Nonprofit (C)4s Get Ready for Midterms (news)

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Lots Of Money To Move Around PACs, Super PACs, But Also 501(c)4 Tax-Exempt Orgs This Election Cycle

As the primaries wrap up and the general midterm elections start moving into full swing, more and more money will start flowing through various election spending vehicles, including 501(c)4 organizations, which are sometimes criticized as “dark spending” avenues for political expenditures. 501(c)4 organizations are prohibited by FEC and IRS rules from spending more than 50% on political lobbying or advocacy, though some critics argue that the largest funds might spend beyond that. While 501(c)3 organizations can spend “insubstantial” amounts of money on political lobbying, their 501(c)4 counterparts routinely spend millions during each election cycle. Nonprofits should brace themselves for a tough messaging battle in Q3 to the beginning of Q4 as they go up against political organizations spending millions on advertising, fundraising, lobbying, and the like.

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Summary:

• Violence In Boston nonprofit shut down by board as leaders face fraud and conspiracy charges | WBUR News
• 2021 Lookback Report - GivingTuesday
• NPOs Added $1.4 Trillion To U.S. Economy | The NonProfit Times
• Org created to support Ukrainian children with their art 

 

 

 

 

Transcript:

[00:00:00] This week on the nonprofit news feed for the week of July 11th, seven 11, always open lots of money, lots of money moving around packs and super packs. As we move into that type of midterm season, Nick, how's going good, George. We can dive right into it. So alluding to that first story, uh, we wanted to talk about at the head of the podcast was that lots of money are moving around packs super PACS, but also 5 0 1 C four tax exempt organizations, this election cycle as in past election cycles.

[00:00:38] So this is something we want to talk about because I think it's important for nonprofit leaders to know that there are tax exempt organizations operating in this space and. Might create messaging challenges and public perception, challenges as we go into what is sure to be another pretty volatile midterm election year.

[00:00:59] So 5 0 1 C four organizations are similar to C3 organizations except they are. Specifically designed for groups that work on advocacy they can spend up to, but no more 50% of their expenditures on advocacy, political lobbying, X, Y, Z some of these orgs, however that are associated with packs doll out millions and millions of dollars.

[00:01:26] We have an article in here about a pack associated with Senate majority pack, uh, or a, a C4 associated with Senate majority pack. Given out tens and tens of millions of dollars to various causes in previous elections. This is just how it works. Right. C four S are increasingly a vehicle for moving money around in the political space.

[00:01:47] C3 organizations can send, spend quote, unquote insubstantial amounts of money on political lobbying. Definitely do research it before you do that, if you're a C3, but the, the takeaway here is that C four S are tax exempted organizations. There's going to be tens of millions, if not hundreds of millions of dollars swirling around this year during the.

[00:02:13] Quite frankly, C3 should be aware of that. You might see more news stories about X, Y, and Z tax exempt organization, dark money, this that, how can your organization increase its legitimacy. And the perception that your money is being used for good and being used efficiently. Something else we wanted to point out is that advertising during elections can become notoriously difficult for smaller organizations going up against these massive ones cost per click on ad platforms like Facebook are probably gonna be really hard to compete with.

[00:02:49] There's just a lot of money. Going for what is a finite and ever decreasing attention of the public. So that's kind of at the top of our story, more kind of broad, not necessarily breaking news, but George, what's your takeaway on this? I think during a couple, you know, misnomers, just to circle back on one, is that.

[00:03:09] There's a difference between, uh, C3 and C4 quite, you know, just it's one number apart. But if you donate to a C4, it is not tax deductible. Right. It's very different. C four S are, you know, used both by the. Political left and political right leaning, uh, organizations to shuffle money around. And there's an interesting site, open secrets that really tracks this stuff pretty well to see where, where that money is going.

[00:03:36] The other thing to touch on is that the word in substantial. So in substantial is. Actually not zero. And I think this is a bit of a misnomer for some people who assume that, oh, my nonprofit can't spend a single dime on anything that approaches lobbying otherwise will lose our certification. Not true. So the breakdown is if you are an organization with, uh, less than half a million and and revenue here, the percent that may be spent on lobbying is 20%.

[00:04:06] For organizations under a million it's, uh, a hundred thousand plus 15% of budget over half a million. And then at the highest level, if you're over 1.5 million as an organization, it's 224,000 plus 5% of budget over 1.5 million. I don't know where your definition of insub substantial comes from, but that leaves some room.

[00:04:27] The other reason to bring that up is as it has happened, With Roe V. Wade, there are many organizations now that even by doing the business, they used to do programmatically may actually be looking into this quite deeply because suddenly your, your emails and ads and awareness just about helping women get healthcare for, you know, different areas may suddenly turn into something that looks like lobbying.

[00:04:51] So I would say tightening up your understanding of this moving into election season. Also noting that if you enter into a screaming match and hope to have better ROI than the other person with the, the bull horn. Maybe adjust the strategy. So that was a good note. Thanks. Yeah, of course. George, that's a great call out about, about nonprofits and, and that kind of work.

[00:05:11] There are some organizations that have like sister organizations, a C3, and then a respective C4 counterpart for this exact reason. Right. And quite frankly, with all the issues we talk about on this podcast, uh, it's pretty impossible to avoid the fact that our government and policies. Proposed and voted on by politicians have direct impact on the beneficiaries of nonprofits and communities and programs that they serve and run.

[00:05:38] So, uh, yeah. Great call out there. Shall we move into the summary? Yes, please. All right. This first story is we gotta, we gotta report it out because it's at the top of the top of the feed, top of the news pile here. But this comes from boston.com and it is about an organization. Called violence in Boston.

[00:06:02] And that has just been completely shut down because the two people, uh, leading this organization a couple had exclusive control over violence in Boston's financial accounts from 2017 through at least 2020 and are allegedly Accused of essentially committing, uh, systematic fraud, siphoning off donations, creating fake documents to get, uh, unemployment pandemic, unemployment benefits.

[00:06:28] They knew they weren't qualified for there's lots of counts of wire fraud coming down on, on these at the top. But, uh, supposedly the board had no idea this was happening and the organization just completely folded. Has stopped existing because it's just a, it was a, a, a money, uh, fr it was a fraudulent scheme.

[00:06:51] Uh, I mean, these, these people allegedly kind of, it seems set out to use this as a vehicle, uh, for money, but George, what's your takeaway on this? Yeah, I mean, it's a federal indictment. That's saying that this couple used over 1 million. That was collected in donations between 2017 and 2021 for personal expenses.

[00:07:13] So this isn't a, oh, they're being, you know, overly scrutinized on our financials. Uh, this, this is pretty significant and it's just devastatingly unfortunate that it coincides with, uh, certainly the summer 2020 George Floyd incident, where, you know, they really rose to prominence. Uh, according to the, the reporting on this, the, the highest level takeaway.

[00:07:37] Is understanding the critical importance of board. A board of directors plays in every nonprofit. They are at the very core, financially responsible. They are on the hook. Essentially as stewards of this organization, they've been put in a position of power that is higher than the CEO they can hire and fire.

[00:07:57] That is the most important job a board has. And you are very much derelict in your duties. I'd say as board members. When you are not overseeing the financial health of an organization and attending to that role. So, you know, I would, I would, I would hold that mirror up very, very closely. And I, and I wonder if there isn't, uh, any, uh, legal ramifications for, for that board, uh, because they were siphoning money away from a very important cause a very important.

[00:08:27] Area, uh, of I'm sure programs in, in Boston. And I, all I can think of is like that money routing to, to other places. But I, I look at the board of directors here. I L less so on the, the, the individual couple that most of this article points to

[00:08:42] yeah. George that's, that's a good point. Yeah. Shall we take us into some brighter news, some giving Tuesday trends. I like it. Let's see. All right. So giving Tuesday has, uh, released a new data commons report entitled from scarcity to abundance mapping, the giving ecosystem and it's worldwide generosity survey.

[00:09:06] Uh, it has some interesting stats. I'll I'll I'll, uh, name a couple of them here. 85% of people surveyed globally gave in 2021 that non monetary giving was two X more common than monetary giving, uh, and globally again, in global context, only 5% of people who gave, gave money only. That's a really interesting, only mm-hmm, , that's a really interesting stat.

[00:09:32] I imagine it would be much different for the United States, which has one of the most advanced, you know, nonprofit, social. Impact sectors in the world, but, uh, really interesting stat. Another one is that volunteering for nonprofits has increased 7.4% in 2021 after a severe drop in 2020, but remains far below pre COVID 19 levels in the United States.

[00:09:58] This is something we've talked about even recently on the podcast here. Uh, Then I, I, one third one is that in the United States, giving to non-registered entities was over twice more as common than giving to registered entities. With most people giving to multiple types of recipients. I imagine that's things like go fund Mees and other fundraisers and, and that kind of thing.

[00:10:26] But George, what do we take away from, uh, the summaries of this.

[00:10:30] Yeah, the macro trend certainly is down as we've moved through the, the pandemic and many giving avenues 7% increase in 2021 was, was really great. Uh, actually I am also, I also feel like a, a broken record bringing back the fact that macro giving. I love the sentiment. I love the surveys, the, the fundamental gravity of donations in America.

[00:10:54] Is the simple relationship of the rule of two, the rule of 2%, 2% of our GDP. Tell me what our GDP is, and I'll tell you what pretty much giving is gonna be, because it has been anchored to that roughly since 1970 and. You know, we can, we can look up and down, but right now I'm a little concerned that the retraction potential recession and that net effect of taking 2% of a smaller number.

[00:11:17] So I'm not optimistic about what's gonna happen, unfortunately in 2022. And normally that that sort of consolidation, uh, tends to amplify a power law, but we'll, we'll see, I think it is positive though, that sentiment is, is increasing, is not decreasing. Uh, 82% of Americans affirmed that they gave. And you know, it's a good thing about participation.

[00:11:44] I think that's something that you may want to hang your hat on in a year where just the overall volume will be down, but you really want to keep those transactions, those interactions as also an important measure, uh, of what's going on because the, the tail of the tape can be misled by one large donor, not giving.

[00:12:03] Yet your actual underlying health might be strong. So, uh, keep that in the back of your mind this year, especially fundraisers who are out there trying to hit your number, like obviously hit your number, but you also pay attention to those, those transactions. And look just more than the, uh, the end of this year, because, uh, as this, uh, downturn recession, however you wanna brand it, uh, will come and go.

[00:12:25] But, uh, maintaining the number of unique donors that are connected to your organization will pay dividend. Later. Yeah, George, I think those are great points. And that actually takes us into our next article, which comes from the nonprofit times, which states that nonprofits contributed 1.4 trillion to the nation's economy during the first quarter of 2022, uh, actually exceeding the overall, uh, gross tic product by.

[00:12:55] 1%. But states that despite positive signs and comparable charitable giving in 2020 and 2021, the current 8.5% inflation signals that holding study financially is not good enough for some organizations to maintain staff services and impact to 2021 levels and goes into some things as you were talking about to look at, uh, through the end of 20, 22 as inflation.

[00:13:21] And recessionary concerns come into play. Uh, George what's kind of continuing along that, that macro conversation about giving a nonprofits and the economy. What's your takeaway from this article first? Always a fan of the nonprofit times clearly. No, we, uh, we occasionally like to write, uh, for them over there and I like that they do this summary.

[00:13:41] I like looking. Nonprofits as an economic engine, quite literally generating 1.4 trillion to the us economy, you know, via jobs, making up 10%, roughly speaking of our labor force, I mean, it's huge. And I think oftentimes over overlooked, uh, at that just sort of raw value of what's going on. And usually the, the GDP, just because of the way, the dumb way that GDP, maybe that's as a rant for a future day it isn't properly represented by what nonprofits do, because by the way, our service to each other isn't properly fit into a tiny bucket.

[00:14:16] measured in, uh, zeros and ones and oil and gas, but the, the contribution is real. And, you know, there's a, a number, uh, associated with.

[00:14:26] Yeah, George, I think that's a, a great point. Takes me back to my high school level economics class, trying to remember what goes into a GDP, but this is a cool way. There's actually, there's a little bit more in here. Sorry. I wanna call call to I'll just quote, uh, directly, cuz it speaks to sort of diversity.

[00:14:42] The sector workforce is continuing a trend of losing, uh, racial and ethnic, uh, ethnic diversity proportion of white workers, 70. Call it 78% higher than pre pandemic levels. Uh, generally, uh, the say the racial and ethnic proportions of nonprofit workforce track with demographics of the broader workforce ex except for Hispanic workers currently making up 11% of the nonprofit workforce and 18% of the overall workforce.

[00:15:09] According to the, the data in this, uh, report that they.

[00:15:12] those are pretty striking data. That was, that was one I missed also that's that's striking.

[00:15:18] We'll have to dive into that slide. It's holding up that, right. It's just like, it's holding up that mirror of being like, you know, here's the, here are the macro trends. Like we can use the language, we can, you know, put out the. Put out the campaigns, all we want, but you know, when you look at your own labor, uh, it's an important thing to note, especially if you're serving, uh, those communities, uh, directly and saying like, what is, what is our complexion juxtaposed with our stakeholders?

[00:15:44] Absolutely. All

[00:15:45] right, George, what about a fun feel? Good story. We actually have one. We, we did our job. This. We actually, we actually have one, it's not so much a story, but just more a cool project. This is a website called Leica, L E L E K a.me dot E. And it is a website that essentially you can buy digital art made by.

[00:16:10] Kids from Ukraine, kids in Ukraine and kids in the Ukrainian diaspora and the funds go directly to them. Uh, this is a UK based, uh, organization. They're registered as a non-for-profit company, but they're not a charity. But, uh, there's tons of cool artwork here and they're all around, uh, seven pounds.

[00:16:34] I think that's the, what I think the. Oh, that's the, is the weight. It's the currency. I was like the currency, the currency. These kids are churn out some high, high volume. Could you imagine the shipping on that? No, but for seven pounds you could be the proud owner of a digital copy of this really cool artwork made by kids going through what can only be, uh, a heartbreaking time.

[00:16:59] And, uh, the money goes directly to, to those kids. And. Uh, kids, families, bank accounts. So just a cool project. And you're seeing lots of really cool social impact like tech, uh, spring up from this, uh, this crisis. And, uh, you know, we talked about crypto philanthropy and, and this, that, and the other, but just another cool little project to help people in this trying time.

[00:17:25] Yeah, my only, my only critique here is. It was a huge opportunity to turn these into NFTs and sell them. Uh, instead you can, uh, you can choose to donate and download.

[00:17:34] They reach out to them, see if they wanna wanna help moving this into the, the crypto philanthropy world. Anyway, Nick, thanks for bringing this. Thanks for summarizing. Thanks George. Talk next week.