When people say nonprofit, they usually mean a 501(c)(3), the charitable category that lets donors deduct their gifts. But the section of the tax code that grants exemption, Section 501(c), covers more than two dozen kinds of organizations, and many of the nonprofits you deal with every day belong to a different one.
A chamber of commerce, a labor union, a social club, and a veterans' post are all tax exempt without being 501(c)(3) charities. Knowing which type an organization is tells you what it can do with donations, how much it can lobby, and how it applied for exemption.
In This Article
- The Main Types at a Glance
- 501(c)(3): Charities and Foundations
- Inside (c)(3): Public Charity or Private Foundation?
- 501(c)(4): Social Welfare Organizations
- (c)(5), (c)(6), (c)(7), and the Membership Types
- What Each Type Can Do With Politics and Lobbying
- How Each Type Gets Recognized
- Choosing the Right Type for a New Organization
- Why the Type Matters If You Sell to Nonprofits
- Frequently Asked Questions
The Main Types at a Glance
| Type | Who it is for | Are gifts deductible? |
|---|---|---|
| 501(c)(3) | Charitable, religious, educational, scientific, and literary organizations | Generally yes |
| 501(c)(4) | Civic leagues and social welfare organizations | Generally no |
| 501(c)(5) | Labor, agricultural, and horticultural organizations | Generally no |
| 501(c)(6) | Business leagues, chambers of commerce, and trade associations | Generally no, though dues can be a business expense |
| 501(c)(7) | Social and recreational clubs | No |
| 501(c)(8) | Fraternal beneficiary societies that provide member benefits | Generally no |
| 501(c)(19) | Veterans' organizations | Limited |
This is a simplified view. The tax code contains specific rules for each category, and individual situations vary, so treat the table as a map rather than tax advice.
501(c)(3): Charities and Foundations
This is the category most people picture. It covers organizations operated exclusively for charitable, religious, educational, scientific, or literary purposes, along with a few related purposes such as preventing cruelty to children or animals. Donations are generally tax deductible for the giver, which is the main reason organizations seek this status.
In exchange, a 501(c)(3) faces the tightest limits. It cannot participate in political campaigns for or against candidates, and its lobbying must stay within defined limits. Within the category there is also an important split between public charities and private foundations, which we cover in our guide to nonprofit vs foundation.
Inside (c)(3): Public Charity or Private Foundation?
Every 501(c)(3) is classified as either a public charity or a private foundation, and the label matters because the rules differ. A public charity generally receives support from a broad base of donors or earns its income by carrying out its exempt purpose. A private foundation is typically funded by a single source, such as a family or a corporation, and gets most of its money from investment income.
Private foundations face extra rules, including a minimum annual payout for charitable purposes and excise taxes on certain investment income and transactions. Most groups that ask the public for donations are public charities. Our guide to nonprofit vs foundation explains the distinction in detail.
501(c)(4): Social Welfare Organizations
A 501(c)(4) works to promote the common good and general welfare of a community. Advocacy groups and many civic associations use this status because it gives them far more freedom to lobby than a 501(c)(3) has. The tradeoff is that donations are generally not deductible.
A 501(c)(4) can also engage in some political activity as long as it is not its primary purpose. Since 2016, a new 501(c)(4) is expected to notify the IRS of its existence using Form 8976 within 60 days of formation, even though it can operate without applying for a formal determination letter.
(c)(5), (c)(6), (c)(7), and the Membership Types
Several categories exist mainly to serve members rather than the general public. Labor unions and agricultural groups fall under (c)(5). Chambers of commerce, real estate boards, and trade associations fall under (c)(6). Social clubs and recreation groups fall under (c)(7), and their exempt income comes largely from members. Fraternal societies, veterans' posts, and similar groups have their own subsections.
For anyone selling to associations, these are a distinct audience from charities. A trade association or chamber buys for its members and staff, has dues based revenue, and often runs conferences, which makes it a different prospect from a food bank.
What Each Type Can Do With Politics and Lobbying
| Type | Candidate campaigns | Lobbying |
|---|---|---|
| 501(c)(3) | Prohibited | Allowed, but limited |
| 501(c)(4) | Allowed if not the primary activity | Allowed, including as a primary activity if related to its purpose |
| 501(c)(6) | Allowed if not the primary activity | Generally allowed, with rules affecting how dues can be treated |
| 501(c)(7) | Limited by its social purpose | Not the typical activity |
This is one of the reasons advocacy groups often pair a 501(c)(3) with a 501(c)(4). The charity does educational and service work funded by deductible gifts, while the related social welfare organization handles lobbying that the charity could not do at the same scale.
How Each Type Gets Recognized
- 501(c)(3): applies to the IRS on Form 1023, or the shorter Form 1023-EZ for small organizations that qualify.
- Most other 501(c) types: apply on Form 1024 to receive a determination letter.
- 501(c)(4): may operate without a determination letter but is expected to file Form 8976, and can still request a letter.
- All types: file an annual return, covered in our guide to Form 990.
Choosing the Right Type for a New Organization
The question to ask is what you actually plan to do. If the goal is charitable work funded by deductible gifts and grants, a 501(c)(3) usually fits. If the goal is heavy advocacy, a 501(c)(4) may fit better, and some organizations run a 501(c)(3) and a linked 501(c)(4) side by side. If the goal is to serve an industry or a membership, a (c)(6) or (c)(5) is the natural home.
Starting an organization involves more than picking a category, from state incorporation to bylaws and a board. Our step by step guide to starting a nonprofit walks through the full process.
Why the Type Matters If You Sell to Nonprofits
If you sell products or services to nonprofits, the type tells you a lot about how an organization buys. A charity with a development office buys donor management, email, and event tools. A trade association or chamber of commerce buys membership management software, conference services, and print or digital publishing. A social club buys facilities and event services. The same product usually needs a different pitch for each.
The organizations in our database span the whole sector, so you can segment by industry code, size, and location to reach the kind of organization that fits your offering. Our guide to selling to nonprofits covers how to approach the buyers once you have found them.
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