5 ms·

The requirement of 401c(3)s to be "non-political" looks like a pretty weird to someone that doesn't live in the US. Why do non-profits have to work with that su

by yoelo 7y ago

The requirement of 401c(3)s to be "non-political" looks like a pretty weird to someone that doesn't live in the US. Why do non-profits have to work with that suppression while for-profit companies won't? Does anyone here know the historical context for this?

jacquesl 7y ago
Good question. It sounds strange to me too. I wonder if there’s some unintuitive loophole like the paper itself doesn’t write political articles and sources them from other places.
- garmaine 7y ago
  No, it's just what a 501(c)(3) is: a religious, charitable, scientific, literary, or educational organization, or a handful of other more specialized causes. Note that like a corporation, a 501(c)(3) is allowed to spend a portion of its funds on lobbying, it just can't be the prime focus. There are other non-profit organization types that are specifically suited for political action. Labor unions are 501(c)(5) and often very political. But most political organizations are regulated under section 527 of the code. The reason is simple: different codes require different reporting requirements. The 501 codes are heavily scrutinized by the IRS to make sure they are legitimate charitable causes. 527 orgs are overseen by the FEC to make sure that they obey political campaign financing laws. The reporting requirements for both are different.
- ghaff 7y ago
  501(c)(3)s can write political articles. They just can't engage in overt political activity. For example, my understanding is that a non-profit shouldn't endorse a candidate and certainly shouldn't make political donations or otherwise actively participate in a political campaign. They're not prohibited from covering a campaign or writing about proposed legislation though.
miiiiiike 7y ago
Political Campaign Activities - Risks to Tax-Exempt Status: https://www.councilofnonprofits.org/tools-resources/political-campaign-activities-risks-tax-exempt-status https://www.councilofnonprofits.org/tools-resources/politica...
Zanni 7y ago
Not all non-profits, just 501(c)3. Non-profits organized under other sections of the tax code are allowed to be political. [0] Here's an exhaustive list. Some of the sections are pretty narrow in scope (e.g. 501(c)(21) - black lung benefits trust). [1] [0] https://www.thebalancesmb.com/can-nonprofits-engage-in-political-activity-2501879 https://www.thebalancesmb.com/can-nonprofits-engage-in-polit... [1] https://www.thebalancesmb.com/how-the-irs-classifies-nonprofit-organizations-2501798 https://www.thebalancesmb.com/how-the-irs-classifies-nonprof...
conanbatt 7y ago
Maybe because non-profits are net-creditors of tax consumption and using them to pay for political campaigns means the tax payer funds his political adversaries.
OliverJones 7y ago
Why? It's all about federal US politics (national government, not state or local governments). The road to today's situation is winding and dark. https://www.forpurposelaw.com/501c3-political-ban-history/ https://www.forpurposelaw.com/501c3-political-ban-history/ The current restriction is based on a hastily worded amendment to the tax code from 1954 by one Lyndon Baines Johnson, who later became president when JFK was murdered. It reduces to a few principles. 1. orgs should use their tax-deductible contributions in support of their stated missions. 2. orgs cannot be set up for "selfish" reasons. Because of the present and historical culture of graft (the buying and selling of political favors) in the US, we basically assume that anybody who promotes a candidate gets something in return. 3. confusion in the US Senate in 1954 about the difference between an org's "primary" mission and other missions. There's also an undercurrent of church-state separation. By dollar volume, houses of worship are very big recipients of tax-exempt contributions. Politicians fear the influence of people in pulpits, so it's easier to prohibit that. In May 2017, the current president, Donald Trump, issued an executive order weakening the restrictions on political speech. He did this under pressure from his political party and from the "evangelical" churches who support him.
- lisptw102019 7y ago
  Church-state is related, but different. 'Churches' (this is a short reply so I don't have the definition handy) actually get additional benefits on top of a 501(c)3. Specifically, if they follow certain rules they don't even have to file a proper return. They still have to throw some numbers the way of the IRS, but in addition to not having to file, religious orgs do not have to publish their returns (normal 501s must do so, part of the 'transparency' of their tax break is they must show CEO salaries, salaries of certain top paid employees, and other expenditures).
  - jtbayly 7y ago
    Actually, it’s not quite that they get additional benefits. Churches are automatically tax exempt, with no need to apply for 501c3 status, even. In other words, a better way to look at it is that the gov doesn’t have the right to interfere, so they don’t.
jacquesm 7y ago
I'm sure there will be some that will use any article on the opinion page that criticizes the government to use this to fight the non-profit status. After all, if there is one thing that stands out in the political landscape at the moment it is that the government is at war with those segments of the media that are critical of it.
- jeffdavis 7y ago
  It's quite possible that there will be a court challenge to the non-political requirement. The recent case[1] about union dues for public-sector employees made clear that SCOTUS doesn't want to be in the business of deciding what is political speech versus some non-political opinion. [1] https://www.supremecourt.gov/opinions/17pdf/16-1466_2b3j.pdf https://www.supremecourt.gov/opinions/17pdf/16-1466_2b3j.pdf
- cartoonworld 7y ago
  This looks to be the case, but consider the source of the vitriol hurled down. The par for the course, mcluhan-esque media manipulation is one thing, but this latest round we're referring to comes from a different source with much different motivations. My guess is this slides under the radar, catching a tweet at best. Could give this outfit a few years to spin up, and by then, who's to say?
- chc 7y ago
  This might make for an interesting relationship between the paper and the LDS Church, which is itself a 501(c)3 that gets involved in politics a lot.
  - vonmoltke 7y ago
    Many non-profits have one or more sister 527 organizations that actually do the electioneering and other political activities.
empath75 7y ago
There’s more than one category of non profit and some of them are allowed to be political.
jcrawfordor 7y ago
There are several other tax-exemption provisions which do apply to political organizations, but with different tradeoffs involved. To oversimplify, 401(c)3 are exempt from taxation and donations to them can be deducted from the donor's income tax liability. As a tradeoff, they cannot participate in political activity. 401(c)4 organizations are permitted to participate in politics as part (but not all) of their activity, and are exempt from taxation, but donors to them may not deduct their donations. 527 organizations exist explicitly for political purposes and are exempt from taxation. However, donors may not deduct their donations, and 527 organizations are subject to more rigorous regulation and reporting requirements due to their almost guaranteed exposure to campaign finance regulation. The best way to think about it is this: while the IRS permits many types of non-profit organizations to not pay corporate income tax, the ability of donors to deduct donations from their personal income tax is a privilege specifically granted to charities. Charities are a subset of nonprofits which exist for specific purposes, and political advocacy is not one of them. Subject to state law, it is often possible to incorporate nearly any type of business venture as a nonprofit (even a conventionally for-profit one, such as a retailer). However, the IRS does not grant tax-exempt status to any nonprofit. Only nonprofits of specific types are granted tax-exempt status.

by yoelo 7y ago

jacquesl 7y ago

Good question. It sounds strange to me too. I wonder if there’s some unintuitive loophole like the paper itself doesn’t write political articles and sources them from other places.

garmaine 7y ago
No, it's just what a 501(c)(3) is: a religious, charitable, scientific, literary, or educational organization, or a handful of other more specialized causes. Note that like a corporation, a 501(c)(3) is allowed to spend a portion of its funds on lobbying, it just can't be the prime focus. There are other non-profit organization types that are specifically suited for political action. Labor unions are 501(c)(5) and often very political. But most political organizations are regulated under section 527 of the code. The reason is simple: different codes require different reporting requirements. The 501 codes are heavily scrutinized by the IRS to make sure they are legitimate charitable causes. 527 orgs are overseen by the FEC to make sure that they obey political campaign financing laws. The reporting requirements for both are different.
ghaff 7y ago
501(c)(3)s can write political articles. They just can't engage in overt political activity. For example, my understanding is that a non-profit shouldn't endorse a candidate and certainly shouldn't make political donations or otherwise actively participate in a political campaign. They're not prohibited from covering a campaign or writing about proposed legislation though.

miiiiiike 7y ago

Political Campaign Activities - Risks to Tax-Exempt Status: https://www.councilofnonprofits.org/tools-resources/political-campaign-activities-risks-tax-exempt-status https://www.councilofnonprofits.org/tools-resources/politica...

Zanni 7y ago

Not all non-profits, just 501(c)3. Non-profits organized under other sections of the tax code are allowed to be political. [0] Here's an exhaustive list. Some of the sections are pretty narrow in scope (e.g. 501(c)(21) - black lung benefits trust). [1] [0] https://www.thebalancesmb.com/can-nonprofits-engage-in-political-activity-2501879 https://www.thebalancesmb.com/can-nonprofits-engage-in-polit... [1] https://www.thebalancesmb.com/how-the-irs-classifies-nonprofit-organizations-2501798 https://www.thebalancesmb.com/how-the-irs-classifies-nonprof...

conanbatt 7y ago

Maybe because non-profits are net-creditors of tax consumption and using them to pay for political campaigns means the tax payer funds his political adversaries.

OliverJones 7y ago

Why? It's all about federal US politics (national government, not state or local governments). The road to today's situation is winding and dark. https://www.forpurposelaw.com/501c3-political-ban-history/ https://www.forpurposelaw.com/501c3-political-ban-history/ The current restriction is based on a hastily worded amendment to the tax code from 1954 by one Lyndon Baines Johnson, who later became president when JFK was murdered. It reduces to a few principles. 1. orgs should use their tax-deductible contributions in support of their stated missions. 2. orgs cannot be set up for "selfish" reasons. Because of the present and historical culture of graft (the buying and selling of political favors) in the US, we basically assume that anybody who promotes a candidate gets something in return. 3. confusion in the US Senate in 1954 about the difference between an org's "primary" mission and other missions. There's also an undercurrent of church-state separation. By dollar volume, houses of worship are very big recipients of tax-exempt contributions. Politicians fear the influence of people in pulpits, so it's easier to prohibit that. In May 2017, the current president, Donald Trump, issued an executive order weakening the restrictions on political speech. He did this under pressure from his political party and from the "evangelical" churches who support him.

lisptw102019 7y ago
Church-state is related, but different. 'Churches' (this is a short reply so I don't have the definition handy) actually get additional benefits on top of a 501(c)3. Specifically, if they follow certain rules they don't even have to file a proper return. They still have to throw some numbers the way of the IRS, but in addition to not having to file, religious orgs do not have to publish their returns (normal 501s must do so, part of the 'transparency' of their tax break is they must show CEO salaries, salaries of certain top paid employees, and other expenditures).
- jtbayly 7y ago
  Actually, it’s not quite that they get additional benefits. Churches are automatically tax exempt, with no need to apply for 501c3 status, even. In other words, a better way to look at it is that the gov doesn’t have the right to interfere, so they don’t.

jacquesm 7y ago

I'm sure there will be some that will use any article on the opinion page that criticizes the government to use this to fight the non-profit status. After all, if there is one thing that stands out in the political landscape at the moment it is that the government is at war with those segments of the media that are critical of it.

jeffdavis 7y ago
It's quite possible that there will be a court challenge to the non-political requirement. The recent case[1] about union dues for public-sector employees made clear that SCOTUS doesn't want to be in the business of deciding what is political speech versus some non-political opinion. [1] https://www.supremecourt.gov/opinions/17pdf/16-1466_2b3j.pdf https://www.supremecourt.gov/opinions/17pdf/16-1466_2b3j.pdf
cartoonworld 7y ago
This looks to be the case, but consider the source of the vitriol hurled down. The par for the course, mcluhan-esque media manipulation is one thing, but this latest round we're referring to comes from a different source with much different motivations. My guess is this slides under the radar, catching a tweet at best. Could give this outfit a few years to spin up, and by then, who's to say?
chc 7y ago
This might make for an interesting relationship between the paper and the LDS Church, which is itself a 501(c)3 that gets involved in politics a lot.
- vonmoltke 7y ago
  Many non-profits have one or more sister 527 organizations that actually do the electioneering and other political activities.

empath75 7y ago

There’s more than one category of non profit and some of them are allowed to be political.

jcrawfordor 7y ago

There are several other tax-exemption provisions which do apply to political organizations, but with different tradeoffs involved. To oversimplify, 401(c)3 are exempt from taxation and donations to them can be deducted from the donor's income tax liability. As a tradeoff, they cannot participate in political activity. 401(c)4 organizations are permitted to participate in politics as part (but not all) of their activity, and are exempt from taxation, but donors to them may not deduct their donations. 527 organizations exist explicitly for political purposes and are exempt from taxation. However, donors may not deduct their donations, and 527 organizations are subject to more rigorous regulation and reporting requirements due to their almost guaranteed exposure to campaign finance regulation. The best way to think about it is this: while the IRS permits many types of non-profit organizations to not pay corporate income tax, the ability of donors to deduct donations from their personal income tax is a privilege specifically granted to charities. Charities are a subset of nonprofits which exist for specific purposes, and political advocacy is not one of them. Subject to state law, it is often possible to incorporate nearly any type of business venture as a nonprofit (even a conventionally for-profit one, such as a retailer). However, the IRS does not grant tax-exempt status to any nonprofit. Only nonprofits of specific types are granted tax-exempt status.