Article Archives >> To the Point

What are the advantages and disadvantages of becoming a 501(c)(3) charity instead of a 501(c)(6) trade association?

A full answer to this question would require a lengthy treatise. In the simplest response, however, there are a few major differences.

A 501(c)(3) public charity is able to attract tax-deductible charitable contributions from individuals and corporations and grants from private foundations. A donor does not obtain a charitable contribution deduction for a gift to a 501(c)(6) trade association and as a practical matter private foundations will not make grants to them.

A trade association is not limited in the amount of lobbying it may do in pursuing its members' interests, while a charity may lobby only so long as it is not a substantial portion of its activities.  (See Ready Reference Page: "Lobbying Rules Create Opportunity for Charities.”)

As a matter of governance, the IRS likes a (c)(6) trade association to be a membership organization, while a (c)(3) charity can be governed by a self-perpetuating Board.  (See Ready Reference Page:  “The Key Question: Whose Organization Is It?)

Rev. 5/9/2007

Article Archives >> To the Point

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