501(c)(4)s: Political powerhouses or misunderstood nonprofits? 

An unusual TikTok trend emerged this summer. It wasn’t a new dance or a trending audio. It was debating the details of the IRS classification of nonprofits—especially those related to politics. As election season heats up, discussions of “political” nonprofits is likely to continue. But what makes a nonprofit “political,” anyway? 

This article will explain the 501(c)(4) designation for nonprofits and describe the rules and context around 501(c)(4)s and political activity. It will also explore how many 501(c)(4) organizations there are in the United States and how many can actually be considered “political,” that is, engaged in politics explicitly with a focus on influencing government policy or elections. 

What are 501(c)(4) nonprofit organizations? 

When people say “nonprofit,” what they typically mean is the 501(c)(3) or “charitable organization.” Indeed, the 501(c)(3)s are the most numerous and ubiquitous type of tax-exempt organization. They can engage in a wide variety of activities—providing social services, promoting the arts, supporting scientific studies, etc. They do, however, face restrictions when it comes to political activity: 501(c)(3)s are only allowed to lobby in very limited circumstances and are banned from most election-related activities other than nonpartisan voter education and registration. 

By contrast, 501(c)(4)s are “social welfare organizations” with a much broader mandate. Operating for social welfare, according to the IRS, means that an organization must “operate primarily to further the common good and general welfare of the people of the community.” 

When it comes to political activity, 501(c)(4)s can engage in unlimited lobbying. The lobbying effort must advance their mission and the interests of the communities they serve. But “communities” can be broadly defined—for example, an organization may operate on behalf of “taxpayers” of a certain state. 

In addition, 501(c)(4)s have far fewer restrictions when engaging in elections. Unlike 501(c)(3)s, 501(c)(4)s are allowed to: 

• engage in political campaigns (so long as that doesn’t make up the majority of their activities); 

• tell voters how candidates stand on the issues they advocate for; and 

• explicitly endorse candidates. 

Moreover, donations to 501(c)(4)s are not tax deductible, unlike donations to 501(c)(3)s. 

So, how many 501(c)(4)s are “political”? 

501(c)(4)s are often grouped together with Political Action Committees (PACs) and Super PACs due to their involvement in the political process, but social welfare organizations don’t necessarily have to be political. There are approximately 77,000 501(c)(4)s active in the U.S. today. To better understand how many of these are “political” in nature—actively working to affect government policy and/or elections—the Candid research team turned to the National Taxonomy of Exempt Entities (NTEE) codes, which are used to classify each organization by subsector and activity. Organizations select their own NTEE codes when they register with the IRS. After a detailed review, we identified 74 NTEE codes we felt confident using as proxies for identifying political organizations. 

Next, we calculated the proportion of active 501(c)(4) organizations that matched one of these 74 NTEE codes. What we found was somewhat surprising. Only about 9% (or around 7,100 organizations) of 501(c)(4) organizations met this criterion of being political organizations. Furthermore, their combined revenue constituted about 9% (or about $13.5 billion) of total 501(c)(4) revenue for fiscal year end 2022. 

In other words, although political 501(c)(4) organizations may receive most of the attention in the popular press, they’re only a small slice of the 501(c)(4) universe. The bulk of 501(c)(4)s are membership organizations like Lions Clubs, volunteer fire departments, local sports leagues, garden clubs, and homeowners’ associations.  

This analysis, however, comes with some important limitations to consider. Our analysis examines only those 501(c)(4)s whose primary purpose is political. 501(c)(4) organizations that are not primarily political may still engage in political activity. For example, a homeowners’ association may lobby the town council against a new zoning regulation even if their primary purpose is community beautification. And since our analysis focused on NTEE codes, we may have missed or included some organizations that were miscategorized. 

This exploration is an early effort to identify the extent to which 501(c)(4)s engage in politics explicitly, and the picture is complicated and multifaceted. But it’s clear from the data that while 501(c)(4)s can and do engage in political activity, most don’t appear to be primarily political organizations. 

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