Seeking legislation germane to the organization’s programs is a permissible means of attaining social welfare purposes. Thus, a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its sole or primary activity without jeopardizing its exempt status. An organization that has lost its section 501(c)(3) status due to substantial attempts to influence legislation may not thereafter qualify as a section 501(c)(4) organization. In addition, a section 501(c)(4) organization that engages in lobbying may be required to either provide notice to its members regarding the percentage of dues paid that are applicable to lobbying activities or pay a proxy tax.
The Internal Revenue Code (IRC), in section 6033(e), imposes reporting and notice requirements on certain tax-exempt organizations described in sections 501(c)(4), 501(c)(5), and 501(c)(6) that incur nondeductible lobbying and political expenses. Organizations that do not provide notices of amounts of membership dues allocable to nondeductible lobbying expenditures are subject to tax (commonly called a proxy tax) under IRC section 6033(e)(2) on the amount of the expenditures. An organization must report the tax on Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e)), at line 37. For information on computing the tax, please see the Instructions for Form 990-T.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.