How Can Nonprofits Support Movement Work? By Finding the Right Policy Lane

It’s no secret that nonprofit 501c3s face unique restrictions on lobbying and policy work. Given their tax-exempt status as “charitable” organizations, federal, state, and local laws limit the political activity nonprofits can support. Yet these nonprofits are often the primary community-engaged organizations in cities and counties across the United States and they often possess unique forms of expertise.

Of course, many groups outside of 501c3 nonprofits—including labor unions, unincorporated movement groups, and some local government agencies—do fantastic work engaging constituents and representing community members.

However, policy decisions made over 50 years ago, such as Nixon-era “new federalism,” have largely shifted the responsibility of caring for communities from the federal government to states and localities. The result has been inconsistent, place-specific social safety nets that rely heavily on private sector actors, especially 501c3 nonprofits—nonprofits that often feel constrained in how strongly they can advocate on behalf of the people they serve.

So, how can this advocacy shortfall be remedied?

Understanding the Structural Barriers

As nonprofits have been rewarded for perfecting programmatic delivery, we’ve seen a dramatic decrease in nonprofits organizing and advocating.

For over 20 years, we at Common Future have been supporting community-serving nonprofits alongside our economic justice work, with a focus for much of the past decade on supporting nonprofits who serve majority-BIPOC communities.

We have heard hundreds of our nonprofit partners express the desire to engage more deeply with economic policy. Nonprofits know that the programmatic solutions they implement are most often incomplete solutions to structural problems.

This has left nonprofits in a tight spot. Many 501c3 nonprofits are well connected to community groups, have unique forms of expertise, and could play a valuable advocacy role. And yet, structural forces push them away from policy-related activities. In fact, according to research from Independent Sector, fewer and fewer of them have engaged in lobbying over the past 20 years.

Why is this? Has the law changed? Interestingly, according to Independent Sector’s research, the most commonly given reason for reducing lobbying has been narrowed mission statements.

So, why are mission statements narrowing? Amid rapidly rising inequality, the need for nonprofits to advocate for economic justice is rising, leading to heightened competition for funding. These forces result in increased specialization and professionalization. Depending on your worldview, this development might be seen as either positive or negative.

Regardless, the data tells us that professionalization decreases civic engagement in nonprofits and disincentivizes coalition building. As nonprofits have been rewarded for perfecting programmatic delivery, we’ve seen a dramatic decrease in nonprofits organizing and advocating to change the structural conditions that define their work.

There are additional structural challenges. It can be difficult for 501c3 nonprofits to find funding that supports organizing and advocacy, especially when led by people of color. Though many organizations with a 501c3 status have opted to form affiliate 501c4 groups to take on advocacy work, there is extremely limited funding for these groups, given that donations to 501c4 groups are not tax deductible. The bottom line: nonprofits struggle to build effective, mission-aligned policy strategies.

Finding Creative Solutions

Despite structural challenges, we’ve seen many nonprofits find paths to achieve the policy and lobbying systems that their communities need. In 2022–2023, we ran a policy incubator at Common Future to support the capacity of nontraditional 501c3 nonprofits to do more economic policy work.

Throughout that process, we’ve seen a range of economic policy work—from changing housing policy in Baltimore to uplifting place-based reparations—done by nonprofits. The creative strategies that nonprofit policy leaders take demonstrate the unique and powerful roles 501c3 nonprofits can play in policy-related work.

There is a significant gap within the economic justice policy world that separates community needs and opportunities from decision-makers.

Take Bree Jones at Parity, who has been able to achieve policy wins and organize for long-term changes, all while running an effective programmatic nonprofit. Parity aims to advance development without displacement by reclaiming and developing vacant properties in Baltimore, MD. Consistent with their mission, Jones and Imani Yasin, Parity’s director of strategic initiatives, helped develop the Campaign for Community Control to establish a community-directed land bank in Baltimore. The land bank would function like a publicly owned investment company to reclaim the 15,000 vacant properties and 15,000 vacant lots across the city to create affordable housing, allowing 100 times more homes than they would be able to support through its programming.

Following the policy incubator, we spoke with over 40 leaders in the economic policy and advocacy fields and distributed a national survey to nonprofits across the country to collect stories and strategies related to effective economic policy change work. Most often, interviewees and survey respondents shared that nonprofit actors can be extremely effective when they step into their power as trusted connectors between communities and power brokers.

Reflecting on these perspectives, we understand that there is a significant gap within the economic justice policy world that separates community needs and opportunities from decision-makers and their trusted advisors. At Common Future, we’ve opted to name this gap the “missing middle” in the economic policy ecosystem. We see major opportunities to support nonprofits in addressing this.

A lot of work is required to successfully move policy. This is especially true if the goal is transformative change, as this work requires more investment in building a shared understanding of an opportunity among stakeholders. By helping 501c3 nonprofits bridge this gap, groups can safely contribute to larger movements for transformative economic impact without risking their tax-exempt status.

Nonprofits…[can] leverage their networks, and deploy communication channels and program expertise to work with others around policy strategies.

Take the movement for guaranteed basic income (GBI). Data show us that these strategies work, and they are ripe for integration within public programs. But advancing policy will require 501c3 nonprofits that operate pilot programs to lean in as advocates.

As Aisha Nyandoro of Magnolia Mother’s Trust observes, “There is a huge missed opportunity….Right now, GBI advocates tend to be academics running intermediaries or operating within think tanks. We see this with the Child Tax Credit movement as well. We need real people advocating for themselves around these policies.”  

How Nonprofits Can Advocate Effectively

Economic policy change depends on many actors. Clearly, charitable nonprofits should not aim to replicate the strategies of movement building organizations, labor unions, and policy-focused 501c4 groups. More traditional policy-oriented actors are better positioned to do direct lobbying around timely opportunities for policy impact. While some direct advocacy is allowed for 501c3 nonprofits, these activities can be difficult to engage in effectively, especially for those who are new to policy work.

Still, nonprofit 501c3s can play an important role. By widening the aperture of what is considered “economic policy” work, these nonprofits can build from their existing strengths. Specifically, we’ve found that nonprofits are best positioned to leverage their networks, and deploy communication channels and program expertise to work with others around policy strategies.

Take Pacific Community Ventures (PCV), a community development financial institution (CDFI) designed primarily to provide investment capital to underserved small business owners. In addition to being a capital provider, PCV has developed an effective policy-influence strategy to support small-business owners and their communities in the fight for economic, racial, and gender justice. PCV leverages lessons learned from their small-business investing and business advising work to inform their policy advocacy. Bulbul Gupta, who directs the organization, is consistently educating policy decision-makers in Washington, DC, on topics like economic risk and informing key policies (such as reforming the Community Reinvestment Act) to ensure that PCV’s work is translating into improved equity-centric policy, for the sake of a more inclusive economy for all in the United States.

And, yes, there are major, timely opportunities for nonprofits to get behind. The current outflow of federal dollars to build infrastructure represents the largest such investment in decades and 501c3s are often well positioned to influence the flow and use of those dollars. Despite recent backlash, major transformative policy proposals are slowly gaining steam—from reparations to baby bonds—and would immensely benefit from nonprofit partners’ support. And, more and more economic justice innovations, such as land trusts and land banks, are gaining ground in communities across the country, providing significant opportunity for nonprofits working on these issues to organize and think big.

Being an Effective Partner

To exercise power, you must wield it. Nonprofits have expertise and connections that can be effective, if activated. The bottom line is that to advance the interests of the constituents they serve effectively, many nonprofits must become comfortable with pushing for economic policy change at the local, state, and federal levels. (A recent toolkit developed by Common Future may offer some useful pointers on how to do so.)

Foundations that fund nonprofits also must reflect on their role in perpetuating the norms that limit the ability of 501c3 nonprofits to engage safely around economic justice policy advocacy. For those that support policy work, this means expanding funding beyond think tanks      to support nonprofits who serve the end-beneficiaries in their base building work. For foundations that concentrate on program support, this means expanding the focus of support to enhance the ability of the nonprofits they support to build power while they serve their communities.

We must challenge our siloed thinking if we are to reverse rising inequality and current trends toward increased marginalization. (Included in our toolkit are recommendations for funders who are interested in supporting nonprofits engaging in movement work).

Although nonprofits are often excluded from policy-related conversations, it is long past time to change that. Despite limitations due to tax-exempt status, there are ample avenues for nonprofits to lean into essential economic policy change work, building from their existing strengths.