As we were doing research on nonprofits and public policy advocacy, we found that there was a political undercurrent in the dialogue that is very powerful and yet not often clearly expressed. This undercurrent has everything to do with how balanced the political dialogue in this country really is. This article by Karen Paget (a reprint from American Prospect) is unusually long for our publication but we thought it was critically important to our readers in gaining a full understanding of the issue. Paget examines the recent social history of nonprofit advocacy. She starkly contrasts the posture and success of conservative with more progressive efforts and we are left with a clear understanding of the pivotal importance of our attitude in approaching the public policy arena and the level of importance this realm of activity has for our sector.
Starting a new organization? You will very likely apply for a tax exemption from the IRS in order to attract foundation grants and gifts from individual donors. This decision, of course, has fateful consequences, especially for organizations devoted to social or political change. Accepting foundation funding means that you will have to limit your tactics and serve the foundation’s goals as well as your own—and the foundation may also be looking over its shoulder at the IRS and Congress.
Since most activist organizations are promoting changes that are, broadly speaking, political—changing public policies, political resources, and the very rules of the game—tax-exempt status tends to cramp their style. In one sense, this constraint seems only fair; other taxpayers should not be subsidizing, via tax exemption, groups whose goals they do not share. Yet what precisely is political? In reality the IRS gives nonprofit organizations wider latitude than many appreciate. Nonprofits that are tax exempt under Section 501(c)(3) of the revenue code (which allows private donors to take tax deductions for the gift and allows foundations to make grants) are nonetheless permitted to organize, to speak out on issues, even to lobby, as long as lobbying doesn’t consume a significant share of their activity. Tax-exempt groups organized under section 501(c)(4), whose donors may not take tax deductions for their gifts, may do an unlimited amount of lobbying.
Tax-exempt groups are not supposed to be explicitly partisan. Even so, however, the IRS recently reaffirmed the status of the Progress and Freedom Foundation, a 501(c)(3) which was closely affiliated with Newt Gingrich. Indeed the foundation’s support for Gingrich’s activity was the basis for the House Ethics Committee’s sanction of Gingrich. Tax-exempt groups have also sponsored voter registration drives, sometimes with implicit partisan objectives. And other groups with close partisan ties, such as the Democratic Leadership Council, have affiliates that are nominally nonpartisan 501(c)(3)s.
In fact, large activist organizations have long divided themselves into different segments. For instance, the Sierra Club is really an organizational complex. The Sierra Club Foundation is a 501(c)(3) organization that receives donor funds which are fully tax deductible; this category of organization may do only limited lobbying. The Sierra Club proper is tax exempt under a different section (501(c)(4)) of the tax code; it raises funds from supporters, who in this case do not receive a tax deduction—meaning the club is free to lobby without restriction. And, finally, the Sierra Club Political Committee, which is regulated primarily by the Federal Election Commission, receives contributions that are not tax deductible and may be used explicitly to support political candidates. An environmentally conscious citizen can participate in the full range of these Sierra Club activities, from issue development to lobbying to supporting specific candidates who reflect the organization’s agenda, notwithstanding the nominal distinctions among the club’s groups. Such conservative groups as the National Rifle Association and the National Right to Life Committee resort to the same devices. If the organization has a competent lawyer, it will pass IRS muster, even though the several units are closely related and share a common agenda, strategy, and, often, board of directors.
As John Judis (“The Pressure Elite,” American Prospect, Spring 1992), Theda Skocpol, Marshall Ganz, and others have observed, large civic organizations in recent years have become increasingly reliant on philanthropic dollars rather than resources from their members or constituents. Nearly a decade ago, in the second issue of the American Prospect, I explored how dependency on foundation funding fosters competition, over-specialization, and issue fragmentation. (See “Many Movements, No Majority,” Summer 1990.) There are two additional consequences: first, dependence on organized philanthropy depoliticizes progressive community groups; and second, the new right is striving to hobble the nonprofits of the liberal left while remaining more politically assertive than the left with its own nonprofits.
Lately, both foundations and the community groups they sponsor have been in a lather over something called “advocacy,” a term that is nowhere in the tax code but which seems to strike fear into the hearts of funders. More precisely, it tends to worry moderately liberal and centrist funders. The idea that nonprofit donors and grantees should be wary of something called advocacy is in fact the result of a highly successful campaign of intimidation by the political right.
“Advocacy,” as a pejorative, reflects a two-decade campaign to defund the left, as originally expressed in a famous 1981 Heritage Foundation tract. It is somewhat ironic that conservative foundations and the activist groups they sponsor are simultaneously highly aggressive about challenging the legitimacy of their liberal counterparts and far bolder about pressing the limits of what they themselves can legally do in the realm of organizing, advocacy, and even explicit lobbying. (See “Lessons of Conservative Philanthropy,” American Prospect, September-October 1998.) For example, the Heritage Foundation, which claims political credit for everything from the balanced budget to the fall of the Berlin Wall, simply declares that everything it does is merely public education and that nothing it does should be construed as lobbying. A typical disclaimer: “Nothing written here is to be construed as necessarily reflecting the views of the Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress.” That seems to satisfy the IRS.
Large centrist foundations tend to be more gun-shy about supporting activist groups, in part because of fears (often exaggerated) about IRS or congressional retribution, and in part because their boards usually include business leaders who may not be enthusiastic about financing activist causes. Blaming the IRS is good cover for denying a grant to an activist group. As a sign that this controversy has hit the mainstream, the Council on Foundations last year at its annual meeting hosted several panels on advocacy, including one entitled “Advocacy is Not a Four Letter Word.”
But what, really, is advocacy? Is foundation and grantee fear of congressional investigations and IRS audits warranted? Why aren’t corporations and conservatives also concerned that they might violate IRS regulations governing tax-exempt activity, especially lobbying? After being on the defensive for many years, some grantees and foundations are beginning to challenge funder timidity on this question. This is a good moment to sort out the relationships among advocacy, philanthropy, and progressive political strategy.
Although the controversy over what kind of advocacy foundations should support is often framed as a legal question, neither the 1969 Tax Reform Act nor its 1976 amendments governing tax-exempt organizations use the word “advocacy.” Nor was “advocacy” one of the 26 categories originally identified in the late 1970s by the Independent Sector, an association of nonprofit organizations, in its taxonomy of nonprofits. As late as the Carter administration, “public interest” was the term of art used to describe citizen organizations and social-action groups.
The right aimed to change that. Reagan-era conservatives hated the rhetoric of “public interest” used by liberal groups, with its elevation of “public” over “private” claims and its mantle of altruism. The Heritage Foundation’s 1981 agenda for the Reagan administration, Mandate for Leadership, suggested two key objectives with regard to liberal groups: to break the “moral monopoly” implied by “public interest” claims, and to cut off government support of such groups. Heritage authors placed the word advocacy in quotation marks and it soon gained widespread usage. For some, advocacy means lobbying. For others, it means just about any activity that involves government agencies, legislatures, public policy, community organizing, or other forms of citizen mobilization. But the charge of advocacy has been enough to intimidate some mainstream foundations.
The conservative campaign to create a broad new class of prohibited activities, called “political advocacy,” gained new momentum after the Republicans took control of Congress in 1994. An amendment first introduced in 1995 by Representative Ernest J. Istook, an Oklahoma Republican, proposed prohibiting any organization that received federal funds from engaging in any advocacy activity. The argument was that money is “fungible,” so restrictions on federal funds just free up other money with which to “advocate.” Istook’s proposed “Stop Taxpayer Funded Political Advocacy” bill not only would have prohibited most interaction with government officials; it also would have given private citizens legal standing to challenge the activity of any nonprofit in court. The burden of proof—demonstrating that the nonprofit did not engage in suspect behavior—would fall on the nonprofit, not the accuser.
Istook, unintentionally, inspired a stunningly broad opposition coalition of nonprofits, most of them anything but radical, who agree on little else. The ad hoc coalition, called Let America Speak, included over 300 nonprofits, ranging from entire professional associations such as the Council on Foundations and the Independent Sector, to large mainstream organizations that included the Girl Scouts, the United Way, and Mothers Against Drunk Driving, to more liberal organizations. While the Istook amendment passed the House on August 3, 1995, the coalit