Philanthropy Roundtable Report Shows (c)(4)s are Mostly Apolitical
Figure 13: Share of 501(c)(4) Organizations Engaged in Political Activities. From Growth of the Nonprofit Sector: More Charites, Better Solutions
When the phrase “social welfare organization” is mentioned, we tend to think about fat cats like Lenard Leo and George Soros buying elections with dark money, don’t we? But Jack Salmon and Patterson Sheehan have written a serious report about the need to avoid caricatures. And to be cautious about new legislation impacting nonprofit and tax exempt organizations based on caricature. You probably want to download this one. Here is part of the Introduction:
Philanthropy Roundtable fully acknowledges the legitimate concerns of policymakers regarding organizations that violate existing laws and regulations, particularly those tied to foreign (especially adversarial) government funding or terrorist groups. At the same time, it is important that we avoid applying a broad-brush approach to the charitable sector that could inadvertently harm the vast majority of organizations doing remarkable work in their communities. Through this comprehensive analysis, the paper aims to provide a balanced and well-informed perspective on the nonprofit sector, fostering a deeper understanding of its complexities and the need for nuanced policymaking.
. . .
Curtailing civil society would not only hamper a fundamental constitutional right, it would result in the government facing immense pressure to allocate more resources toward social services previously supported by private voluntary giving. This would lead to higher taxes, budget deficits, and cuts in other essential areas like infrastructure, education, or defense. Aside from the fiscal costs, limiting nonprofits also risks diminishing civil engagement, leading to a more passive and disengaged citizenry reliant solely on government programs—not the robust Tocquevillian civil society with limited government we should aspire to uphold.
The authors identify cyclical patterns. Events or circumstances — like a pandemic or a war — spur noticeable growth in Civil Society. Incumbents are welcoming, for the most part, but they often react with suspicion and too often respond with legislation broadly applicable though aimed at outliers. For example, when we think nonprofits are getting too radical our instinct is to pass dumb laws that end up unnecessarily restricting the entire sector. I might just have to check my bias, because these young Republicans could be on to something here.
The report contains some good data, too. Figure 11, shown below, shows the different types of social welfare organizations.
The most interesting part of the report concerns 501(c)(4) organizations, a group we tend to think is out of control. Even the Commish thinks so. Last spring, he told Congress that (c)(3)s and (c)(4)s exist in an unregulated “wild west” of political activity. We often hear about exempt orgs using dark money to buy elections, line Clarence’s pockets, print Zuckerbucks, overturn settled precedent, and sow chaos and discord throughout. The data presented in the report disputes that characterization. Maybe we should all calm down:
Recently, however, critics of nonprofit organization growth have also included criticism of the second largest nonprofit category, 501(c)(4) organizations. As this analysis presented in Figure 4 demonstrates, growth in the number of 501(c)(4) organizations hasn’t been seen in recent years. In fact, a 46 percent decline in the number of operating social welfare organizations has been observed in the 13 years since 2010. The criticism of 501(c)(4) organizations, therefore, is not centered on growth but on perceived nonprofit involvement in political activities.
. . .
Analysis finds one-in-ten (10 percent) 501(c)(4) organizations spent money on lobbying activity, while 90 percent did not spend any money on lobbying activity. Among the subset that did spend money on lobbying activity, the median share of functional expenses spent on lobbying was 10.8 percent. In other words, 90 percent of 501(c)(4) organizations typically do not engage in any lobbying activities, while those that do only spend about 10 percent of their total expenses on lobbying efforts.
. . .
Recent years have witnessed growing calls by policymakers to investigate 501(c)(3) and 501(c)(4) organizations over concerns around donations to nonprofit organizations being funneled into potential US political activity. Data and literature on the political activities and policy advocacy of 501(c)(4) organizations are abundant. All too often, terms such as political activity and policy advocacy are conflated. Political activity involves direct or indirect participation in political campaigns, while policy advocacy refers to efforts to influence public policy, such as lobbying for or against legislation. One of the most common methods of calculating the share of social welfare organizations actively engaged in political activities or policy advocacy is the “search term” methodology. Filtering 501(c)(4) organizations by applying ideologically loaded terms (i.e., grassroots, action, citizen, etc.) to search criteria gives a helpful indication in answering this question.
All three search term studies found similar results: between 2 and 3 percent of 501(c)(4) organizations are engaged in either political activity or policy advocacy efforts. In other words, roughly 97-98 percent of these social welfare organizations are likely not engaged in such activities, although they may legally take public advocacy positions.
. . .
Despite massive growth in the nonprofit sector over the past decades, the same time period evidenced a decline in nonprofit advocacy. Criticisms that nonprofit growth equates to a jump in electioneering or lobbying are unfounded. As evidenced by the Independent Sector’s study, there is actually a sharp decline in advocacy activity. This decline is particularly concerning as it suggests a hindering of the vital role nonprofits play in civic discussion.
darryll k. jones