Social Welfare Organizations
Introduction Reg. 1. 501(c)(4)-1(a)(2)(i) provides that:
[A]n organization is operated exclusively for the promotion of
social welfare if it is primarily engaged in promoting in some
way the common good and general welfare of the community.
Obviously the language of both the statute and the regulations
comprehends a very broad category of organizations. As stated in the
1981 CPE text, Chapter G, "Social Welfare: What Does It Mean? How
Much Private Benefit Is Permissible?"
Although the Service has been making an effort to refine
and clarify this area, IRC 501(c)(4) remains in some
degree a catch-all for presumptively beneficial non-profit
organizations that resist classification under the other
exempting provisions of the Code. Unfortunately, this
condition exists because
"social welfare" is inherently an
abstruse concept that continues to defy precise definition.
The general concept, however, can be expressed as follows:
Organizations that promote social welfare should primarily
promote the common good and general welfare of the
people of the community as a whole.
An organization that primarily benefits a private group of
citizens cannot qualify for IRC 501(c)(4) exempt status.
In Erie Endowment v. United States, 316 F.2d 151, 156 (2d Cir.
1963), the court, in defining a civic organization, summed up the
matter by stating that "the organization must be a community
movement designed to accomplish community ends."
Continued
Social Welfare Organizations, Continued
A Note on
Services to
Members
While some activities promote social welfare only if the community as a
whole is the recipient of services, a membership organization is not
automatically precluded from exempt status under IRC 501(c)(4).
In the exceptional case, an organization whose services are made available
solely to its members may qualify. In such cases, it must be clearly
established that making the service available to the membership benefits the
community as a whole.
Precedents
Illustrating
Community
Benefit
Precedents:
An organization that purchases acreage in a stated locality, makes
arrangements for water and sewage facilities and enters into arrangements
for the erection and sale of dwellings to low and moderate income
individuals qualifies as a social welfare organization. Rev. Rul. 55-439,
1955-2 C.B. 257.
A corporation organized for the purpose of rehabilitating and placing
unemployed persons over a stated age may be exempt as an organization
operated exclusively for the promotion of social welfare. Although
substantial private benefit to the unemployed individuals exists, the
community benefit found in employing those individuals is dominant. Rev.
Rul. 57-297, 1957-2 C.B. 307.
A corporation formed to provide a school district with a stadium is exempt
as an organization operated for the promotion of social welfare. Title to the
stadium is to be transferred to the school district after all indebtedness has
been liquidated and its capital stock retired, with no profit to the
stockholders. Rev. Rul. 57-493, 1957-2 C.B. 314.
A corporation was formed to cooperate with the parent-teacher association
of a local school district. Its activity consists of reviewing the proposals of
and designating the insurance company allowed to solicit accident
insurance from the students, teachers, and other employees of the school
district. It qualifies for tax-exempt status under IRC 501(c)(4). Rev. Rul.
61-153, 1961-2 C.B. 114
Social Welfare Organizations, Continued
Precedents
Illustrating
Community
Benefit,
continued
A corporation organized to aid and promote the purposes of the Area
Redevelopment Act by providing loans to purchase or develop lands and
facilities to alleviate unemployment in areas classified as "redevelopment
areas" is entitled to exempt status as an organization described in IRC
501(c)(4). Rev. Rul. 64-187, 1964-1 (Part 1) C.B. 187.
A memorial association organized to study and develop methods of
achieving simplicity and dignity in funeral and memorial services, educate
and inform its members as well as the public as to the results of such study,
and maintain a registry for the wishes of its members in regard to
arrangements following death is entitled to exemption as a social welfare
organization described in IRC 501(c)(4). The organization serves a social
welfare purpose through education of the public and providing a useful
service to the community (membership is available to everyone) on a
noncommercial basis. Rev. Rul. 64-313, 1964-2 C.B. 146.
A junior chamber of commerce operated exclusively for the purpose of
rendering civic services for the promotion of the welfare of the community
and its citizens is exempt from federal income tax as an organization
described in IRC 501(c)(4). Its various programs, such as activities on
behalf of youth, community benefit projects, and community leadership
training, promote the common good and general welfare of the people of
the community. However, ordinary chambers of commerce, which are
organized to promote the business interests of a community, instead
generally qualify for exemption under IRC 501(c)(6). Rev. Rul. 65-195,
1965-2 C.B. 164.
An organization formed to advise, counsel, and assist individuals in solving
their financial difficulties by budgeting their income and expenses and
effecting an orderly program for the payment of their obligations is entitled
to exemption from federal income tax as a social welfare organization
described in IRC 501(c)(4). The objective and activities of the organization
contribute to the betterment of the community as a whole and are therefore
regarded as promoting social welfare. Rev. Rul. 65-299, 1965-2 C.B. 165.
Continued on next page
Social Welfare Organizations, Continued
Precedents
Illustrating
Community
Benefit,
continued
An organization formed for the purpose of establishing and maintaining a
system for storage and distribution of water in order to increase
underground water levels of a community is entitled to exemption from tax
under IRC 501(c)(4) as an organization operated exclusively for the
promotion of social welfare. The organization's activities benefited all
residents of the community whose wells were supplied by the raised water
table. Rev Rul. 66-148, 1966-1 C.B. 143.
An organization may qualify for exemption from federal income tax under
IRC 501(c)(4) where it provides a community with supervised facilities for
rifle, pistol, and shotgun practice and instructions in the safe handling and
proper care of weapons. Rev. Rul. 66-273, 1966-2 C.B. 222.
An organization formed to operate a roller skating rink as a recreational
facility for the benefit and use of all of the residents of a particular country
in a county-owned building that it operates rent-free in cooperation with the
county government may qualify for exemption under IRC 501(c)(4) where
the rink is open to the general public upon payment of such nominal dues
and admission charges as are needed to defray operating expense. Rev.
Rul. 67-109, 1967-1 C.B.136.
An organization created to make loans to businesses as an inducement to
locate in an economically depressed area in order to alleviate a community's
unemployment may be exempt under IRC 501(c)(4) because "promotion of
social welfare" includes efforts to relieve unemployment by inducing
industry to locate in a community. Rev. Rul. 67-294, 1967-2 C.B. 193.
An organization that stimulates the interest of youth in the community by
furnishing virtually free admission to youths and encouraging their
attendance at sporting events may qualify for exemption under IRC
501(c)(4). Rev. Rul. 68-118, 1968-1 C.B. 261.
An organization that conducts an annual festival centered around regional
customs and traditions may qualify for exemption under IRC 501(c)(4).
The organization provides the community with recreation and provides a
means for citizens to express their interest in the community's history,
customs, and traditions. Rev. Rul. 68-224, 1968-1 C.B. 262.
Continued on next page
IRC 501(c)(4) Organizations – page I-6 Exempt Organizations-Technical Instruction Program for F
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