501(c)(3) vs. 501(c)(6): Charities vs. Trade Associations
A 501(c)(6) is a business league — chambers of commerce, trade associations, professional societies, and real estate boards. It exists to improve conditions in a line of business, not to serve the general public as a charity does.
Are trade associations nonprofits?
Yes — most trade associations are nonprofit organizations, but they are not charities. A typical trade association is a nonprofit corporation under state law and is exempt from federal income tax under section 501(c)(6) of the Internal Revenue Code. Being nonprofit means it can't distribute profits to owners; any surplus goes back into its mission for the industry. What it can't offer is a charitable deduction: dues and payments to a 501(c)(6) aren't deductible as charitable contributions, though members can often deduct dues as a business expense.
Like other exempt organizations, a 501(c)(6) generally files an annual Form 990, 990-EZ or 990-N with the IRS. Recognition of exemption is requested on Form 1024.
Key differences
- Purpose: a 501(c)(3) serves charitable, educational, religious, or scientific purposes for the public. A 501(c)(6) promotes the common business interests of its members and industry — but it may not perform particular services for individual members as its main activity.
- Deductibility: contributions to a 501(c)(6) are not deductible as charitable gifts. Members can often deduct dues as an ordinary business expense, except the portion the association spends on lobbying or political activity, which it must disclose.
- Lobbying: a 501(c)(6) can lobby extensively for its industry. A 501(c)(3) is limited.
- Application: a 501(c)(6) uses Form 1024; a 501(c)(3) uses Form 1023 or 1023-EZ.
Can a trade association have a charity?
Yes. Many associations create a related 501(c)(3) foundation for scholarships, research, or public education. The foundation can accept deductible gifts and grants, but its activities must be genuinely charitable rather than member benefits.
Related service: 501(c) Application Services →