Local Association of Employees - 501(c)(4) |
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A local association of employees under Internal Revenue Code section 501(c)(4) is an organization whose membership is limited to employees of a designated person or persons in a particular municipality, and whose net earnings will be devoted exclusively to charitable, educational, or recreational purposes. The organization must meet the following requirements:
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It must be of a purely local character;
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It must limit its membership to employees of a designated person or persons in a particular locality; and
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Its articles of organization, constitution, or bylaws must devote its net earnings exclusively to charitable, educational, or recreational purposes.
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No part of its net earnings may inure to the benefit of any private shareholder or individual.
An organization is of a purely local character if its activities are confined to a particular community, place, or district, irrespective of political subdivision. If the activities are limited only to the borders of a state, the organization cannot be considered to be purely local in character.
A local association of employees that has established a system of paying retirement and/or death benefits to its members will not qualify for exemption, since paying these benefits is not considered as being for charitable, educational, or recreational purposes. Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption.
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Page Last Reviewed or Updated: January 07, 2009