Wednesday, March 10, 2021

Which Tax Exempt Status Fits Your New York Non-Profit?
Ever wonder how some non-profits can lobby the government, but others cannot? 

I cannot tell you how many people in the political circles I have worked and volunteered in have asked me about the differences in various kinds of state and federal political committees.  Of course, that is before we even get to the basics of forming a NY not-for-profit company, which is necessary for you to understand. 


Inevitably, the issue of tax exemption and permissible activities always arises. Tax law can be especially confusing, as there are strict rules to follow if you wish to engage in political activity and remain a non-profit entity. 


This prompted me to write this very basic explanation of the nuances of the two most common tax exempt options available for those who dream of becoming a K Street lobbyist. 

Whether your New York nonprofit should apply for tax exemption under IRS 501(c)(4) depends upon the type of organization you have and the political activities it may be undertaking.

New York nonprofits that are civil leagues and local associations that further a social welfare objective, but do not quite meet the level of a charitable organization (religious, educational, charitable purposes), may pursue exemption under 501(c)(3).  For example, a local civic association, homeowner's association, or the local Lions Club, are organizations that meet this description. 

New York nonprofits that wish to freely conduct political or lobbying efforts, gain support or opposition for political candidates or take action to pass or repeal laws and legislation should choose to apply for 501(c)(4) exemption. 

A New York nonprofit that obtained 501(c)(3) exemption is limited to conducting "insubstantial" lobbying efforts that allocate less than 10% of its total operating budget.  A New York nonprofit that obtained 501(c)(4) exemption may engage in unlimited lobbying and political activity so long as there is some relation to the purpose of the organization.

You should note that should your NY nonprofit obtain 501(c)(4) exemption, individuals and businesses that donate to your organization will most likely be unable to take a tax deduction. 

If you are considering applying for exemption under IRS 501(c)(4) for your New York nonprofit, you should consult an attorney that knows the eligibility requirements and costs and benefits to each classification so you can make an informed decision.

Believe me, it gets more complicated than this. I haven't even talked about the state and federal registration and reporting requirements for certain kinds of political action committees, let alone the requirements on candidate committees and the existence of other options that exist depending upon your own personal background (such as bring a veteran.) 


Luckily, there are some no-cost options available for you to start educating yourself further, such as this workshop provided by the IRS. 


Also, we can get into all the nitty-gritty details of your personal ideas and questions, so feel free to contact me to discuss your individual situation.  


Gene Berardelli is a street-smart attorney with with over fifteen years of experience in civil and commercial litigation. Gene has achieved several career achievements, including successfully settling a seven-figure personal injury claim, successfully arguing before the New York State Appellate Division and successfully representing clients in trial litigation, mediations and arbitrations against such recognizable entities as the City of New York, New York City Transit Authority, JPMorgan Chase, TD Wealth Management Services, Inc., The Long Island Railroad, and Macy*s. Gene is also a noted New York Election Law expert who has had his opinions cited in scholarly works and published in news and feature articles.

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