There are four different categories established by the IRS for tax-exemption purposes. They include organizations that may solicit donations or membership. Not all donations to 501(c) organizations are tax-deductible.
In layman's terms, a 501(c)(6) organization is one that is granted tax-exempt status by the IRS provided that it is not created as a for-profit business. Earnings of the 501(c)(6) organization do not benefit a private shareholder or individual. Any earnings must be put back into the organization to further its cause.
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Types of 501 (c)(6) Organizations
Organizations that fall in this category include business leagues, chambers of commerce, boards of trade, real estate boards and professional football leagues. A business league is an association of persons with a common business interest.
Typically, 501 (c)(6) organizations work to improve the business conditions of their members. Two activities include presenting statistics, industry data and group opinion to governmental bureaus and agencies; and lobbying for legislation that supports the groups' common interests. Organizations that are formed to promote a particular industry and advertise to encourage use of the product or industry qualify for exemption as a 501 (c)(6).
Non-Profit vs. Charitable
While 501 (c)(6) organizations are non-profit, they are not necessarily charitable. Some professional organizations may be classified as a 501 (c)(3) if the purpose of the organization is to promote the profession by engaging in activities that are purely scientific or educational. Typically organizations categorized as 501 (c)(3) are charitable, scientific, religious, educational or literary.
Exemption vs. Deduction
While contributions to a 501 (c)(3) organization are tax deductible by the donor, donations to a 501 (c)(6) are not. An organization's exempt status does not necessarily mean the contribution is tax deductible. Contributions to a 501 (c)(6) can be written off as a business expense.