January 20, 2011; Source: Los Angeles Times | Every time the press writes about the explosion of special interest funding of political campaigns through 501(c)(4) organizations, it uses the term "nonprofits" to refer to these tax-exempt entities – and the public, we're pretty sure, thinks "nonprofits" means public charities, and that's really not good for 501(c)(3) charities.

This article from the Los Angeles Times, linked to above, is case in point.

If corporate interests didn't already have a green light to use their financial largesse to influence elections, they certainly did after Justice Kennedy released his majority opinion on the Citizens United case in January 2010 501(c)(4) groups have sprung up like tax-exempt weeds absorbing unlimited special interest donations without having to identify the names or amounts of the donors since then.

One of them, Real HealthCare Act (created by a PAC called Restore America's Voice), is running scads of cable TV commercials with former Arkansas Governor Mike Huckabee intoning, "We'll do our spanking on the Congress and show them that we still rule in this country," oddly promoting corporal punishment of ideological miscreants.

Don't think that this is simply a conservative special interest strategy. Democrats and liberals – not always the same thing – have been generating their own 501(c)(4)s to defend national health insurance reform against the pointless and fruitless effort in the House of Representatives to repeal the legislation. (Repeal won't be supported, or even voted on, in the Senate, and would be vetoed by President Obama even if it did pass.)

On the NPQ website, we have frequently pointed out two big dangers to the nonprofit (read: public charity or 501(c)(3)) sector from these secretive 501(c)(4) political instruments. These otherwise political campaign-oriented 501(c)(4) social welfare organizations are supposed to devote more than half of their spending to nonpolitical purposes, so they run “issue ads” that don’t refer specifically to candidates. If you think the public sees these purportedly nonpolitical issue ads as promoting their social welfare, you underestimate the public.

The danger for public charities? When the public hears about "nonprofits" running Huckabee ads supported by secret special interest donors, they think of public charities – 501(c)(3)s –and the trust and credibility of what most people think of the nonprofit sector suffers additional chinks in its increasingly worn and rusty armor of probity and transparency.—Rick Cohen