Smart David Pozen on the Use of 501(c)(4)s to Fund Trump “Resistance” Groups

I missed linking earlier to this smart Atlantic piece from David:

This model had been fraying long before the Trump presidency. Labor unions, under sustained attack from the right, suffered a steep decline in membership and clout over the latter half of the 20th century. Public charities continued to proliferate, but as progress on racial integration stalled out and levels of economic inequality and partisan polarization crept up and up, many on the left began to question whether a court-centric approach was capable of producing lasting social change.

The 2016 election pushed these concerns past the breaking point. Thousands upon thousands of well-established public charities, after all, didn’t translate into robust voter turnout. Nor did they halt the ascent of a demagogue. And with Brett Kavanaugh’s recent confirmation, whatever remained of the left’s faith in the Supreme Court as an engine of justice has crumbled. While lawsuits may be crucial for challenging certain flagrant abuses of power, many resistance groups feel compelled to participate directly in the rough-and-tumble of electoral politics.

And so they have turned to … section 501(c)(4) of the Internal Revenue Code. Many of the key groups founded to resist Trump, including Indivisible Project, Onward Together, Our Revolution, Sixteen Thirty Fund, Stand Up America, and Women’s March, are abandoning the 501(c)(3) public-charity route and incorporating as 501(c)(4) “social welfare” organizations instead. Social-welfare organizations are also exempt from federal income tax, but they have fewer fiscal privileges. Donations to them are not deductible. Yet unlike public charities, they may lobby as much as they wish, and they may engage in partisan political work—from asking candidates to sign pledges to registering like-minded voters to endorsing specific pieces of legislation—as long as that work is not their “primary” purpose or activity (a requirement so hard to define and enforce that, in the words of one leading nonprofit tax scholar, it “virtually invites wholesale noncompliance”). Since this past summer, social-welfare organizations have also been allowed to withhold the names of their donors from the Internal Revenue Service.

Together with affiliated political-action committees (pacs), conservative social-welfare organizations such as Americans for Prosperity and Crossroads GPS spent massive amounts over the past several election cycles. Liberals initially responded with alarm at the “politicization” of the 501(c)(4) category. Now they are following suit.

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