This year we saw a midterm election system that was a record-breaker in political spending — to the tune of more than $16.7 billion. Our political discourse is replete with concerns about money’s influence, including “dark money” in elections. But what’s important to remember is the critical difference between expressly political spending for candidates and campaigns and spending on policy-related nonprofits.
Consider that even given the massive sum spent on elections, it pales in comparison to the philanthropic sector — the generosity of individual Americans. These Americans gave $484.85 billion in 2021 to support the local soup kitchen, medical research, museums and libraries, disaster-relief organizations, and more.
Recently, some activists and policymakers have pushed to restrict donors’ rights regarding public policy giving. Privacy opponents claim there’s not enough clear division between giving to policy nonprofits versus donating to political parties and candidates.
But the truth is, when we conflate politics with policy, it can negatively affect communities that rely on philanthropy. When donors’ privacy is not protected under the law and their giving to 501(c)3 organizations is viewed as equal to their political giving, it can stifle that effective giving.
First, it’s crucial to understand the differences between political giving and policy philanthropy. They aren’t the same, and their objectives are vastly different.
Political giving is a short-term donor investment to support a specific candidate or party. These are donations aimed at directly bolstering a candidate or party in the short term, with the goal being a successful campaign. While donors may support a specific candidate because of the policies they want to put forward, the donation itself is not directed toward any long-term agenda beyond the current political cycle.
On the other hand, policy philanthropy takes a long view. Donations to policy-related activities aren’t political in nature, instead, they support ideas, research and education that will inform policymakers and policy. As required by the IRS, 501(c)(3) charities can legally allocate a part of their budget to lobbying efforts, but it can’t take up a large amount of their overall activities.
Charities’ ability to engage in policy debates is at the core of our civil society. Funding the tax-exempt charitable organization of their choice is part of Americans’ right to free speech. Any gift to a 501(c)(3) organization is a charitable gift — including policy philanthropy — and donor privacy must be protected.
The law must continue to protect giving so that charitable giving to policy philanthropy can contribute to improving our society as a whole.
The IRS can help better protect policy philanthropy. Here are three ways that can improve privacy and freedom to give.
—The IRS should be depoliticized. In recent years, the public has increasingly begun mistrusting the IRS due to partisanship and failure to protect donor privacy. This is most apparent in cases where nonprofit status has been denied to applicants with specific affiliations. In addition, donor leaks and tax record breaches have occurred. Restoring Americans’ trust in the IRS is critical, otherwise, any steps the agency takes to further enforce existing laws will be suspect.
—Existing laws should be adequately enforced. It is the IRS’s responsibility to enforce existing laws relating to nonprofit organizations. However, it must neutrally enforce those laws. State agencies and attorneys general should also support the IRS and investigate alleged wrongdoing as appropriate.
—Improve the IRS through existing funding streams. No new revenue streams are necessary to better enforce existing laws or to depoliticize the IRS. Instead, lawmakers can reallocate a part of existing private foundation excise tax revenue to the IRS tax-exempt section. These steps would help to boost public trust in the neutrality of the IRS.
Ultimately, Americans are free to support the causes they choose and give as they see fit. Rather than stifling foundations that offer support to policy centric-nonprofits, they should be free to provide that support within their bounds. That’s why it’s critically important for the difference between political giving and policy philanthropy to be clarified and protected by the law.
