501(c)(4)

501(c)(4) organizations are generally civic leagues and other corporations that are supposed to be operated exclusively for the promotion of social welfare, or local associations of employees with membership limited to a designated company or people in a particular municipality or neighborhood, and with net earnings devoted exclusively to charitable, educational, or recreational purposes.

501(c)(4) groups have never had to disclose their donors, but were not allowed to take corporate or union money, otherwise they'd have to disclose their donors to the Federal Election Commission. But after the January 2010 Citizens United v. Federal Election Commission Supreme Court decision, 501(c)4 groups can take unlimited corporate and union money, still without disclosing. 501c4s have been increasingly affiliated with the growth of super PACs.

Lobbying

Unlike 501(c)(3) organizations, 501(c)(4) organizations may lobby for legislation; they may also participate in political campaigns and elections, as long as campaigning is not the organization's primary purpose. There has long been a hanging question in campaign finance law, however, over just what constitutes a political communication or campaign.

Disclosure and lobbying

501(c)(4) organizations are not required to disclose their donors publicly. This aspect of the law has led to extensive use of the 501(c)(4) provisions for organizations that are actively involved in lobbying, and has become controversial, particularly since the 2010 Citizens United Supreme Court decision.

Tax exemption

501c4 of the Internal Revenue Code reads:

• (c) List of exempt organizations

• Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.

The tax exemption for 501(c)(4) organizations applies to most of their operations, but contributions may be subject to gift tax, and income spent on political activities - generally the advocacy of a particular candidate in an election - is taxable.

Super PACs

Since the 2010 Citizens United decision, 501c4s have been increasingly affiliated with the growth of super PACs. According to iwatch: "The super PACs can take unlimited contributions but they must be reported to the Federal Election Commission. The 501(c)(4)s, registered with the IRS rather than the FEC, need not disclose any of their donors or the amount of their contributions. These groups, often formed in pairs, are the newest twist in campaign fundraising."

Spending

501c4 organizations outspent super PACs in the 2010 election cycle. According to a June 2012 article by iWatch, "A joint investigation by the Center for Public Integrity and the Center for Responsive Politics has found that more than 100 nonprofits organized under section 501(c)(4) of the U.S. tax code spent roughly $95 million on political expenditures in the 2010 election compared with $65 million by super PACs. Nearly 90 percent of the spending by these nonprofits - more than $84 million - came from groups that never publicly disclosed their funders.... [C]onservative 'social welfare' groups outspent liberal groups $78 million to $16 million, nearly 5-to-1, according to the analysis."

Resources

Related SourceWatch Resources

• 501c3
• soft money
• The U.S. tax code and non profits

External links

• Peter Stone, "Fine line between politics and issues spending by secretive 501(c)(4) groups" iwatch, Oct. 31, 2011.
• "(C) Spot Run!" The Daily Show, October 12, 2010.
• Bill Adair, "Groups hide behind tax code", St Petersburg Times, December 11, 2006.