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?”)
Planned giving sounds complicated, with its CRUTs and CRATs, CLUTs and CLATS, and CGAs. It can be incredibly complicated, but it needn’t be. Keeping it simple may be the best way to start a planned giving program for a charity that hasn’t already put one in place.
This webinar offered a review of major planned giving instruments and a discussion of ones that make the most sense to emphasize in starting a planned giving program. It discussed the advantages of integrating planned giving into an existing development program, targeting the best prospects, getting buy-in from the board that is likely to generate results, and setting a structure to make it all happen.
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