The URL can be used to link to this page

Home My WebLink About08-18-2002 501(c)4 StatusBROWN, WARD, SALZMAN & WEISS, P.A. ATTORNEYS AT LAW Usher L. Brown • Suzanne D'Agresta Anthony A. Garganese° Gary S. Salzman' John H. Ward • Jeffrey S. Weiss Debra S. Babb Jeffrey P. Buak Alfred Truesdell Joseph E. Blitch Scott D. Danahy Brett A. Marlowe Cheyenne R. Young Board Certified Civil Trial Lawyer ° Board Certified Business Litigation Lawyer ° Board Certified City, County & Local Government Law April 18, 2002 The Honorable Mayor Paul P. Partyka and Members of the City Commission 1126 East State Road 434 Winter Springs, Florida 32708-6912 Re: 501(c)4 Status Our File No. 1193 Dear Mayor Partyka and Members of the City Commission: Two Landmark Center 225 East Robinson Street, Suite 660 Post Office Box 2873 Orlando, FL 32802-2873 (407) 425-9566 (407) 425-9596 FAX Email: agarganese@orlandolaw.net Website: www.orlandolaw.net Cocoa: 866-425-9566 REC,NI APR 1 #2go OA?CP"P I was asked to provide some general information regarding the meaning of a 501(c)4 corporation. The following is a description of 501(c)4 organizations from the IRS website: To be tax-exempt as an organization described in 501(c)(4), an organization must not be organized for profit and must be operated exclusively for the promotion of social welfare. The earnings of a 501(c)(4) organization may not inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any managers agreeing to the transaction. To be considered operated exclusively for the promotion of social welfare, an organization must operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic The Honorable Mayor Paul P. Partyka and Members of the City Commission April 18, 2002 Page 2 betterment and social improvements). An organization is not operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. The seeking of legislation germane to the organization's programs is recognized by the regulations as a permissible means of attaining social welfare purposes. Thus, a 501(c)(4) social welfare may further its social welfare purposes through lobbying as its primary activity without jeopardizing its exempt status. In addition, a 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 promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. A 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditures it makes for political activities may be subject to taxation. In addition, attached you will find a chart comparing 501(c)3, 501(c)4, 501(c)6, and 501(c)7 corporate statuses. If you have any specific questions, please do not hesitate to call. U ly yours, Anthony A. Garganese City Attorney AAG:jf Enclosure cc: Ron McLemore, City Manager if 50 1 (c) Status http://members.aol.com/irsforTn1023/Mi,,/,Omp.5 01s.ht, "Comparison of 501(c)(3) and 501(c)(4), (6) and (7) Status .. .. ........ . - .... ........ ... . ...... . ...... ......... .......... ............................. ......... ......... .. ... .. ......... .. .. . ........ .... .." ... . . ........ .... ....... .... .. ... . .... . ... . 501 (c)(3) 501(c)(6) E� E(c)(:44) F� 761 _(c)(7) Organizational No requirement (or less No requirement (or less No requirement (or less requirement----- Istringent) stringent) stringent) i 'Assets must be dedicated f No requirement to No requirement to _j No requirement to to charitable purposes dedicate assets --J dedicate assets dedicate assets Social activity must be Social activities must be 1 Social activity may be Social activity may be i primary; other activities anything less than anything less than insubstantial lot If it must be less than primary primary Drimary No limit on legislitive Legislative activity must No limit on legislative activity as long as it No limit on legislative be insubstantial, or <20% 1 I activity as long as it fin-t hers the exempt fh furthers the exempt legislative activity as long as it 'furthers if election made purpose; ' the exempt i1 ,purpose expenditures may limit purpose ------------------ the deductibility of dues Absolute prohibition 'Political activity Political activity 1p Political activity against political activitypermitted, but taxed i permitted, bj permitted, but taxed permitted, but taxed Can serve community I ... . ...... Must serve public purposes, can be Can serve the business Serves the social and .purposes 'somewhat narrower than purposes of the members recreation purposes of (c)(3) members 'Donations Donations are deductible I not deductible i Donations not deductible as charitable contributions as charitable contributions bdonors as charitable contributions - I businesses sometimes deduct Donations not deductible as charitable y on their tax returns i1businesses sometimes j1dues as advertising; may be deductible as: contributions 11deduct as advertising i[business expense Eligible for low cost non-profit bulk mailing I Not eligible for lowest Not eligible for lowest permit bulk Mai Irates bulk mail rates bulk mail rates ----------- I .. . .......... . .. ........ . ...... . ... ... ......... . Must take care to generate7 . ............ ...... ... .. .................. . .... . ....... ....... .... .... ........ ..... .. .. ... ....... enough public support to ,avoid classification as a = Not an issue under (c)(4) Not an issue under (c)(6) Not an issue under (c)(7) private foundation Exempt from Federal Exempt from Federal income tax unless the income tax unless the Exempt from Federal Exempt from Federal organization has unrelated! j business organization has unrelated business i income tax unless the organization has unrelated: income tax on income derived from members; income i ilincome I business income other income taxed Where To Go for Additional Information Miscellaneous 4/8/02 12:3.3 PM