If your organization is not organized for profit and will be
operated only to promote social welfare, you should file Form 1024 to
apply for recognition of exemption from federal income tax under
section 501(c)(4). The discussion that follows describes the
information you must provide when applying. For application
procedures, see chapter 1.
To qualify for exemption under section 501(c)(4), the
organization's net earnings must be devoted only to charitable,
educational, or recreational purposes. In addition, no part of the
organization's net earnings may benefit any private shareholder or
individual. If the organization provides an excess benefit
to certain persons, an excise tax may be imposed. See
Excise tax on excess benefit transactions under Public
Charities in chapter 3 for more information about this tax.
Types of organizations that are considered to be social welfare
organizations are civic associations and volunteer fire companies.
You must submit evidence that your organization is organized and
will be operated on a nonprofit basis. However, such evidence,
including the fact that your organization is organized under a state
law relating to nonprofit corporations, will not in itself establish a
social welfare purpose.
To establish that your organization is organized exclusively to
promote social welfare, you should submit evidence with your
application showing that your organization will 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 betterment
and social improvements).
An organization that restricts the use of its facilities to
employees of selected corporations and their guests is primarily
benefiting a private group rather than the community. It therefore
does not qualify as a section 501(c)(4) organization. Similarly, an
organization formed to represent member-tenants of an apartment
complex does not qualify, since its activities benefit the
member-tenants and not all tenants in the community. However, an
organization formed to promote the legal rights of all tenants in a
particular community may qualify under section 501(c)(4) as a social
Promoting 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. However, if you
submit proof that your organization is organized exclusively to
promote social welfare, it may still obtain exemption even if it
participates legally in some political activity on behalf of or in
opposition to candidates for public office. See the discussion in
chapter 2 under Political Organization Income Tax Return.
If social activities will be the primary purpose of your
organization, you should not file an application for exemption as a
social welfare organization but should file for exemption as a social
club described in section 501(c)(7).
Retirement benefit program.
An organization established by its members that has as its primary
activity providing supplemental retirement benefits to its members or
death benefits to their beneficiaries does not qualify as an exempt
social welfare organization. It may qualify under another paragraph of
section 501(c) depending on all the facts.
However, a nonprofit association that is established, maintained,
and funded by a local government to provide the only retirement
benefits to a class of employees may qualify as a social welfare
organization under section 501(c)(4).
Tax treatment of donations.
Donations to volunteer fire companies are deductible on the donor's
federal income tax return, but only if made for exclusively public
purposes. Contributions to civic leagues or other section 501(c)(4)
organizations generally are not deductible as charitable contributions
for federal income tax purposes. They may be deductible as trade or
business expenses, if ordinary and necessary in the conduct of the
taxpayer's business. However, see Deduction not allowed for dues
used for political or legislative activities on page 46 for more
The following information should be contained in the application
form and accompanying statements of certain types of civic leagues or
social welfare organizations.
Volunteer fire companies.
If your organization wishes to obtain exemption as a volunteer fire
company or similar organization, you should submit evidence that its
members are actively engaged in fire fighting and similar disaster
assistance, whether it actually owns the fire fighting equipment, and
whether it provides any assistance for its members, such as death and
medical benefits in case of injury to them.
If your organization does not have an independent social purpose,
such as providing recreational facilities for members, it may be
exempt under section 501(c)(3). In this event, your organization
should file Form 1023.
A membership organization formed by a real estate developer to own
and maintain common green areas, streets, and sidewalks and to enforce
covenants to preserve the appearance of the development should show
that it is operated for the benefit of all the residents of the
community. The term community generally refers to a
geographical unit recognizable as a governmental subdivision, unit, or
district thereof. Whether a particular association meets the
requirement of benefiting a community depends on the facts and
circumstances of each case. Even if an area represented by an
association is not a community, the association can still qualify for
exemption if its activities benefit a community.
The association should submit evidence that areas such as roadways
and park land that it owns and maintains are open to the general
public and not just its own members. It also must show that it does
not engage in exterior maintenance of private homes.
A homeowners' association that is not exempt under section
501(c)(4) and that is a condominium management association, a
residential real estate management association, or a timeshare
association generally may elect under the provisions of section 528 to
receive certain tax benefits that, in effect, permit it to exclude its
exempt function income from its gross income.
Other nonprofit organizations that qualify as social welfare
- An organization operating an airport that is on
land owned by a local government, which supervises the airport's
operation, and that serves the general public in an area with no other
- A community association that works to improve
public services, housing and residential parking, publishes a free
community newspaper, sponsors a community sports league, holiday
programs and meetings, and contracts with a private security service
to patrol the community,
- A community association devoted to preserving the
community's traditions, architecture, and appearance by representing
it before the local legislature and administrative agencies in zoning,
traffic, and parking matters,
- An organization that tries to encourage industrial
development and relieve unemployment in an area by making loans
to businesses so they will relocate to the area, and
- An organization that holds an annual festival of
regional customs and traditions.