Flutterby™! : Robertson Retires 2001-12-06 17:55:41+00

Robertson Retires

2001-12-06 17:55:41+00 by Dan Lyke 3 comments

Pat Robertson leaves the Christian Coalition:

"I would rather be active in spiritual ministry than engaged in political activity anymore," Robertson said.

I was a bit ignorant. I thought there were restrictions on what non-profits can do politically, and the Christian Coalition claims to be non-profit, but apparently 501(c)(4) can do just about anything (legal) , but electioneering cannot be the majority of its work.

[Update: Wow. Read Dylan's elucidation on 501(c)(3) and 501(c)(4) corporations and how campaign finance works in relation to them in the comments to this entry.]

*Actually*, speaking as somebody who used to work for a 501(c)(3/4) organization...well, officially two organizations with one set of employees...Nonprofit tax law is complex.

I *will*, however, state that electioneering *can* and *is* the majority of most 501(c)(4)'s work. I'll refer you to the relevant tax regs here:

|The seeking of legislation germane to the organization's programs is |recognized by the regulations as a permissible means of attaining social |welfare purposes. Thus, a 501(c)(4) social welfare may further its social |welfare purposes through lobbying as its primary activity without jeopardizing |its exempt status. However, an organization that has lost its 501(c)(3) |status due to substantial attempts to influence legislation may not thereafter |qualify as a 501(c)(4) organization. In addition, a 501(c)(4) organization |that engages in lobbying may be required to either provide notice to its |members regarding the percentage of dues paid that are applicable to lobbying |activities or pay a proxy tax. For more information, download Lobbying Issues.

|The promotion of social welfare does not include direct or indirect |participation or intervention in political campaigns on behalf of or in |opposition to any candidate for public office. However, a 501(c)(4) social |welfare organization may engage in some political activities, so long as that |is not its primary activity. However, any expenditures it makes for political |activities may be subject to tax under 527(f). See the FY-2002 CPE topic |entitled Election Year Issues for further information regarding political |activities of 501(c) organizations and 527(f).

So...having dropped the lengthy IRS textbomb, let me tell you how it works in the real world.

Accounting is the lifeblood of nonprofits, to an even greater extent than for-profit companies. The reason for this is the tricks and traps of maintaining tax-exempt status.

My former employer, who shall remain nameless here, was an environmental political action committee for all intents and purposes, but it was organized (quite legitimately) as a "social welfare" organization. Now...when they say that a welfare organization may participate in political activities...let me tell you what that means in practical terms.

What it means is: Your organization can be entirely devoted to affecting social change *through* politics. It can give endorsements, it can publish position papers, and you bet your ass it can give large sums of money to political candidates. Granted, the amounts with my former employer were *much* smaller than those of the Christian Coalition.

So, you're asking yourself, in light of that code up above...what, if anything, constitutes illicit political activity for a 501(c)(4)? Simple. You have to be *officially* non-partisan. You must endorse/give/whatever to candidates based on their views, not their party affiliation (though, in practical terms, the two are usually one and the same). So...the Coalition couldn't give money to the Republican National Committee. But they could give it to each and every candidate on their ticket (and probably do).

Where it gets really entertaining is when somebody tries to reform campaign finance laws. I could go on for days about campaign finance and why meaningful reform, though badly needed, *can not* work in our political system. But I'll spare you.

I'll close with an example of how easily a political organization can get around campaign finance laws. LEGALLY.

Ok. You have the ABC (Association for the Benefit of Couscous-eaters). The ABC is organized as a 501(c)(4) corporation. It takes part in political activity, etc. Now, there's also the ABCDEF (ABC Defense and Education Fund). That's a 501(c)(3). The ABCDEF has only one employee, an Executive Director. It will have an at least marginally different board of directors. All other employee functions are performed under contract. (I.E. ABCDEF pays ABC for contracting services, ABC gets free money from the completely exempt money).

So...somebody comes along and says "let's pass Proposition 208". Man, this sounds like disaster for the special interest groups in California...right? WRONG. It was like Christmas. The law stated that interest groups could no longer give single contributions of more than $250 to a candidate. Now...on the surface, this sounds like "well, hell...can't give Joe Smith 500 grand for this election." Wrong again. You see, there was this really cool grassrootsy idea in 208 that said "it's ok for 'independent expenditure campaigns' to give as much as they want, as long as all the contributions that made up the total were under $250 per individual".

Nice idea. The problem with it is this...let's say Jack Brown wants to give Joe Smith a $100,000 contribution. He can't, right? Oh yeah he can. You see, here's the crux:

The "independent expenditure campaign" is its own bank account under section 527. It can *only* contain contributions of less than $250. However...there's no reason at all that Jack couldn't give ABC the $100,000. ABC then transfers 400 individuals' donations of $250 each from its main account to the 527.

Boom. The IEC gives Joe Smith $100k. Effectively, Jack has just given his favorite candidate 100 grand...but *legally and officially* he didn't.

Wow, I didn't mean this to get so long. That's *got* to be more than any of you cared to know.

Actually, I'd like to know more but I just can't stay awake through the digestion process. ;-)

The Supreme Court has repeatedly ruled that campaign contributions from individuals are Protected Speech under the First Amendment. Interest groups? As long as they can claim to be non-partisan, again...protected under the First Amendment.

I'm not sure I agree that spending money is Speech, but the Court's been pretty damn clear on this, which is why so many campaign finance initiatives have passed and then been struck down.

Common Cause did their legal homework on Prop. 208 as far as not getting it struck down goes. But they left a giant loophole. They had to to make the measure constitutional. If they hadn't allowed IEC's, they'd have been limiting free speech. So now we have the IEC to give massive amounts of cash to one candidate, and there are still no limits whatsoever on individual contributions to political parties on the state or national level.