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Other Kinds of Nonprofit Organizations
*This webpage was co-written with Perplexity AI.Other Kinds of Nonprofit Organizations
When most people hear the word nonprofit they are usually thinking of 501(c)(3)s.
However, there are 30 other kinds of nonprofit organizations that are recognized by the IRS that recieve only a fraction of the attention.
501(c)(8) Fraternal Beneficiary Societies
501(c)(8) Fraternal Beneficiary Societies
Overview of 501(c)(8) Fraternal Beneficiary Societies
Overview of 501(c)(8) Fraternal Beneficiary Societies
501(c)(8) organizations are a specific category of tax-exempt entities under the Internal Revenue Code, known as fraternal beneficiary societies. These organizations have a long history in the United States, with their exemption from federal income tax dating back to the Revenue Act of 19132.
Key Requirements
Key Requirements
To qualify as a 501(c)(8) fraternal beneficiary society, an organization must meet three primary requirements:
Fraternal Purpose: The organization must have a fraternal purpose, meaning its membership is based on a common tie, such as a profession, ethnicity, or shared interest, and it must conduct a substantial program of fraternal activities. These activities often include rituals, ceremonies, and events that promote the social, moral, and intellectual welfare of members345.
Lodge System: The society must operate under the lodge system, which requires at least two active organizational levels:
Provision of Benefits: The organization must provide for the payment of life, sick, accident, or other benefits to its members or their dependents. These benefits are typically funded through member dues and are a defining feature of 501(c)(8) societies, setting them apart from purely social clubs or other fraternal organizations that do not offer such benefits12345.
Specific Operational Rules
Specific Operational Rules
Eligibility for Benefits: Most-but not necessarily all-members must be eligible to receive benefits. The IRS has clarified that an organization does not qualify if the majority of its members are not entitled to benefits. However, it is permissible to have different classes of membership (e.g., beneficial and social), as long as the majority are eligible for benefits and the criteria for exclusion are reasonable23.
Nature of Benefits: Benefits must accrue automatically as part of membership dues. It is not sufficient for members to simply have the option to purchase insurance or benefits independently; the society itself must provide them as part of its structure2.
Non-Fraternal Activities: While some non-fraternal activities are allowed, they must not overshadow the primary fraternal purpose and benefit provision. Excessive non-fraternal activities can jeopardize the organization's tax-exempt status, and income from unrelated business activities may be taxable1.
Political Activity: 501(c)(8) organizations may engage in some political activities, including supporting or opposing candidates, but this cannot be their primary activity. Political expenditures are subject to tax under IRC 527(f)15.
Examples and Distinctions
Examples and Distinctions
Examples: Well-known 501(c)(8) organizations include the Elks Lodge and the Knights of Columbus5.
Distinction from 501(c)(10): 501(c)(8) societies provide direct member benefits (like insurance), while 501(c)(10) domestic fraternal societies do not provide such benefits and focus solely on fraternal and charitable activities15.
Formation and Compliance
Formation and Compliance
To obtain 501(c)(8) status, organizations must file IRS Form 1024 and, once approved, file annual Form 990 returns disclosing their financial activities5.
Membership standards, admission processes, and rights/privileges must be clearly documented and maintained5.
There are the following requirements to create and maintain a 501(c)(8) in good standing.
There are the following requirements to create and maintain a 501(c)(8) in good standing.
Fraternal Purpose - Common bond among members; substantial fraternal activities
Lodge System - Parent organization with self-governing local lodges/branches
Provision of Benefits - Life, sick, accident, or other benefits to members/dependents, funded by member dues
Political Activity - Permitted, but not primary; expenditures may be taxable
IRS Compliance - File Form 1024 (application) and annual Form 990 (reporting)
501(c)(8) fraternal beneficiary societies play a unique role in American civil society by combining social and mutual aid functions with a formal benefit structure, all within a regulated, tax-exempt framework12345.
What is a "Lodge System" and How Does it Work?
What is a "Lodge System" and How Does it Work?
Structure and Hierarchy
Structure and Hierarchy
The lodge system is a foundational organizational model for 501(c)(8) fraternal beneficiary societies. It consists of at least two active levels:
A parent organization (sometimes called the supreme or grand lodge)
Multiple subordinate local branches (called lodges, chapters, camps, courts, councils, or similar terms), each of which is largely self-governing and chartered by the parent organization1459.
Key Features of the Lodge System
Key Features of the Lodge System
Chartering and Governance: Local lodges are officially chartered by the parent body and operate under the society’s constitution, bylaws, and rituals. While they must adhere to the overarching rules and mission set by the parent, they maintain significant autonomy in their day-to-day affairs, including electing officers and managing local activities135.
Self-Governance: Each lodge is largely self-governing, holding regular meetings, admitting new members, and conducting ceremonies and activities that align with the organization’s fraternal and beneficiary purposes1356.
Representative Government: The system is typically representative, with local lodges sending delegates to higher-level meetings (such as state or national conventions), where broader organizational decisions are made7.
Rituals and Ceremonies: Ritualistic work and ceremonies are a hallmark of the lodge system, fostering unity and a sense of belonging among members. These rituals often draw on historical, religious, or cultural themes67.
Meetings: Local lodges usually meet weekly, biweekly, or monthly to conduct business, initiate members, perform rituals, and organize activities. Higher-level lodges (state or national) may meet annually or biennially67.
Membership: Members are typically elected, initiated, or admitted into the local lodge according to established procedures. There may be different classes of membership, such as benefit members (who receive insurance or other benefits) and social members (who participate in activities but do not receive benefits)6.
Purpose and Activities
Purpose and Activities
Fraternal Activities: Lodges engage in social, educational, charitable, and community service activities, all directed toward promoting the welfare of members and the broader community256.
Benefit Provision: The lodge system is also the mechanism through which member benefits (such as life, health, or accident insurance) are administered, distinguishing 501(c)(8) societies from other fraternal groups256.
Lodge System Component Roles and Functions
Parent Body -Charters lodges, sets rules/mission, oversees organization, holds conventions
Local Lodges - Self-governing, admit/initiate members, hold meetings, conduct rituals/activities
The lodge system ensures both local autonomy and centralized oversight, maintaining the fraternal character and benefit structure required for 501(c)(8) tax-exempt status14567.
Additional Information on the Chartering Process
Additional Information on the Chartering Process
Here is a summary on how parent organizations charter and oversee subordinate lodges in 501(c)(8) fraternal beneficiary societies:
Chartering Process
Chartering Process
Formation Requirements:
Charter members must be recruited (specific numbers vary by organization), often requiring approval from the parent body2.
Application: Prospective lodges submit formal requests to the parent organization, demonstrating compliance with membership standards and financial viability12.
Fee Payment: A charter fee (e.g., $50 for Elks Lodges) is typically required2.
Institutional Meeting: A formal ceremony is held to establish the lodge, often including officer elections and ritualistic procedures25.
Legal Compliance:
Oversight Mechanisms
Oversight Mechanisms
Governance Structure:
Operational Control:
Bylaw Adherence: Lodges must follow parent-mandated bylaws covering membership, rituals, and benefit administration14.
Financial Reporting: Lodges submit regular financial statements, including income/expense details from social quarters (bars, event spaces)58.
Audits: Parent organizations may require audits or reviews of lodge records45.
Hierarchical Supervision:
Corrective Measures:
Key Compliance Areas
Key Compliance Areas
And how the parent organization oversees these areas:
Membership - Validates admission processes and ensures majority of members qualify for benefits18.
Benefits - Monitors insurance/sick pay distributions to comply with 501(c)(8) requirements15.
Activities - Reviews lodge programs to ensure alignment with fraternal purpose (e.g., rituals, charity)38.
Politics - Limits political expenditures to avoid jeopardizing tax-exempt status17.
Parent organizations maintain authority through a mix of formal charters, financial accountability, and hierarchical governance, ensuring lodges operate within IRS and fraternal guidelines.
Example Membership Benefits Package for a 501(c)(8) Fraternal Beneficiary Society
Example Membership Benefits Package for a 501(c)(8) Fraternal Beneficiary Society
Core Benefits (Required by 501(c)(8))
Core Benefits (Required by 501(c)(8))
Life Insurance: $10,000 term life policy automatically included with membership, funded through member dues37.
Accident Coverage: $5,000 accidental death/dismemberment benefit paid to designated beneficiaries13.
Sick Aid: $200/week short-term disability payments for up to 12 weeks (requires 6-month membership)37.
Emergency Relief Fund: Interest-free loans for medical emergencies or natural disasters57.
Example Supplementary Benefits
Example Supplementary Benefits
Travel Discounts: 10-35% off rental cars (Avis/Budget-style partnerships)69, hotel chain discounts68.
Health Partnerships: Group dental/vision plans with negotiated rates.
Financial Services: Free will preparation workshops and discounted estate planning consultations9.
Education Benefits: Scholarships for members' dependents and free financial literacy courses57.
Typical Fraternal Engagement Benefits
Typical Fraternal Engagement Benefits
Lodge Amenities:
Free access to meeting halls for family events
Complimentary notary services
Community food pantry access
Member Recognition:
25-year member gold watch benefit
College scholarship legacy program for multi-generational families
Cultural Programs:
Insurance Add-Ons (Optional)
Insurance Add-Ons (Optional)
Supplemental Cancer Insurance: $50,000 coverage available through society-endorsed provider7.
Identity Theft Protection: Discounted LifeLock-style monitoring89.
Benefit Structure Compliance
Benefit Structure Compliance
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