WISCONSIN SMALL BUSINESSES UNITED, INC. (“WSBU”) SECTION 501(C)(4) ORGANIZATIONS
What is a section 501(c)(4) organization?
Section 501(c)(4) organizations are tax-exempt organizations often referred to as “social welfare” or “civic league” organizations. As entities established for the “promotion of social welfare,” the primary purpose of section 501(c)(4) organizations must involve the promotion of the common good and general welfare of the community. Many section 501(c)(4) organizations are established to achieve their goals by influencing legislation, bringing litigation or marshalling public opinion. The purposes of section 501(c)(4) organizations are incredibly varied and may be seen as affiliated with conservative, liberal or independent viewpoints. A section 501(c)(4) organization is not a charity. WSBU was formed and incorporated to improve Wisconsin’s economic climate for its residents and small businesses by reducing regulations, lowering taxes, increasing job growth and hiring, and opposing legislation and policies that would create more burdens for Wisconsin residents and small businesses.
WSBU believes that its purposes and operations are consistent with section 501(c)(4) tax-exempt status and is in the process of seeking recognition of such status from the Internal Revenue Service (“IRS”). The IRS does not restrict WSBU from operating while final determination of its tax-exempt status is pending.
Can I donate to a section 501(c)(4) organization?
Yes, virtually anyone may donate to a section 501(c)(4) organization, including individuals, corporations, labor organizations and tribes. Other tax-exempt organizations also may also donate to section 501(c)(4) organizations, although additional considerations apply when the donor is a public charity. Section 501(c)(4) organizations are not regulated as political committees and are not subject to the state or federal ban on campaign contributions. A section 501(c)(4) organization may, on its own, refuse to accept certain donations from particular groups or types of donors as an organizational decision. Please contact WSBU if you have questions on making a donation.
Are my donations to a section 501(c)(4) organization required to be disclosed to the public?
No. Although a section 501(c)(4) organization may choose to publicly disclose its donors, WSBU has no plans to do so. Donors to a section 501(c)(4) organization that provide more than $5,000 in support per year must be disclosed each year to Internal Revenue Service (the “IRS”) on Schedule B to the Form 990, but such information is not publicly available. Furthermore, any section 501(c)(4) organization that receives a transfer from another section 501(c) organization does not publicly disclose receipt of those funds. Instead, the transfer would generally be disclosed publicly on the other (donor) organization’s Form 990 as a grant and not as a donation on the filings made by the organization that receives the funds.
Are my donations to a section 501(c)(4) organization tax-deductible as a charitable contribution?
No. Donations to a section 501(c)(4) organizations, whether in cash or property, are not deductible as charitable contributions. While some donors to section 501(c)(4) organizations may qualify for a trade or business expense deduction, lobbying amounts are not deductible. Donations to WSBU are attributed 100 percent as lobbying and political expenses as defined in the Internal Revenue Code and are not deductible as an ordinary or necessary business expenses. In sum, donors may not deduct donations made to WSBU.
Can a section 501(c)(4) organization engage in lobbying activities?
Yes. A section 501(c)(4) organization can engage in an unlimited amount of lobbying to achieve its exempt purposes.
Can a section 501(c)(4) organization engage in political campaign activities?
Yes, but political campaign activity should never be the primary purpose of a 501(c)(4) organization. Any political campaign activity is also subject to applicable state and federal campaign finance laws.
What is the difference between lobbying activity and political campaign activity?
In determining whether a particular activity is political campaign activity, the IRS will look at all relevant facts and circumstances. Taking a position on the outcome of an election or on a specific candidate in an election (rather than focusing on an issue) is likely to be considered by the IRS to be political campaign activity. Communications that are part of an ongoing lobbying/advocacy effort in connection with pending legislative matters are more likely to be considered lobbying than political campaign activities.
Example: Urging the public to contact their legislators about a proposed bill would usually be grassroots lobbying.
Example: Urging the public to vote for or against a candidate would be political campaign activity, even if the communication otherwise focused on informing the public about a particular issue.
Can a section 501(c)(4) organization be affiliated with other organizations?
Yes, it is quite common for section 501(c)(4) organizations to be affiliated with other organizations. Such affiliations may be with political action committees (PACs), charities, or other types of organizations and groups. In some cases, the organizations may even share similar names and related purposes.
What is the difference between a section 501(c)(3) organization and a 501(c)(4) organization?
While both section 501(c)(3) organizations and section 501(c)(4) organizations are tax exempt, these two types of organizations are formed for different purposes. Section 501(c)(3) organizations serve charitable, educational and religious purposes, while section 501(c)(4) organizations serve general social welfare purposes (as noted above).