Does having permission waive the 500 foot distance requirement in 91.119(c)?
See 91.905, List of rules subject to waivers:

91.119   Minimum safe altitudes: General.

In other words, 91.905 allows the FAA to issue a waiver to 91.119, e.g. for airshows. The form for requesting a waiver is here, and the FAA can set more or less whatever conditions they like for granting one.