization will need to ensure that it has completed the charitable solicitation registration process that most states require. The organization will also need to file some version of IRS Form 990 each year; small social welfare organizations can file the 990-N postcard version online. Social welfare organizations that collect membership dues must notify anyone who pays a membership due of the amount that is attributable to lobbying and which cannot therefore be taken as a business deduction. Finally, the organization will need to ensure that it keeps its corporate entity in good standing, typically by filing an annual report with the state.