Nonprofits Dive Into PAC World

Posted March 21, 2012 at 6:48pm

As politically active tax-exempt groups draw scrutiny from lawmakers and regulators, leaders in the sprawling nonprofit sector are torn between circling the wagons and joining in calls for reform.

On the one hand, many activists promoting mainstream causes, from environmental to public health issues, are just as worried about secret political spending as Members of Congress. In the wake of the Supreme Court’s 2010 ruling to deregulate corporate and union spending, controversial nonprofit groups on both sides of the aisle have spent millions on election-style ad campaigns.

On the other hand, the diverse charities, social welfare organizations and trade groups that make up the nonprofit world are more determined than ever to speak out politically. If anything, they argue, the big money flowing through overtly partisan tax-exempt groups makes it all the more crucial for smaller players to speak up.

“They’re finding either new ways to be more forthrightly political actors — by lobbying or electioneering — or they’re being forced to become more political, in order to defend the business-as-usual operation of the 501(c)(3) sector, because that’s been under scrutiny and attack for the past couple of years,” said Rob Reich, a political science professor at Stanford University and co-director of its Center on Philanthropy and Civil Society.

Some nonprofit leaders argue that the rules restricting political activity for tax-exempt organizations should be relaxed, not strengthened. Lately philanthropic leaders have worked to organize the interests of nonprofits into a more cohesive voice, advocating on Capitol Hill to beat back proposals to lower the tax deduction for charitable contributions, for example.

Nonprofits now even have their own political action committee, CForward, which aims to back state and local candidates who are committed to strengthening nonprofits in their communities.

“We want to open a PAC, but not because we want to mimic the behavior of super PACs or raise millions of dollars,” said CForward President Robert Egger, who runs the anti-hunger charity D.C. Central Kitchen. “The currency we’re interested in is, say, 10 million employees becoming activated and supporting a candidate.”

For nonprofits, the public furor over the Citizens United v. Federal Election Commission ruling presents tricky challenges. For one thing, tax-exempt groups do not speak with one voice. Nonprofits themselves fall into numerous different categories — 501(c)(3) charities, 501(c)(4) social welfare groups, 501(c)(5) labor unions and 501(c)(6) trade associations — that all face different rules.

“One of the things that’s made this debate so much more complicated is that the world of nonprofits is so diverse,” said Abby Levine, legal director of advocacy programs at the Alliance for Justice, an association of progressive groups. “And the types of organizations that fit into the nonprofit space, including the (c)(4) space, is so broad.”

The bulk of nonprofits, namely 501(c)(3) charitable organizations, are not even affected by the Citizens United ruling. That’s because as charities, they are barred under IRS rules from engaging in partisan political activity. That has created a public relations headache for charities, said David Thompson, vice president of public policy at the National Council of Nonprofits.

“We have the workload problem of having to clarify to the public, and to [the media], and to policymakers that none of this stuff you’re upset about applies to us,” said Thompson, who slaps a red-and-white sticker reading “NONPARTISAN” across his chest when he tackles the topic in public.

But Thompson said his big worry over post-Citizens United political spending by corporate-backed nonprofits is that small, lesser-known nonprofits will be drowned out: “The louder they are, the less impact we have.”

He added: “We think it is vital for charitable nonprofits to engage in election activities — legal, nonpartisan election activities.”

Egger, of CForward, goes even further, arguing that the IRS restrictions on partisan political activity by 501(c)(3) charities should be rolled back altogether.

“You cannot keep 10 percent of the economy silent and just say, ‘Shut up and feed the poor,’” he said.

All that poses a challenge for House and Senate Democrats, who have revived legislation that would increase disclosure requirements for politically active groups, including nonprofits. A broader version of the legislation, known as the DISCLOSE Act, fell short in the previous Congress, partly because nonprofits on both sides of the aisle objected to reporting provisions that they said were overly broad.

This year’s DISCLOSE Act is an improvement, Levine said, but still worries nonprofit leaders. A big sticking point is how much disclosure will be required for groups that run ads that don’t explicitly tell viewers to vote for or against a candidate, but that are considered electioneering communications because they mention candidates and fall within a certain window near Election Day. Under the new DISCLOSE Act, that window would be substantially broadened.

“I’m sympathetic to their concerns,” said Rep. Peter Welch (D-Vt.), a co-sponsor of the House DISCLOSE Act who is rounding up signatures from his colleagues on a letter to the IRS calling for better enforcement. “We have many (c)(4) organizations across the country that are doing very good work. And that’s why the ones who are involved in this political activity are few in number, and they’re very visible. And so, with the appropriate, focused enforcement by the IRS, we can root out the bad and protect the good.”