Section 501(c)(4) of the Internal Revenue Code expressly prohibits inurement of the net earnings of an entity otherwise described in that paragraph to the benefit of any private shareholder or individual. Moreover, the Code imposes excise taxes on excess benefit transactions between a disqualified person and any organization described in section 501(c)(4). The regulations provide that an organization is described in section 501(c)(4) if: It has applied for and received recognition from the Service as an organization described in section 501(c)(4); or It has filed an application for recognition of exemption under section 501(c)(4), filed an annual return as a section 501(c)(4) organization, or has otherwise held itself out as an organization described in that section. Additional information: An Introduction to I.R.C. 4958 (Intermediate Sanctions), 2002 EO CPE Text Topic HPDF Intermediate Sanctions (IRC 4958) Update, 2003 EO CPE Text Topic EPDF Return to Life Cycle of a Social Welfare Organization
