Wednesday, July 25, 2012

Philanthropy Buzzword 2012.5 - Social welfare organizations

The Citizens United decision plus the Presidential election plus Super PACS and anonymous giving through 501(c) 4s suddenly has a lot of people itching to get the public to distinguish between subsections of the IRS tax code.  This strikes me as about as likely as getting people to stop saying "I'll Google it" when what they mean is "I'll go type a search term into the browser and see what I find."

Time and again folks will point out the 501 (c) 4 tax exempt organizations are "social welfare organizations," distinct from 501 (c) 3 tax-exempt organizations which are "Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations." In other words, nonprofits.

Usually the issue is headlines like this one:
"Nonprofits Outspent SuperPACS in 2010, trend may continue"
or this one:
"Nonprofit Groups Shield Big Companies' Political Spending"

Don't get me wrong. The distinction matters. C4s and C3s are different beasts. Political C4s are different beasts from other C4s. The rules are different and the practices are different. But to most folks, a nonprofit is a nonprofit. In the vernacular, the only times it isn't is when someone is talking about a failing business, in which case they sometimes laughingly refer to their business as "unintentionally nonprofit."

Addressing the problem as a semantic issue or trying to introduce a term like social welfare organization into the vernacular is a losing strategy in my opinion. First, it won't work. Second, it doesn't solve the problem of what these organizations are actually doing. And, third, it won't have any effect on money in politics. But all that is besides the point of this buzzword blogpost. Social Welfare Organization may be the first ever entry on this list of "an existing term for which the failing effort to make it a buzzword is precisely why I picked it."

1 comment:

Unknown said...

Lucy: I guess I would quibble with your sense of defenders of c4s making "social welfare organization" a buzzword (unless I don't grasp your concept of buzzwords, which is entirely possible!). It's the classification in the tax code and used as a shield for hiding what c4s actually do. It strikes me this way: if an organization were really doing social welfare work, even when it stretches into advocacy and lobbying, there's little it can't do as a 501(c)(3) public charity. I would guess that nearly everyone is using the (c)(4) structure as an avenue for playing in the electoral sandbox. What makes it particularly galling is not the fact that the preponderance of a (c)(4)'s programs (expenditures) are supposed to be social welfare-focused (and purportedly not in the electoral arena)--and of course we still don't have much guidance from the IRS as to what social welfare really is or looks like--you have some (c)(4)s classifying their political expenditures as social welfare activities. It's kind of insane. Making it worse, if you go after the biggest abusers of the (c)(4) status, you don't have the information in hand usually until after the electoral cycle, and sketchy (c)(4)s can simply disband before they or their managers get upbraided by the nation's monitors.

To the press and to the public, (c)(4)s are nonprofits, (c)(3)s are nonprofits. I've been debating people here in DC about the impact on the credibility of public charities, with Beltway insiders saying that there is no problem, of course everyone gets the difference between public charities and social welfare organizations and there's no evidence of a negative blowback on charities. Sorry, I don't buy it. The credibility of nonprofits is often very thin (take a look at the reaction of readers to my NPQ newswire about the JBR article with the amazingly negative findings about the incompetence and corruption of nonprofit managers). When public charities need a good wake-up call for misdeeds, it should be done, but they don't need to carry the image burden of dubious social welfare organizations that don't have a lot of social welfare in their operations.