Examining the Landscape of Section 501(c)(4) Social Welfare Organizations

68 Pages Posted: 23 May 2018

Date Written: May 21, 2018

Abstract

This article will be part of a symposium issue on social welfare organizations exempt from income tax under section 501(c)(4) of the Internal Revenue Code. The articles in the symposium issue will cover many aspects of section 501(c)(4). This contribution gives an overview of the provision, including applicable law, legislative history, and, relying on some recent empirical work from the Urban Institute, a description of the many kinds of entities it includes.

The article emphasizes that political activity is not key for most section 501(c)(4) organizations. Thus, focusing only on section 501(c)(4) political activities, as much recent coverage of section 501(c)(4) has done, misrepresents and misunderstands the subsector. The article argues that section 501(c)(4) often carries out a border control function by providing a home for entities that are almost but not quite eligible for exemption as charities under section 501(c)(3) or other provisions of section 501(c). At other times, however, section 501(c)(4) does the opposite – undermining rather than protecting the limits of other provisions of section 501(c). As a result, section 501(c)(4) has witnessed many border skirmishes, including conflicts that produced statutory changes regarding veterans’ organizations, homeowners’ organizations, amateur sports and credit counseling. The article suggests reforms of section 501(c)(4), including possible taxation of investment income, and predicts growth of the subsector in light of the 2017 tax legislation that increased the standard deduction and limited certain itemized deductions.

Suggested Citation

Aprill, Ellen P., Examining the Landscape of Section 501(c)(4) Social Welfare Organizations (May 21, 2018). New York University Journal of Legislation and Public Policy, Forthcoming; Loyola Law School, Los Angeles Legal Studies Research Paper No. 2018-17. Available at SSRN: https://ssrn.com/abstract=3182619

Ellen P. Aprill (Contact Author)

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States
213-736-1157 (Phone)
213-380-3769 (Fax)

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