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Advantages and disadvantages of becoming a 501(c)(3) v. 501(c)(6)?

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Advantages and disadvantages of becoming a 501(c)(3) v. 501(c)(6)?

What are the advantages and disadvantages of becoming a 501(c)(3) charity instead of a 501(c)(6) trade association?

A full answer to this question would require a lengthy treatise. In the simplest response, however, there are a few major differences. 
A 501(c)(3) public charity is able to attract tax-deductible charitable contributions from individuals and corporations and grants from private foundations. A donor does not obtain a charitable contribution deduction for a gift to a 501(c)(6) trade association and as a practical matter private foundations will not make grants to them. 
A trade association is not limited in the amount of lobbying it may do in pursuing its members' interests, while a charity may lobby only so long as it is not a substantial portion of its activities. (See Ready Reference Page: "Lobbying Rules Create Opportunity for Charities.”)   A (c)(6) may endorse or oppose candidates for public office, while a (c)(3) could lose its exempt status for doing so.
As a matter of governance, the IRS likes a (c)(6) trade association to be a membership organization, while a (c)(3) charity can be governed by a self-perpetuating Board. (See Ready Reference Page: “The Key Question: Whose Organization Is It?”)
Wednesday, May 9, 2007

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