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The Nonprofit Status Nitty-gritty: 501(c)3 vs 501(c)4, etc.

You might have noticed that if you request a United States-based charity through the Shop for Good dashboard, we’re happy to approve public 501(c)3 nonprofits — but we decline 501(c)4, 501(c)5, or 501(c)6 organization requests. There’s a good reason for that and I’m here to tell you what it is!

We know — you have a favorite organization and want to support it. We love that! We do our best to add your beloved charities to our system so that you can choose from millions not just in the U.S. but also worldwide. 

That said, there is a limit to the charities we can funnel your funds to. Let’s dive in.

501(c)3 vs 501(c)4, etc.

To stay compliant with commercial coventuring and other regulations in the United States and across the globe, the organizations we help fund must meet certain criteria.

For instance, for an organization to be considered charitable, its members mustn’t personally benefit from the donations being made. The organization also must not be organized or operated for the benefit of private interests. Further, donations must be tax-deductible. 

The above criteria are met when an organization holds a public 501(c)3 status (again, these statuses are exclusive to the United States and different statuses are used outside of the U.S.).

Let’s break down a few of these sections to better understand the 501(c)3 vs 501(c)4 vs 501(c)5 and even vs 501(c)6 nonprofit differences.

501(c)3

As per the Internal Revenue Service (IRS), 501(c)3 is a nonprofit organization for religious, charitable, scientific, and educational purposes. 

Section 501(c)3 organizations are restricted insofar as political and legislative (a.k.a. lobbying) activities. Further, the charity must not be organized or operated for the benefit of private interests, and no part of its net earnings may benefit any private shareholder or individual.

Conversely, a section 501(c)(4), (5), or (6) organization may engage in political campaigns, provided that such activities are not the organization’s primary activity. It’s also notable that section 501(c)4 and 501(c)6 organizations don’t have to disclose the identity of their donors on their annual Form 990 filing with the IRS.

Now let’s dive a little deeper into these other sections…

501(c)4

Unfortunately, the DailyKarma Foundation is legally prohibited from funding 501(c)4’s. 

This is because 501(c)4 is a social welfare group and donations to 501(c)4 generally are not deductible as charitable contributions for federal income tax purposes (although they may be deductible as trade or business expenses). 

This section may include local employee groups, homeowners’ associations, civil leagues, and similar organizations meant to provide social welfare benefits but that don’t meet the requirements of section 501(c)3. 

501(c)5

Section 501(c)5 organizations provide for exemption of labor, agricultural or horticultural organizations.

501(c)6

Section 501(c)6 organizations are not considered charitable because the members of said organization benefit from the donations being made.

These organizations include business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

What about nonprofits outside of the U.S.? 

We are stoked to be including nonprofits from across the globe in our database! If your favorite one isn’t there already, you can request a nonprofit from any country through your Shop for Good dashboard. 

Please include as much information as possible in your request, i.e., location and charity number and we will run it through our international charity vetting process. Including additional information helps us get through your requests faster so you can get back to giving!

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