Forming a 501(c)(4) Nonprofit in California: A Guide for Social Welfare Organizations

What is a 501(c)(4) Organization?

A 501(c)(4) organization is classified as a social welfare organization by the Internal Revenue Service (IRS). These entities are primarily aimed at promoting social welfare and can engage in political activities, making them suitable for groups focused on advocacy. While contributions to a 501(c)(4) are not tax-deductible, these organizations have more flexibility in political involvement compared to 501(c)(3) nonprofits.

Key Characteristics:

• Purpose: Primarily organized for social welfare.
• Political Activity: Allowed to engage in lobbying and political advocacy as long as these activities do not become the primary focus.
• Tax Status: May qualify for federal income tax exemption but not for tax-deductible contributions.

Steps to Form a 501(c)(4) in California

1. Draft a Mission Statement

Define the organization’s specific goals, emphasizing its commitment to promoting social welfare and engaging in political advocacy. A clear mission statement will guide future activities and help in filing necessary paperwork.

2. Form a Board of Directors

California requires a minimum of three directors. Ensure that the board members are individuals who can help further the organization’s mission and comply with any residency requirements.

3. Choose a Unique Name

Select a name that complies with California naming laws. The name must be distinguishable from other entities registered in the state. Conduct a name search to ensure availability.

4. File Articles of Incorporation

Prepare and submit the Articles of Incorporation (Form ARTS-PB-501(c)(4)) to the California Secretary of State. This document should state the organization’s purpose and include information about the board.

5. Obtain an Employer Identification Number (EIN)

Apply for an EIN from the IRS. This number is essential for tax purposes and to open a bank account for the organization.

6. Create Bylaws

Draft bylaws that outline governance structures, including details about board meetings, membership, and voting procedures. Bylaws will serve as the internal operating manual for the organization.

7. File Form 8976 with the IRS

Submit Form 8976, Notice of Intent to Operate Under Section 501(c)(4), to notify the IRS of your intent to operate as a 501(c)(4) organization. This can be done electronically through the IRS portal.

8. State Registration

If necessary, register with the California Attorney General’s Registry of Charitable Trusts using Form CT-1.

9. File a Statement of Information

Within 90 days of incorporating, file a Statement of Information (Form SI-100) with the California Secretary of State. This document must be updated every two years.

10. Establish a Bank Account

Open a bank account in the organization’s name using the EIN to manage finances and donations.

11. Consider Fundraising and Budgeting

With a budget in mind, allocate funds wisely to cover filing fees and initial operational costs. Explore low-cost fundraising options to support the organization’s mission.

Considerations for Compliance

• Recordkeeping: Maintain accurate records of income, expenditures, and activities to comply with IRS and state requirements.
• Ongoing Reporting: Be prepared for annual reporting and compliance with federal and state regulations, including potentially filing IRS Form 990.

Conclusion

Creating a 501(c)(4) organization in California is a significant step toward making a difference in your community through social welfare and political advocacy. By following the outlined steps and ensuring compliance with both state and federal regulations, you can successfully establish your nonprofit. If you need further assistance or legal guidance, don’t hesitate to reach out to us at Anelya Law Offices.

For more detailed information or personalized advice, feel free to contact our office today. Together, we can navigate the complexities of nonprofit formation and help you achieve your goals.