501(c)(6) Organizations Can Expect Increasing Scrutiny

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March 8, 2012; Source: New York Times

In the midst of last week’s efforts by Senate Democrats to call for scrutiny of 501(c)(4) social welfare organizations whose politicking might be overwhelming their purported social welfare programming (if they even have any), the watchdog group Citizens for Responsibility and Ethics in Washington (CREW) lodged a complaint with the Internal Revenue Service (IRS) and the Federal Election Commission (FEC) about an organization called Americans for Job Security. CREW charged that Americans for Job Security spent almost three-fourths of its 2010 budget of $9 million (or about $4.4 million) on electioneering communications, which most of us know as political ads calling out candidates by name and advocating for their defeat or election at the polls.

Americans for Job Security is a 501(c)(6), not a 501(c)(4). 501(c)(6) organizations are “business leagues, chambers of commerce, real estate boards of trade, or professional football leagues” operating as nonprofits (see here and here for details on how the NFL made that list). While not all business and trade associations are necessarily like Americans for Job Security or the National Football League, it might be important for NPQ readers to understand the array of tax-exempt entities organized as 501(c)(6)s which, like (c)(4)s, might also be doing a bit too much politicking. These associations cover the political gamut; among the largest and best known are the AARP, the National Education Association, the National Rifle Association, and the American Chemical Association.

The Center for Association Leadership (ASAE), the trade association of trade associations, so to speak, just released its regular review of the association world in time for its annual “legislative fly-in.” Although trade and business associations may not be typical charities, they are often big and powerful, like the U.S. Chamber of Commerce. The ASAE report includes the following important nuggets:

  • According to the IRS, there were 92,331 officially recognized trade and professional associations in 2010, up from 88,071 in 2007. There were 1,695 applications for new 501(c)(6)s in fiscal year 2010.
  • In 2009, membership organizations (501(c)(6)s and associations organized as 501(c)(3) public charities) accounted for 1.2 million employees.
  • “Of the 63 million people who volunteered in the United States between September 2009 and September 2010, more than 18 million volunteered through a membership organization.”
  • “The average trade association spent nearly $1.2 million on program activity in 2009—which includes publications, conferences, seminars, and other forms of education—and $66,400 on lobbying activity reported under the Lobbying Disclosure Act. In comparison, the average professional society spent $1,498,150 on program activity and $65,085 on lobbying activity.”

People (and organizations) band together in associations because of common interests and concerns. Frequently—and especially now after the Supreme Court’s Citizens United decision—501(c)(6) associations are on politicians’ radar screens for their involvement in electioneering activities. Like 501(c)(4)s, as the nation stumbles and slogs its way to election day in November, (c)(6)s can expect more of what Americans for Job Security is now facing: increased scrutiny.—Rick Cohen

  • Ronald Colvin

    Are 501 c 6 entities required to have their financial records available for public inspection and is a 501 c 3?

    If so where can you find them?