Life Cycle of an Exempt Organization

Easy elimination

There are some things we definitely are not, or probably do not want to try to be.

• Labor organizations/unions [501(c)(5)] - Definitely not us
• Agricultural/horticultural organizations [501(c)(5)] - Definitely not us
• Charitable organizations [501(c)(3)] - Probably not us
  • Specific provisions required in organizing document (ref)
  • Exemption Requirements for 503(c)(3)
    • Must be a charitable cause under the legal sense
    • Seems to be about "betterment of mankind" sort of things
    • Only thing that we might even come close on is "advancement of education or science"
    • Limits are imposed on political activism
  • Lots of requirements for keeping track of fund-raising and contributions

That leaves two types.

Social welfare organizations

Social welfare organizations - Section 501(c)(4)

Life Cycle of a Social Welfare Organization states the organization "may be performing some type of public or community benefit but whose principal feature is lack of private benefit or profit". Okay so far.

Social Welfare Organizations says political lobbying is okay, within certain limits.

Social Welfare Purposes states "...organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements)". That could be us. But it goes on to say that an org which "restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community and, therefore, does not qualify". That would seem to exclude us.

Social Welfare: What Does It Mean? How Much Private Benefit Is Permissible? (PDF) specifically addresses this question. It does seem like GNHLUG is likely in a gray area, here. Some relevant quotes:

... where the services furnished by an organization are beneficial to the community and available to all members of the community on an equal basis, irrespective of membership, a social welfare objective will generally be found to exist. However, where an organization limits its services and benefits to its members, the organization is not ordinarily operated exclusively for the promotion of social welfare ...

and

Although the Service has been making an effort to refine and clarify this area, section 501(c)(4) remains in some degree a catch-all for presumptively beneficial nonprofit 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. Careful case-by-case analyses and close judgments are still required.

In short, while we might be able to argue our case, it seems quite possible that we would have to argue it. Do we want to go down that road? Would we be better off avoiding the argument?

Business leagues

Business leagues (trade associations) - 501(c)(6)

Requirements for Exemption - Business League states:

• "A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit."
• "It must be shown that the conditions of a particular trade or the interests of the community will be advanced."

Common business interest states: "For this purpose, the term business is broadly construed. For example, it includes professions..."

Composition of membership states:

• "a membership organization characteristically supported by dues. Although an organization may receive a substantial portion or even the primary part of its income from non-member sources, membership support, either in the form of dues paid to or involvement in the organization's activities, must be meaningful."
• "membership support includes ... substantially related activities ... contributions from the general public"
• So membership support is critical, but need not be the primary source of funds, and support can include activities, not just money. I would think our member participation in the mailing lists and presentations at meetings easily meets this requirement. It doesn't generate money, but it's our primary activity, furthers our cause, and is absolutely member-driven.

"Substantially related" defined states "The causal relationship must be substantial. The activities that generate the income must contribute importantly to accomplishing the organization's exempt purposes to be substantially related." So getting together for dinner does not qualify, but getting together to hear about some cool Linux software is okay. If we do dinner, too, I guess that's okay.

Apropos selections from Examples of common business interests:

• "Promoting higher business standards and better business methods"
• "Encouraging the use of goods and services of an entire industry"
• "Attempting to influence legislation germane to the common business interests of an organization's members"