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501c5 ORGANIZATION

If you’re a lover of the land or run an agricultural nonprofit, your institution may qualify for tax exemption under IRS code 501c5. A nonprofit tax code meant to cover companies that look to help people who work with their hands, this is for labor, agricultural, or horticultural organizations. This particular type of nonprofit also permits political influence, so it’s a well-rounded way to do good.

What Is a 501c5 Organization?

According to the IRS, in order to qualify for 501c5 tax exemption, not only can the institution’s earnings not be used for any solitary member’s benefit, but also its purpose has to be to help the conditions of people working in labor, agriculture, or horticulture, increase the quality of their products, and/or make them more efficient.

Unlike a 501c3, charitable donations to your 501c5 are typically not tax-deductible. However, if the organization is a labor union, dues are almost always considered a business expense.

Although earnings can’t be used for a single person’s benefit, they can be used to give financial assistance to the establishment’s members, provided it’s available to all members.

Examples of this type of nonprofit are labor unions like the AFL-CIO, county fairs, and flower societies.

Two people’s hands holding tomatoes from a harvest in a 501c5 agricultural organization

501c5 Political Activities

Similar to 501c4s and 501c6s, a 501c5 organization is able to engage in political activity. They’re allowed to lobby as much as they’d like to influence legislation so long as it is in the common interests of their members, although they have to let their members know what percentage of their dues is going towards lobbying costs.

Additionally, these labor, agricultural, or horticultural societies can participate more directly in politics by supporting or opposing candidates. However, this type of political activity cannot be their primary purpose, so they can spend a maximum of 49% of their resources on it. Plus, the IRS may not consider those expenditures to be tax-exempt.

How to Start and Manage a 501c5

In order to get tax-exempt status from the IRS, you have to file a Form 1024. Be sure to fill it out as completely as possible and attach all necessary documents. The IRS can take months to review paperwork, and you don’t want to get stuck having to redo it. Every year after gaining tax-exempt status, you’ll also have to file a Form 990 to keep it.

Contact our team at BryteBridge Nonprofit Solutions to get your nonprofit operations on track. Our experienced staff has helped over 30,000 people before, so we can guarantee that you’ll get 501c5 status when you work with us. Our mission is to help you help others, so give us a call and schedule your consultation today.