It remains debatable whether the impropriety of the IRS’ actions in targeting certain politically-oriented 501(c)(4) “social welfare” organizations for heightened scrutiny rises to the level of scandal. Nevertheless, the related Congressional and media attention have thrust a glaring spotlight on a previously overlooked area of the nonprofit sector, with reactions pouring in from all corners.
One of those reactions has been a rush to condemn the entire 501(c)(4) universe, including calls to eliminate it entirely. Granted, that would be one way to ensure 501(c)(4) status is no longer exploited by partisan-oriented political organizations, in the same way that it’s possible to kill a mosquito with a chainsaw.
But just like wielding a chainsaw irresponsibly, that approach to reform would leave an awful lot of collateral damage. A clear majority of 501(c)(4) organizations have little to no involvement with lobbying or advocacy, let alone political activity. Using National Center for Charitable Statistics data obtained from the IRS, we can estimate a more precise number.
First, the basics. There were 86,451 active 501(c)(4) organizations approved by the IRS as of December 2012. (For comparison, there are 1,075,140 501(c)(3) charities.)
Determining how many are engaged in lobbying or the political process is a rather tricky endeavor – if it weren’t, the IRS probably wouldn’t be in trouble in the first place. Yet using NCCS data tools, it is possible to get to at least a rough estimate.
Avoiding ideologically loaded terms, a keyword search for groups with names including “advocacy,” “activist” or “activism,” “action,” “voting” or “voter,” “citizen” (excluding “senior citizens”), “grassroots,” “movement,” or “change” turns up 2,059 organizations, just 2.4 percent of the total. A more exhaustive search that includes similar terms appearing in program descriptions only adds another 191, but those added include the two largest and best known 501(c)(4) lobbying groups, the AARP and the NRA.
To further supplement the keyword search, we can add organizations that fall into certain program codes under the National Taxonomy of Exempt Entities (NTEE). These categories, developed by the NCCS team, consist predominantly of advocacy organizations. This includes all organizations located within the “R (civil rights, social action, and advocacy)” category; the part of the “W (public & societal benefit)” category that covers organizations focusing on government, taxes, and citizen participation; and all “01” codes designating advocacy-related activities within other broad categories, such as environment or healthcare. Combining those categories with the previously mentioned search results yields 5,808 organizations, representing roughly one in 15 501(c)(4) groups approved by the IRS.
Not only are the politically active 501(c)(4) organizations rather difficult to find, it is possible to identify a clear majority of organizations not engaged in such activity. To demonstrate that point, a random sample of 100 (c)(4) organizations with revenues greater than $25,000 includes:
Healthpartners, Inc., a giant HMO based in Minnesota
The Miss America Organization
The Military Order of the Purple Heart Service Foundation
12 volunteer fire departments
20 community service clubs such as Rotary Clubs, Kiwanis Clubs, and Lions Clubs
Two Disabled American Veterans chapters
Nine groups that appear primarily geared toward ideological, constituency-based or issue advocacy, representing both left-leaning and right-leaning interests
One group that exists “to promote voting and civic participation within the Latino community,” but does not necessarily appear to be partisan in nature
Fully two-thirds of these organizations can be easily identified as not engaged in lobbying or political activities. In addition, not one of the shadowy groups spending large amounts of money on political activity appears on the list. Many, though not all, of the large 501(c)(4) organizations reporting 2012 election spending to the FEC do appear in the NCCS database, but their numbers are negligible in comparison to the broader universe of 501(c)(4) organizations. Instead, the local Rotary Club is much more indicative of a typical (c)(4).
The rules governing what kinds of activities are and are not allowable within 501(c)(4) organizations need to be clarified, and those few groups directly engaging in politics and using the (c)(4) designation to hide their donors need to be held accountable in a more systematic way. But the presence of a small number of political actors shouldn’t jeopardize a legal structure that works for the vast majority of 501(c)(4) organizations that have little to do with lobbying, let alone election-season attack ads.
Image by Tim Meko, Urban Institute