Making it Rain 501(c)(3) Style
A large theme of the 2016 election already is big money in politics. Issue campaigns, such as Iowa Pays the Price, have popped up all over Iowa and have been working to confront candidates on both sides of the aisle on their plans to lessen the power of dark money and super PACs on the electoral process. However, organizations that often get overlooked when it comes to moneyed politicking are groups that fall under the 501(c)(3) category.
A 501(c)(3) organization is an organization that is tax-exempt usually because of their status as a charitable non-profit. For example, when you donate money to an organization and are able to deduct it from your personal income taxes, you are most likely donating to a 501(c)(3) organization. However, public charity is not the only classification that falls under the 501(c)(3) category. Private foundations, or foundations that receive the majority of their incomes from investments an endowments, are also tax exempt under this section of the U.S. tax code.
The incomes generated by private foundations are used to make grants to other organizations or causes. Again, this provides a great outlet for foundations seeking to give grants to fund medical research, education, or a number of other noble causes. But what happens when these tax-exempt organizations dip their hands into the political realm?
This past Tuesday, I attended the Pastors Policy Briefing hosted by an organization called The American Renewal Project. The opening speaker prefaced his statements by saying that even though Sen. Marco Rubio was the keynote speaker for that event, The American Renewal Project “does not endorse a political candidate, of course, because they are a 501(c)(3) organization.” This statement was followed by a couple of chuckles from the crowd, but not much attention was drawn to it after the fact. The event carried on, featuring a fancy catered meal, live entertainment by a local harpist, and a faith-based speech from Rubio.
You see the IRS prohibits 501(c) (3) organizations from engaging in political activity. Violation of this rule results in the revocation of the organization’s tax- exempt status and subsequently prohibits the organization for filing for 501(c)(4) status in the future. However, there is a catch. The definition of “political activity” under this section of the U.S. tax code only limits these organizations from contributing, giving support or opposition, and/or hosting events for specific political candidates. In fact, 501(c)(3) organizations are actually encouraged to engage in political forums and other lobbying activities as long as it is not candidate-specific.
The American Renewal Project, by disclaiming that they do not endorse Rubio, established the legality of their event. The fancy dinner, the hotel conference hall, the harpist — all were paid for by grants or gifts funded by donors who, in turn, earn tax breaks for their donations.
The American Renewal Project is far from the only organization that operates under 501(c)(3) status and engages in these kinds of activities. These organizations have become increasingly influential in the electoral process, yet they are frequently overlooked when it comes to discussions of the influences of money in politics. Their tax-exempt status also allows for these organizations to spend money in ways that many others cannot, introducing increased opportunities for oversight not only by the IRS, but also by the FEC and other entities tasked with regulating money in politics.
It should be noted that most, if not all, donors to these organizations are well aware of the cause their money is funding. It is not as if 501(c)(3) organizations accept donations under false pretenses and use them to advance their own agendas. It is a team effort by donors, organizers, participants, and others that work toward developing the mission of the organization. Moreover, the activities that these organizations engage in are not illegal by any means. The American Renewal Project, for example, has made it explicitly clear on their social media and in other ways that they are a religious organization whose purpose is to advocate for “people of faith positively affecting public policy.” As far as we are aware, they have also adhered to all of the guidelines laid out in the U.S. tax code. So if 501(c)(3) organizations are perfectly legal and extremely influential, why are they ignored in most discussions regarding money in politics?
As the 2016 election moves forward, it is no secret that big money will play a role in its outcome. The impacts of PACs, dark money, and corporate donors will take a spotlight for issue campaigns focused on moneyed politicking. Should 501(c)(3) organizations be included in these discussions of influence? What exactly is the problem, if any, with these organizations using their incomes in this way? Both parties benefit from all of these sources of funding, and the current 2016 race would look very different if these influences did not exist, so why not talk about all the whole issue, not just certain parts?
Steirer is a senior politics, rhetoric, and law politics and society triple major. She enjoys reading/writing feminist rants on social media, political satire and the Green Bay Packers. Follow her on Twitter.