Many of the most visible and politically active nonprofit organizations in the United States are classified by the Internal Revenue Service (IRS) as 501(c)(4) social welfare groups. The National Rifle Association (NRA), National Organization for Women (NOW), American Civil Liberties Union (ACLU) and Sierra Club, for example, are high-profile 501(c)(4) organizations that are active participants in the nation’s public policy process. They lobby for and against legislation, get issues on policymakers’ radar screens, and educate and mobilize the public around election time, with 2004 being no exception.
Foundations should consider providing support to their 501(c)(3) charitable grantees to help these groups develop the institutional expertise required to establish and manage—legally and effectively—affiliated 501(c)(4) organizations. Providing support would help grantees work toward effecting long-term systemic changes that would assist in fighting the root causes of the social, economic and political problems besetting their constituents.
According to the IRS, “To be considered operated exclusively for the promotion of social welfare, an organization must operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements).” Many organizations that fail to receive 501(c)(3) charitable status—because, for example, their program focus is too narrow or they are explicitly political—are granted 501(c)(4) status. According to data from the National Center for Charitable Statistics, there are 120,000 501(c)(4) organizations on file with the IRS, compared with nearly 1 million 501(c)(3) groups. Additional data from the National Center for Charitable Statistics suggest that 501(c)(4) organizations rely on membership dues and other individual contributions for a large part of their budgets. PoliticalMoneyLine.com tracks the activities of about 300 politically active 501(c)(4) organizations and reports that these organizations earned $1.7 billion in income in 2003.
Although many 501(c)(4) organizations are politically active—nonprofit sector researchers often refer to them as “social advocacy organizations”—it is important to remember that most are decidedly apolitical and are merely given 501(c)(4) status because they don’t easily fit into another nonprofit category.
Unlike 501(c)(3) charities, 501(c)(4) organizations cannot offer their donors the ability to make tax-deductible donations, and they generally do not receive foundation grants. As a trade-off, these social welfare organizations can engage in unlimited lobbying activities, while charities may only do an insubstantial amount of lobbying. Similarly, charities are barred from doing any kind of direct electoral work, but 501(c)(4) groups can encourage their “members” to support particular candidates for public office. The definition of “member” is fairly broad and open to legal interpretation—by both the IRS and the Federal Election Commission (FEC)—with some organizations purportedly counting visitors to their Web sites as members.
Read the full article about 501(c)(4) organizations by Jeff Krehely at National Committee for Responsive Philanthropy.