Thursday, May 11, 2006

501(c)(4) orgs - should you be registered?

Everyone thinks registration with the California Attorney General's Registry of Charitable Trusts is only for 501(c)(3) organizations.

To the contrary, the AG's office says that certain 501(c)(4) orgs must also register. According to the AG, California's registration and reporting requirements are based on how the organization is incorporated, not the subsection of Internal Revenue Code 501(c) under which exemption from taxation was granted. This means that a 501(c)(4) organization incorporated as a California nonprofit public benefit corporation must register and file annual reports with the Attorney General's Registry of Charitable Trusts.

Surprised? So are most of my c4 clients.

Exempt status under Section 501(c)(4) is provided to nonprofit "civic leagues" and similar organizations operated exclusively for the promotion of social welfare. While similar in some ways to both 501(c)(3) charitable orgs and 501(c)(6) trade associations, the 501(c)(4) designation is really a catch-all between the two for organizations that don't clearly fall into either of the other categories.

Because many 501(c)(4) orgs began life assuming they would be a 501(c)(3) or a 501(c)(6), the incorporation status of these entities in California is a mixed bag. Some of my c4 clients are incorporated as public benefit corps and some are incorporated as mutual benefit corporations.

So find out. Pull out those dusty old articles of incorporation, and if "public benefit" lurks in the verbiage, you need to get registered.