Not Just 501(c)3’s: Other Nonprofit Groups and Their Importance to the Sector

​When we think about the nonprofit sector, we tend to automatically think about the organizations provide a variety of services in areas ranging from poverty to arts and culture, right? These are almost always 501(c)3 incorporated nonprofit organizations that come to mind. But there are so many other different kinds of organizations that make up the third sector, and it does us all a disservice to ignore or discount them. 

So let’s review some of the different kinds of organizations within the nonprofit sector and a few reasons why you should pay more attention to them. 

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Other Section 501(c) Organizations

Social Welfare Groups- 501(c)4
This grouping also includes civic leagues and local employee associations. Interestingly, these groups are allowed to participate in some political activity (unlike traditional 501(c)3 nonprofits). As long as they spend less than 50% of their funds on politics, they are allowed to keep their nonprofit status.

As per the IRS website, examples of social welfare organizations include:

• An organization that holds an annual festi­val of regional customs and traditions.
• An organization that tries to encourage in­dustrial development and relieve unem­ployment in an area by making loans to businesses so they will relocate to the area

Business Leagues- 501(c)6
Not just business associations- this section also includes chambers of commerce, real estate boards, and more. This section of nonprofits are designed to help businesses and professionals advance in their industry or geographical location.These organizations consist of members- either individuals or companies- that share a common business interest, and the focus is to provide value to the members and assist with the local economy.

Social and Recreation Clubs- 501(c)7
This group includes fraternities, country clubs, yacht clubs, and other associations based around hobbies or sports. Generally, these are funded by membership dues rather than donations, although some funding is allowed to come from other sources. These groups are very different from traditional nonprofits in their method of funding and in overall mission- the main focus is to benefit members of the group. However, they do need to file annual returns just like 501(c)3 organizations.

(Note: This list is not exhaustive- there are other tax-exempt organizations that are nonprofit as defined by the IRS, including 527 political organizations.)

Honorable Mention- Social Enterprises
The Social Enterprise Alliance recommends this working definition for what constitutes a social enterprise: “Organizations that address a basic unmet need or solve a social problem through a market-driven approach.”

Although not technically in the nonprofit sector, social enterprises should be given some attention here because they provide social good and can be a great resource for nonprofit organizations. With the overlap between private and nonprofit, there is a lot of room for collaboration and relationships between nonprofit organizations and these socially-driven businesses.

The Value of a Diverse Nonprofit Sector
Some have argued against having so many different groups of nonprofits outside of the traditional organizations. Their main point is that this complicates the sector and cheapens or drowns out the traditional 501(c)3s that are working to benefit society through services and programs.

This viewpoint seems to be missing the point of our “third sector,” however. It is the sum of all of these different groups in the nonprofit world that add value to society in one way or another. Much of our civil society resides in this; and the entirety of all of these different organizations provides a richness and diversity that spreads to the rest of society.

It is important for anyone working in the nonprofit field to understand the different groups at work and what the full spectrum of organizations consists of. The depth and breadth of the nonprofit sector is staggering, and the only way to fully understand the climate in which you are working is to know the different groups that are contributing.

How do YOU work with and/or collaborate with other groups in the nonprofit sector? What types of organizations did we leave out of this list? Let us know here, along with all of your other comments and questions!