It’s no secret that traditional 501(c)(3) nonprofits are looking into launching 501(c)(4) arms (the NAACP, pictured above, recently transitioned entirely into a c4). The c4 designation allows a group to engage in much more direct advocacy, such as lobbying and even partisan campaigning for candidates, as long as that’s not the “primary” purpose of the c4. The strict limits placed on the activities of c3s largely sideline these organizations when it comes to political debates, and that can be a major problem if your nonprofit is involved in an issue that has been politicized. Whether it’s family leave or expanding healthcare access or some other cause that carries a progressive tinge, your c3 may rationally conclude that advancing it requires passing a ballot measure or electing certain candidates—things that only a c4 can do.
Bolder Advocacy, a project of Alliance for Justice (itself a c3), has been pushing nonprofits to be more assertive in the public square, work that includes coaching c3s on giving birth to c4s. Bolder Advocacy Director Abby Levine recently spoke on the phone with Blue Tent to go over the process of establishing a c4. Here’s what she thinks every organization looking to make the transition should know:
Establish a Firewall
Your c3 and c4 may have similar overarching objectives, but they must be completely separate organizations, Levine stressed. “They need to have separate EIN numbers, they need to have separate bank accounts. They need to have separate articles of incorporation, bylaws, and they need separate boards of directors,” she said. This is especially true for c4s that plan to engage in activities that the c3 can’t, like direct spending on elections.
The c3 can never give money to the c4, and the c3 can’t give the c4 its list of donors, either. Starting an affiliated c4 is in many ways like starting an entirely new nonprofit from scratch. The c4 will need seed money, possibly from the people who will form its board, before it can do anything. After it’s up and running, it can pay fair market value for the c3’s email list.
Keep Track of Who Is Working for What
In some cases, a new c4 can afford to hire an entirely new staff and rent new office space, and thus more easily establish that separation. “From what I've seen, that’s sort of rare,” said Levine. Usually, when a c3 creates a c4, “they share staff, they share office space, and they work with a cost-sharing agreement.”
This means having your staff fill out timesheets that make it clear what amount of work they have done for each organization. If the c4 is working out of the c3’s office, it should pay for its share of that space and the equipment. The two organizations can’t operate like a couple where the wealthier partner pays for everything; they need to be like roommates who rigorously divide everything.
Pay Attention to the Limits of the Law
“The c3 can’t do work to further the c4’s political purposes,” Levine said. If your c3 is looking into the merits of paid sick leave, it can’t release a report on the topic timed to coincide with an election where that is a hot-button issue. But if the c3 was independently issuing white papers on paid sick leave and making them publicly available, the affiliated c4 could use them in communications during a political campaign.
Another area where the separation is important is gift solicitation. A staffer working for the c4 can always solicit money from a donor for the c3, just as the c4 can give directly to the c3, Levine said. But if a staffer is “wearing their c3 hat” while talking to a prospective donor and the conversation turns to the c4, they need to be sure to bill some of their time to the c4.
Make Sure the C4 Has a Strong Mission
Not every c3 decides to start a c4. Bolder Advocacy’s c4 guide says that there are downsides to launching a more politically active group. In particular, if your c3 has a reputation as genuinely nonpartisan, it may be damaging to your image to have a c4 engaging in elections.
But a c4 can’t simply be a way for a c3 to get involved in elections. “The primary purpose of the c4 has to be social welfare activity, which by definition is not political activity,” said Levine. “Figuring out what the primary-purpose activity of the c4 will be is often the hardest part.”
Some organizations simply move all of their lobbying activity to the c4 and make that its primary purpose. But occasionally, a c3 will be confused about what its c4 should be doing. “For some organizations, particularly organizations that want to start in an election year, it’s like, ‘Oh, we want to get involved, we want to comment on candidates,’” Levine said. “It's like, what else are you going to do?”
Photo credit: garagestock / Shutterstock.com
