If you participate in the work of a nonprofit organization, you may wonder how your organization’s tax-exempt status could affect your ability to engage in certain activities.

The tax status — 501c3 or 501c4 — of your nonprofit organization determines whether your organization is allowed to engage in lobbying and other political activities. 

But what does the IRS consider lobbying? And how does lobbying differ from education and advocacy?

The Difference Between 501c3 and 501c4 Tax Status

The tax-deductible status of a 501c3 organization relates to its educational role within the community. The IRS states that 501c3 organizations should spend "no substantial part" of their budget or volunteer time on lobbying activity.

A 501c3 organization cannot make campaign contributions or engage in campaign activity for or against a political candidate. Members of a 501c3 organization, however, are free to take part in these activities on their own time as individuals.

In contrast, 501c4 organizations are tax-exempt, non-tax-deductible organizations specifically set up to lobby for nonprofit causes. The IRS defines lobbying as these two activities:

• Political activity (campaigning)
• Legislative activity (asking legislators to do things)

 The IRS permits educational work related to both of these activities. For example, permitted political activities include voter education activities, like hosting public forums and publishing voter education tools. Permitted legislative activities include hosting educational sessions on policy issues, and preparing and distributing educational briefs.

What the Law Intends

The crafters of the federal tax law sought to use tax incentives to support public education and certain good works. Historic preservation is one area where federal law offers these tax incentives. The federal government has recognized the value of educating the general public about historic buildings and public history. As a result, it grants tax-deductible status to preservation organizations with a mission to educate the public about historic places.

When preservation groups expand into political activity — that is, the act of shaping public policy through direct requests for changes or public money — their work is no longer purely educational. A small amount of this political activity is permitted by law, but nonprofit preservation groups must engage primarily in educational work to protect their tax deductibility. Most nonprofit organizations will not compromise their 501c3 status by engaging in limited lobbying activity. Donations to 501c4 organizations can be written off as business expenses.

How to Protect Your 501c3 Status

If your 501c3 organization is set up primarily for advocacy, you need to be careful when engaging in political activity. If the bulk of your work focuses on educational activities and keeping your office afloat, you should be safe. Focus on educational work consistent with your organization’s mission, and do not support specific candidates or political party platforms.

If you decide you need a lobbyist, you may create a 501c4 arm for this purpose. It is not uncommon for a 501c4 organization to emerge from a 501c3 organization and engage in lobbying and other political activity. However, even a 501c4 needs to be careful about its political activity. Preservation is a nonpartisan issue. Even if your 501c4 organization merely appears partisan, you can harm your government relations work and possibly your membership development efforts.

Members of your organization may elect to start a Political Action Committee (PAC) to raise money for a political candidate that shares their views. A 501c4 nonprofit organization can form a PAC, but 501c3 organizations need to distance themselves from PACs even if they work toward the same aims. A 501c3 that sets up a 501c4, which in turn sets up a PAC, should not co-locate. The 501c3 officers should not participate in the PAC.

Learn More

Historic Preservation Advocacy Guide

Find more how-to articles about historic preservation advocacy.