What’s The Correct Non-Profit Type for a Chamber of Commerce
If you’re running a chamber of commerce or a non-profit organization, you may have heard the terms “501c(6)” and “501c(3)” thrown around, but what do they actually mean? In short, these are two different categories of non-profit status under the Internal Revenue Code (IRC).
A 501c(6) organization is considered a business league or trade association. This type of non-profit status is typically granted to organizations that are comprised of businesses or trade groups, and their purpose is to promote the common business interests of their members. For example, a chamber of commerce may be considered a 501c(6) organization.
On the other hand, a 501c(3) organization is a tax-exempt, non-profit entity that is dedicated to charitable, educational, or scientific purposes. This type of non-profit status is typically granted to organizations that are focused on promoting the public good and improving the lives of others. For example, a charity or a religious organization might be considered a 501c(3) organization.
So, what’s the difference between these two types of non-profit status, and why does it matter?
The main difference between the two is the way they are taxed. 501c(6) organizations are taxed on any profits they earn that are not used to further the organization’s purpose, while 501c(3) organizations are exempt from federal income tax. Additionally, contributions made to 501c(3) organizations are tax-deductible for the donor, while contributions made to 501c(6) organizations are not.
It’s important to choose the right type of non-profit status for your organization, as it can have a significant impact on your finances and operations. For example, if your chamber of commerce has a dual mission of promoting the interests of your members and supporting local charitable causes, you may want to consider applying for both 501c(6) and 501c(3) status.
If you’re unsure which type of non-profit status is best for your organization, you should consult with an attorney or accountant who specializes in non-profit law. They can help you determine the best course of action based on your specific needs and goals.