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?”)
State Charitable Solicitation Statutes: Everything You Wanted to Know But Were Afraid to Ask
Charities that seek contributions nationally must typically register in 39 states and the District of Columbia before starting to solicit. Furthermore, for-profit fundraisers are also required to register and file their contracts and other documentation with many states. Since many states are increasing their enforcement efforts to ensure that charities and fundraisers are complying with initial and annual registration requirements, it's important that charities and fundraisers abide by these statutes.
Program materials include an extensive review of the statutes and their provisions, plus a copy of the Uniform Registration Statement for multi-state filings. Purchasers will receive an e-mail receipt that includes a link that will take them to the product download. The download is a pdf file. Learn More
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