Designation as a 501(c)(4) entity by the Internal Revenue Service allows nonprofit organizations that focus on social welfare to lobby public officials regarding the organization's concerns and to participate in political campaigning. A 501(c)(4) organization does not pay income taxes and contributors to these organizations cannot deduct their donations. If your group plans to lobby or campaign for a political cause, 501(c)(4) status is for you. Although getting this designation is a straightforward task, the process requires preparation and patience.
Check that the name that you've chosen for your organization is not in use by another organization by searching the online business database for your secretary of state’s office. In most states, no two nonprofits can operate under the same or a similar name.
Submit articles of incorporation for a nonprofit organization to the secretary of state's office by hand or by mail. This document is a form and can be found online or by writing to the secretary of state. A filing fee paid by check is also required to process the document. The amount varies by state and expedited processing may be available at an additional cost.
Create bylaws by working with a lawyer and using a sample provided by your secretary of state's office or the bylaws form provided by the state. Depending on the rules in the state of incorporation, you may have to submit the bylaws to state authorities when submitting the group’s articles of incorporation.
Obtain a federal Employer Identification Number (EIN) from the Internal Revenue Service by completing Form SS-4. The application can also be completed for free at the IRS website. The EIN must later be included on the form requesting tax-exempt status from the IRS.
Apply for tax-exempt status from the IRS by completing Form 1024. A user fee must be included in the form of a check or money order. Once approved, you will receive a letter of notification, which will later be used to file for tax exemption at the state level.
Obtain tax exemption designation from your state by submitting an application for tax exemption form to your state's tax agency. Include proof of federal tax-exempt status and attach a check for the processing fee.
A lawyer is not required to establish a 501(c)(4) organization, but using an experienced attorney may be helpful, particularly when completing IRS Form 1024.
Although a 501(c)(4) can lobby and campaign, these and other non-social welfare activities must not be the primary function of the organization. When that becomes the case, the group will lose its 501(c)(4) designation.
Failure to file an annual information return with the IRS will result in the automatic loss of tax-exempt status.