501(c)(5)
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501(c)(5) is an Internal Revenue Service (IRS) tax exemption status that applies to nonprofit agricultural, horticultural or labor organizations. No portion of a 501(c)(5) organization's earnings may be applied toward the private gain of a particular individual or member.[1]
Labor organizations are formed by a group of workers for the purpose of collective bargaining with an employer in order to secure improved working conditions, earnings or benefits. These entities are made up of workers in a particular trade or industry, such as electrical workers, or a profession, such as teachers. Labor organizations may directly pay benefits to members, but the primary purpose of a labor organization must be to participate in negotiations on work-related affairs. Benefits may include accident, death, strike, lockout and sick benefits. Labor groups may take the form of a union, council or committee.[1][2][3]
Agricultural organizations include entities that engage in fishing, forestry, raising livestock, or growing and harvesting crops. Horticultural organizations denote entities that cultivate plants for decorative or functional purposes. All horticultural organizations are also agricultural organizations, but not all agricultural organizations operate as horticultural organizations. These groups must aim to advance the interests of agricultural endeavors or improve conditions for agricultural workers. Farm bureaus, breeders' associations, rodeos and garden clubs all qualify as 501(c)(5) agricultural or horticultural organizations.[1]
In 2008, the IRS reported that there were 54,425 registered 501(c)(5) organizations nationwide.[4]
Tax status
501(c)(5) organizations are exempt from federal income tax, with the exception of any funds used for lobbying or political activities. Individual contributions to 501(c)(5) organizations are not tax deductible for the donor as charitable expenses. However, 501(c)(5) contributions may be tax deductible for individuals if they qualify as "ordinary and necessary" business expenses, such as labor union dues.[3]
Certain agricultural entities may qualify as both 501(c)(5) and 501(c)(3) organizations. These organizations offer an educational component, which allows them to also qualify as a 501(c)(3) educational organization. In these situations, the agricultural organization may determine which tax status to pursue. Most entities in this position prefer the 501(c)(3) designation because individual donations to 501(c)(3) organizations are tax exempt as charitable expenses.[1][5]
Political activities
Since politics and legislation may directly impact labor or agricultural activities, 501(c)(5) organizations may engage in lobbying and campaign activities as a means of advancing the interests of their members. Political expenses, however, are not tax deductible. In order to participate in lobbying activities, 501(c)(5) organizations must either notify their members of the amount of membership dues attributed to lobbying or pay a proxy tax on the sum of lobbying expenses. These entities may participate in political campaign activities as long as political campaigning is not the organization's primary purpose.[6][7]
Examples
The following entities are examples of 501(c)(5) organizations:[8]
Labor organizations
- International Brotherhood of Electrical Workers (Washington, D.C.)
- National Association of Letter Carriers (Washington, D.C.)
- Communications Workers of America (Washington, D.C.)
- United Steelworkers (Pittsburgh, Pa.)
- National Education Association of the United States (Washington, D.C.)
Agriculture or horticulture organizations
- Iowa Farm Bureau Federation (West Des Moines, Iowa)
- Texas Farm Bureau (Waco, Texas)
- Sunset Empire Orchid Society (Seaside, Ore.)
- Flint Hills Beef Fest Inc. (Emporia, Kan.)
- Clark County Agri-Business Tour Inc. (Winchester, Ky.)
Recent news
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See also
External links
Footnotes
- ↑ 1.0 1.1 1.2 1.3 Internal Revenue Service, "IRC 501(c)(5) organizations," accessed December 21, 2015
- ↑ Internal Revenue Service, "Labor organizations," accessed December 21, 2015
- ↑ 3.0 3.1 Internal Revenue Service, "Publication 557," accessed December 21, 2015
- ↑ National Center for Charitable Statistics, "501(c)(5) Agricultural, horticultural, and labor organizations," accessed December 21, 2015
- ↑ Internal Revenue Service, "Exempt Purposes - Internal Revenue Code Section 501(c)(3)," accessed January 13, 2014
- ↑ Internal Revenue Service, "Nondeductible lobbying and political expenditures," accessed December 21, 2015
- ↑ Internal Revenue Service, "Political campaign and lobbying activities of IRC 501(c)(4), (c)(5), and (c)(6) organizations," accessed December 21, 2015
- ↑ National Center for Charitable Statistics, "Organizations by IRS subsection 501(c)(5)," accessed December 21, 2015
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