The Spillover Effect: A Tour of American Democracy
2 September 2014 at 9:59 am
In her final blog as the Fulbright Professional Scholar in Non-profit Leadership, Dr Tessa Boyd-Caine reflects on what she describes as the most surprising element of her research – the extent to which US Not for Profits can engage directly in political activity.
And so my incredible Fulbright experience comes to an end. Having the time to focus on one project for four months has been a rare privilege. It has also enabled what one colleague called a ‘tour of American democracy’, as I met with almost 100 foundations and Not for Profits over four months. I am preparing a report about what I’ve learnt through this process to share with colleagues across the sectors in Australia and the US. But in this final blog from New York, I reflect on the most surprising element of my research over the past four months: the extent to which US non-profits can engage directly in political activity.
The tax treatment of US Not for Profits revolves around a distinction between so-called ‘charitable organizations’ [registered under section 501(c)(3) of the Internal Revenue Code] and ‘social welfare organizations’ [501(c)(4)]. Charitable organizations can engage in advocacy on an issue related to their mission, for example promoting affordable housing, but they cannot engage in ‘political activity’. In this context, ‘political activity’ encompasses everything from advocacy for elected representatives to vote for a specific piece of legislation through to actively campaigning for someone to be elected (or not).
By contrast, a social welfare organization ‘may engage in some political activities, so long as that is not its primary activity’. Prominent politically active non-profits include the National Rifle Association and NARAL Pro Choice America, which are both 501(c)(4) charities.
Of course there are specific rules that govern 501(c)(4)s, such as providing notice to members about the proportion of resources spent on lobbying activities or paying taxes on those activities. Consequently, accounting for these activities requires close monitoring, documenting and reporting on them.
Not all 501(c)(4) organizations are engaged in political lobbying – far from it. Urban Institute data indicate that just 2.4 per cent of the total number of organizations registered as ‘social welfare organizations’ engage in political activity. But in a sector as large as the US Not for Profit sector, that still leaves room for a lot of political participation.
I am uncomfortable by how broad this interpretation of ‘political activity’ is, particularly its implications for the age-old question of how advocacy is a charitable activity. In actual fact, the IRS definition allows for systemic advocacy of the sort that is critical to addressing social injustices like poverty and inequality. But in practice many organizations steer clear of much of the advocacy they could undertake to meet their aims, because of fear that they will overstep what’s allowed under their tax status.
At the same time, we need to be finding new and more ways for communities to participate in democratic process and Not for Profits can be a key connector in this respect. I’m not at all convinced that restructuring Not for Profit organizations to enable political activity is a path we should pursue in Australia. But my tour of American democracy has raised the spectre of the many ways in which we could engage our communities more in the decisions that affect us all.
And now to the people who have made my Fulbright experience so memorable
First and foremost, a huge thank you to my hosts at the Foundation Center, in particular the Research Team and the many people across the organization that spent time with me; and similarly at the Center on Nonprofits and Philanthropy at Urban Institute.
Much of what I learnt in the US was what you do every day and your generosity of time and explanations were truly valuable. The added benefit of working within organizations, an insider but not on staff, also helped me think about how Not for Profits work to achieve our aims; and how I can improve my own practices to that end.
I have met with over 60 different organizations and countless more people within them over the past four months. Every encounter has left me with more questions than when I began; has indicated new ways to approach old problems; and has reminded me how truly diverse and vibrant our sector is.
Thank you to each and every person who took time to share their perspectives with me. I look forward to continuing the conversations.
What I’m reading: ‘The Revolution Will Not be Funded: Beyond the Non-profit Industrial Complex’ … and travel guides to the US east and west coasts, in preparation for impending road trips.
Follow me on twitter: @tboydcaine
About the Author: Dr Tessa Boyd-Caine is on leave as the Deputy CEO of the Australian Council of Social Service, the peak body for charities and social services and the voice for people experiencing poverty and inequality in Australia. She was awarded the inaugural Fulbright Professional Scholarship in Not for Profit leadership in 2013 and has just completed her Fulbright at the Foundation Center in New York City and the National Center for Charitable Statistics within the Urban Institute in Washington DC.
The Fulbright Professional Scholarship in Not for Profit leadership is sponsored by the Origin Foundation and supported by the Australian Scholarships Foundation.
 Social Welfare Organizations, Internal Revenue Service, http://www.irs.gov/Charities-&-Non-Profits/Other-Non-Profits/Social-Welfare-Organizations
 Metrotrends blog by Jeremy Koulish, Urban Institute, 24 May 2013, http://blog.metrotrends.org/2013/05/lot-501c4-nonprofit-organizations-political/