IDADA is a 501 (c)(6) Non-Profit Organization
Most people are familiar with the “501(c)(3)” non-profit designation. But what many don’t realize is that Section 501(c)(3) of the Internal Revenue Code is just one of many tax law provisions granting exemption from the federal income tax to non-profit organizations. A pertinent example of this is IDADA, which is a 501(c)(6) non-profit. For each type of exemption classification, varying rules and requirements may apply. The following information will help IDADA members and donors understand the distinction between these two types of non-profit organizations, 501(c)(3) and 501(c)(6), including important tax deduction consequences.
501(c)(3) exemptions apply to entities organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (think NCAA).
26 U.S.C. § 170 provides a deduction, for federal income tax purposes, for some donors who make charitable contributions to most types of 501(c)(3) organizations, among others. Regulations specify which such deductions must be verifiable in order to be allowed (e.g., receipts for donations over $250).
IDADA is a 501(c)(6) non-profit. A 501(c)(6) is specifically reserved to business leagues. A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Trade associations and professional associations are business leagues. To be exempt, a business league’s activities must be devoted to improving business conditions of one or more lines of business as distinguished from performing particular services for individual persons. 501(c)(6) organizations are exempt from most federal income taxes. However, donations to a 501(c)(6) are not tax deductible as charitable contributions, as is the case with a 501(c)(3). Donations to 501(c)(6) organizations are not required to be disclosed.
Here’s a quick comparison of 501(c)(3) and 501(c)(6) status:
We hope you find this information helpful. Please leave comments or questions below.
Note: this blog post contains general advice. I’m a lawyer, but I’m not your lawyer (unless I am your lawyer ☺) so please consult your own attorney or accountant with specific legal and tax issues.
Kenan L. Farrell advises business owners, non-profits, entrepreneurs and artists on business and intellectual property (copyright, trademark, patent) issues. You can read more from him over at the Indiana Intellectual Property & Technology Law Blog. Follow on Twitter @klflegal.
4 Responses to “IDADA is a 501 (c)(6) Non-Profit Organization”
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This was extremely helpful information Kenan! Thank you so much. As a recently started non for-profit, it’s extremely helpful information getting our filing status figured out!
Thanks for putting this up Kenan. Another example of members working to help others.
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