Should Nonprofits Aim to Overturn the Prohibition on Charities Promoting Candidates?

“Nonprofits are led by ideals and values for changing the world. Vote with the ideals and values that lead you.” So reads the campaign tagline of the California Association of Nonprofits (CalNonprofits), which is asking its nonprofit members to mobilize their staff and board members, as well as volunteers, to vote with their mission. Last month, the new nonprofit PAC CForward (which is also a 501(c)(4) social welfare organization, and so not a charitable nonprofit) actually endorsed eight politicians, all Democrats except for one candidate for state senator in Tennessee, as pro-nonprofit candidates for public office.[i] The PAC of the Association of Fundraising Professionals (AFP) has been making donations to political candidates for some years, leaning somewhat toward Republican incumbent politicians with oversight responsibilities of the nonprofit sector at the Senate Finance Committee and the House Ways and Means Committee.[ii]  

CalNonprofits, CForward, and the AFP are all organizations concerned about nonprofits as nonprofits, and they are eager to a varying extent, to see nonprofits directly engaging in the electoral process. Increasingly, nonprofit leadership organizations are telling their constituents to vote for candidates who will be good for the nonprofit sector. In his call to arms about the potential impacts of sequestration, National Council of Nonprofits head Tim Delaney urged nonprofits to push on the electoral side of the equation: “(L)ook at the people running for office. Focus …on who is running for Congress and state legislature in your district. Ask: who will work seriously to solve problems rather than be another partisan obstructionist or apologist on either side of the aisle? Apply the same standard for statewide races and local elections. Then, stand up, speak out, and demand straight answers. People running for office need our votes and they fear the wrath of voters.”

Traditional charities like CalNonprofits and the National Council of Nonprofits follow the law and encourage citizen engagement without endorsing or opposing candidates, trusting that individuals can—informed by the facts—make their own decisions. On the other hand, AFP, which is a 501(c)(6) professional or trade association, set up a separate PAC that can make contributions, and CForward is both a 501(c)(4) social welfare organization and a PAC. While their strategies may differ, all of the above aim at electing people to office who will pursue policies that support, benefit, and promote the interests of 501(c)(3) public charities. Given such an aim, why not take the big leap and call for the end to the barrier that prevents public charities from directly engaging in partisan electoral activities? Should nonprofits and churches join together to do away with the (c)(3) electoral prohibition?

Arguments for Eliminating the Ban on Charity Electoral Activity

Clearly, many church leaders want to cross the line and endorse candidates from the pulpit. Last week, some 1,500 churches participated in “Pulpit Freedom Sunday,” challenging the IRS to slap them for discussing politics and even endorsing candidates. The sponsor of Pulpit Freedom Sunday, the Alliance Defending Freedom, pushes for a specific theological line in its advocacy of partisan electoral pulpits: “keep the door open for the spread of the Gospel by transforming the legal system and advocating for religious liberty, the sanctity of life, and marriage and family.” Some liberal church leaders have also been less than shy about making partisan political statements.

This has long been a favorite advocacy item of Rep. Walter Jones (R-N.C.), whose perennial Houses of Worship Free Speech Restoration Act would allow churches to engage in partisan electoral activities without jeopardizing their tax exemptions. Jones recently referred to the prohibition against church politicking as akin to communism or socialism, because like those two -isms, the IRS has to rely on third parties to report potential church violations, which Jones sees as sort of like communist cell members who turn in their neighbors for political deviations.

Although some churches have been greatly exercised by what they see as this restriction on their free speech rights, the prohibition on political activity added to the Internal Revenue Code applies to all organizations that are exempt as 501(c)(3) public charities or as churches (which do not have to apply for 501(c)(3) status and approval). When President Johnson added this prohibition to the 501(c)(3) standards in 1954, contrary to the imprecations of fundamentalist churches, there is no indication that he was singling out churches to shut them up. The last church to lose its exemption for having explicitly engaged in partisan electoral activities was Randall Terry’s Church at Pierce Creek, which took out a paid ad against the candidacy of Bill Clinton for president in 1992, a pretty blatant violation of the prohibition. There have been a number of IRS-imposed excise taxes on churches that violate the prohibition, but no further exemption denials, to the best of our knowledge.

Of course, churches can endorse whomever they want if they are willing to forego their ability to collect tax-deductible charitable donations and to forego the federal tax incentive donors get for giving to the churches, synagogues, and mosques of their choice. Jones’s bill would exempt only churches, not public charities, from the politicking prohibition, but some take this position in regards to the entire spectrum of charities.

The nonprofit leader who comes closest to suggesting that the current prohibition is counterproductive is CForward’s Robert Egger. In a Hudson Institute debate with Chronicle of Philanthropy columnist Pablo Eisenberg, Egger called on nonprofits to be as maximally engaged as possible within the law in public policy advocacy, but suggested that the law doesn’t work for nonprofits. “Sure we can play by the rules. Sure we can use the laws. But at the end of the day, I question openly whether those laws were designed by people to keep us right where we are,” Egger said. “And I question those laws. I don’t like where we are. I’m not going to sit still.”

Egger sees a latent political powerhouse in the nonprofit sector but for its being hamstrung by the 501(c)(3) prohibition, which is why he created CForward. “We want to open a PAC, but not because we want to mimic the behavior of super PACs or raise millions of dollars,” he told Roll Call. “The currency we’re interested in is, say, 10 million employees becoming activated and supporting a candidate.” In calling for an end to the partisan political activity prohibition, Egger argues, “You cannot keep 10 percent of the economy silent and just say, ‘Shut up and feed the poor.’”

We get where Egger is going with this. He and Delaney are both vocal advocates for maintaining government funding of programs operated by nonprofits for individuals in local communities, since one-third of nonprofit revenues come from the government through contracts and written agreements to deliver health and human services more efficiently and effectively at the local level than far-off government bureaucracies. Egger’s argument is partly that since “nonprofits often work on the front lines to help vulnerable populations…[they] can identify the candidates who would work to solve the root causes of those social ills in the first place.” When Delaney argues for putting a “human face” on the impacts of sequestration, he, too, is arguing that nonprofits on the front lines can “bring the impending human tragedies of this story to life” for the public, for newspaper editors, and for politicians who can choose to do something about it—except that Delaney isn’t arguing for a change in the 501(c)(3) prohibition. Instead, he’s arguing that nonprofits should lobby and translate for the public the deleterious effects of the impending sequestration cuts, leaving it to individual voters to make up their own minds on who will be best to support.

To take Egger’s point a step further, however, there is another reason in favor of doing away with the prohibition. The reluctance of nonprofits to engage in advocacy and lobbying is sometimes explained as due to nonprofits’ (or their lawyers’) lack of knowledge that under existing law they can legally engage in lobbying. When lobbying and electioneering—two distinct activities in the political world—get conflated in people’s minds, it may be that when nonprofits hear about the politicking prohibition, it makes them stop not only their electoral activities, which they are not supposed to do, but also their lobbying, which they legally can and really should be doing. Think it doesn’t make sense? We think it does, especially given that organizations such as the National Council of Nonprofits and the Alliance for Justice provide such clear and reliable information on the minimal risks of lobbying. Rather, we think that the nonprofits sometimes shy away from lobbying due to a fear that they will be seen as too complimentary or critical of one pol’s position, which someone could then use to suggest that the nonprofit is slipping into partisan politics.

Arguments for Retaining the Ban on Charity Electoral Activity

Delaney, Egger, Eisenberg, and this writer all want nonprofits to be full-throated advocates in the halls of Congress and state legislatures. But there are problems with the notion of nonprofits engaging in partisan electoral activities nearing or blurring the lines between (c)(3)s and (c)(4)s—or even passing the flimsy limitations on (c)(4)s’ electoral activities.

First, there is the messy and potentially divisive question of who is really a “friend” to nonprofits. When some AFP members discovered that their organization’s low-profile PAC had contributed to former Sen. Rick Santorum (R-Pa.), they blew a gasket. True, Santorum had weighed in with the Senate Finance Committee against new regulations to deal with improprieties in the nonprofit sector and sponsored legislation to increase charitable incentives, but for many observers, his positions on so many issues of social policy and government funding outweighed the attractiveness of these positions. The same issue applies to the CForward candidates. It is difficult to determine exactly what the nonprofit interest might be in supporting candidates who call for deep social spending cutbacks such as State Sen. Andy Dinniman in Pennsylvania or State Sen. Becky Massey in Tennessee.

In an e-mail, CForward spokesperson Doug Knight told us that CForward could see “how the nonprofit sector either shaped their political philosophy, their professional background, or the policy platforms.” But the nonprofit sector is quite large, and it is hard to see how organizations as different as Harvard University and a small homeless shelter, or politically conservative groups anxious to cut domestic discretionary spending and liberal groups trying to expand the social safety net, coalesce around what it means—in political terms—to be a nonprofit.

Another problem with overturning the ban on charities engaging in electioneering is that there is already too much money in politics. At the moment, because of the prohibition, charitable donations get used largely for charitable purposes (including lobbying) without being diverted to electoral activities. If charities could engage in politics, how much of that charitable contribution would be diverted into political activities? What would protect charitable dollars from the encroachment of political needs and appetites? Politicians already hit up nonprofits for money, not knowing that nonprofits legally can’t give. Can you image how bad the hounding would be if they could give? And don’t forget the negative ripple effect this would have with funders, who would rightfully wonder whether their contributions were going for delivery of services or slipping out the back door as political contributions.

Already, the wall between non-charitable nonprofit activities and partisan political activity is pretty porous. Plenty of (c)(3)s have created affiliated (c)(4)s with complex financial transactions between them. For some organizations, it is already difficult to track and distinguish cash flows between interrelated mixes of 501(c)(3), (c)(4), (c)(5), (c)(6), 527, and PAC entities. It is hard to imagine how freeing up 501(c)(3) contributions for political activities wouldn’t result in a further blurring of resources.

But perhaps it is the National Council of Nonprofits that has hit upon the strongest reason not to overturn the ban on charity electoral activity. According to its 2012 Public Policy Agenda, the Council of Nonprofits supports “ensuring the integrity of the nonprofit sector by supporting the tax-law ban on electioneering and partisan political activities.” The Council’s rationale? The public needs services to be delivered on a nonpartisan basis, and as soon as a charitable nonprofit gets labeled as being controlled by only one political party, the partisan gamesmanship that is so toxic to government will spread elsewhere, hurting nonprofits applying on a nonpartisan basis for government contracts and then hurting the communities they serve when contracts get awarded on a partisan basis.

An implicitly related issue in the Council’s framework would be that nonprofits will never be able to play partisan politics on an even playing field with the likes of defense contractors, Wall Street financiers, and oil lobbyists lined up with endless cash. Moreover, as NPQ has repeatedly covered, there are already too many examples of politicians corrupting the nonprofit form by running money through scam organizations, resulting in indictments and convictions of City Council members and state legislators. Those abuses will only worsen if charities started engaging in partisan electioneering. As the Council of Nonprofits thinking goes, when Americans give to charitable nonprofits to advance their missions, they want to know the money is going for services, not for campaign ads for or against political candidates that the donor didn’t expect to be paying for.

Although roughly one-third of nonprofit revenues have come from government funding through written agreements—contracts or grants—to provide certain goods or services on behalf of government, nonprofits have to try to maintain an independent stance to be able to monitor governmental activities and criticize if necessary. It has sometimes been difficult for nonprofits to seek and accept governmental funds while at the same time remaining true to the notion that nonprofits have to remain separate from government in a way that is no different than seeking corporate dollars while speaking out about corporate improprieties. Here is what Eisenberg said on this point at the Hudson Institute:

“I believe that nonprofits must maintain that independence from business, government and politics that has characterized their history in this country if they want to do their jobs well, serving as an intermediary between these factions. It is, I maintain, the unique quality of ‘nonprofitness’ that has been the backbone of our civil society over the years. It is that quality that has enabled nonprofits to challenge governments, monitor and hold accountable corporate America, give a voice to the voiceless, mobilize constituencies, influence public policies and generate crucial scientific and medical research. It has done so because of its independence, not because it has become more like businesses or politicians.”

Nonprofits haven’t demonstrated this independence as much as they should have in recent years. When the Obama administration came in, major nonprofit institutions and major foundations virtually camped out at the White House and the Executive Office Building, eager to cut deals as partners on White House initiatives such as the Social Innovation Fund and the Promise Neighborhoods program. Early on, we noticed a disturbing tendency of many nonprofits not to criticize the Obama administration for fear that Obama was the nonprofits’ guy in the Oval Office even if he was taking unfavorable positions on budget cuts (such as his proposed gutting of Community Service Block Grants). In the U.K., Barry Knight of Centris described the problem clearly: “The state’s actions appear to have created two grades of charities: those that get no money and those that are heavily dependent…As contracts replace grants…contracting organisations become wholly owned subsidiaries of the state and, in sacrificing their independence, lose their place in civil society.”

Would nonprofits campaigning for their favorite political candidates make the challenge of maintaining nonprofit independence worse? We think so. The predominant form of nonprofit advocacy with governmental officials and lawmakers is, unfortunately, advocating for their own grants. One of the main critiques many people have about some of the larger, more effective nonprofits is that they advocate well for the programs and funding that benefit them first and foremost, forgetting the rest. Would nonprofits enabled to endorse and support electoral candidates trade access to specific grant lines for their offers of political campaign support? It is a legitimate danger.

We have to face the fact that for whatever aspersions anyone wants to cast at nonprofits, the credibility of the nonprofit sector is stronger and more positive than business or government, particularly Congress. That’s partly the virtue of the nonprofit sector. Despite the occasional malefactor, the nonprofit sector is largely focused on doing good, whether through service or advocacy, even though the services and advocacy can take many different forms and pursue just as many different issues and ideas. That credibility is fragile and crucial to maintain.

Eisenberg’s argument against nonprofit electoral politicking hinges on credibility. “(D)irect political activity would inevitably taint the integrity and public trust of nonprofits,” he says, “thereby diminishing their capacity to deliver services, retain public confidence and raise charitable dollars for their operations.” As much as we want to see nonprofits duking it out with the lawmakers who are doing such a phenomenally bad job in running this country that Congress is now more unpopular than the Post Office (and this writer likes the Post Office!), the problems with eliminating the prohibition on charity electoral activity outweigh the attraction.

Creating a Political Impact without Focusing on Electoral Politics

Egger is right that nonprofits are sometimes minimally visible on issues when they should be dominating and framing the dialogue. Delaney is right that the sector has to step it up to frame the debates around issues such as sequestration and other budget cuts that will hit people in their local communities across America so that the public sees what is really at stake. And we largely agree with Eisenberg that opening up 501(c)(3) charities for direct engagement in partisan electoral activities has more downside than upside.

This takes us back to what the nonprofit sector can and should be able to do. This doesn’t entail things that will almost inevitably divert charitable dollars into political dollars. Do you really want to see charitable deductions for the $87.8 million spent in the 2012 electoral cycle so far by Restore Our Future, the $68.1 million flowing through American Crossroads/Crossroads GPS, the $38 million spent by the National Republican Congressional Committee, or the $32.6 million spent by Americans for Prosperity (the top four outside spending organizations, according to the Center for Responsive Politics)? Or worse, would you care to see a charitable deduction for the $432.2 million raised for Barack Obama’s 2012 campaign, the $279.3 million for Mitt Romney’s, or for the millions raised and spent by Michele Bachmann, Herman Cain, Rick Perry, Newt Gingrich, and Rick Santorum?

If the nonprofit sector is encouraged to emulate the behavior of big money players, using multiple mechanisms to deny the public the right to know who is paying for elections, it will have undermined its own core mission in connection to small “d” democracy in the U.S. Nonprofits can engage in electoral politics through 501(c)(4) social welfare organizations, but should do so without giving donors a charitable tax deduction. They should be able to do it with full disclosure of the donors to these political instruments.

At the core of what the nonprofit sector can and should be able to do, funders and national leadership organizations must provide nonprofits with the wherewithal to conduct effective citizen mobilization and advocacy. But it has to be done by organizations that represent and channel the voices of large numbers of nonprofits, not a tiny coterie of very large, exclusive, and elite nonprofits. And it has to be done with a commitment to what makes democracy really work.