What Is a 501(c)(10) and How to Get Tax-Exempt Status?

A 501(c)(10) organization is a domestic fraternal society, order, or association that operates under a lodge system. This Internal Revenue Code classification is for groups whose net earnings are dedicated to charitable, religious, educational, and fraternal purposes. A defining feature is that they do not provide for the payment of life, sick, accident, or other benefits to their members, distinguishing them from other fraternal societies.

Qualification Requirements for Exemption

To qualify for tax-exempt status under section 501(c)(10), an organization must first be a domestic fraternal society operating under the lodge system. This means the organization must be formed in the United States. The term “fraternal society” implies an organization where members have a common tie or shared interest and are bound together by rituals, ceremonies, and a commitment to mutual support.

The requirement to operate under the “lodge system” is a structural one. It necessitates a parent organization and subordinate entities, often called lodges, chapters, or branches. This hierarchical structure is a key identifier for this type of fraternal organization, distinguishing it from standalone clubs. The parent organization typically governs the subordinate lodges, ensuring a consistent mission and operational standards.

A central condition for exemption is how the organization uses its funds. The net earnings of a 501(c)(10) must be devoted exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes. This means that after covering operational expenses, the remaining income cannot benefit private shareholders or individuals. Instead, it must be channeled into activities that align with these specified exempt functions, such as funding scholarships, supporting community projects, or conducting educational programs.

Information and Documents for Application

Securing tax-exempt status requires the submission of Form 1024, Application for Recognition of Exemption Under Section 501(a). This includes the articles of incorporation, association agreement, or other organizing instruments that legally created the entity. The organization’s bylaws, which outline its operating rules, are also necessary. These documents must contain language that aligns with the purposes and operational structure required by section 501(c)(10).

The organization must provide detailed financial statements for the current year and the three preceding years, or for the period of its existence if less than four years. If the organization is newly formed, it must provide proposed budgets for the next two years. A description of the organization’s past, present, and planned future activities must be prepared. Evidence of the lodge system, such as a charter from a parent organization, is also needed.

The Application Submission Process

The completed Form 1024 must be submitted electronically through the Pay.gov portal, as paper submissions are not accepted. At the time of electronic submission, the organization must pay a $600 user fee. The application is then assigned to an IRS agent for review. This review process can take several months, and the agent may contact the organization with questions or requests for additional information, before the IRS issues a determination letter that either grants or denies tax-exempt status.

Maintaining Tax Exempt Status

After receiving a favorable determination letter, a 501(c)(10) organization must meet annual compliance responsibilities to maintain its tax-exempt status. Most are required to file an annual information return with the IRS. The specific form depends on the organization’s gross receipts; organizations may file Form 990, Form 990-EZ, or the electronic postcard Form 990-N. Failure to file this return for three consecutive years results in the automatic revocation of tax-exempt status.

An organization must also monitor its sources of income. If a 501(c)(10) generates more than $1,000 in gross income from an unrelated trade or business, it must file Form 990-T, Exempt Organization Business Income Tax Return. This income is subject to tax.

There is a prohibition on participating or intervening in any political campaign on behalf of or in opposition to any candidate for public office. Donations to a 501(c)(10) organization are tax-deductible for the donor only if they are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Contributions used for the organization’s fraternal purposes are not deductible.