501(c)3s, (c)4s and 527s….What’s the Difference?
Basically, Philanthropy Roundtable is trying to draw a distinction between the policy work 501(c)3’s do and the more highly politicized work done by 527’s and 501(c)4’s groups. Generally speaking, 527 groups are created primarily to influence the selection, nomination, election, appointment or defeat of candidates to federal, state or local public office. There are no upper limits on contributions to 527s and no restrictions on who may contribute. There are no spending limits imposed on these organizations. The organizations must register with the Internal Revenue Service (IRS), publicly disclose their donors and file periodic reports of contributions and expenditures.
501(c)4 groups are social welfare organizations, such as a civic organization or a neighborhood association. An organization is considered by the IRS to be operated exclusively for the promotion of social welfare if it is primarily engaged in promoting the common good and general welfare of the people of the community. Net earnings must be exclusively used for charitable, educational, or recreational purposes. 501(c)4s may inform the public on controversial subjects and attempt to influence legislation relevant to its program. Unlike 501(c)3 organizations, they may also participate in political campaigns and elections, as long as their primary activity is the promotion of social welfare and related to the organization’s purpose.
One of the amazing things you learn about 501(c)4 organizations is that their tax exempt status is guaranteed and there is no rigorous review by the Internal Revenue Service. Granted, donations made to a 501(c)4 is not tax-deductible on a personal income tax return, but all a (c)4 has to do is file a Form 8976 and you are ready to roll. In fact, it is not unheard of to have a 501(c)3 charter a 501(c)4.
Defending Policy Philanthropy
According to the Philanthropy Roundtable, 501(c)3s should continue to have the freedom to support charitable causes that do important policy research and their donors should be free to give to these causes and not be put under public scrutiny of giving to political causes. In their own words:
“Americans have the right to support the causes they believe in, but all too often, their support for nonprofits is wrongly deemed as political activity,” said Philanthropy Roundtable Senior Director of Policy and Government Affairs Elizabeth McGuigan, co-author of the paper. “Rather than painting all policy philanthropy with the ‘political giving’ brush, we need to distinguish giving to candidates, political parties and political action committees from giving to organizations that work to improve society through policy research and education.”
The Roundtable puts forward four important points that want to make clear:
- Policy-oriented philanthropy is an important part of the philanthropic landscape and should be protected, despite recent criticisms.
- Part of what has fueled calls to restrict policy-focused giving is a lack of understanding about the difference between charitable giving — which includes giving to policy-related organizations — and expressly political giving to candidates, political parties and political action committees.
- The term “dark money” is often used erroneously to refer to charitable giving to policy-oriented nonprofits.
- We must reinforce and protect the right of donors to support policy-oriented nonprofits. At the same time, it is important to depoliticize the IRS and enforce existing laws, using existing funding sources to accomplish these goals.
It’s hard to argue these points. However, if nonprofits want to be clear and draw distinctions between themselves and “dark money” groups, some of that responsibility needs to be borne by the 501(c)3 sector themselves.
First and foremost, their should be serious consideration to prohibit 501(c)3 organizations from advertising on policy issues sixty days before an election. My rationale is that if the work between 501(c)3s and (c)4s and 527s is getting confused, (c)3s should step back and have it made clear that it is not going to participate in large-scale policy debates before elections. There is always time to talk about good policy and election season seems to be becoming a bad time to start those conversations, just for the reasons the roundtable brought out.
Second, (c)3s should be prohibited from sponsoring (c)4s. Now, I know this is practically impossible to prevent or even police, but things like not sharing the same leadership, the same physical address, having a (c)3 fund, in part or in whole, a (c)4 are reasonable measures nonprofits can take to insulate themselves from unwarranted political consequences.
The Philanthropy Roundtable is correct, individuals should be free to give to those causes that they find important and matches their own personal values and ideals and the roundtable has a strong point when they say the work of (c)3s, (c)4s and 527s can get confusing. And while looking at the IRS for some remedies is a welcome message, the Roundtable should also encourage (c)3s to take a more introspective approach and encourage our sector to act more responsibly as well.
The Weekly Announcements
A quick rundown of what I am seeing and hearing in the nonprofit world….
I have a nonprofit in Sidney, Ohio that has reached out to me looking for a new Executive Director. I can tell you that this a very strong organization that needs leadership that has strong entrepreneurial and staff management skills. If you have any interest, please drop me a line at email@example.com and let’s talk!
Registrations now open for Paul G. Duke Academy for Community Leadership!
Registrations are now open for continuing education offered by Edison State Community College in Piqua for the Paul G. Duke Academy for Community Leadership! I have been a proud alumni of both programs and have even been asked to help present sessions and teach classes. It’s an amazing program and I would encourage you to be a part of it if you are in the area! You can register here.
There are only two spots open for the 1.0 Academy and one spot open for the 2.0 Academy!
The Paul G. Duke Academy for Community Leadership 1.0 is a series of workshops designed to develop more effective directors, leaders, board members, staff and volunteers of nonprofit organizations. Course topics include the fundamental practices of board recruitment, planning, staffing, budgeting, evaluation, board meetings and community awareness. The classes are designed to help individuals make a difference on their boards and in their community.
The Paul G. Duke Academy for Community Leadership 2.0 has been created and designed specifically for experienced executive directors of nonprofit organizations and alumni of the Academy for Community Leadership 1.0. This challenging and intensive Academy is coordinated by the Academy development team and participants. Advanced participants will conduct original research and exchange results via reports and discussion. Participants will help to further develop the foundational agenda for each of the four monthly sessions that will explore nonprofit organizations—based upon their backgrounds, experiences, pressing issues and needs—through self-analysis, organizational analysis, guest speakers, best practices, resource review and in-depth discussions. At its conclusion, Academy 2.0 participants will be immersed in the annual Mosaic of Community Leadership Conference, both as participants and presenters. Academy 2.0 is the latest collaboration between the Paul G. Duke Foundation and the Edison State Community College Center for Leadership Development.
What Can We Work on Together?
Did you know that Pinnacle Strategies works individually with nonprofit and public sector leaders to help them solve problems, achieve goals and gain confidence in their roles?
Because, this work is hard and it’s often a lonely road. Our nonprofit and public sector leaders need people that they can talk to to get solid advice and encouragement to do the work that is in front of them. If you feel that this can be of value to you, or a member of your team, please reach out to firstname.lastname@example.org and let’s talk.
We are so close to 500!
Over the last few weeks, the subscription base to the newsletter has just grown and grown and grown. It has finally arrived at a point where we are SO CLOSE to 500 SUBSCRIBERS!
Originally, I had hoped to have 500 by the end of the first year, but it looks more and more likely like it’s going to 15 months to hit that 500 figure, which is still pretty impressive. You can help this newsletter get to that 500 figure by sharing this publication with your friends and colleagues!
Personally, I feel very excited about the future of this newsletter and if you have any ideas or comments, please feel free to share them with me at email@example.com
I know many of you have shared this with your friends and colleagues and I am very grateful. Thank you! If you haven’t shared it yet…..well, here is your chance….remember we are trying to get to 500….right?
Ready to Learn Something New?
One of the prettiest cities in Fall is Indianapolis and travelling there can open a perfect opportunity to sharpen your skills and meet new professionals in the field. I would encourage you to look at some of the offerings of The Fund Raising School at the Lilly School of Philanthropy at Indiana University’s campus in Indianapolis. The professional development school has great programming both on-line and in-person both in Indianapolis and at other sites across the country. Take a look at their course offerings here!
Other Ways to Connect
Our coaching practice has openings and it has been a blast working with nonprofit leaders all across the country! If you are interested in working with me to get your nonprofit organization on a track to achieve the big missions you have, please reach out to me at firstname.lastname@example.org.