Although most people think of nonprofits or charities as organizations such as blood banks or food pantries, according to the IRS code there are many different types of nonprofits. The phrase "501(c)" is found in the National Taxonomy of Exempt Entities (NTEE), a system used by the IRS to classify nonprofit organizations. Although there are "501c" nonprofits, there are no "504" nonprofits. Instead, some nonprofits are classified by the IRS as 501(c)(4).
According to IRS rules, a 501(c)(3) nonprofit must be organized and operated for purposes that are "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals." Examples of 501(c)(3) organizations include nonprofit hospitals, youth groups, public charities, educational institutions, historical societies, local food pantries, among others. Cedars-Sinai Medical Center, Salvation Army, Boy Scouts of America, Princeton University and Longwood Gardens are all 501(c)(3) organizations.
Nonprofits falling under subsection 501(c)(4) of the IRS code are civic leagues and social welfare organizations, operated only to promote social welfare to benefit the community. The National Center for Charitable Statistics reports that 501(c)(4) nonprofits generally fall into one of three broad categories: social welfare organizations, such as neighborhood civic associations and service clubs; advocacy organizations involved in educating policymakers and the public about political issues, or promoting policies or political action to them; and HMOs or other medical or dental managed care plans. 501(c)(4) nonprofits include Rotary and Lions clubs, volunteer fire companies, AARP and the Health Insurance Plan of Greater New York.
Like 501(c)(3) organizations, 501(c)(4) groups do not pay taxes on income, except for certain unrelated business activities. However, unlike 501(c)(4) groups, donations to nonprofits with 501(c)(3) status can be deducted from an individual's personal income tax.
Unlike 501(c)(3) organizations, 501(c)(4) nonprofits are able to participate in substantial political lobbying activities and are freer to serve individuals who are not low-income or minority, as long as the activity serves the common good and general welfare.