Trade and professional associations depend on member support. Offering discounts, perks, or exclusive treatment often seems like good customer service. But for organizations exempt under Section 501(c)(6), those perks can become compliance traps if they provide disproportionate benefits to particular members.
The IRS grants exemption to business leagues, chambers of commerce, and similar groups only if they are operated to improve conditions for a line of business as a whole. Activities that provide shared knowledge, raise professional standards, or expand networking opportunities are generally fine. Problems arise when benefits look like special deals for insiders rather than collective industry advancement.
IRS Guidance
The Service has consistently said that:
- Benefits must advance the common business interest of members, not provide direct economic gain to individuals.
- Selective discounts, freebies, or services that a single member receives without paying fair value may amount to private benefit or inurement.
- Even small perks, if ongoing or concentrated, can raise risk.
Real-World Risk Examples
- Trade show booths – Waiving booth fees for a board member’s company while charging everyone else.
- Certification programs – Offering one member company free certification testing while others must pay.
- Advertising – Giving a single firm free ad space in the association magazine while selling ads to others at market rates.
- Sponsorships – Letting a long-time supporter put their logo on event signage without a sponsorship contract or payment.
- Consulting services – Having staff provide business development or legal advice to one member company without charging for it.
Each of these examples turns an industry-facing program into a private perk.
Checklist for Spotting Problems
When reviewing member benefits, ask:
- Equal Access – Is the perk equally available to all members?
- Market Value – If not free, is the price consistent with what the association charges others?
- Documentation – Is there a written sponsorship or partnership agreement explaining the exchange of value?
- Industry Impact – Does the activity advance the profession as a whole, or just one company’s bottom line?
- Pattern – Is one member consistently receiving more than their fair share?
Best Practices
- Publish a clear benefits package so all members know what’s included.
- Standardize pricing for ads, booths, certifications, and events.
- Use sponsorship agreements to spell out what companies get in return for support.
- Review benefits annually with legal or tax counsel.
Takeaway
501(c)(6) organizations exist to serve industries, not individual businesses. Occasional courtesies may not sink exemption, but repeated or significant perks to particular members can. The safest course is to make benefits transparent, equal, and grounded in the association’s mission to serve the common business interest.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.Â