501(c)(6)
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501(c)(6) is an Internal Revenue Service (IRS) tax exemption status that applies to nonprofit business leagues and related membership organizations including real estate boards, chambers of commerce, boards of trade and professional football leagues. Business leagues refer to associations of individuals organized for the purpose of advancing the common interest of a particular field of business or a specific profession. A 501(c)(6) association may participate in certain for-profit business activities, but these activities must not function as the organization's primary purpose. No amount of a 501(c)(6) organization's earnings may be applied toward the private gain of a particular individual or member.[1][2]
501(c)(6) organizations must rely on membership dues as a significant, though not necessarily primary, means of financial support. Affiliated trusts established by a 501(c)(6) organization for the purpose of administering funds may also qualify as 501(c)(6) organizations.[1]
In 2008, the IRS reported that there were 69,734 registered 501(c)(6) organizations nationwide.[2]
Tax status
501(c)(6) organizations are exempt from federal income tax, with the exception of any funds used for lobbying or political activities. Individual contributions to 501(c)(6) organizations are not tax deductible for the donor as charitable expenses. However, 501(c)(6) contributions may be tax deductible for individuals if they qualify as "ordinary and necessary" trade or business expenses, such as membership dues.[3]
Political activities
Since politics and legislation may directly impact business activities, 501(c)(6) organizations can engage in germane lobbying and campaign activities as a means of advancing common business interests. Political expenses are only tax deductible if they are used in certain capacities to lobby pertinent legislation before local-level governing authorities, such as city councils. A 501(c)(6) organization may also participate in political campaign activities as long as political campaigning is not the organization's primary purpose.[3][4]
Sports leagues
Sports leagues have historically operated as 501(c)(6) organizations. Since these entities work to advance the business interests of their affiliated teams or players, the groups qualify as business leagues or trade associations.[5][6]
Over the years, sports leagues have faced opposition to their 501(c)(6) tax exemptions. For example, opponents disputed the National Football League's (NFL) nonprofit status due to the league's high executive salaries and large revenues. The NFL argued, however, that the organization operated as a trade association while each affiliated team functioned as an independent, for-profit entity and paid taxes on revenues garnered from television contracts, ticket sales and merchandise. The NFL voluntarily ended its nonprofit status in August 2015 in response to criticism from the public and congressional leaders including Independent Senator Angus King of Maine and Democratic Senator Maria Cantwell of Washington.[5][7][8]
As of January 2016, several sports leagues have declined nonprofit status while others have continued to operate as 501(c)(6) organizations. Major League Baseball (MLB), the NFL, the National Basketball League (NBA) and NASCAR all operate as for-profit entities while the National Hockey League (NHL) and the PGA Tour continue to operate as 501(c)(6) organizations.[5]
Examples
The following entities are examples of 501(c)(6) organizations:[9]
- American Bar Association (Chicago, Ill.)
- American Medical Association (Chicago, Ill.)
- American Bureau of Shipping (Houston, Texas)
- PGA Tour (Ponte Vedra Beach, Fla.)
- Berlin Main Street Merchants Inc. (Berlin, Ohio)
Recent news
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See also
External links
Footnotes
- ↑ 1.0 1.1 Internal Revenue Service, "IRC 501(c)(6) organizations," accessed December 21, 2015
- ↑ 2.0 2.1 National Center for Charitable Statistics, "501(c)(6) business leagues," accessed December 21, 2015
- ↑ 3.0 3.1 Internal Revenue Service, "Publication 557," 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
- ↑ 5.0 5.1 5.2 The Washington Post, "The NFL is dropping its tax-exempt status. Why that ends up helping them out." August 28, 2015
- ↑ National Public Radio, "NFL Announces It Will Forgo Its Tax Exempt Status," April 28, 2015
- ↑ The Atlantic, "Why the NFL Decided to Start Paying Taxes," April 28, 2015
- ↑ Change.org, "Revoke the Tax-Exempt Status of the National Football League," accessed January 15, 2016
- ↑ National Center for Charitable Statistics, "Organizations by IRS subsection 501(c)(6)," accessed December 21, 2015
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