Order Code RL30877
CRS Report for Congress
Received through the CRS Web
Characteristics of and
Reporting Requirements for
Selected Tax-Exempt Organizations
Updated April 18, 2005
Erika Lunder
Legislative Attorney
American Law Division
Congressional Research Service ˜ The Library of Congress

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Characteristics of and Reporting Requirements for
Selected Tax-Exempt Organizations
Summary
This report addresses the differences among the tax-exempt organizations
described in Internal Revenue Code subsections 501(c)(3), 501(c)(4), 501(c)(5),
501(c)(6), and section 527. Each type of organization has a unique statutory
definition, enjoys benefits from obtaining tax-exempt status, is subject to statutory
limitations on its activities, and must disclose certain information to the IRS and the
general public. At the end of the report is a chart that summarizes the organizations’
characteristics and reporting requirements.

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Contents
Organizational Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
IRC § 501(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
IRC § 501(c)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IRC § 501(c)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IRC § 501(c)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IRC § 527 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Benefits of Tax-Exempt Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tax exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Deductible contributions and dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Non-tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disadvantages of Tax-Exempt Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Restrictions on lobbying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Restrictions on political campaign activity . . . . . . . . . . . . . . . . . . . . . . 6
Related Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Requirements for Obtaining Tax-Exempt Status . . . . . . . . . . . . . . . . . . . . . . 7
IRC § 501(c) organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IRC § 527 organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
IRS Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
IRC § 501(c) organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
IRC § 527 organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Public Disclosure of Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Chart: Characteristics of and Reporting Requirements for Selected
Tax-Exempt Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

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Characteristics of and Reporting
Requirements for Selected Tax-Exempt
Organizations
There are more than thirty types of tax-exempt organizations described in the
Internal Revenue Code (IRC). Most tax-exempt organizations fall into one of five
types: the organizations described in IRC §§ 501(c)(3), 501(c)(4), 501(c)(5),
501(c)(6), and 527. This report was developed to answer frequently asked questions
about the differences among these organizations: how they are defined; what they can
and cannot do; how they obtain exempt status; and what kind of information they
must disclose to the IRS and the public. As will be seen, the same rules often apply
to the four organizations described in IRC § 501(c), while different ones apply to 527
organizations.
For purposes of this report, the term “501(c) organizations” refers to the
organizations described in IRC §§ 501(c)(3), 501(c)(4), 501(c)(5) and 501(c)(6). It
should be noted that there are many other organizations described in IRC § 501(c)
and that the rules described in this report do not necessarily apply to them.
Organizational Definitions
IRC § 501(c)(3). The organizations described in IRC § 501(c)(3) are
commonly referred to as “charitable organizations.” The section describes them as:
organized and operated exclusively for religious, charitable, scientific, testing for
public safety, literary, or educational purposes, or to foster national or
international amateur sports competition (but only if no part of its activities
involve the provision of athletic facilities or equipment), or for the prevention of
cruelty to children or animals, no part of the net earnings of which inures to the
benefit of any private shareholder or individual, no substantial part of the
activities of which is carrying on propaganda, or otherwise attempting, to
influence legislation . . . and which does not participate in, or intervene in
(including the publishing or distributing of statements), any political campaign
on behalf of (or in opposition to) any candidate for public office.
There are two types of 501(c)(3) organizations: public charities and private
foundations. In general, public charities receive contributions from a variety of
sources, while private foundations receive contributions from limited sources and are
often controlled by their donors.1 Due to fear of abuse, private foundations are
subject to stricter regulation than public charities. Examples of 501(c)(3) public
charities include the Red Cross, churches, schools, hospitals, Boy Scouts, Girl
Scouts, animal shelters, and Little League. Examples of private foundations include
1 IRC § 509.

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the John D. and Catherine T. MacArthur Foundation, the Ford Foundation, the
Rockefeller Brothers Fund, Inc., and the Mars Foundation.
An important limitation to note from the organizational definition is that
501(c)(3) organizations may only engage in a non-substantial amount of lobbying and
are prohibited from engaging in political campaign activity. None of the other
exempt organizations discussed in this report are similarly limited. This issue is
discussed below in the “Disadvantages of Tax-Exempt Status” section.
IRC § 501(c)(4). The organizations described in IRC § 501(c)(4) are generally
referred to as “social welfare organizations.” The section describes these
organizations as:
[c]ivic leagues or organizations not organized for profit but operated exclusively
for the promotion of social welfare, or local associations of employees, the
membership of which is limited to the employees of a designated person or
persons in a particular municipality, and the net earnings of which are devoted
exclusively to charitable, educational, or recreational purposes.
Examples of 501(c)(4) organizations include the National Rifle Association and the
Sierra Club.
As can be seen from the organizational definitions in IRC §§ 501(c)(3) and
501(c)(4), these organizations have some overlapping characteristics. Both sections
include organizations that operate for charitable purposes and are restricted in that
no earnings may be used to benefit private shareholders or individuals. There are,
however, two important differences between them. First, 501(c)(3) organizations are
eligible to receive tax-deductible contributions, but 501(c)(4) organizations are not
[see “Benefits of Tax-Exempt Status” section, below]. Second, 501(c)(3)
organizations are more limited in the amount and types of political activity they may
do [see “Disadvantages of Tax-Exempt Status” section, below]. Thus, an
organization that could qualify under either section will generally choose based on
which is more important: receiving tax-deductible contributions or participating in
political activity.
IRC § 501(c)(5). IRC § 501(c)(5) organizations are described as “labor,
agricultural, or horticultural organizations.” Most of these organizations are labor
unions.
IRC § 501(c)(6). The organizations described in IRC § 501(c)(6) are generally
thought of as trade associations. The section describes these organizations as:
[b]usiness leagues, chambers of commerce, real estate boards, boards of trade,
or professional football leagues . . . not organized for profit and no part of the net
earnings of which inures to the benefit of any private shareholder or individual.
Examples of 501(c)(6) organizations include the Chamber of Commerce, Jaycees,
American Bar Association, American Medical Association, and National Association
of Manufacturers.

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IRC § 527. The organizations described in IRC § 527 are political
organizations or funds organized and operated primarily for accepting contributions
and/or making expenditures for an exempt function.2 Section 527 defines an exempt
function3 as:
influencing or attempting to influence the selection, nomination, election, or
appointment of any individual to any Federal, State, or local public office or
office in a political organization, or the election of Presidential or Vice-
Presidential electors, whether or not such individual or electors are selected,
nominated, elected, or appointed.
IRC § 527 encompasses every kind of political committee, including a candidate
committee, a political party, and a political action committee set up by a union, a
corporation or a group of politically-interested citizens. In recent years, the term
“527 organization” has been used to describe certain groups that intend to influence
federal elections in ways that may be outside the scope of federal election law;
however, the tax definition of the term is not limited to such organizations.
Benefits of Tax-Exempt Status
Organizations that qualify for tax-exempt status may receive various types of
benefits from the federal government. These include tax and non-tax benefits.
Tax exemption. Most exempt organizations, including those described in
IRC §§ 501(c)(3), 501(c)(4), 501(c)(5) and 501(c)(6), are generally exempt from tax
on their income. However, they are taxed on any income from unrelated business
activities.4 Additionally, 501(c) organizations, particularly 501(c)(3) organizations,
are subject to tax if they engage in certain activities. Taxable activities include
making political expenditures, participating in excess lobbying and political
activities, and engaging in excess personal benefit transactions (i.e., transactions
where insiders realize unwarranted benefits from their relationship with the
organization).5
527 political organizations are exempt from income tax to the extent that they
only have exempt function income and engage in exempt function activities. Exempt
function income is income from such sources as contributions, membership dues and
political fundraising. The funds must be segregated to be used for an exempt
function. 527 organizations are taxed if they have income derived from other
sources, e.g., investment income, or if they spend money on non-exempt function
activities.
2 For more information, see CRS Report RS21716, Political Organizations Under Section
527 of the Internal Revenue Code.
3 In this report, when exempt function is italicized, it is to emphasize that the term refers to
political organization exempt function activities, i.e., influencing or attempting to influence
an election, etc., and not the activities of other tax-exempt organizations.
4 IRC §§ 511-514.
5 IRC § 527(f); IRC chapters 41 and 42.

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The exemptions under IRC §§ 501 and 527 do not extend to employment taxes.
Thus, if they have employees, exempt organizations generally pay the usual employer
share of taxes for Social Security and Medicare. However, churches opposed for
religious reasons to the payment of these taxes may elect to be exempt from these
taxes, and all 501(c) organizations are exempt for employees whose wages are less
than $100.6 Additionally, exempt organizations generally pay the federal
unemployment (FUTA) tax. However, 501(c)(3) organizations are exempt from this
tax, and the other 501(c) organizations are exempt if the employee’s wages are less
than $50 per calendar quarter.7
Deductible contributions and dues. Of the types of organizations
discussed in this report, only 501(c)(3) organizations are eligible to receive tax-
deductible charitable contributions.8 The IRS determines whether an organization
is eligible to receive deductible contributions at the time it considers the
organization’s application for 501(c)(3) status. A list of the 501(c)(3) organizations
eligible to receive deductible contributions is found in IRS Publication 78,
Cumulative List of Organizations Described in Section 170(c) of the Internal
Revenue Code of 1986. This publication is available on the IRS website at
[http://www.irs.gov].
Charitable contributions to 501(c)(3) organizations are not deductible if the
organization provides goods or services in exchange for the contribution. If the
contribution exceeds the fair market value of the goods or services, then the amount
of the excess may be deductible. When an organization receives more than $75 in
exchange for goods or services, the organization must tell the donor how much of the
contribution, if any, is tax-deductible.9
Generally, there are no particular requirements placed on contributors to
501(c)(3) organizations. However, if a contributor wants to take a tax deduction for
a contribution of $250 or more, then he or she needs to obtain “contemporaneous
written acknowledgment of the contribution” from the organization.10 The
acknowledgment should include a description of the contribution, a good faith
estimate of the value of any property contributed, and a statement about whether
anything was given in return. Also, it should be noted that there are limitations on
the amount that may be deducted: the deduction may not exceed a percentage of the
taxpayer’s income, only individuals who itemize deductions may take the deduction,
6 IRC §§ 3121(a)(16) and (b)(8)(B).
7 IRC §§ 3306(c)(8) and (10)(A).
8 IRC § 170. Non-501(c)(3) organizations that may receive tax-deductible contributions are
governmental units, veterans organizations, fraternal organizations, and cemetery
companies.
9 IRC §§ 6115 and 6714.
10 IRC § 170(f)(8).

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and higher-income taxpayers are further restricted in the amount that may be
deducted.11
When a contribution is not deductible as a charitable contribution, the
organization must notify the potential contributor of that fact at the time of
solicitation.12 There is an exception for organizations with annual gross receipts of
less than $100,000. If this exception does not apply, then fundraising solicitations
by organizations described in IRC §§ 501(c)(4), 501(c)(5), 501(c)(6) and 527 must
include a notice that the donation is not deductible. Organizations that fail to meet
this requirement face a fine of $1,000 for each day the failure occurs, with an annual
cap of $10,000.13 The fines are higher and the cap is eliminated for organizations that
intentionally disregard the notification requirement.
Dues to many labor unions [501(c)(5)] and trade associations [501(c)(6)] and
to some charitable [501(c)(3)] or social welfare [501(c)(4)] organizations may be tax-
deductible business expenses for their members.14 However, IRC § 162(e) restricts
the use of tax-deductible dues for lobbying purposes. If the organization lobbies, it
must generally notify its members of the portion of dues that is nondeductible.15 That
amount is determined by comparing the organization’s expenditures on all activities
with the percentage of expenditures for lobbying activities. If the organization fails
to notify its members of the amount that is non-deductible, then it is subject to a
proxy tax on its lobbying expenditures.
Non-tax benefits. Organizations with tax-exempt status may qualify for
certain non-tax benefits from the federal government. For example, some federal
grants are only available to tax-exempt organizations, generally those described in
IRC § 501(c)(3). Additionally, organizations that qualify for tax-exempt status may
also qualify for favorable mailing rates. The special rates are not an automatic
benefit from receiving tax-exempt status so the organization must still apply to the
United States Postal Service.16 Tax-exempt organizations may also receive beneficial
treatment under a variety of federal laws, e.g., federal provisions relating to antitrust,
securities regulation, bankruptcy, and gambling.
11 IRC §§ 62, 63, 68, and 170(b).
12 IRC § 6113.
13 IRC § 6710.
14 IRC § 162. Only individuals who itemize deductions may take the deduction and higher-
income taxpayers will be restricted in the amount that may be deducted. IRC §§ 62, 63, and
68. Additionally, only itemizers with substantial expenses that qualify to be deducted as
miscellaneous itemized deductions will be able to benefit from the deduction. IRC § 67.
15 IRC § 6033(e). 501(c)(3) organizations are exempt from this requirement.
16 For more information on the preferential mailing rates, see USPS Publication 417,
Nonprofit Standard Mail Eligibility, which is available on the USPS website at
[http://pe.usps.gov/cpim/ftp/pubs/Pub417/Pub417.pdf].

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Disadvantages of Tax-Exempt Status
There are some disadvantages to having tax-exempt status. Organizations may
be restricted in their activities, such as their ability to participate in lobbying or
political campaign activity. Additionally, organizations will have to comply with
annual reporting requirements and disclose certain information to the public [see
“Reporting Requirements” and “Public Disclosure of Returns” sections, below].
Restrictions on lobbying. As mentioned above, 501(c)(3) organizations are
the only type of organization discussed in this report with a statutory definition that
explicitly limits lobbying activity. Under IRC § 501(c)(3), these organizations may
only conduct a non-substantial amount of lobbying without risking their exempt
status. Additionally, they are subject to penalty taxes for making excess lobbying
expenditures.17 The other tax-exempt organizations discussed in this report may,
under the Internal Revenue Code, participate in lobbying so long as it is consistent
with the qualifications in their organizational definitions.
Section 18 of the Lobbying Disclosure Act of 1995, P.L. 104-65, prohibits
organizations described in IRC § 501(c)(4) from receiving federal grants, loans, or
other awards if they engage in lobbying activities, even if they conduct the lobbying
with their own funds. As originally passed, section 18 also applied to 501(c)(4)
organizations that received government contracts, but the section was amended by
P.L. 104-99 to delete that restriction. The Lobbying Disclosure Act imposes
registration and disclosure requirements on any organizations that have paid lobbyists
whose lobbying activities exceed certain time and monetary limits. For more
information, see CRS Report 96-809A, Lobbying Regulations on Non-Profit
Organizations, by Jack H. Maskell.
Restrictions on political campaign activity. With the exception of 527
organizations, the organizations discussed in this report are restricted in some manner
by the Internal Revenue Code from participating in political campaign activity . The
purpose of 527 organizations, of course, is to participate in such activity.
The organizational definition in IRC § 501(c)(3) prohibits those organizations
from participating in political campaign activity. An organization that violates the
prohibition may lose its exempt status and/or be subject to penalty taxes under IRC
§§ 4945 and 4955.
The Internal Revenue Code allows 501(c)(4), 501(c)(5), and 501(c)(6)
organizations to participate in political campaign activity so long as such activities
are consistent with the organization’s exempt purpose. However, under IRC §
527(f), any 501(c) organization that makes an expenditure for an exempt function is
subject to tax on the lesser of its net investment income or the amount of the
expenditure. The tax rate is the highest corporate tax rate, with an allowance for
capital gains. This provision provides an inducement for these organizations with
substantial investment income to conduct their campaign activity through an
affiliated 527 organization [see the “Related Organizations” section, below].
17 IRC §§ 4911, 4912, and 4945.

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Finally, it should be noted that while the tax laws permit organizations
described in IRC §§ 501(c)(4), 501(c)(5), and 501(c)(6) to engage in political
campaign activity, the election laws ban corporations and labor unions from making
any contribution or expenditure in connection with federal elections.18 This ban
applies whether a corporation is for-profit or tax-exempt. Exceptions may arise from
the definitions used in election law, but it is important to note that the election laws
do not necessarily correspond to the tax laws. This is another inducement for 501(c)
organizations to conduct political activity in a 527 organization. Of course, 527
organizations must also abide by applicable election laws.
Related Organizations
It is not unusual for different types of exempt organizations to form affiliates or
related organizations to more effectively perform their missions. For example, labor
unions often have a related 501(c)(3) scholarship fund, which is eligible to receive
tax-deductible contributions, and a 527 political action committee, which can
conduct campaign/endorsement activities that the union cannot legally carry on inside
the union itself. Similarly, a trade association might have a lobbying affiliate, a
charitable affiliate, and a political action committee. So long as the entities carefully
observe the requirements that the organizations be separate, these types of
relationships are not prohibited.
Requirements for Obtaining Tax-Exempt Status
In general, the organizations described in IRC §§ 501(c)(3), (c)(4), (c)(5) and
(c)(6) must apply to the IRS to be recognized as tax-exempt, while 527 organizations
must notify the IRS of their existence.
IRC § 501(c) organizations. Before an organization described in IRC §§
501(c)(3), (c)(4), (c)(5), or (c)(6) can apply for exempt status, it generally must be
established under state law as whatever type of organization it intends to be, which
is usually a nonprofit corporation. This process will typically include developing
articles of incorporation and bylaws. The organization must also obtain an employer
identification number [EIN] from the IRS, which can be done on-line or by
telephone. The organization may then apply to the IRS for tax-exempt status.
501(c)(3) organizations file Package 1023 with the IRS. Some organizations do
not have to apply, including churches, very small organizations, and organizations
that are essentially subsidiaries of organizations with a group exemption letter. If the
application is filed within 27 months of the organization’s formation, the exemption
will generally be effective back to the date of formation. If the organization does not
file its application in a timely manner, it will not be treated as an exempt organization
for the period between its formation and IRS recognition of its status.
501(c)(4), (c)(5), and (c)(6) organizations file Package 1024, filling out the
sections relevant to their organizational type. There is no particular deadline for
filing. The recognition of exempt status will be effective back to the date of the
18 2 U.S.C. § 441b.

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organization’s formation so long as the organization’s activities and purposes have
not changed over time. If the organization has altered its activities or substantially
amended its charter to qualify for exempt status, then the recognition of its status will
be effective as of a date determined by the IRS.
IRC § 527 organizations. With several exceptions, organizations must
notify the IRS of their 527 status by electronically filing Form 8871 within 24 hours
of formation. They must also obtain an EIN. The exceptions are political
organizations that are required to report to the FEC as a political committee, are
political committees of non-federal candidates or state or local committees of a
political party, or anticipate having annual gross receipts of less than $25,000. An
organization that fails to register with the IRS will be taxed at the maximum
corporate tax rate on all gross receipts (less certain expenses) for the period of the
failure.
IRS Reporting Requirements
In general, tax-exempt organizations must report information to the IRS by
filing information and tax returns. While the reporting requirements are similar for
501(c) organizations and 527 organizations, 527 organizations have an additional
requirement to report information on their expenditures and contributions.
IRC § 501(c) organizations. The organizations described in IRC §§
501(c)(3), 501(c)(4), 501(c)(5), and 501(c)(6) must file several returns with the IRS:
information returns, income tax returns, and employment tax returns.
Under IRC § 6033, these organizations must file an annual information return
[Form 990 series]. Exceptions exist for churches and certain small organizations.
The return asks for information concerning such things as sources of revenue,
functional expenses, disbursements, and the names and compensation of officers,
directors, and trustees. IRC § 6033(b) further requires that 501(c)(3) organizations
report information concerning such things as:
! the names and addresses of and amounts given by all substantial
contributors (generally donors of gifts in excess of $5,000) — this
information is included on the form’s Schedule B;
! for 501(c)(3) organizations that have elected a numerical
measurement of the substantiality of their lobbying expenditures:
their lobbying expenditures, the permissible amount of their
lobbying expenditures, their grassroots lobbying expenditures, and
the permissible amount of grassroots lobbying expenditures;
! information about transfers to and relationships with other 501(c) or
527 organizations; and
! information about any taxes imposed for excess lobbying or
political expenditures and excess benefit transactions.
IRC § 6033(f) requires that 501(c)(4) organizations furnish the same information
regarding excess benefit transactions.

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With respect to income tax returns, all the 501(c) organizations described in this
report that conduct business activities unrelated to their exempt purpose must file a
Form 990-T. Furthermore, a 501(c) organization that makes an expenditure for an
exempt function will need to file a Form 1120-POL and one that has been assessed
a penalty tax must file Form 4720.
501(c) organizations file the usual employment tax returns for income tax
withholding and social security and medicare taxes [Form 941], income reporting
[W-2, W-3, Form 1099], and unemployment tax [Form 940].
IRC § 527 organizations. Like 501(c) organizations, 527 organizations must
file information returns, income tax returns, and employment tax returns. 527
organizations with gross receipts of at least $25,000 ($100,000 for certain state and
local organizations) must file an annual information return [Form 990 series].19 527
organizations are not required to file Form 990 if they are state or local committees
of a political party, political committees of a state or local candidate, required to
report to the FEC as a political committee, caucuses or associations of state or local
officials, authorized committees of a candidate for federal office under FECA §
301(6), national committees of a political party under FECA § 301(14), or
congressional campaign committees of a political party committee. As discussed
above, Form 990 includes such information as the organization’s revenue sources and
expenses. Additionally, like 501(c)(3) organizations, 527 organizations must report
contributions of at least $5,000 on the form’s Schedule B.
527 organizations with taxable income over $100 must file a tax return [Form
1120-POL].20 Additionally, 527 organizations with employees are required to file the
usual employment tax returns, including those for income tax withholding and social
security and medicare taxes [Form 941], income reporting [W-2, W-3, Form 1099],
and unemployment tax reporting [Form 940].
527 organizations have an additional reporting requirement that 501(c)
organizations are not subject to. 527 organizations must file periodic disclosures of
contributions and expenditures with the IRS [Form 8872].21 The disclosure
requirements do not apply to political organizations that have annual gross receipts
of less than $25,000; are political committees of a state or local candidate, state or
local committees of a political party; or are required to report to the FEC as a
political committee or, if a state or local political organization, required to report
similar information to a state. The requirements also do not apply to any expenditure
that is an expenditure that expressly advocates for a candidate but is made without
the candidate’s cooperation.
A periodic report must include (1) the name, address, occupation, and employer
of any contributor who makes a contribution during the reporting period and has
given at least $200 during the year, along with the amount and date of the
19 IRC § 6033(g).
20 IRC § 6012(a)(6).
21 IRC § 527(j).

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contribution, and (2) the amount, date, and purpose of each expenditure made during
the reporting period if the recipient has received at least $500 during the year, along
with the recipient’s name, address and, if appropriate, occupation and employer.
Contracts to spend or contribute are treated as contributions or expenditures. The
organization may file on a (1) quarterly basis in a year with a regularly scheduled
election and semi-annually in any other year or (2) monthly basis. There are
additional requirements for pre-general election, post-general election, and year-end
reports. Form 8872 may be filed electronically, and organizations with annual
contributions or expenditures exceeding $50,000 must do so.

Penalties. The penalty imposed on an exempt organization for failing to
timely or accurately file the annual information return [Form 990] is $20 per day for
each day the return is not filed, up to the lesser of $10,000 or 5% of the
organization’s gross receipts for the year.22 For organizations with gross receipts
over $1,000,000, the daily penalty is $100, with a maximum penalty of $50,000.
Exempt organizations are subject to the same penalties as other taxpayers for
failing to file a tax return or pay their taxes. An organization that fails to file a timely
tax return is subject to a penalty that equals 5% of the tax due for each month the
return is late, limited to 25% of the tax due.23 If the organization does not pay its
taxes, it is subject to a penalty that equals 0.5% of the unpaid tax for each month the
tax is not paid, limited to 25% of the unpaid tax.24 Neither penalty will be imposed
if the organization shows that the failure was due to reasonable cause. On the other
hand, the penalty may be increased if the failure was due to negligence or fraud.25
Organizations are also subject to penalty for failing to make estimated tax payments26
and for failing to properly handle and deposit employment taxes — for more
information, see IRS Publication 15, Circular E, Employer’s Tax Guide, available
at [http://www.irs.gov/pub/irs-pdf/p15.pdf].
If a 527 organization fails to file a timely or accurate Form 8872 [disclosure of
contributions and expenditures], it is subject to a penalty that equals the highest
corporate tax rate multiplied by the amount of contributions and/or expenditures to
which the failure relates.27
Public Disclosure of Returns
Under IRC § 6104, all the 501(c) organizations discussed in this report are
required to make available for public inspection a copy of their three most recent
information returns [Form 990] and any materials relating to their applications for
exempt status. 527 organizations must meet the same requirement for their Forms
22 IRC § 6652(c)(1)(A).
23 IRC § 6651.
24 IRC § 6651.
25 IRC § 6662 and 6663.
26 IRC § 6655.
27 IRC § 527(j)(1).

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CRS-11
990, notification of 527 status [Form 8871], and returns for disclosing contributions
and expenditures [Forms 8872]. With respect to Form 990’s Schedule B, although
501(c)(3) organizations disclose the names and addresses of their substantial
contributors to the IRS, they are not required to disclose any identifying information
to the general public unless the organization is a private foundation.28 527
organizations must disclose the names and address of their substantial contributors
to the IRS and the public. The other 501(c) organizations do not have to disclose the
information about substantial contributors to the IRS or the public.
There are two parts to the public disclosure requirements. First, the organization
must make the forms and application available for public inspection during regular
business hours at its principal, regional, and district offices. If an individual makes
a request to inspect the returns or application, an inspection copy must generally be
provided immediately. Second, the organization must provide copies of the forms
and application upon request, whether the request is made in person or in writing.
The copies must be free, but the organization is permitted to charge for copying and
mailing. If the request is made in person, the organization must generally provide the
copies on the same day; if the request is made in writing, the organization must
generally respond withing 30 days. If the organization has made its documents
widely available, e.g. published them on a website, it is not required to respond to
written requests for copies. It must, however, still keep the information available for
inspection during business hours. An organization that fails to comply with the
public inspection requirements is subject to a penalty that equals $20 per day for each
day the failure continues, which is limited to $10,000 for failures relating to Forms
990 and 8872.29
An organization’s income and employment tax returns are not subject to the
public disclosure requirements.
Any return or application that must be disclosed to the public by the
organization must also be made publicly available by the IRS. All publically-
available information may be obtained from the IRS by using Form 4506-A, Request
for Public Inspection or Copy of Exempt or Political Organization. Additionally,
some of the information for 527 organizations is available on the IRS website
[http://www.irs.gov]. The IRS must post electronically-submitted Forms 8871 and
8872 in an on-line database within 48 hours of their filing. The IRS also posts some
527 organizations’ Forms 8871, 8872 and 990 that were submitted on paper.
The information contained in this report is summarized in the following chart.
28 IRC § 6104(d)(3).
29 IRC §§ 6652(c)(1)(C) and (D). The penalty may be increased if the failure was willful
or involved willfully providing false or fraudulent information. IRC §§ 6685 and 7207.

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CRS-12
Chart: Characteristics of and Reporting
Requirements for Selected Tax-Exempt
Organizations
IRC section
501(c)(3)
501(c)(4)
501(c)(5)
501(c)(6)
527
short-hand
charitable
social welfare
labor union
trade
political
name
organization
organization
association
organization
charitable
yesa
no
no
no
no
contribution
deduction
business
maybea
maybe (with
usually (with
usually (with
no
deduction for
reduction for
reduction for
reduction for
dues
lobbying
lobbying
lobbying
expenses)a
expenses)a
expenses)a
taxed on
unrelated
unrelated
unrelated
unrelated
investment
business
business
business
business
income and
income;
income;
income;
income;
other non-
political
political
political
political
political
expenditures;
expenditures;
expenditures;
expenditures;
income; all
excess
excess benefit
proxy tax on
proxy tax on
expenditures
lobbying
transactions;
lobbying
lobbying
for non-
expenditures;
proxy tax on
expenditures;
expenditures;
political
excess benefit
lobbying
withholding
withholding
purposes;
transactions;
expenditures;
taxes on
taxes on
withholding
withholding
withholding
employees
employees
taxes on
taxes on
taxes on
employees
employees
employees
permitted to
non-
yes
yes
yes
to influence
lobby
substantial
the selection
amount
of a candidate
permitted to
no, but may
yes, but FECA
yes, but FECA
yes, but FECA
yes, but may
engage in
educate public
may prohibit
may prohibit
may prohibit
be regulated
campaign
about issues
certain
certain
certain
by FECA
activities
activities
activities
activities
application for
Package 1023
Package 1024
Package 1024
Package 1024
Form 8871,
exempt status
unless exempt
or registered
with FEC

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CRS-13
IRC section
501(c)(3)
501(c)(4)
501(c)(5)
501(c)(6)
527
reports to IRS
Form 990 or
Form 990
Form 990
Form 990
Form 8872

Form 990PF
contains:
contains:
contains:
(unless filing
(not including
contains:
- name,
- name,
- name,
with FEC or
employment
- name,
- address,
- address,
- address,
otherwise
returns such as
- address,
- revenue,
- revenue,
- revenue,
exempt);
Forms 940, 941,
- revenue,
- expenses,
- expenses,
- expenses,
contains:
W-2, W-3,
- expenses,
- total assets
- total assets,
- total assets,
- name,
1099, and the
- total assets,
- functional
- functional
- functional
- address,
business income
- functional
expenses,
expenses,
expenses,
- custodian of
return 990-T)
expenses,
- program
- program
- program
records,
- program
accomplishme
accomplishme
accomplishme
- contributors’
accomplishme
nts,
nts,- list of
nts,- list of
names,
nts.
- list of
officers,
officers,
addresses,
- list of
officers,
directors, key
directors, key
amounts
officers,
directors, key
employees,
employees,
given,
directors, key
employees,
-
-
- itemized
employees,
-
compensation
compensation
expenditures
-
compensation
of highest paid
of highest paid
compensation
of highest paid
employees,
employees,
Form 990
of highest paid
employees,
-
-
contains:
employees,
-
compensation
compensation
- name,
-
compensation
of highest paid
of highest paid
- address,
compensation
of highest paid
independent
independent
- revenue,
of highest paid
independent
contractors
contractors
- expenses,
independent
contractors
- total assets,
contractors,
- list of
- major
officers,
contributors,
directors, key
- relationships
employees,
with other
- functional
exempt
Form 1120-
Form 1120-
expenses,
organizations
Form 1120-
POL
POL
- program
POL
(if made
(if made
accomplishme
Form 1120-
(if made
expenditure
expenditure
nts,
POL
expenditure
for an exempt
for an exempt
-
(if made
for an exempt
function)
function)
compensation
expenditure
function)
contains:
contains:
of highest paid
for an exempt
contains:
- name,
- name,
employees,
function)
- name,
- address
- address
-
contains:
- address
- income
- income
compensation
- name,
- income
- expenses
- expenses
of highest paid
- address
- expenses
- tax
- tax
independent
- income
- tax
contractors
- expenses
- tax
Form 1120-
POL
contains:
- name,
- address
- income
- expenses
- tax

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CRS-14
IRC section
501(c)(3)
501(c)(4)
501(c)(5)
501(c)(6)
527
public
yes;
yes;
yes;
yes;
yes;
disclosure of
major
major
major
major
major
Form 990
contributors
contributors
contributors
contributors
contributors
are disclosed
are not
are not
are not
are disclosed
to the IRS but
disclosed to
disclosed to
disclosed to
to the IRS and
not disclosed
the IRS or the
the IRS or the
the IRS or the
the public
to the public
public
public
public
unless the
organization is
a private
foundation
Note: the forms are available on the IRS website at [http://www.irs.gov/formspubs].
a. While the contributions or dues may be deductible, limitations apply which may reduce the amount
the contributor or payor is actually able to deduct

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