If your corporate structure happens to be as a 501(c)6, that headline probably got your attention. In a recent POLL RDG conducted, 70% of the organizations surveyed were structured solely as a 501(c)6. More surprisingly, only 10% had both a 501(c)6 AND 501(c)3. Admittedly, this was not a scientific survey, however, the results are still instructive given one of the current issues facing Chamber’s and EDO’s today; namely, the exclusion of 501(c)6 organizations from the Paycheck Protection Program.
If you want to learn more about non-profit and not-for-profit corporate structures, scroll down to the end of this blog for a super quick tutorial. In the meantime, hats off to groups like ACCE, IEDC and others that have been lobbying congress relentlessly for 501(c)6 inclusion in future iterations of the various recovery acts. Let’s hope those efforts pay off. But in the meantime, let us also not lose sight of the bigger question here:
why don’t more Chambers and EDO’s have a 501(c)3 foundation? After all, for those that do, this is much less of a problem because the 501(c)3 portions of their operations DO qualify for PPP!
Having said that, qualifying for PPP is not a good reason to try and secure a 501(c)3; ensuring your organization is flexible and innovative in your ability to both receive and spend fungible money is! RDG has advised our clients for decades that to be fully operational and the most effective, they need both a 501(c)6 and 501(c)3. The combination allows organizations to offer two very important and, in fact, fundamental components of a comprehensive economic development strategy – receive funding from all possible sources and maximize your programmatic potential.
If you find this stuff interesting, join IEDC’s Webinar later TODAY at 3 pm EST and hear RDG Principal Clint Nessmith expound on the proper way to resource during a crisis. Register HERE.
For example, with a 501(c)3, the funding door is open from philanthropic foundations, corporate foundations and some governments that choose to only financially support 501(c)3’s. Conversely, while the 501(c)6 excludes receipt of philanthropic revenue, it does allow significantly more flexibility in how funds are spent, most importantly allowing for public policy and advocacy work that is severely limited under 501(c)3 provisions. In short, to fully optimize funding AND do the job you are being asked to do, you need both!
There has been a lot of movement in this area over the past few years. Historically, it was extremely difficult for EDO’s and even Chambers to attain 501(c)3 status. Less so today. While 501(c)3 availability is still more limited and therefore more difficult to qualify, it is less restrictive than in the past. More importantly, with the onslaught of Chamber and EDO work in areas like workforce readiness and entrepreneurialism – let’s just say more “foundation friendly” portfolios of work – philanthropic foundations have become more expansive in organizational distributions.
The bottom line is there’s more money being spent charitably in the USA than ever before.
While we know this will take a dip in 2020, much like the ensuing aftermath of the great recession ten years ago, the economy and correspondingly charitable contributions will recover. The question for you will be “are you structured to get your fair share?”. Remember, RDG is here to help!
ALL THINGS 501(c) TUTORIAL:
For more information, click HERE. You can find even more detail on the Internal Revenue Service website, this LINK being a good place to start.