Inadequately-noted: It's about (c)(4)s all over these days

Maybe not everywhere, but (c)(4)s are the way we rock for an awful lot more of us than were engaged in political activism in the last couple of decades.

What do these letters and numbers mean? They refer to section 501(c)(4) of the Internal Revenue (tax) Code defining a kind of not-for-profit charity that is tax exempt as to its own income, but permitted to engage in some direct political activity. Used to be, most advocacy outfits were organized under section 501(c)(3) which treats contributions as tax deductible to the donors, but constrained direct political activity, especially endorsing candidates. Nonprofits were able to offer their donors (people, corporations and foundations) a tax deduction in return for staying out of politics.

These restrictions were drummed into nonprofit managers and boards. They were little understood and little explored. And, too often, they scared the stuffing out of otherwise transgressive advocates. I mean, how can you claim to stick up for undocumented immigrants and communities subjected to police abuse if you won't publicly denounce the politicians whose schtick is bashing your people? To a great extent, you can't. Can you claim to be serious about your goals if you are organized under a legal structure that amounts to accepting handcuffs on your advocacy? You've pretty much promised not to contend for power when only real political power will get you where you aim to go.

Nonprofits weaseled around amid the (c)(3) restrictions, more and less openly and bravely. Groups on the left always suspected that "charities" (especially churches) on the right ignored the rules; the suspicions were mutual.

Fortunately, the necessity to build new institutions and adapt old ones in response to the 2016 election of an anti-democratic GOP and an authoritarian president has pushed us onto new ground. Columbia Law Professor David Pozen explained in the Atlantic:

resistance groups have ... been transforming American politics behind the curtains, through the choices they are making about their place within the tax code. This seemingly dry legal development could turn out to be one of the movement’s most significant legacies, as it presages a new model of liberal activism for the age of Trump and beyond. Nonprofit groups that used to focus their energies on litigation and education are increasingly structuring themselves to be political players.

... Many of the key groups founded to resist Trump, including Indivisible Project, Onward Together, Our Revolution, Sixteen Thirty Fund, Stand Up America, and Women’s March, are abandoning the 501(c)(3) public-charity route and incorporating as 501(c)(4) “social welfare” organizations instead. Social-welfare organizations are also exempt from federal income tax, but they have fewer fiscal privileges. Donations to them are not deductible. Yet unlike public charities, they may lobby as much as they wish, and they may engage in partisan political work—from asking candidates to sign pledges to registering like-minded voters to endorsing specific pieces of legislation—as long as that work is not their “primary” purpose or activity (a requirement so hard to define and enforce that, in the words of one leading nonprofit tax scholar, it “virtually invites wholesale noncompliance”). Since this past summer, social-welfare organizations have also been allowed to withhold the names of their donors from the Internal Revenue Service.

... Federal tax law allows social-welfare organizations to be affiliated with public charities as well as with PACs. So while anti-Trump start-ups are setting up shop as 501(c)(4)s, long-standing civil-liberties and civil-rights groups are reallocating resources to (c)(4) arms. In fiscal year 2017, for example, total assets of the American Civil Liberties Union’s (c)(3) grew 17 percent. Total assets of its (c)(4), on the other hand, grew 89 percent. This past June, the Southern Poverty Law Center spun off a (c)(4), the SPLC Action Fund. The NAACP went further and transformed itself entirely last year from a 501(c)(3) into a 501(c)(4). This restructuring was necessary, the incoming president explained, for the NAACP to “have the collective voice and impact that a civil-rights organization in 2017 and forward should have.”

... the shift toward 501(c)(4)s, PACs, and hybrid legal structures represents more than just a temporary adaptation to Trumpism. ...

I certainly hope so. The task of preserving rule of law and democratic rights is too important to allow it to be constrained by fears that donors are so attached to their (often negligible) tax deductions they'll run away if they don't get them.

The outpouring of direct (taxable) political donations to Dems in the midterms seems to prove that the money for democracy is there, if people are convinced it must be.

Importantly, labor unions are heavily regulated in their political work, but they too are sometimes reaching for the flexibility of the (c)(4) status. The UniteHERE effort we just worked on in Nevada was part of a big (c)(4) coalition providing an "independent expenditure" boost to Jacky Rozen's run for the Senate without coordination with the Democratic campaign.

Sure, the rich always have more with which to push back, but if we have the people, we can find enough so long as democracy holds. So let's continue to move away from letting tax code worries keep us quiet -- and, when we win power, clean up the tax code and campaign finance law to level the playing field. A right wing Supreme Court that confuses cash with speech will be a barrier -- but a determined people's ingenuity amplified by lawyers is deep and wide.