Koch Brothers’ New Nonprofit “Business League” Gave $250M in 2012

 

Koch

September 12, 2013;Huffington Post, “Politics”

 

Conservative billionaires Charles and David Koch, known to many as the Koch Brothers, have been widely reported to be at the center of a network of groups and organizations that support right-wing causes. With all the recent discussion of political activity in 501(c)(3) charities and 501(c)(4) “social welfare” organizations, it’s significant that the Koch Brothers are about to file a 38-page report with the IRS for a group called Freedom Partners, a 501(c)(6) “business league” with a mission of “defending innovators and entrepreneurs.”

Freedom Partners, established in 2012, gave more than $250 million in grants to organizations including the Center to Protect Patient Rights, an anti-Obamacare group that received $115 million; Concerned Women for America Legislative Action Committee ($8.2 million); the National Rifle Association ($3.5 million); and the U.S. Chamber of Commerce ($2 million). The State Tea Party Express, the Tea Party Patriots, and Heritage Action for America were among groups that received less than $1 million each.

The Huffington Post report is based on a report from Politico’s Mike Allen and Jim VandeHei. As they note, this means that Freedom Partners was the second-largest conservative organization active in the 2012 election cycle, eclipsed only by Karl Rove’s Crossroads GPS, which spent $300 million.

Freedom Partners demonstrates several points about nonprofit organizations and political expenditures, regardless of political affiliation.

  • First, there is more than one way to collect and distribute politically and/or ideologically motivated contributions. Almost all categories of nonprofits recognized by the IRS are allowed to engage in some level of political activity, though 501(c)(3) charities are prohibited from engaging in campaigns (see NPQ’s recent coverage of a Congressional Research Service analysis of political activity of charities) and 501(c)(4) social welfare organizations are restricted in how much must be spent for public education and advocacy activities as opposed to political involvement.
  • Second, there’s more than one way to use nonprofit organizations to conceal the identities of donors. While political action committees (PACs) and so-called 527 organizations must disclose the identities of all or most donors, most other nonprofits do not have to disclose the identities of most of their supporters.
  • Third, the same monies may be moved from group to group, making it even less clear who ultimately benefits from the donor’s gift.
  • Fourth, because gifts may be transferred among several nonprofit groups, it will be easy to overcount the use of cash in elections without detailed flowcharting of the funds’ source and travels from group to group.
  • Fifth, current laws and regulations allow nonprofit groups like Freedom Partners to organize and carry on activities for significant periods of time before being required to report their activities to the government. Review and regulation of political spending remains an activity performed largely after the election cycle is long passed.

It’s difficult to make changes to nonprofit regulation to modify how nonprofit organizations operate in elections. When do public education and issue advocacy become political activity? When does political activity intend to influence elections, and which elections does it seek to influence? Besides, there are some organizations whose advocacy we like and others we detest. Making it more difficult for nonprofits to advocate will likely affect many nonprofits, rather than just a few.—Michael Wyland

About

Michael Wyland

Michael L. Wyland, CSL, has more than thirty years of experience in corporate and government public policy, management, and administration. An expert on nonprofit governance and public policy issues, he has been featured and quoted extensively in media including The Wall Street Journal, The New York Times, CNN, Fox News, Washington Post, The Chronicle of Philanthropy, and The Nonprofit Quarterly. He currently serves as an editorial advisory board member and contributor to The Nonprofit Quarterly, with more than 100 articles published since 2012. Michael is a partner in the consulting firm of Sumption & Wyland. Founded in 1990, the firm provides board governance consulting, public speaking and training, and executive coaching to nonprofit organizations. Sumption & Wyland has assisted more than 200 nonprofits with strategic planning services from pre-retreat research to staff-level implementation assistance and effectiveness monitoring. Speaking topics include board-CEO partnerships, nonprofit executive transition issues, and overviews of the nonprofit sector of the US economy. Michael was born in Washington, DC and raised in the Northern Virginia suburbs. Prior to co-founding Sumption & Wyland, Michael managed the computer operations for an independent oil & gas investor in Dallas, Texas and served as a staff assistant to a U.S. Representative. During his college years, he spent one summer working at the US Department of Labor and one summer working at the US Department of Justice. His past volunteer service includes various leadership positions at the local, state, and national level with the Young Republicans. He has been the secretary and president of a condominium homeowners association and the treasurer of a professional association serving computing professionals. He served as a Trustee and Vice President of Sertoma Foundation, and has been elected president of his local Sertoma club twice. In 2014, Michael was elected Chair of the South Dakota Commission for National and Community Service (Serve SD), on which he has served since its founding in 2011. He is currently working as a senior advisor to establish a national charity dedicated to the elimination of prejudice, expanding the scope and reach of the 120-year old Pi Lamba Phi fraternal organization. Michael's writing for NPQ often addresses healthcare policy and governance, scandals involving nonprofits, and the governance and policy implications of nonprofit stories in the news. He was widely quoted and cited for his work analyzing the governance issues related to the Jerry Sandusky/Penn State/Second Mile scandal in 2011. More recently, he has written more than 30 pieces for NPQ relating to the IRS scandal. In addition, he presented a paper at the national 2014 ARNOVA Conference about the IRS scandal and its implications for regulation of political activity by nonprofit organizations. Michael lives in Sioux Falls, SD with his wife, Margaret Sumption, and their dog. They have one adult son. In his leisure time, he likes to read histories and biographies, play golf, cook, and be a companion to his wife.