tag:theconversation.com,2011:/africa/topics/501c3-37329/articles501c3 – The Conversation2024-01-18T13:28:25Ztag:theconversation.com,2011:article/2205682024-01-18T13:28:25Z2024-01-18T13:28:25ZUS law permits charities to encourage voting and help voters register, making GOP concerns about this assistance unfounded<figure><img src="https://images.theconversation.com/files/569650/original/file-20240116-27-7pcz6q.jpg?ixlib=rb-1.1.0&rect=1375%2C1184%2C3166%2C1954&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Volunteers register voters in Santa Fe, N.M. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/volunteers-register-voters-at-a-table-set-up-at-a-fourth-of-news-photo/997809612?adppopup=true">Robert Alexander/Getty Images</a></span></figcaption></figure><p>U.S. charities <a href="https://www.law.cornell.edu/uscode/text/26/501">aren’t allowed to campaign for or against specific political candidates</a>. But they can <a href="https://www.irs.gov/pub/irs-tege/rr2007-41.pdf">legally engage</a> in nonpartisan <a href="https://www.eac.gov/sites/default/files/electionofficials/QuickStartGuides/Voter_Education_EAC_Quick_Start_Guide_508.pdf">voter education</a> and candidate-neutral efforts to get out the vote, as well as voter registration drives.</p>
<p>I’m an <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2057780">expert on charitable tax law</a> who used to work at the Internal Revenue Service. </p>
<p>While <a href="https://gop-waysandmeans.house.gov/event/oversight-subcommittee-hearing-on-growth-of-the-tax-exempt-sector-and-the-impact-on-the-american-political-landscape/">testifying before a House subcommittee</a> in December 2023, I explained that these electoral-related activities are consistent with a healthy democracy and <a href="https://gop-waysandmeans.house.gov/wp-content/uploads/2023/12/Hackney-Testimony.pdf">don’t violate any U.S. laws</a>. </p>
<h2>Voter assistance</h2>
<p>Some nonprofits like the <a href="https://www.lwv.org/elections/increasing-voter-registration">League of Women Voters</a> have engaged in these nonpartisan efforts for decades. Others, like <a href="https://www.nonprofitvote.org/">Nonprofit Vote</a> and <a href="https://www.rockthevote.org/">Rock the Vote</a>, seek to motivate people of color and young voters to cast their ballots.</p>
<p>It’s hard to find data on how much charitable money funds these causes. But there’s no shortage of conjecture about its possible impact.</p>
<p>The Republican Party has long seen nonpartisan voter registration and get-out-the-vote campaigns as being somehow tied to the Democratic Party or more helpful for turning out votes for Democratic candidates than Republican hopefuls. As far back as the 1960s, Republican representatives accused the <a href="https://capitalresearch.org/article/the-ford-foundation-the-1967-cleveland-mayoral-election-and-the-1969-tax-reform-act/">Ford Foundation of using voter registration</a> in what they alleged was a partisan manner. </p>
<p>Today, <a href="https://www.philanthropy.com/article/the-house-gop-wants-to-probe-nonprofits-both-left-and-right-have-pushed-back">Republican objections</a> <a href="https://gop-waysandmeans.house.gov/wp-content/uploads/2023/09/UPDATED-RFI-on-501c3-and-c4-Activities-FINAL.docx87.pdf">and concerns</a> are getting louder. There are <a href="https://tenney.house.gov/media/press-releases/congresswoman-tenney-reintroduces-end-zuckerbucks-act">GOP efforts underway</a> to make some of these donations illegal. </p>
<h2>Charity constraints</h2>
<p>Because it’s against the law for charities to overtly engage in political activity, any direct politicking tied to these nonpartisan registration drives could <a href="https://www.law.cornell.edu/uscode/text/26/501">jeopardize their tax-exempt status</a>.</p>
<p>These “organizations may encourage people to participate in the electoral process through voter registration and get-out-the-vote drives, conducted in a non-partisan manner,” the <a href="https://www.irs.gov/pub/irs-tege/rr2007-41.pdf">Internal Revenue Service states</a>. “On the other hand, voter education or registration activities conducted in a biased manner that favors (or opposes) one or more candidates is prohibited.”</p>
<p>In practice, that means it’s OK if a charity sets up a voter registration booth at a state fair and registers anyone who comes to the booth, regardless of their political leanings. But if a charitable organization runs a phone bank that encourages people to vote only if they agree with a particular candidate’s position, that would break the law.</p>
<p>The Americans who can <a href="https://theconversation.com/whats-the-charitable-deduction-an-economist-explains-162647">deduct their contributions to charities</a> from their taxable income – an option generally available today for only the highest earners – can’t do that with the money they <a href="https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/are-your-political-campaign-contributions-tax-deductible-11380/">donate to political candidates</a>.</p>
<p>The <a href="https://projects.propublica.org/nonprofits/organizations/300126510">Center for American Progress</a>, a progressive think tank, isn’t allowed to endorse President Joe Biden’s reelection bid. Nor is <a href="https://projects.propublica.org/nonprofits/organizations/237327730">The Heritage Foundation</a>, a conservative think tank, at liberty to urge voters to support his Republican rival.</p>
<p>Although <a href="https://projects.propublica.org/nonprofits/organizations/300126510">both of these groups produce political analysis</a>, they <a href="https://projects.propublica.org/nonprofits/organizations/237327730">are charities</a> and must comply with section <a href="https://www.501c3.org/what-is-a-501c3">501(c)(3)</a> of the tax code.</p>
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<figcaption><span class="caption">Professor Philip Hackney testifies before the House Ways and Means oversight subcommittee on Dec. 13, 2023.</span></figcaption>
</figure>
<h2>Johnson amendment</h2>
<p>This restriction, on the books since 1954, is known as the <a href="https://theconversation.com/trump-says-the-irs-regulates-churches-too-much-heres-why-hes-wrong-77605">Johnson amendment</a> because of Lyndon B. Johnson’s insistence on its passage when he was serving in Congress.</p>
<p>Former President Donald Trump tried and failed to get rid of the Johnson amendment for churches and other houses of worship, which the U.S. government <a href="https://theconversation.com/whats-a-church-that-can-depend-on-the-eye-of-the-beholder-or-paperwork-filed-with-the-irs-130517">lumps together with all other charities</a>. </p>
<p>House Speaker Mike Johnson and other Republican lawmakers would like to go even further than Trump’s proposed change. They have backed the <a href="https://slate.com/business/2023/11/mike-johnson-speaker-johnson-amendment-religious-leaders-taxes.html">Free Speech Fairness Act</a>, <a href="https://www.councilofnonprofits.org/trends-and-policy-issues/protecting-johnson-amendment-and-nonprofit-nonpartisanship">which would practically eliminate restrictions on politicking</a> for not just churches but all charities.</p>
<p>Some conservative preachers, meanwhile, have been <a href="https://www.keranews.org/politics/2022-11-03/many-churches-use-their-pulpit-to-support-or-oppose-political-candidates">flouting the Johnson amendment</a> without eliciting much of a <a href="https://www.texastribune.org/2022/10/30/johnson-amendment-elections-irs/">response from the IRS</a>.</p>
<h2>Republican lawmakers</h2>
<p>At the same time Republicans are trying to significantly weaken restrictions on the use of charitable money for politicking, they are also calling out nonpartisan voter registration and get-out-the-vote efforts as unfair uses of tax-deductible charitable dollars.</p>
<p>The <a href="https://gop-waysandmeans.house.gov/event/oversight-subcommittee-hearing-on-growth-of-the-tax-exempt-sector-and-the-impact-on-the-american-political-landscape/">House Ways and Means subcommittee hearing</a> in which I testified focused on the role that some nonprofits are playing in American politics.</p>
<p>Republicans expressed their concerns that charities are engaging in voter registration and get-out-the-vote efforts in communities that might boost the electoral chances of Democratic candidates. Because contributions to charities can be tax deductible, those lawmakers said they are concerned that the federal government is thus being used to further Democratic interests.</p>
<p><a href="https://www.vox.com/recode/2020/1/7/21055340/mind-the-gap-silicon-valley-donors-democrats-2020-plan-140-million">Some of them highlighted a memo</a> from <a href="https://www.opensecrets.org/political-action-committees-pacs/mind-the-gap/C00683649/summary/2022">Mind the Gap</a>, a Democratic <a href="https://www.fec.gov/press/resources-journalists/political-action-committees-pacs/">super PAC</a>. According to the memo, donating to charities for voter registration in the 2020 election cycle was “the single most effective tactic for ensuring Democratic victories.”</p>
<p>But as political scientists Daron R. Shaw and John R. Petrocik have observed, seven decades of survey data and election returns “<a href="https://www.nationalaffairs.com/publications/detail/does-high-voter-turnout-help-one-party">suggest that turnout has no systematic partisan consequences</a>.” </p>
<h2>‘Zuckerbucks’ contributions</h2>
<p>Republican lawmakers are particularly incensed by the over <a href="https://www.washingtonpost.com/politics/2022/09/08/zuckerberg-2020-election-republicans/">US$400 million in contributions Mark Zuckerberg</a> and his wife, <a href="https://www.techandciviclife.org/100m/">Priscilla Chan</a>, made to two charities to make grants to state and local election administrations to aid those authorities during the COVID-19 crisis.</p>
<p>Conservatives have dubbed this support aimed at ensuring a well-run election system “<a href="https://apnews.com/article/2022-midterm-elections-united-states-government-and-politics-78e0e0d548df9023aeac1c9c690b48f8">Zuckerbucks</a>.” A Republican bill pending in Congress <a href="https://www.foxnews.com/politics/end-zuckerbucks-gop-bill-aims-to-ban-mark-zuckerberg-style-election-funding">would outlaw this kind of spending</a> in the future.</p>
<p>And more than 20 Republican-led states have already <a href="https://apnews.com/article/2022-midterm-elections-united-states-government-and-politics-78e0e0d548df9023aeac1c9c690b48f8">barred this private spending on elections</a> within their borders.</p>
<p>However, the Federal Elections Commission, which is responsible for this kind of oversight, has found no cause for concern. In a rare unanimous decision in 2022, three Republican and three Democratic commissioners <a href="https://www.washingtonpost.com/politics/2022/09/08/zuckerberg-2020-election-republicans/">determined that all complaints of violations of campaign finance law</a> in the case of the Zuckerberg grants were without merit.</p>
<h2>Concerns moving forward</h2>
<p>As I advised House lawmakers, I believe that drafting any restrictions on the nonprofit sector requires proceeding with great care. Charities make up a part of civil society – a place outside of government and business – where we all have an opportunity to generate important information, develop our opinions and share those with government representatives. </p>
<p>In my view, Congress needs to assess whether any cure it seeks to implement will be better or worse than the disease that it thinks afflicts the U.S. electoral system. Clamping down on nonpartisan voter registration and get-out-the-vote efforts seems to me to be misguided at best.</p>
<p>Congress can, if it wishes to take action, appropriate more funds to ensure that all local and state authorities have the money they need for a well-run election system. That could eliminate the need for donors to step in.</p>
<p>In any case, Congress can help by supporting increases in the IRS budget, especially for the tax agency’s capacity to enforce compliance with the laws pertaining to tax-exempt organizations.</p><img src="https://counter.theconversation.com/content/220568/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Philip Hackney is a member of the Democratic Party. </span></em></p>A professor of nonprofit law explains why drafting any restrictions on charities requires proceeding with great care.Philip Hackney, Associate Professor of Law, University of PittsburghLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2086242023-08-11T12:39:28Z2023-08-11T12:39:28ZGovernment support was key for thousands of US nonprofits battered by COVID-19’s early costs − new research<figure><img src="https://images.theconversation.com/files/541977/original/file-20230809-20-lbprqx.jpg?ixlib=rb-1.1.0&rect=0%2C337%2C4800%2C2522&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Federal funding shored up charities when the economy was in distress.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/washington-with-uncle-sam-hat-royalty-free-image/481268763?adppopup=true">mj0007/iStock via Getty Images Plus</a></span></figcaption></figure><p>Government funding helped keep U.S. charities afloat during the first six months of the COVID-19 pandemic, according to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4417861">a study I conducted</a> with <a href="https://www.stephanie-a-karol.com/">Stephanie Karol</a>, a fellow economist.</p>
<p>We found that charitable donations declined by more than an estimated 20% during that period – which preceded a sharp end-of-year <a href="https://theconversation.com/americans-gave-a-record-471-billion-to-charity-in-2020-amid-concerns-about-the-coronavirus-pandemic-job-losses-and-racial-justice-161489">upswing in giving</a> in late 2020. But the government grants to nonprofits, which soared during those six months by over 65%, and the <a href="https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program">Paycheck Protection Program</a> – a government-run loan program established to support employers as the pandemic upended the economy – enabled many charities to retain their employees.</p>
<p>The pandemic hindered many donors’ <a href="https://www.fastcompany.com/90563856/how-the-covid-19-pandemic-has-changed-how-we-give-to-charity">ability to give</a>, while also <a href="https://cep.org/portfolio/persevering-through-crisis-the-state-of-nonprofits/">hampering the delivery of charitable services</a> when nearly all indoor activities screeched to a halt. After analyzing data we obtained from the <a href="https://theconversation.com/whats-a-990-form-a-charity-accounting-expert-explains-175019">Internal Revenue Service</a> and the <a href="https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-data">Small Business Administration</a>, another government agency, we found that when donations declined, from March to November 2020, charities spent less delivering their services. Spending by charities fell by 34%, as many of those groups struggled to keep going.</p>
<p>We found that nonprofit employment also suffered. The number of nonprofit jobs declined by 14%, and wages for the people charities employed fell by over 40% on average during this <a href="https://www.bls.gov/opub/mlr/2021/article/unemployment-rises-in-2020-as-the-country-battles-the-covid-19-pandemic.htm">period of high U.S. unemployment</a>. The arts were particularly hard-hit, with donations, spending on programs, salaries and other forms of employee compensation all falling by roughly 50% as museums, theaters and concert venues remained shut and in-person shows were canceled.</p>
<p>By contrast, the data we analyzed indicates that social service charities, such as homeless shelters and hospices, fared relatively well, with private contributions and employment remaining stable, and spending on programs and employee compensation declining by less than 20%. That was the smallest decline compared with other kinds of charities.</p>
<p>At the same time, <a href="https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19">many governments around the world</a> stepped in to provide additional support to businesses and nonprofits alike. In the United States, government grants to charities increased significantly, and Paycheck Protection Program loans, most of which were later <a href="https://www.npr.org/2023/01/09/1145040599/ppp-loan-forgiveness">converted into grants</a> that borrowers didn’t need to pay back, helped to cushion economic blows. We calculated that the PPP saved more than 450,000 nonprofit jobs in those initial six months.</p>
<p>All told, the <a href="https://doi.org/10.1016/j.jpubeco.2022.104664">PPP saved between 1.4 and 2 million jobs in its first year</a>, according to a study by MIT economist David Autor and his co-authors. Our estimates imply that between 23% and 33% of jobs saved by the Paycheck Protection Program were in the nonprofit sector. </p>
<h2>Why it matters</h2>
<p>Our results suggest that the Paycheck Protection Program was a particularly helpful lifeline for nonprofits, which constitute a large segment of the U.S. economy. Nonprofit employees make up roughly <a href="https://www.bls.gov/opub/ted/2018/nonprofits-account-for-12-3-million-jobs-10-2-percent-of-private-sector-employment-in-2016.htm">10% of the U.S. labor force</a>.</p>
<p>By helping nonprofits keep their operations running, this funding may have prevented an even larger reduction in spending on the many services charities provide.</p>
<p>As far as we’re aware, our study is the first to assess the economic impact of the pandemic on the entire nonprofit sector in the United States.</p>
<p><iframe id="Y4yRD" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/Y4yRD/5/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>What still isn’t known</h2>
<p>Given <a href="https://blog.candid.org/post/new-990s-are-here-why-thats-a-big-deal-what-happens-now/">delays in data availability</a>, we focused on the first six months of the COVID-19 pandemic. A lot has changed since late 2020 in terms of economic conditions and the way nonprofits adapted to the pandemic.</p>
<p>Data in the annual Giving USA report shows that U.S. charitable donations overall <a href="https://theconversation.com/americans-gave-a-near-record-485-billion-to-charity-in-2021-despite-surging-inflation-rates-185086">remained stable in 2021</a> before <a href="https://theconversation.com/us-charitable-donations-fell-to-499-billion-in-2022-as-stocks-slumped-and-inflation-surged-207688">declining in 2022</a> because of inflation and stock market declines.</p>
<p>We believe further research is needed to determine how changes in the scale of donations, combined with a relatively brief surge in government support, affected the delivery of nonprofit services.</p>
<p><em>The <a href="https://theconversation.com/us/topics/research-brief-83231">Research Brief</a> is a short take about interesting academic work.</em></p><img src="https://counter.theconversation.com/content/208624/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jennifer Mayo does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Two economists calculated that the Paycheck Protection Program saved more than 450,000 nonprofit jobs in the first six months after the pandemic was declared.Jennifer Mayo, Assistant Professor of Economics, University of Missouri-ColumbiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2104272023-08-02T12:30:13Z2023-08-02T12:30:13ZNonprofits may engage in advocacy and limited lobbying, but few do so – new research<figure><img src="https://images.theconversation.com/files/540504/original/file-20230801-16611-emuheh.jpg?ixlib=rb-1.1.0&rect=0%2C89%2C5847%2C3727&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is anybody ready to speak up?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/microphone-over-the-abstract-blurred-photo-of-royalty-free-image/829570660?adppopup=true">Tzido/iStock via Getty Images Plus</a></span></figcaption></figure><p><em>The <a href="https://theconversation.com/us/topics/research-brief-83231">Research Brief</a> is a short take about interesting academic work.</em></p>
<h2>The big idea</h2>
<p>Fewer than a third of charities in the U.S. (31%) engaged in advocacy in the last five years. This represents a dramatic decline in the past two decades, <a href="https://independentsector.org/policy/advocacy-research/#research-report">we found</a>, even though the law allows these groups to speak up regarding the issues that affect the people they serve.</p>
<p>The results of the <a href="https://independentsector.org/wp-content/uploads/2023/07/IndependentSector_AdvocacyResearch.pdf">Public Engagement Nonprofit Survey</a>, a new nationally representative study we conducted on behalf of <a href="https://independentsector.org/">Independent Sector</a> – a coalition of nonprofits, foundations and corporate giving programs – indicate that many charities don’t engage in policy discussions because they don’t fully understand the <a href="https://bolderadvocacy.org/wp-content/uploads/2012/06/Public_Charities_Can_Lobby.pdf">rules governing those activities</a>. </p>
<p><a href="https://scholar.google.com/citations?user=53L5ftAAAAAJ&hl=en&oi=ao">We are</a> <a href="https://scholar.google.com/citations?hl=en&user=gbNTcf0AAAAJ">scholars of nonprofits</a> who <a href="https://scholar.google.com/citations?hl=en&user=T543VR4AAAAJ">conduct research</a> regarding nonprofits. The executive directors of about 2,300 nationally representative nonprofits completed this survey during the second half of 2022.</p>
<p>Along with finding that only 3 in 10 nonprofits engage in policy advocacy, we found that only 25% report ever formally lobbying government, compared with 74% that ever lobbied in 2000 – and this is heavily related to not knowing that they can. In 2000, the last time a similar survey was conducted, <a href="https://www.aspeninstitute.org/news/seen-not-heard-book-calls-more-advocacy-nonprofit-oragnizations/">73% of charities knew they had the right</a> to support or oppose legislation, compared with only 32% who know that today. </p>
<h2>Why it matters</h2>
<p>We were surprised to see such a sharp decline in nonprofit advocacy, despite ongoing educational efforts around advocacy by <a href="https://www.councilofnonprofits.org/everyday-advocacy/why-should-your-nonprofit-advocate">national</a> and <a href="https://journals.sagepub.com/doi/pdf/10.1177/0899764009338963?casa_token=n3tkY-zmDwkAAAAA:gTqui-fdOH0qGdk7dZJ1driDrIwueDFw0tfl2LKGbfJZssVQVVjvNVwLuslCJsLxxjuh8PJttHTK">state</a> associations of nonprofits and others since 2000.</p>
<p>All charities, officially known as <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations">501(c)3 nonprofits</a> due to the portion of the U.S. tax code that defines their obligations, may legally speak out regarding public issues in an effort to influence local, state and national government decisions. There are roughly <a href="https://nccs.urban.org/publication/nonprofit-sector-brief-2019">1.5 million nonprofits of this kind</a> in the U.S., including food banks, homeless shelters, day care centers and arts organizations. </p>
<p>It can be <a href="https://nonprofitquarterly.org/yes-can-nonprofit-advocacy-core-competency/">vital for the advancement of their missions that charities exercise this right</a>. For example, after-school programs can encourage staff members and volunteers to address school board members and other local officials, state representatives – and even members of Congress. They can suggest ideas for new rules, laws or funding that would help the children they serve.</p>
<p>The rules for how nonprofits can <a href="https://bolderadvocacy.org/advocacy-defined/">advocate are more flexible</a> than many people believe. Nonprofits can raise awareness about issues affecting the people they serve, and <a href="https://bolderadvocacy.org/resource/being-a-player-a-guide-to-the-irs-lobbying-regulations-for-advocacy-charities/">they can also lobby</a> by directly reaching out to public officials about legislation. As long as nonprofit employees don’t <a href="https://www.irs.gov/charities-non-profits/measuring-lobbying-substantial-part-test#:%7E:text=Under%20the%20substantial%20part%20test,income%20being%20subject%20to%20tax.">spend too much time</a> out of their day – meaning that doing so does not become a major part of their daily activities – and don’t use government money for lobbying, they’re complying with the law.</p>
<p>While how much is “too much time” is unclear, charities can file a simple <a href="https://www.irs.gov/pub/irs-pdf/f5768.pdf">one-page form with the IRS</a>, called the 501(h) election, providing their organization’s name and address and taking the election. Filing this form lets charities follow much clearer rules based on how much money they spend on lobbying rather than how much of it they do.What’s more, when nonprofits use this form, their volunteers don’t face any limits on the time they spend lobbying on behalf of organizations.</p>
<p>There’s evidence that the public wants nonprofits to be engaged in this way. According to a <a href="https://independentsector.org/resource/new-poll-voters-want-nonprofits-to-be-engaged-and-resourced/">recent poll the Independent Sector conducted</a>, 87% of registered voters support nonprofits educating policymakers about the needs of their communities.</p>
<p>We believe these findings indicate a need for more training of nonprofit leaders regarding the importance of advocacy and lobbying tied to their missions.</p>
<h2>What’s next</h2>
<p>We have several additional related studies underway, including qualitative interviews, that will cast more light on why so few nonprofits engage in advocacy and identify potential solutions. Following the completion of the project, we plan to make the data publicly available for additional research by other scholars of nonprofits. We’re also planning to conduct follow-up surveys to see how these trends evolve.</p><img src="https://counter.theconversation.com/content/210427/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lewis Faulk received a research grant from Independent Sector for the Public Engagement Nonprofit Survey (PENS) project. He is a former visiting scholar at Independent Sector and collaborates with Independent Sector on other research and policy focused projects.</span></em></p><p class="fine-print"><em><span>Heather MacIndoe received a research grant from Independent Sector for the Public Engagement Nonprofit Survey (PENS) project. She is a current visiting scholar at Independent Sector.</span></em></p><p class="fine-print"><em><span>Mirae Kim received a research grant from Independent Sector for this Public Engagement Nonprofit Survey (PENS) project. She is a visiting scholar at Independent Sector and is a non-paid board member at the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA).</span></em></p>A nationally representative survey found that the share of nonprofits aware of their right to support or oppose legislation has fallen by more than half in the past 20 years.Lewis Faulk, Associate Professor of Public Administration and Policy, American UniversityHeather MacIndoe, Associate Professor of Public Policy, UMass BostonMirae Kim, Associate Professor of Nonprofit Studies, George Mason UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1305172020-02-06T13:45:43Z2020-02-06T13:45:43ZWhat’s a church? That can depend on the eye of the beholder or paperwork filed with the IRS<figure><img src="https://images.theconversation.com/files/312613/original/file-20200129-92992-1kizmfc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">This might be a church. Or not.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/group-people-holding-hands-praying-worship-709782334">Rawpixel.com/Shutterstock.com</a></span></figcaption></figure><p>In 2016, the <a href="https://www.christianitytoday.com/ct/2016/december/should-parachurch-become-church-bgea-franklin-graham-irs.html">Billy Graham Evangelistic Association</a> told the Internal Revenue Service that it no longer wanted to be treated merely as a tax-exempt religious organization, <a href="https://www.501c3.org/what-is-a-501c3/">free from the obligation to pay taxes on its income</a>. Instead, the association – a Charlotte, North Carolina-based group that <a href="https://billygraham.org/what-we-do/evangelism-outreach/">produces evangelical events</a>, celebrates the legacy of Billy Graham and proselytizes about Jesus Christ – wanted the IRS to recognize it as a church.</p>
<p>The IRS complied with its request.</p>
<p>Similar religious groups lacking pews and parishioners are making the switch, too, including <a href="https://www.christianpost.com/news/focus-on-the-family-defends-irs-classification-as-a-church-says-its-meant-to-protect-donors.html">Focus on the Family</a>, which promotes <a href="https://www.focusonthefamily.com/about/">Christian</a> <a href="https://www.hrc.org/resources/10-things-you-should-know-about-focus-on-the-family">heterosexual marriage</a>; and <a href="https://religionnews.com/2016/11/23/ministries-and-money-christian-charities-that-use-your-money-wisely/">the Navigators</a>, an <a href="https://www.navigators.org/about/">interdenominational Christian group</a> active on college campuses. </p>
<p>In spite of being registered with the IRS as “churches,” these organizations and others like them don’t claim to be churches publicly. In fact, <a href="https://www.gideons.org/faq">Gideons International</a> – an association of businessmen and their wives who leave Bibles in hotel rooms – says on its website that it is neither a denomination nor a church. And yet, for tax purposes, Gideons claims to be <a href="https://www.guidestar.org/profile/36-2270051">a church</a>.</p>
<p>Why would an already tax-exempt religious group want the government to treat it as a church? Because the rules governing churches are less strict.</p>
<h2>501(c)(3) groups</h2>
<p>While reasons for this <a href="https://ministrywatch.com/when-a-church-is-not-a-church/">growing trend</a> vary, these groups may share one main goal: <a href="https://www.washingtonpost.com/religion/2020/01/17/major-evangelical-nonprofits-are-trying-new-strategy-with-irs-that-allows-them-hide-their-salaries/">keeping their donor lists private</a> to protect their donors from public criticism or backlash. </p>
<p>As a professor who studies <a href="https://scholar.google.com/citations?user=ef2n0uEAAAAJ&hl=en&oi=ao">how tax laws affect churches and other tax-exempt organizations</a>, I believe these groups overestimate the benefits their donors will receive if the groups are treated as churches. Even so, I’m concerned that groups taking this step are reducing the flow of valuable information about these organizations to the public.</p>
<p>To see why I’m worried, here’s some background about what’s probably the best-known section of the U.S. tax code, <a href="https://www.law.cornell.edu/uscode/text/26/501">section 501(c)(3)</a>. It provides two benefits to organizations that meet its requirements for tax exemption. First, these <a href="https://theconversation.com/america-has-1-5-million-nonprofits-and-room-for-more-97528">approximately 1.5 million</a> groups – including everything from familiar nonprofits like the <a href="https://redcrosslegacy.org/advisor-faqs">Red Cross</a> to <a href="https://www.guidestar.org/profile/52-0907625">National Public Radio</a> to the lesser-known <a href="https://www.usatoday.com/story/news/politics/2015/06/02/first-church-of-cannabis/28364521/">First Church of Cannabis</a> and the <a href="https://www.guidestar.org/profile/82-3404757">Satanic Temple</a> – generally don’t have to pay taxes on their income. </p>
<p>Second, some of their donors can deduct their donations from their taxable income through the <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions">charitable deduction</a>, creating an incentive to support those groups. While groups must be organized as nonprofits to qualify for the federal tax exemption, <a href="https://www.venable.com/insights/publications/1999/10/the-difference-between-nonprofit-and-taxexempt-sta">not every nonprofit is exempt</a>.</p>
<p>Eligibility requires pursuing a <a href="https://www.irs.gov/charities-non-profits/exempt-organization-types">specific purpose</a>, such as religion, education or charity. </p>
<p>These organizations face obligations to maintain their exemptions, such as filing special paperwork with the IRS every year known as a <a href="https://www.irs.gov/forms-pubs/about-form-990">Form 990</a>. It requires disclosing some information, including who sits on its board of directors and the highest-paid employees. Tax-exempt groups also must share select financial information, including the value of their assets, their expenditures and their revenue.</p>
<p>As you may know, the IRS can’t violate your privacy by releasing your <a href="https://www.law.cornell.edu/uscode/text/26/6103">tax return</a>. By contrast, it must make all <a href="https://www.irs.gov/charities-non-profits/copies-of-eo-returns-available">990 forms</a> part of the <a href="https://projects.propublica.org/nonprofits/">public record</a>.</p>
<h2>An exception</h2>
<p>As I explained in <a href="https://www.dialoguejournal.com/wp-content/uploads/sbi/articles/4804_taxdaysb.pdf">Dialogue: A Journal of Mormon Thought</a>, an academic publication, no tax-exempt organization had to file any documentation with the IRS for the first 30 years following the modern federal income tax’s inception in 1913. That changed in 1943, when Congress decided to make all of these groups except the religious ones – whether or not they function as churches – file of annual tax returns.</p>
<p>By 1969, in the wake of the discovery of a number of organizations <a href="http://www.capdale.com/the-1969-private-foundation-law-historical-perspective-on-its-origins-and-underpinnings">abusing their tax exemptions</a>, Congress had begun to feel like the government needed more information. That year, the House of Representatives passed a bill that would have eliminated the filing exception for all religious organizations. </p>
<p>The House’s bill galvanized the religious community, which lobbied the Senate. Leaders like <a href="https://magazine.byu.edu/article/ernest-l-wilkinson-university-builder/">Ernest Wilkinson</a>, the president of Brigham Young University, and the <a href="http://www.usccb.org/about/a-brief-history-of-usccb.cfm">U.S. Catholic Conference</a> argued against this legislation.</p>
<p>They claimed that the added paperwork would be burdensome and expensive for churches without generating additional tax dollars. They also asserted that disclosure was unnecessary because religious donors make charitable contributions based on religious obligations, not due to concern regarding the financial health of churches.</p>
<p>Ultimately, Congress split the proverbial baby. As of 1970, religious organizations were no longer exempt from filing 990 forms. The government did, however, exempt from this obligation churches, church associations and their “<a href="https://www.irs.gov/charities-non-profits/churches-religious-organizations/integrated-auxiliary-of-a-church-defined">integrated auxiliaries</a>” – that is, organizations associated with a church that receive financial support primarily from that church. </p>
<p>Today churches, synagogues, mosques and <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/organizations-not-required-to-file-form-1023">other houses of worship</a> remain free from the obligation to file the forms the IRS makes all other tax-exempt organizations submit.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/312616/original/file-20200129-93007-bwumlg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The IRS uses the term ‘church’ broadly, applying it to all faith traditions.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/interfaith-dialogue-illustration-religious-symbol-surrounding-250676428">Crystal Eye Studio/Shutterstock.com</a></span>
</figcaption>
</figure>
<h2>Let’s be a church!</h2>
<p>To decide whether something really is a church, at least for tax purposes, the IRS considers <a href="https://www.irs.gov/charities-non-profits/churches-religious-organizations/churches-defined">14 criteria</a>. </p>
<p><iframe id="J4vF8" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/J4vF8/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The criteria include the existence of a congregation, the occurrence of religious services and the ownership of property where people pray.</p>
<p>These criteria are vague, at least partly because of the <a href="https://scholarship.law.nd.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1439&context=law_faculty_scholarship">religious freedom granted by the Constitution</a>. That vagueness lets some organizations meet the IRS definition of “church” even if they really aren’t. </p>
<p>For instance, Focus on the Family allegedly claimed its cafeteria was an “<a href="https://www.christianpost.com/news/focus-on-the-family-defends-irs-classification-as-a-church-says-its-meant-to-protect-donors.html">established place of worship</a>” because the group’s members occasionally pray there. It also changed the job titles of all 600 of its employees to “minister.” Those steps most likely fail to meet the standards that guided the IRS when it laid out its 14 criteria. </p>
<p>But the federal tax agency <a href="https://theconversation.com/the-real-irs-scandal-has-more-to-do-with-budget-cuts-than-bias-95026">lacks the funding and staff it</a> would need to verify these claims, leaving the IRS with a limited ability to challenge Focus on the Family’s assertions. (The group has told <a href="https://www.washingtonpost.com/religion/2020/01/17/major-evangelical-nonprofits-are-trying-new-strategy-with-irs-that-allows-them-hide-their-salaries/">The Washington Post</a> that its main reason to become a “church” for tax purposes was “to protect the confidentiality of our donors.”)</p>
<p>If the IRS recognizes a religious organization as a church, the public loses access to significant information. The public does not, however, lose any information about the organization’s donors, notwithstanding these groups’ stated goals in transitioning to churches. </p>
<p>Currently, tax-exempt groups required to file 990 forms must tell the IRS about their “substantial contributors” – basically, donors who give <a href="https://www.irs.gov/forms-pubs/about-schedule-b-form-990-990-ez-or-990-pf">more than US$5,000 annually</a>. But the <a href="https://www.irs.gov/charities-non-profits/public-disclosure-and-availability-of-exempt-organizations-returns-and-applications-contributors-identities-not-subject-to-disclosure">IRS can’t release</a> these donor lists to the public. </p>
<p>That is, becoming a church for tax purposes eliminates an obligation to file 990 forms, but this newfound opaqueness does nothing additional to shield donors from public scrutiny because donors never faced public scrutiny in the first place.</p>
<p>As long as churches don’t have to share their financial details with the IRS, religious groups will have an incentive to act like churches for tax purposes. But the incentive doesn’t have to exist. I believe that if Congress were to heed its 1969 goals and eliminate the filing exemption for churches, other religious organizations would not feel pressure to act like churches.</p>
<p>And society would get more access to the information it needs to oversee tax-exempt organizations.</p>
<p>[ <em>Get the best of The Conversation, every weekend.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklybest">Sign up for our weekly newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/130517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samuel Brunson is on the board of BCC Press, a nonprofit publisher that publishes books related to the Mormon experience.</span></em></p>A growing number of groups you probably wouldn’t think are churches are opting to be treated like churches. And the government isn’t stopping them.Samuel Brunson, Professor of Law, Loyola University ChicagoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1291322019-12-20T19:07:33Z2019-12-20T19:07:33ZMormons and money: An unorthodox and messy history of church finances<figure><img src="https://images.theconversation.com/files/308030/original/file-20191219-11896-1h6r56l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There was something fishy about this $3 bill.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/mormon-money-issued-by-kirtland-safety-237228478">Everett Historical/Shutterstock.com</a></span></figcaption></figure><p>The Church of Jesus Christ of Latter-day Saints has <a href="https://www.scribd.com/document/439385879/Letter-to-an-IRS-Director">allegedly amassed US$100 billion in purportedly charitable assets</a> since 1997 without ever giving any money away – a possible breach of federal tax laws.</p>
<p>This estimate of the size of its investment vehicle known as Ensign Peak Advisors became public knowledge when David A. Nielsen, a former employee and a member of the church, blew the whistle. </p>
<p>Together with his <a href="https://www.newsweek.com/mormons-heres-why-we-published-our-revelations-about-lds-churchs-100-billion-stockpile-1478084">twin brother Lars</a>, a former church member, Nielsen gave the Internal Revenue Service evidence he claims proves <a href="https://www.washingtonpost.com/investigations/mormon-church-has-misled-members-on-100-billion-tax-exempt-investment-fund-whistleblower-alleges/2019/12/16/e3619bd2-2004-11ea-86f3-3b5019d451db_story.html">the church mishandled funds</a>.</p>
<p>According to the Nielsens, Ensign Peak Advisors has invested the church’s annual surplus member contributions to build up a $100 billion portfolio. But the Nielsens say they could find no evidence that Ensign Peak Advisors spent a dime of this money for religious, charitable, educational or other “public” purposes as <a href="https://www.law.cornell.edu/cfr/text/26/1.501(c)(3)-1">IRS rules require under most circumstances</a>. They also allege that it diverted tax-exempt funds to finance some for-profit projects, which could also violate <a href="https://supreme.justia.com/cases/federal/us/326/279/">IRS rules banning such transactions</a> in some situations.</p>
<p>If the IRS determines that the investment fund failed to act as a charity even though it benefited from tax breaks, it might find that Ensign Peak Advisors <a href="https://bycommonconsent.com/2019/12/17/some-thoughts-about-ensign-peak-advisers-and-the-church/">broke tax laws</a>. If that happens, and the IRS collects back taxes, David Nielsen could receive a cut as a reward.</p>
<p>If the numbers are accurate, Ensign is the nation’s largest charitable endowment, with as much money as <a href="https://www.investopedia.com/articles/markets/081616/top-5-largest-university-endowments.asp">Harvard University</a> and the <a href="https://www.gatesfoundation.org/Who-We-Are/General-Information/Foundation-Factsheet">Bill and Melinda Gates Foundation</a> have at their disposal, combined, if not more.</p>
<p>Church leaders <a href="https://newsroom.churchofjesuschrist.org/article/first-presidency-statement-church-finances">deny that they have violated</a> any laws that regulate tax-exempt institutions. The church “complies with all applicable law governing our donations, investments, taxes and reserves,” said the <a href="https://www.sltrib.com/religion/2019/12/17/lds-church-we-obey-all/">three-member council</a> headed by church president Russell M. Nelson. </p>
<p>From my vantage point as a <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674737433">historian of Mormonism</a>, this news marks a new twist on an old story. For nearly two centuries, the church has conducted its finances in ways that defy the expectations Americans have for religious organizations.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/DXOWRN19i-4?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Lars Nielsen, brother of whistleblower David Nielsen, explains how Ensign Peak Advisors allegedly operates.</span></figcaption>
</figure>
<h2>A church-owned ‘anti-bank’</h2>
<p>Consider what happened in the <a href="https://www.josephsmithpapers.org/articles/joseph-smith-and-his-papers-an-introduction">summer of 1837</a>, when the fledgling church teetered on the brink of collapse.</p>
<p>At the time, Joseph Smith and many church members lived in Kirtland, a small town in northeastern Ohio. The Smith family had moved there in the early 1830s, seeking a safer gathering place for church members in the face of persecution in New York state.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=669&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=669&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=669&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=841&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=841&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307986/original/file-20191219-11946-1vow5ca.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=841&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Joseph Smith’s followers built this temple in Kirtland, Ohio before most of them moved westward.</span>
<span class="attribution"><a class="source" href="https://www.loc.gov/item/2015646065/">Library of Congress</a></span>
</figcaption>
</figure>
<p>Smith and his followers began building a <a href="https://www.kirtlandtemple.org/">temple in Kirtland</a>. The Saints dedicated their temple in 1836, but the project left Smith and others deep in debt. Like many communities in antebellum America, Mormon Kirtland was land-rich and cash-poor. A lack of hard currency hampered commerce. </p>
<p>Smith and his associates <a href="https://www.churchofjesuschrist.org/study/history/topics/kirtland-safety-society?lang=eng">decided to start their own bank</a> to solve their financial woes. The circulation of bank notes, they thought, would boost Kirtland’s economic prospects and make it easier for church leaders to satisfy their creditors.</p>
<h2>Lots of currency</h2>
<p>The idea of Mormon leaders printing their own money wasn’t as crazy as it sounds in 2019. The United States <a href="http://numismatics.org/a-history-of-american-currency/">still lacked a uniform currency</a>. A host of institutions of varying integrity – chartered banks, unchartered banks, other businesses and even <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674032446">counterfeiting rings</a> – issued notes whose acceptance depended on the confidence of citizens who might accept or refuse them. </p>
<p>Mormon leaders bought engraving plates for printing bank notes and asked the Ohio state legislature to charter their bank. The Mormon proposal <a href="https://www.josephsmithpapers.org/topic/kirtland-safety-society">went nowhere in the legislature</a>.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=926&fit=crop&dpr=1 600w, https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=926&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=926&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1164&fit=crop&dpr=1 754w, https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1164&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/308027/original/file-20191219-11939-zxoe67.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1164&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Joseph Smith: Latter-day Saints movement founder and, for a time, currency creator.</span>
<span class="attribution"><span class="source">AP Photo/Douglas C. Pizac</span></span>
</figcaption>
</figure>
<p>At this point, church leaders took a more fateful and dubious step.</p>
<p>They had collected money from investors and had already begun printing notes of the “<a href="https://americanhistory.si.edu/collections/search/object/nmah_835201">Kirtland Safety Society Bank</a>.” Instead of shutting down the operation when the charter failed to come through, they doubled down. Worried about the legal risk of running an unchartered bank, church leaders altered the notes to read “anti-Banking-Co.”</p>
<h2>A brief boom</h2>
<p>For a while, all went well. “Kirtland bills are as safe as gold,” <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674416857">one church member wrote</a> in January 1837. The town enjoyed a short-lived boom. </p>
<p>Soon, however, the anti-bank proved anything but safe. Non-Mormons questioned the society’s ability to redeem its notes, and church leaders could not keep it afloat. The Kirtland Safety Society’s struggles were not unusual. Scores of banks, including some of the nation’s largest, failed in what became the <a href="https://www.cornellpress.cornell.edu/book/9780801478864/americas-first-great-depression/">Panic of 1837</a>. Real estate speculators lost their fortunes, and workers lost their jobs. </p>
<p>What made Kirtland different was the bank’s ownership. Many church members lost not only confidence in the society’s banknotes, but faith in the prophet who had signed them.</p>
<p>The crisis divided the church. At one point that summer, church members wielding pistols and bowie knives fought with each other in the temple. Smith and one of his top associates were <a href="https://www.josephsmithpapers.org/topic/kirtland-safety-society">convicted of issuing banknotes without a charter</a> and fined $1,000 each. They soon fled the courts and their creditors, taking refuge with fellow church members in Missouri. </p>
<p>After anti-Mormon mobs forced the Latter-day Saints out of Missouri and then Illinois, Smith’s successor, <a href="https://www.history.com/topics/religion/brigham-young">Brigham Young</a>, led thousands of church members to what became the Utah Territory. </p>
<h2>From a railroad to a shopping mall</h2>
<p>The church has never stopped blending commerce and religion.</p>
<p>In the late 1860s, Mormons built the <a href="https://uncpress.org/book/9781469653204/railroading-religion/">Utah Central Railroad</a>, which connected Salt Lake City with Ogden – a stop along the transcontinental railroad. Church leaders controlled the railway until 1878, when <a href="https://utahrails.net/utahrails/uc-rr-1869-1881.php">Union Pacific</a> bought it.</p>
<p>Beginning in 1868, the church also operated the <a href="https://archive.sltrib.com/article.php?id=4083139&itype=CMSID">Zion’s Cooperative Mercantile Institution</a>, a department store designed to put the squeeze on non-Mormon businesses. </p>
<p>The church sold the store in 1999, but in many ways its commercial interests have become more grandiose since its frontier days of railroading and retailing.</p>
<p>In 2003, the church’s for-profit real estate division purchased the land on which the store had stood. Nine years later, the estimated $1.5 billion <a href="https://www.curbed.com/2018/3/20/17142760/salt-lake-city-downtown-development-hot-market">City Creek Center</a> development opened to the public, including a glitzy mall. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=336&fit=crop&dpr=1 600w, https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=336&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=336&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=422&fit=crop&dpr=1 754w, https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=422&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/308023/original/file-20191219-11946-vrfwzg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=422&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Mormon Church’s commercial real estate arm built the lavish City Creek Center shopping mall in Salt Lake City.</span>
<span class="attribution"><a class="source" href="https://scholar.google.com/citations?user=ef2n0uEAAAAJ&hl=en&oi=ao">AP Photo/Rick Bowmer</a></span>
</figcaption>
</figure>
<p>At the time, <a href="https://archive.sltrib.com/article.php?id=54478720&itype=cmsid">church officials asserted</a> that they had not used any tithing money on the City Creek project. The <a href="https://www.churchofjesuschrist.org/study/manual/tithing-and-fast-offerings/how-are-tithing-funds-used?lang=eng">church explains</a> that tithing – the contribution of <a href="https://www.bbc.co.uk/religion/religions/mormon/customs/tithing.shtml">10%</a> of its <a href="https://www.churchofjesuschrist.org/church/news/2018-statistical-report-released-during-april-2019-general-conference?lang=eng">16 million members’</a> annual income – is for the construction and maintenance of church buildings, local congregational activities and the church’s educational programs. The church’s <a href="https://archive.sltrib.com/article.php?id=54478720&itype=cmsid">for-profit divisions</a> handle commercial projects, including real estate and publishing. </p>
<p>The Nielsen brothers allege that Ensign Peak Advisors <a href="https://www.newsweek.com/mormon-church-stockpiled-100-billion-intended-charities-misled-lds-members-whistleblower-says-1477809">diverted $1.4 billion in tithing funds</a> to pay for the development, a possible violation of the <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations">IRS rules that govern tax-exempt institutions</a>.</p>
<p>It is impossible to confirm the accusation without greater transparency on the part of the church, which has told <a href="https://religionunplugged.com/news/2019/12/16/whistleblower-exposes-100-billion-stockpile-by-mormon-church">Religion Unplugged</a>, a nonprofit media outlet, that it “does not provide information about specific transactions or financial decisions.”</p>
<p>According to <a href="https://scholar.google.com/citations?user=ef2n0uEAAAAJ&hl=en&oi=ao">Samuel Brunson</a>, a tax law professor, the church was <a href="https://www.fairmormon.org/answers/Mormonism_and_church_finances/Twenty-first_century/Disclosure">more open</a> about its ledger sheet and business arrangements during the first half of the 20th century.</p>
<p>Then, in the mid- to late 1950s, it <a href="http://www.sunstonemagazine.com/pdf/102-17-29.pdf">lost approximately $10 million</a> in municipal bond investments. The resulting embarrassment was one factor in the church’s decision to become less forthcoming about its finances.</p>
<p>In this respect, the church is not unique. U.S. laws do not require churches to disclose their financial information in much detail. While some churches do so voluntarily, others – including the <a href="https://www.washingtonpost.com/religion/2019/07/17/facing-financial-boycott-west-virginias-catholic-diocese-agrees-hire-new-auditor-make-findings-public/">Catholic Church</a> – keep their financial and commercial interests <a href="https://www.thestreet.com/opinion/how-rich-is-the-catholic-church-it-s-impossible-to-tell-13295788">shrouded from public view</a>. </p>
<h2>Saving for a ‘rainy decade’</h2>
<p>It remains to be seen whether Ensign Peak Advisors is going to become the subject of IRS investigations.</p>
<p>There are, of course, ethical and moral questions in addition to legal ones. For example, should the church amass so much money? And might the church use more of its excess funds and investment gains for humanitarian purposes or to make the tuition at church-owned <a href="https://news.byu.edu/news/byu-tuition-increase-three-percent-2019-2020-academic-year">Brigham Young University</a> even more affordable?</p>
<p>What’s also at stake is confidence in the church’s leaders. Sen. Mitt Romney, the Republican Party’s 2012 presidential nominee and the nation’s most politically influential Mormon, <a href="https://twitter.com/thomaswburr/status/1207021336721268736?s=20">professed to be</a> “happy that they’ve not only saved for a rainy day, but for a rainy decade.”</p>
<p>Romney’s perspective makes some historical sense, given that the most obvious problem in Kirtland, Ohio, was that Joseph Smith’s financial stewardship was decidedly unwise. At least today’s church leaders earn good returns on their investments.</p>
<p>[ <em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/129132/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Turner does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A historian connects the $100 billion reportedly at the church’s disposal with the rocky start Mormons got in finance in the 1830s.John Turner, Professor of American Religion, George Mason UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1132412019-03-14T10:42:07Z2019-03-14T10:42:07ZHow AIPAC could lose its bipartisan status<figure><img src="https://images.theconversation.com/files/263691/original/file-20190313-123519-13u02x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Donald Trump spoke at AIPAC's annual conference during his 2016 presidential campaign.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/GOP-2016-Trump-AIPAC/cd32f26facbc452f8c9486eea50db34b/19/0">(AP Photo/Evan Vucci</a></span></figcaption></figure><p>The American Israeli Public Action Committee, widely known as AIPAC, has managed to remain <a href="https://www.npr.org/2015/09/17/441063233/aipac-walks-bipartisan-line-while-israeli-politics-moves-sharply-right">bipartisan</a> for nearly 70 years. Its membership is divided roughly equally between Democrats and Republicans. Leaders from across the American political spectrum – everyone from Vice President <a href="https://www.whitehouse.gov/briefings-statements/remarks-vice-president-pence-aipac-policy-conference/">Mike Pence</a> to Sen. <a href="https://theintercept.com/2018/03/07/kamala-harris-israel-aipac/">Kamala Harris</a> – have spoken at the influential lobbying group’s conferences.</p>
<p>But as a <a href="https://scholar.google.com/scholar?hl=en&as_sdt=0%2C18&q=dina+badie&btnG=">political scientist</a> who teaches and writes about U.S. foreign policy and Middle East politics, I have been observing changing political landscapes within the United States and Israel. Growing competition between AIPAC and J Street, a relatively new pro-Israeli lobbying group, along with changes in how American Jews regard increasingly <a href="https://www.hoover.org/research/religion-and-politics-israel">hardline and conservative Israeli policies</a>, reflect a growing partisan split. I believe that ultimately these changes <a href="https://www.vox.com/2019/2/11/18220160/ilhan-omar-aipac-benjamins-kevin-mccarthy">could make AIPAC’s agenda</a> more attractive to Republicans than to Democrats, with potentially significant consequences for American-Israeli relations. </p>
<h2>Social welfare</h2>
<p>AIPAC is a nonprofit that promotes close ties between the U.S. and Israeli governments. It lobbies members of Congress directly, organizes <a href="https://theintercept.com/2018/12/03/rashida-tlaib-palestine-israel-aipac-congress-trip/">trips to Israel for legislators</a> across party lines, and hosts an annual conference at which a <a href="http://www.policyconference.org/gallery/speakers2018.asp">prominent lineup of American and foreign leaders</a> speak. The <a href="http://www.aiefdn.org/">American Israel Education Foundation</a>, a charity that operates as a branch of AIPAC, supports its educational activities and funds trips to Israel for lawmakers and what it calls “other political influentials.” </p>
<p>Although he is campaigning for re-election and is slated to be indicted by Israel’s attorney general for corruption, <a href="https://www.haaretz.com/israel-news/elections/gantz-to-speak-at-aipac-i-will-end-netanyahu-s-battle-with-u-s-jews-1.7017323">Benjamin Netanyahu</a> will address attendees at AIPAC’s <a href="http://www.policyconference.org/">upcoming annual conference</a> in Washington that begins March 24. The Israeli settler leader <a href="http://www.israelnationalnews.com/News/News.aspx/260118">Oded Revivi</a> has told the Israeli media that he will also be on the roster, as has Benny Gantz – Netanyahu’s rival in the upcoming elections. </p>
<p>One thing that AIPAC does not do, despite <a href="https://www.npr.org/2019/03/07/700901834/minnesota-congresswoman-ignites-debate-on-israel-and-anti-semitism">suggestions to the contrary</a>, is directly finance political campaigns. Perhaps the confusion owes something to its name. The letters “P-A-C” typically signify that a group is a <a href="https://www.opensecrets.org/pacs/pacfaq.php">political action committee</a>, or PAC, whose purpose is to raise campaign cash. The “PAC” in AIPAC is different. As a <a href="https://theconversation.com/hillary-clinton-is-starting-a-social-welfare-group-what-does-that-mean-78221">social welfare group</a>, technically known as a 501(c)(4) organization under the tax code, it is primarily devoted to legislative advocacy through lobbying, activism and education. </p>
<p>AIPAC does, however, connect sympathetic candidates to a formidable base of donors, who may then <a href="https://www.opensecrets.org/news/2019/02/aipac-dont-contribute-which-pro-israel-groups-do/">contribute directly to political campaigns</a>.</p>
<p>The <a href="http://www.pewforum.org/2015/04/02/jews/pf_15-04-02_projectionstables137/">U.S. is home to the world’s largest Jewish population</a>, estimated at 5.7 million as of 2010. It is an ideologically and politically diverse group and <a href="https://actionnetwork.org/forms/pledge-to-join-the-jewishresistance-at-aipac">not uniformly represented by AIPAC</a>. According to the group’s own website, <a href="https://www.aipac.org/connect/communities">not all of the organization’s 100,000 members are Jewish</a>.</p>
<h2>U.S.-Israel connections</h2>
<p>AIPAC is nearly as old as the Israeli government. President <a href="https://www.trumanlibrary.org/whistlestop/study_collections/israel/large/index.php?action=bg">Harry Truman</a> formally recognized Israel within minutes of the announcement that the state was forming, on May 14, 1948. Three years later, the Canadian-born American journalist, lawyer and philanthropist <a href="http://www.israellobby.org/kenen/">Isaiah L. “Si” Kenen</a> founded the pro-Israel lobbying organization. </p>
<p><a href="https://www.vox.com/2018/11/20/18080080/israel-palestine-us-alliance">American-Israeli relations have flourished</a> ever since, regardless of the parties in power in the U.S. or in Israel. Even when Israeli policy has conflicted with international laws and norms, such as with the expansion of <a href="https://www.un.org/press/en/2016/sc12657.doc.htm">Jewish settlements into occupied Palestinian territory</a> or the use of <a href="https://www.ohchr.org/EN/HRBodies/HRC/Pages/NewsDetail.aspx?NewsID=24226&LangID=E">force against Palestinians</a>, the U.S. has continued to support Israel and to <a href="https://www.jewishvirtuallibrary.org/u-s-vetoes-of-un-security-council-resolutions-critical-to-israel">protect the country against international censure</a> at the United Nations and other fora. </p>
<p>The U.S. has given Israel a total of <a href="https://crsreports.congress.gov/product/pdf/RL/RL33222">about US$135 billion</a> <a href="https://www.jewishvirtuallibrary.org/total-u-s-foreign-aid-to-israel-1949-present">since 1951</a>, mostly for military purposes, and Israel is usually the <a href="https://explorer.usaid.gov/cd/ISR">top U.S. aid recipient</a>. For most of this time, the U.S. has seen Israel as a <a href="https://www.doi.org/10.1093/acrefore/9780199329175.013.385">strategic and geopolitical ally</a> that it could rely on in an oil-rich and frequently unstable region.</p>
<p>Yet shortly before Donald Trump took office, cracks began to appear in this close relationship. </p>
<p>In 2016, against <a href="https://www.aipac.org/learn/resources/aipac-publications/publication?pubpath=PolicyPolitics/Press/AIPAC%20Statements/2016/09/Senators%20Urge%20President%20to%20Veto%20One%20Sided%20UN%20Resolutions">AIPAC’s strong objections</a>, the Obama administration refrained from blocking a <a href="https://www.theguardian.com/world/2016/dec/23/us-abstention-allows-un-to-demand-end-to-israeli-settlements">United Nations resolution condemning Israeli settlements</a>. President-elect Trump supported a veto, and he vowed to reinvigorate U.S.-Israeli relations. </p>
<p>Trump’s ambassador to Israel, <a href="https://www.usnews.com/news/politics/articles/2017-02-15/former-ambassadors-say-trump-pick-for-israel-is-unqualified">David Friedman</a>, is ardently pro-settlement. The president has also made good on campaign promises by recognizing Jerusalem as the capital of Israel and relocating the U.S. embassy to the contested city, moves that <a href="https://www.aipac.org/learn/resources/aipac-publications/publication?pubpath=PolicyPolitics/Press/AIPAC%20Statements/2017/12/Jerusalem%20announcement">AIPAC applauded</a>. And relations between Trump and Israeli Prime Minister <a href="https://theconversation.com/netanyahus-hardline-foreign-policies-may-outlast-his-tenure-112744">Netanyahu</a> could not be better.</p>
<p>Netanyahu has found Trump a reliable ally for some of his most controversial policies. For instance, he is actively pressuring the Trump administration to <a href="https://www.foxnews.com/world/netanyahu-makes-first-public-appeal-to-u-s-to-recognize-golan-heights-as-israel">recognize Israeli sovereignty</a> over the disputed <a href="https://www.bbc.com/news/world-middle-east-14724842">Golan Heights</a>. Israel first occupied the Syrian territory in 1967. It annexed the land in 1981 over international objections, including <a href="https://ecf.org.il/issues/issue/138">U.N. condemnation</a>.</p>
<p>Trump’s proposed 2020 budget includes <a href="https://www.middleeastmonitor.com/20190313-trump-cuts-will-leave-military-aid-to-israel-untouched/">$3.3 billion in aid</a> for Israel despite calling for <a href="https://www.reuters.com/article/us-usa-trump-budget-details/trump-2020-budget-slashes-foreign-aid-hikes-defense-spending-official-idUSKBN1QS1Z0">slashing foreign aid overall</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/263688/original/file-20190313-123551-llyz6c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Israeli Prime Minister Benjamin Netanyahu, center, Republican U.S. Sen. Lindsey Graham, left, and U.S. Ambassador to Israel David Friedman, right, visiting the Israeli-held Golan Heights.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Israel-Golan-Heights/e2bdf06b2eb74b4fb9dfad543aad6cd2/1/0">Ronen Zvulun/Pool via AP</a></span>
</figcaption>
</figure>
<h2>A rift</h2>
<p><a href="https://carnegieendowment.org/sada/78002">Israel moved to the right</a> under the leadership of Netanyahu, who first served as prime minister between 1996 and 1999 as the head of the conservative Likud Party and then <a href="https://theconversation.com/netanyahus-hardline-foreign-policies-may-outlast-his-tenure-112744">returned to power in 2009</a>.</p>
<p>Many American Jews, especially younger ones, are deeply troubled by changes in Israel that they see as <a href="https://theconversation.com/as-israel-turns-70-many-young-american-jews-turn-away-95271">inherently discriminatory</a>. Recent passage of a nation-state law <a href="https://www.vox.com/world/2018/7/31/17623978/israel-jewish-nation-state-law-bill-explained-apartheid-netanyahu-democracy">legally enshrines Israel’s Jewish character</a> at the expense of Israel’s non-Jewish Arab minority, which composes 20 percent of the population. Pending <a href="https://www.haaretz.com/world-news/europe/israel-s-chief-rabbinate-cements-monopoly-over-conversions-after-europe-deal-1.6695727">legislation and regulations</a> could alter recognition over religious conversions and <a href="https://www.doi.org/10.1093/jlb/lsv027">redefine who qualifies as Jewish</a>. </p>
<p>This rightward turn has alienated the many American Jews who <a href="http://www.pewforum.org/essay/american-and-israeli-jews-twin-portraits-from-pew-research-center-surveys/">don’t see eye to eye</a> with Israeli Jews on questions of religion, security and the prospect of a two-state solution.</p>
<p>Netanyahu’s recent overture to Israel’s <a href="https://www.timesofisrael.com/rabbi-meir-kahane-and-israels-far-right-explained/">Otzma Yehudit Party</a>, known for its extremism and racism, is likely to widen that rift. </p>
<p>Israel’s <a href="https://www.hoover.org/research/religion-and-politics-israel">growing conservatism</a> has long troubled many U.S. Jews, a clear <a href="http://www.pewresearch.org/fact-tank/2018/11/07/how-religious-groups-voted-in-the-midterm-elections/">majority of whom</a> consistently <a href="https://www.jewishvirtuallibrary.org/jewish-voting-record-in-u-s-presidential-elections">vote for Democrats</a> and make more <a href="http://jcpa.org/article/the-2016-election-jews-and-their-politics/">campaign contributions to Democrats than Republicans</a> overall. While AIPAC <a href="https://twitter.com/AIPAC/status/1099010866853359621">distanced itself from the most controversial parts</a> of Netanyahu’s record, it has continued to support his hawkish tendencies toward the Golan Heights and Iran, as well as the possible <a href="https://www.jpost.com/Middle-East/All-Likud-MKs-eyeing-reelection-but-Netanyahu-favor-West-Bank-annexation-579768">annexation of parts of the West Bank</a>.</p>
<p>It has yet to be seen whether AIPAC’s balancing approach will be enough to quell the concerns of more liberal Jewish Americans.</p>
<h2>Competition</h2>
<p>Amid this discomfort, another U.S.-Israeli lobby group called J Street formed in 2007 as an alternative to AIPAC. </p>
<p>J Street advocates for a peaceful resolution to the Israel-Palestine conflict in line with <a href="https://act.jstreet.org/sign/the_i_word_1click">international law</a>. Unlike AIPAC, it <a href="https://slate.com/news-and-politics/2019/02/democrats-israel-ilhan-omar-j-street-ben-ami.html">criticizes Israeli policies</a>, such as settlement expansion, as <a href="https://jstreet.org/policy/settlements/#.XIbzjC2ZPEo">obstacles to a two-state solution</a>, and supports the continuation of foreign aid to both Israel and Palestinians.</p>
<p>J Street, through its political action committee, <a href="https://www.opensecrets.org/orgs/toprecips.php?id=D000052457&cycle=2018">gave Democratic Party candidates roughly $4 million</a> in 2018 and nothing to Republicans, according to the Center for Responsive Politics, a campaign finance watchdog. By comparison, AIPAC does not donate directly to campaigns, but it spent more than <a href="https://www.opensecrets.org/news/2019/02/aipac-dont-contribute-which-pro-israel-groups-do/">$3.5 million on direct lobbying</a>, compared to J Street’s $300,000.</p>
<p>J Street and AIPAC are taking different positions on some key issues where the two major U.S. political parties are at odds regarding relations with Israel. While AIPAC lobbied strongly against the Obama-backed Iran nuclear deal, an agreement that Netanyahu also strongly condemned, <a href="https://www.jpost.com/Diaspora/US-Jewish-liberal-group-J-Street-hails-Iran-nuclear-deal-warns-Congress-408927">J Street supported it</a>. </p>
<p>Likewise, when Trump announced his intention to withdraw the U.S. from the agreement, AIPAC supported Trump’s decision while J Street opposed it. J Street’s position matched the positions of <a href="https://www.usatoday.com/story/news/politics/2018/05/08/president-trumps-decision-withdraw-iran-deal-splits-lawmakers/592111002/">most Democrats</a> and AIPAC’s approach reflected GOP consensus.</p>
<p>If AIPAC’s legislative and foreign policy preferences appear to align more closely with Republicans, I believe that its bipartisan credentials could be compromised.</p><img src="https://counter.theconversation.com/content/113241/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dina Badie does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The American Israeli Public Action Committee has managed to work with Democrats and Republicans alike. Will that change now that Israel has tacked to the right?Dina Badie, Associate Professor of Politics and International Studies, Centre CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/904272018-05-31T10:43:30Z2018-05-31T10:43:30ZMissouri’s dark money scandal, explained<figure><img src="https://images.theconversation.com/files/221070/original/file-20180530-120487-xxs2ss.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Missouri Gov. Eric Greitens, before he resigned amid scandals</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Missouri-Governor/9a8f268c9fe240978eab65b72d8dbc6e/57/0">AP Photo/Jeff Roberson</a></span></figcaption></figure><p><a href="http://time.com/5299261/missouri-governor-eric-greitens-resign-office/">Eric Greitens has resigned</a>, finally. The former Missouri governor’s sex scandal didn’t force him to step down, but rather allegations that “dark money” improperly financed his winning gubernatorial bid.</p>
<p>During the years I’ve spent <a href="https://cap-press.com/books/isbn/9781632847263/Corporate-Citizen">writing about the topic</a>, I’ve seen an uptick in political dark money. As a result, it’s getting harder for voters to identify exactly who is trying to influence their vote.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1001601160527085568"}"></div></p>
<h2>What’s dark money?</h2>
<p><a href="https://www.opensecrets.org/dark-money/basics">Dark money</a> is political cash from a concealed source. This anonymity often happens because a donor’s political money passes through a nonprofit on its way to support a candidate. Dark money is the opposite of the transparent political spending that happens when donors openly support political action committees, political parties and candidate campaigns.</p>
<p>Investigative journalist <a href="https://sunlightfoundation.com/2010/10/18/daily-disclosures-10/">Bill Allison</a> coined the term when he worked at the Sunlight Foundation in 2010. It quickly entered the political lexicon, partly because of a best-selling book on the topic by The New Yorker’s <a href="https://www.penguinrandomhouse.com/books/215462/dark-money-by-jane-mayer/9780307947901/">Jane Mayer</a>. </p>
<p>Typically, political money goes dark when it is funneled through <a href="https://theconversation.com/hillary-clinton-is-starting-a-social-welfare-group-what-does-that-mean-78221">social welfare organizations</a> – commonly known as 501(c)(4) nonprofits because of the relevant section of the tax code – or trade associations that are also called <a href="https://www.irs.gov/charities-non-profits/other-non-profits/business-leagues">501(c)(6) nonprofits</a>. </p>
<p>Political money can also hide when it is obscured through <a href="https://www.opensecrets.org/dark-money/basics">limited liability companies</a>, or LLCs. In some cases, these companies are created <a href="https://www.theatlantic.com/politics/archive/2013/12/theres-no-way-to-follow-the-money/282394/">solely to obscure the source</a> of political spending.</p>
<h2>The Greitens case</h2>
<p>The obscurity inherent in all dark money transactions makes them hard to follow and to keep track when they get politicians into hot water.</p>
<p>For instance, <a href="https://www.yahoo.com/news/stunning-rise-fall-eric-greitens-233305491.html">Greitens announced he would resign</a> within hours of a judge ordering that the real identities of the backers of a social welfare group called A New Missouri Inc. be made public. His exit came amid <a href="https://www.cnn.com/2018/05/03/politics/missouri-lawmakers-special-session-greitens-impeachment/index.html">impeachment proceeedings</a> related to the alleged misuse of <a href="https://www.cnn.com/2018/05/30/politics/eric-greitens-missouri-felony-charge-dropped/index.html">another nonprofit’s donor list</a>, for which he faced a felony charge.</p>
<p><a href="http://www.kansascity.com/news/politics-government/article212102994.html">A New Missouri</a>, which the governor’s close political advisers created in February 2017, operates out of the same building as his campaign committee. There are some people who work for both entities, according to the Kansas City Star.</p>
<p>All told, the Greitens campaign may have benefited from <a href="http://news.stlpublicradio.org/post/former-aide-says-greitens-relied-charity-donor-list-dark-money-kick-start-campaign#stream/0">US$6 million in dark money</a> during his 2016 election, one of his former aides has estimated.</p>
<p>Investigators are trying to learn if any of the donors to the secretive groups supporting Greitens <a href="http://www.ozarksfirst.com/news/missouri-judge-rules-greitens-committees-must-turn-over-supoenaed-documents/1206365413">were foreigners</a>. That would <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2864436">violate federal laws</a>, which only allow Americans to finance political activities.</p>
<p><a href="https://www.cnn.com/2018/05/29/politics/eric-greitens-missouri-governor/index.html">Greitens has admitted no wrongdoing</a>, insisting he had “not broken any laws, nor committed any offense worthy of this treatment” despite acknowledging that his behavior had not been “perfect.”</p>
<h2>Federal and state laws</h2>
<p>The governor’s claim of innocence may not be that far-fetched.</p>
<p>Federal law actually permits the use of dark money in federal elections. Some politicians and political operatives prefer undisclosed spending because the <a href="https://www.law.cornell.edu/uscode/text/26/6103">IRS typically keeps nonprofit taxpayer information confidential</a> and the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1833484">Federal Election Commission’s rules don’t require disclosure either</a>. If a political spender had spent the same funds through a PAC instead of a nonprofit, then the money would be fully reportable. </p>
<p>Political spenders that <a href="https://www.fec.gov/help-candidates-and-committees/making-disbursements-pac/independent-expenditures-nonconnected-pac/">spend more than $200 on independent expenditures</a> or put <a href="https://www.fec.gov/help-candidates-and-committees/making-disbursements-ssf-or-connected-organization/making-electioneering-communications/">more than $10,000 into ads known as “electioneering communications”</a> must report these outlays to the FEC every electoral cycle. But because that agency does not require every entity that spends money influencing elections to name their donors, political money can legally remain in the “dark.”</p>
<p>Meanwhile, <a href="http://www.ncsl.org/research/elections-and-campaigns/election-administration-at-state-and-local-levels.aspx">each state</a> has its own political spending disclosure rules. To get a sense of how good or bad your state’s campaign finance disclosure is, you can see how <a href="https://www.followthemoney.org/research/institute-reports/scorecard-essential-disclosure-requirements-for-contributions-to-state-campaigns-2016">the National Institute on Money in Politics graded them</a> a few years back.</p>
<h2>A growing quandary</h2>
<p>The surge in dark money is a negative development because it thwarts both democratic accountability and responsibility within corporations, which are suspected as being the sources of dark money without informing shareholders that corporate money is being spent on politics. Moreover, dark money can be a perfect cover for illegal foreign spending in American elections. Not everyone agrees with me. <a href="http://prospect.org/article/defense-dark-money">Others</a> find anonymous political spending appealing. </p>
<p>Since the Supreme Court’s 2010 Citizens United v. FEC ruling, which deemed political spending limits on businesses and unions to be unconstitutional, an estimated <a href="https://www.opensecrets.org/outsidespending/nonprof_summ.php">$800 million in dark money has been spent in federal elections</a>, according to the Center for Responsive Politics’ Open Secrets database. Based on what I learned while writing my book “<a href="https://cap-press.com/books/isbn/9781632847263/Corporate-Citizen">Corporate Citizen? An Argument for the Separation of Corporation and State</a>,” I would not be surprised if the total were to hit $1 billion by the time voters cast their ballots in the 2018 mid-term elections.</p>
<p>And the use of nonprofits to hide political slush funds is only growing. A recent report from <a href="https://www.brennancenter.org/publication/elected-officials-secret-cash">the Brennan Center</a>, a think tank housed at the New York University Law School, found that at least two presidents, seven governors – including Greitens – and several mayors have established nonprofits that let them raise unlimited, anonymous funds for political spending while in office.</p>
<h2>What some states and Congress are doing</h2>
<p>Some states have taken steps to diminish the role of dark money in state elections.</p>
<p>California enacted the <a href="http://www.sacbee.com/news/politics-government/capitol-alert/article177659771.html">California Disclose Act</a> in 2017 to improve disclosure. Maryland has a requirement that corporations tell shareholders about their political spending. </p>
<p>At the same time, some states have eased the flow of dark money. For example, <a href="http://www.governing.com/topics/politics/gov-campaign-finance-arizona-tempe-denver.html">Arizona</a> passed a law preventing its cities from fighting dark money, and <a href="https://docs.legis.wisconsin.gov/2015/proposals/ab387">Wisconsin</a> relaxed its campaign finance laws in 2015.</p>
<p>And <a href="http://time.com/4922542/democrats-citizen-united/">Congress has done nothing</a> to improve federal disclosures in elections. This leaves voters in the dark as they choose among candidates in the midterm elections. Unless Missouri tightens up its disclosure rules, the state’s voters may elect their next governor without knowing who is actually supporting the candidates on the ballot.</p><img src="https://counter.theconversation.com/content/90427/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ciara C Torres-Spelliscy is affiliated with the Brennan Center for Justice at NYU Law where she is a fellow. </span></em></p>Embattled Gov. Eric Greitens resigned over allegations tied to political contributions from concealed sources.Ciara Torres-Spelliscy, Leroy Highbaugh Sr. Research Chair and Professor of Law, Stetson University Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/872852017-11-22T20:55:13Z2017-11-22T20:55:13ZHow the tax package could blur the separation of church and politics<figure><img src="https://images.theconversation.com/files/195871/original/file-20171122-6072-1ri5exo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">If a House provision gets enacted, churches will be able to endorse -- not just pray for -- political candidates.
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sign-election-night-prayers-church-our-512271844?src=0HREH_t_zGV5g3kO65KoMg-1-0">Andrew Cline/Shutterstock.com</a></span></figcaption></figure><p><a href="http://money.cnn.com/2017/11/16/news/economy/house-tax-bill-vote/index.html">The tax package</a> pending in Congress includes a provision that would leave churches and other nonprofits, which by law must be nonpartisan, suddenly free to engage in political speech.</p>
<p>This measure, currently <a href="http://www.thenonprofittimes.com/news-articles/senate-tax-bill-keep-johnson-amendment-intact/">only in the House version</a> of the bill, could potentially change charitable life as we know it.</p>
<p>As an accounting professor who teaches nonprofit taxation, I believe that this significant change deserves vigorous public debate and is too big to bury in tax legislation.</p>
<h2>Johnson Amendment</h2>
<p>Tax law currently bars religious and secular charities alike from <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/the-restriction-of-political-campaign-intervention-by-section-501c3-tax-exempt-organizations">engaging in political activity</a>, which the government defines as attempting to influence legislation or intervening in a campaign on behalf of (or in opposition to) specific candidates.</p>
<p>Nonprofits caught breaking this law may pay back taxes or lose their tax-exempt status. </p>
<p>Known as the <a href="https://www.npr.org/2017/02/03/513187940/the-johnson-amendment-in-five-questions-and-answers">Johnson Amendment</a>, this provision dates back to 1954, when then-Senator Lyndon B. Johnson led the effort to get this restriction on the books. <a href="https://www.fcnl.org/updates/78-organizations-call-on-congress-to-oppose-the-repeal-of-the-johnson-amendment-1135">More nonprofits say they welcome this</a> as a <a href="https://www.councilofnonprofits.org/article-tags/johnson-amendment">form of protection</a> from political pressure <a href="https://www.fredericksburg.com/falwell-expounds-on-support-for-repealing-johnson-amendment/article_98b73a4b-2c78-5340-9dad-b0ba9e0de233.html">than object to it</a> as a restriction on their rights. </p>
<p>President Donald Trump vowed as a candidate to repeal the Johnson Amendment to <a href="http://thehill.com/homenews/administration/317542-trump-vows-to-destroy-the-johnson-amendment">give church leaders the ability to speak about politics</a> without penalty. But repealing a law takes an act of Congress and power he lacks. </p>
<p>As a step in that direction, he issued an <a href="https://www.whitehouse.gov/the-press-office/2017/05/04/presidential-executive-order-promoting-free-speech-and-religious-liberty">executive order</a> directing the IRS <a href="http://www.politifact.com/truth-o-meter/statements/2017/jul/18/donald-trump/trump-claims-he-got-rid-johnson-amendment-true/">not to enforce</a> it for religious institutions.</p>
<p>The tax bill’s proposed change would actually repeal the Johnson Amendment, and it would apply to all <a href="https://www.forbes.com/sites/peterjreilly/2017/11/17/will-destruction-of-johnsnon-amendment-destroy-charity/#19330d8a47c2">charitable</a> organizations, including churches and other houses of worship like mosques and synagogues. It came as an unwelcome surprise to most charities, which have been openly rejecting it. </p>
<p>“Charitable nonprofits don’t want to be dragged into the toxic political wasteland,” said Tim Delaney, who leads the <a href="https://www.councilofnonprofits.org/article/last-minute-change-tax-reform-bill-hardens-nonprofit-opposition">National Council of Nonprofits</a>. </p>
<p>If the House language becomes law, political speech by these groups would technically need to meet <a href="https://waysandmeansforms.house.gov/uploadedfiles/summary_of_chairman_amendment_2.pdf">two requirements</a>. First, charities would be able to make political statements in the ordinary course of business – that is, doing whatever it is they do. For example, a prominent pastor could endorse political candidates during a sermon that’s broadcast or livestreamed.</p>
<p>Second, making such statements must cost no more than an “<a href="https://waysandmeansforms.house.gov/uploadedfiles/summary_of_chairman_amendment_2.pdf">incremental de minimis amount</a>” – regulatory language that basically translates into “not much.”</p>
<p>In other words, <a href="https://www.philanthropy.com/article/Opinion-The-House-Tax-Bill/241794">calls to vote for a particular candidate</a> could be printed in flyers as long as those missives were mainly about something else. And nonprofits could endorse candidates on their websites as long as the details do not dominate that digital space. Politicking would be allowed on the sidelines and if it does not consume a large share of a group’s budget.</p>
<p>Where exactly the government would draw a line isn’t clear yet. Most likely, churches wouldn’t be free to mail their congregants straightforward calls to “vote for Jennifer Doe on November 7.” But they might be able to include that language in their monthly newsletters or on a web page about a church supper.</p>
<h2>Why bother?</h2>
<p>Why lift current restrictions on political speech by charities? The <a href="https://www.adflegal.org/detailspages/blog-details/allianceedge/2016/10/31/the-legal-implications-of-the-johnson-amendment">Alliance Defending Freedom</a>, a conservative Christian legal group, argues that the Johnson Amendment unconstitutionally restricts free speech by not allowing nonprofits to speak on big issues that matter to the public.</p>
<p>However, there’s no clear evidence that this is a valid concern. Plenty of pastors already speak out often on policy issues, such as abortion, immigration and income inequality. Some even endorse <a href="http://www.pewforum.org/2016/08/08/many-americans-hear-politics-from-the-pulpit/">candidates running for office</a>, according to a 2016 Pew study.</p>
<p>In fact, religious leaders have been reportedly speaking out more because of increasingly lax <a href="https://www.nytimes.com/2015/07/06/us/politics/irs-expected-to-stand-aside-as-nonprofits-increase-role-in-2016-race.html">IRS enforcement</a> of nonprofit political activity starting years before Trump signed his executive order.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/195742/original/file-20171121-6055-a20dl5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">President Donald Trump, shown here signing an executive order on May 4. The order instructed the IRS to use ‘maximum enforcement discretion’ in enforcing a tax code provision barring nonprofits from engaging in political activity.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Trump-Religion/9d90c9b46eef4e799303bbf8688e7637/2/0">AP Photo/Evan Vucci</a></span>
</figcaption>
</figure>
<h2>Arguments against this change</h2>
<p>The Johnson Amendment entangles church and state by requiring the IRS to determine whether speech by 501(c)(3) nonprofits – the kind to which Americans who itemize their returns can make tax-deductible donations – is political or merely issue advocacy.</p>
<p>For example, religious leaders currently can speak about abortion as long as they do not endorse candidates based on their views regarding the procedure. If the proposed tax code amendment becomes law, they would be free to do just that.</p>
<p>Delaney and other nonprofit leaders – including religious ones – say that they would prefer to see <a href="http://thehill.com/opinion/finance/359330-theres-a-wolf-in-sheeps-clothing-hiding-in-the-gop-tax-bill">partisan politics kept out of charities, churches and foundations</a>. This arrangement, they argue, currently <a href="http://thehill.com/opinion/finance/360915-nonprofits-must-sound-the-alarm-on-house-tax-bill?platform=hootsuitetheres-a-wolf-in-sheeps-clothing-hiding-in-the-gop-tax-bill">shields them from political pressure</a> from donors, board members or politicians. </p>
<p>There is also a risk that some charities would superficially serve an educational purpose while actually engaging in political activity, according to <a href="https://www.philanthropy.com/article/Opinion-The-House-Tax-Bill/241794">Roger Colinvaux</a>, a Catholic University law professor who previously served as a lawyer for the Joint Committee on Taxation, a congressional committee with members from both the House and Senate whose staff analyzes tax proposals.</p>
<p>Without restrictions on political speech by churches and secular charities, many experts predict that taxpayers seeking to make political contributions would <a href="http://www.councilofnonprofits.org/print/2028">shift such nondeductible donations</a> from politicians, parties and political organizations to nonpartisan charities. </p>
<p>This would mean potentially billions of dollars in political donations could be written off. And like the tax cuts themselves, this change would come with a price tag.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/8rUjwgqNyMY?wmode=transparent&start=3279" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Rep. John Lewis, a Georgia Democrat, raised questions about the proposed changes to charity tax laws during a congressional hearing.</span></figcaption>
</figure>
<p>The House bill would lift this restriction for five years beginning in the 2019 tax year, reducing revenue by approximately <a href="https://waysandmeans.house.gov/wp-content/uploads/2017/11/20171106-JCT-Estimated-Revenue-Effects-of-Amendment-in-the-Nature-of-a-Substitute-to-H.R.-1.pdf">US$1.5 billion</a>, according to the <a href="https://www.jct.gov/publications.html?func=startdown&id=5034">Joint Committee on Taxation</a>. </p>
<p>What’s more, contributions to nonprofits for political purposes could be anonymous. While the names of donors who contribute to political campaigns must be disclosed, charitable donations don’t have to revealed.</p>
<p>In other words, donors could make their contributions to nonprofits contingent upon endorsements for candidates without anyone knowing about it if this provision becomes part of the tax code.</p>
<h2>What nonprofits say</h2>
<p>More than 4,200 religious leaders signed an <a href="https://www.faith-voices.org/find-out-more">interfaith petition</a> to keep the Johnson Amendment intact.</p>
<p>At the same time, 5,500 charitable organizations <a href="https://www.givevoice.org/sites/default/files/community-letter-in-support-of-nonpartisanship-5-12-update.pdf">have objected</a> to the proposed revision by signing a letter to that effect.</p>
<p>And a <a href="http://independentsector.org/news-post/national-poll-johnson-amendment/">national poll by the Independent Sector</a>, an organization representing charities, foundations and corporations seeking to advance the common good, found that 72 percent of respondents wanted to keep the Johnson Amendment on the books.</p>
<p>The only people who have called for this change are <a href="https://www.vox.com/identities/2017/11/2/16598906/republican-tax-bill-religious-right-johnson-amendment-trump">evangelical Christian</a> pastors.</p>
<h2>Rushed timetable</h2>
<p>Given the pending tax package’s potential to make sweeping changes, the question of whether it makes sense to loosen restrictions on political speech by charitable organizations is getting less attention than it should.</p>
<p>Most Americans do not know what is in this legislation, which Trump wants to sign into law before Christmas on a <a href="http://www.businessinsider.com/trump-tax-reform-plan-bill-timeline-2017-10">rushed timetable</a>. If he gets his wish, chances are strong that the debate will follow passage rather than precede it. </p>
<p>A huge shift like this deserves a real and open debate, not the kind of behind-the-scenes deal-making that apparently went on before House Republicans folded this nonprofit provision into its tax bill.</p><img src="https://counter.theconversation.com/content/87285/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan Anderson is not affiliated with any organization other than Elon University and receives no funding from outside sources..</span></em></p>A provision in the House’s pending tax bill would let religious and secular nonprofits engage in political speech without facing a penalty.Susan Anderson, Professor of Accounting, Elon UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/785852017-06-09T03:54:14Z2017-06-09T03:54:14ZWant to help animals? Don’t forget the chickens<figure><img src="https://images.theconversation.com/files/172794/original/file-20170607-6583-1ow76hn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Most of the money Americans give to animal welfare charities helps causes that aid companion animals.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/scottish-fold-cat-lying-on-back-319216814?src=kV_vSFb31L-Yn0tgX0hFgQ-1-42">www.shutterstock.com</a></span></figcaption></figure><p>Summertime is “<a href="http://www.humanesociety.org/animals/cats/facts/kitten_season.html?referrer=https://www.google.com/">kitten season</a>” – <a href="http://www.pethealthnetwork.com/cat-health/cat-checkups-preventive-care/what-kitten-season">unspayed female cats</a> go into heat and give birth to more adorable kittens than animal shelters can give away.</p>
<p>That’s why local humane societies encourage prospective pet owners to bring cats into their homes in June, also known as <a href="http://www.americanhumane.org/initiative/adopt-a-cat-month/">Adopt-a-Cat Month</a>. <a href="https://www.aspca.org/news/adopt-shelter-cat-month-you-can-make-difference-felines-need">Animal protection organizations</a> like the American Society for the Prevention of Cruelty to Animals also step up their appeals to the public for donations to fund widespread spaying and neutering that will help bring the companion animal population under control.</p>
<p>But a growing number of animal advocates insist that these well-intended, altruistic efforts should <a href="https://www.theguardian.com/commentisfree/2015/nov/19/charity-animals-cats-dog">change course</a>. They’re using mathematical reasoning to deliver a sharp message to mainstream animal charities and their donors: The money you spend to help cats, dogs and other human companions could be used more effectively to improve the lot of chickens, pigs and other animals raised in farms for food. </p>
<p><a href="http://ijoc.org/index.php/ijoc/article/view/1992">As a vegan</a> who has long been troubled by society’s hypocritical treatment of different kinds of animals, I find that this argument makes sense. And as a <a href="http://www.tandfonline.com/doi/abs/10.1080/17524032.2014.968178?journalCode=renc20">researcher who studies nonprofit animal advocacy</a> and <a href="http://www.ucpress.edu/book.php?isbn=9780520287457">food justice</a>, I believe this demand for what supporters call “<a href="http://www.symposium.animalcharityevaluators.org/">effective animal advocacy</a>” has a chance to reshape the animal protection movement.</p>
<h2>A big business</h2>
<p>When it comes to making life good for our beloved companion animals, our generosity knows few bounds. Americans <a href="http://www.americanpetproducts.org/press_industrytrends.asp">spend nearly US$70 billion annually</a> on feeding, grooming and boarding our pets, as well as paying for their medical care and adoption fees. </p>
<p>But sadly, we also <a href="https://www.aspca.org/animal-homelessness/shelter-intake-and-surrender/pet-statistics">euthanize more than 1.5 million shelter dogs and cats</a> every year because the supply of companion animals outpaces demand. For a nation of unabashed animal lovers, that’s a sad and shocking statistic. </p>
<p>That contradiction may explain why so many Americans give generously to charities that promote animal welfare. Charity Navigator lists more than <a href="https://www.charitynavigator.org/index.cfm?bay=search.results&cgid=1&cuid=2">300 of these nonprofit groups</a>. According to my calculations, they collectively raise close to $1.9 billion a year. </p>
<p>But peruse that list of major animal welfare nonprofits and one thing becomes clear – the primary beneficiaries of their compassion are companion animals. Less than 1 percent of all the money donated to animal charities supports groups <a href="https://animalcharityevaluators.org/wp-content/uploads/2016/06/2016_guide_to_GIVING.pdf">that exclusively advocate for farmed animals</a>.</p>
<p>This charitable giving reflects a cultural bias that insists <a href="https://www.amazon.com/Love-Dogs-Pigs-Wear-Cows/dp/1573245054">some animals are more important than others</a>. An increasingly vocal set of animal advocates are using science and math to prove this bias wrong.</p>
<h2>Why cats but not chickens?</h2>
<p>The number of cats and dogs euthanized every year pales in comparison to the <a href="http://www.countinganimals.com/how-many-animals-does-a-vegetarian-save/">more than nine billion farmed animals killed</a> for food Americans eat or export, as well as the more than 46 billion fish and shellfish killed worldwide and destined for U.S consumption. </p>
<p>At the same time, scientific research shows that animals such as chickens, pigs, cows and <a href="http://animalstudiesrepository.org/cgi/viewcontent.cgi?article=1074&context=acwp_asie">even fish</a> are as <a href="http://www.livescience.com/39481-time-to-declare-animal-sentience.html">smart and self-aware</a> as dogs and cats. They all seem able to <a href="https://www.nytimes.com/2016/05/01/books/review/are-we-smart-enough-to-know-how-smart-animals-are-and-the-genius-of-birds.html?_r=0">build emotional relationships and think in complex ways</a>. Yet they continue to <a href="https://www.theguardian.com/books/2015/sep/25/industrial-farming-one-worst-crimes-history-ethical-question">suffer greatly in a system</a> that breeds them to be unnaturally large, excuses cruel treatment as standard practice, generates <a href="https://www.nytimes.com/2017/05/21/opinion/who-factory-farming-meat-industry-.html?_r=1">a lot of pollution</a> and is deemed by scientists to be <a href="http://www.jhsph.edu/research/centers-and-institutes/johns-hopkins-center-for-a-livable-future/research/clf_publications/pub_rep_desc/pew_report.html">environmentally unsustainable</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172793/original/file-20170607-5408-cupvi6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Research suggests that chickens are as smart as cats and dogs.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/red-rooster-symbol-new-2017-year-545914006">www.shutterstock.com</a></span>
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</figure>
<p><a href="http://www.animalcharityevaluators.org">Animal Charity Evaluators</a> is a nonprofit that tries to help people who donate to animal welfare causes identify groups that will make the best use of their gifts. It argues that <a href="https://animalcharityevaluators.org/blog/why-farmed-animals/">donations that impact the lives of farmed animals are more effective</a> than donations to places like animal shelters. It’s simple math – farmed animal welfare is a much bigger problem and there are <a href="https://animalcharityevaluators.org/blog/some-thoughts-on-our-cost-effectiveness-estimates/">cost-effective ways</a> to make a difference. It calls for changes – <a href="http://www.humanesociety.org/issues/confinement_farm/facts/cage-free_vs_battery-cage.html">like moving chickens out of battery cages and pigs out of crates</a> – and advocates for dietary shifts that will lead to <a href="http://www.bbc.co.uk/programmes/p04sh6zg">far fewer animals being killed</a> for food. <a href="https://animalcharityevaluators.org/advocacy-interventions/interventions/">Persuading large numbers of people</a> to eat less meat can impact thousands of animals at a time, whereas every kitten adoption only helps one feline.</p>
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<h2>Helping animals effectively</h2>
<p>The effective animal advocacy movement sees companion and farmed animals as having equal moral value. They are inspired by the <a href="https://www.ted.com/talks/peter_singer_the_why_and_how_of_effective_altruism">ethical arguments of Peter Singer</a> that tactics which reduce animal suffering the most – no matter the species – do the most good. </p>
<p>In 2016, Animal Charity Evaluators <a href="https://animalcharityevaluators.org/donation-advice/recommended-charities/">recommended a dozen charities</a> – including <a href="mercyforanimals.org">Mercy For Animals</a>, the <a href="http://www.thehumaneleague.com/">Humane League</a> and the <a href="http://www.gfi.org/">Good Food Institute</a>. Most of these groups aim to improve farmed animal welfare in various ways, such as investigating conditions at factory farms, reaching out to corporations, promoting plant-based diets and researching so-called “<a href="http://www.new-harvest.org/">clean meats</a>” grown in labs. Each makes a case that their work is particularly effective at saving animals’ lives, now and into the future.</p>
<p>Donors gave more than <a href="https://animalcharityevaluators.org/about/impact/giving-metrics/">$3.5 million to these charities</a> in 2016 based on its recommendations, the group says. </p>
<p>The <a href="http://www.openphilanthropy.org/">Open Philanthropy Project</a> – an “<a href="https://www.effectivealtruism.org/">effective altruism</a>” foundation funded by <a href="http://www.goodventures.org/about-us">Facebook co-founder Dustin Moskovitz and his wife Cari Tuna</a> – is a new and major player in this movement. Since early 2016, it has <a href="http://www.openphilanthropy.org/giving/grants?field_focus_area_target_id_selective=531">awarded nearly $20 million in grants</a> aimed at improving farmed animal welfare in the U.S. and in the developing world.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=333&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=333&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=333&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=419&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=419&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172577/original/file-20170606-3662-3f5tin.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=419&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Facebook co-founder Dustin Moskovitz and his wife Cari Tuna are among the effective animal advocacy movement’s leading funders.</span>
<span class="attribution"><a class="source" href="http://www.goodventures.org/about-us">goodventures.org</a></span>
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<p>Some leading animal advocates question the wisdom of this approach, including <a href="http://www.ingridnewkirk.com/">Ingrid Newkirk</a>, president of People for the Ethical Treatment of Animals. With a <a href="http://features.peta.org/annual-review-2016/year.aspx">$67 million annual budget</a>, PETA is one of the largest animal-focused charities. It seeks to help both farmed and companion animals. Newkirk has criticized “<a href="https://www.peta.org/blog/ingrid-newkirk-animal-rights-conference-speech/">effective animal advocates</a>” for “reducing animals to numbers” and for failing to see how different animal protection efforts reinforce each other.</p>
<p>In addition, some researchers <a href="http://veganpublishers.com/effectiveness/">question the rigor</a> of effective animal advocacy research. Other activists accuse groups like Open Philanthropy Project of <a href="https://medium.com/@harrisonnathan/the-actual-number-is-almost-surely-higher-92c908f36517">favoring organizations</a> with which they are personally connected. <a href="https://animalcharityevaluators.org/blog/responses-to-common-critiques/">Responding to these critiques</a>, effective animal advocacy leaders have admitted to some flaws in their previous studies.</p>
<h2>The future of animal charity</h2>
<p>Despite these critiques, I’ve watched the movement kickstart a conversation that’s encouraging groups like <a href="http://www.humaneleaguelabs.org/">the Humane League</a> <a href="http://www.sentienceinstitute.org/foundational-questions-summaries">to research</a> which tactics improve animals’ lives the most and <a href="https://faunalytics.org/a-summary-of-faunalytics-study-of-current-and-former-vegetarians-and-vegans/">why people go vegetarian or vegan</a>. </p>
<p>The movement has also helped channel more energy and charitable dollars toward one of the most important and neglected issues of our time – the plight of farmed animals. </p>
<p>Now, I love cats and dogs as much as anybody, and I don’t want anyone to feel guilty about donating to their local animal shelter. But it’s clear to me that animal lovers should care about all animals equally. Since farmed animals suffer most and the issue has long been neglected, there’s a greater need to support that cause. </p>
<p>At least that’s what the math seems to suggest.</p><img src="https://counter.theconversation.com/content/78585/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Garrett M. Broad has shared his research perspectives with Animal Charity Evaluators and other members of the effective animal advocacy community on a voluntary basis. </span></em></p>A growing number of animal advocates want Americans to do more to aid animals raised in farms for food, rather than supporting groups that help cats, dogs and other human companions.Garrett M. Broad, Assistant Professor of Communication and Media Studies, Fordham UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/782212017-06-02T02:51:45Z2017-06-02T02:51:45ZHillary Clinton is starting a social welfare group. What does that mean?<figure><img src="https://images.theconversation.com/files/171832/original/file-20170601-25658-oa23u5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Some nonprofits, including the NAACP, can operate different divisions subject to different IRS rules but with the same branding.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Campaign-2016-Clinton/76534b9aa9b743edbc530c7b78bd927c/8/0">AP Photo/Andrew Harnik</a></span></figcaption></figure><p>Hillary Clinton recently announced that she was setting up a new group called <a href="https://www.onwardtogether.org/">Onward Together</a>, offering few details other than that it will support an array of <a href="http://www.politico.com/story/2017/05/15/hillary-clinton-onward-together-238408">progressive causes</a>, such as Swing Left, Emerge America, Color of Change, Indivisible and Run for Something. Unlike the <a href="https://www.clintonfoundation.org/">Clinton Foundation</a>, which is a charity, Onward Together will operate as a <a href="https://www.irs.gov/charities-non-profits/other-non-profits/social-welfare-organizations">social welfare organization</a>. </p>
<p>But what exactly are social welfare nonprofits, what’s the difference between them and charities and how involved in politics can they get?</p>
<p>As a law professor who formerly served as counsel to the nonpartisan congressional <a href="https://www.jct.gov/about-us/overview.html">Joint Committee on Taxation</a>, I am interested in the use of <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=661225">nonprofits</a> to serve political purposes. I would like to explain why this kind of organization has become more popular – and more controversial.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"864211960732295168"}"></div></p>
<p><strong>What are social welfare organizations?</strong></p>
<p>Social welfare groups are nonprofits formed to benefit the community in some way. </p>
<p>The largest social welfare groups, like <a href="http://www.aarp.org/">AARP</a>, the <a href="https://home.nra.org/">National Rifle Association</a> and the local units of the <a href="http://www.naacp.org/">NAACP</a>, are familiar to most Americans. Smaller ones, such as firefighters’ associations, neighborhood civic associations and many <a href="http://www.pta.org/">PTAs</a> serving specific schools, are more common. According to the <a href="http://nccsweb.urban.org/nonprofit-overview.php">National Center for Charitable Statistics</a>, there are more than 83,000 social welfare nonprofits. </p>
<p>Social welfare organizations, sometimes referred to by the part of the tax code regulating them – <a href="https://www.irs.gov/charities-non-profits/other-non-profits/types-of-organizations-exempt-under-section-501-c-4">section 501(𝚌)(4)</a> – have been around since 1913. The IRS and the courts sometimes <a href="https://www.irs.gov/pub/irs-tege/eotopicm95.pdf">treat this category as a catchall</a> for nonprofits not made exempt by other parts of the tax code.</p>
<p>Social welfare groups <a href="http://www.urban.org/sites/default/files/publication/77226/2000594-From-Camps-to-Campaign-Funds-The-History-Anatomy-and-Activities-of-501(c)(4)-Organizations.pdf">rarely got much attention</a> until the Supreme Court’s <a href="https://www.publicintegrity.org/2012/10/18/11527/citizens-united-decision-and-why-it-matters">Citizens United</a> decision. That 2010 ruling opened the door for 501(𝚌)(4)s to be used as a channel for dark money, or anonymous political contributions, making them a <a href="https://www.propublica.org/article/how-nonprofits-spend-millions-on-elections-and-call-it-public-welfare">magnet for controversy</a>.</p>
<p><strong>How do they differ from charities?</strong></p>
<p>On the surface, social welfare groups are easily confused with charities, as defined by <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501-c-3-organizations">section 501(𝚌)(3)</a> of the tax code. Both are nonprofits, both are meant to provide a community benefit and both are exempt from paying federal income taxes. Even more confusing: Social welfare organizations and charities are <a href="https://www.irs.gov/pub/irs-tege/eotopics00.pdf">often affiliated</a> and share the same branding. </p>
<p>But there are key operational differences. Social welfare groups are allowed to engage in unlimited lobbying activities – and could spend all their time and money on Capitol Hill or in state houses – while charities face strict limits. </p>
<p>Social welfare groups may also get involved in partisan politics, such as by endorsing candidates, and face fewer compliance burdens and less public scrutiny. Charities, on the other hand, may not engage in <a href="https://www.irs.gov/uac/charities-churches-and-politics">any political campaign activity</a>. </p>
<p>The main reason for the tougher standards on charities is the <a href="https://www.irs.gov/taxtopics/tc506.html">charitable deduction</a>, which lets donors deduct contributions to charities – but not to social welfare groups – from their taxes. This gives the government a stake in ensuring that charitable dollars are used as intended. </p>
<p>That’s why, despite the tougher rules, charitable organizations are by far the most common kind of nonprofit. There are <a href="http://nccs.urban.org/data-statistics/quick-facts-about-nonprofits">more than 1.2 million of them</a>, dwarfing the number of social welfare groups.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/171537/original/file-20170530-23672-1gatxdr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">In 2015, Pennsylvania Governor Tom Wolf announced an initiative that improves care services for seniors at an AARP office.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/governortomwolf/16663004401/">Governor Tom Wolf/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p><strong>Why does it matter if these groups are too political?</strong></p>
<p>Longstanding <a href="https://www.irs.gov/pub/irs-tege/rr81-095.pdf">IRS guidance</a> says that political activity may not be a social welfare organization’s primary activity. But the agency has not specified where it draws the line. </p>
<p>Nevertheless, the law requires that once an organization becomes mainly political, the IRS should treat it as a “<a href="https://www.irs.gov/charities-non-profits/political-organizations">political organization</a>” under <a href="https://www.publicintegrity.org/2005/11/21/5541/527s-frequently-asked-questions">section 527</a> of the tax code – better known as a political action committee or PAC. </p>
<p>Being designated either as a PAC or a social welfare group matters not so much for tax reasons but because Congress requires that gifts to PACs, but not to social welfare groups, be made public. Often, donors prefer to support social welfare groups to <a href="http://scholarship.kentlaw.iit.edu/cgi/viewcontent.cgi?article=4132&context=cklawreview">hide their giving</a>. The difference in disclosure rules thus creates an incentive to exploit the ambiguity about how much political activity social welfare groups are permitted before they no longer fit in that category. </p>
<p>A prominent example is Crossroads GPS, a conservative group co-founded by Republican operative Karl Rove that has spent heavily on ads attacking Democrats and supporting GOP political candidates. The group <a href="https://www.opensecrets.org/news/2016/02/how-crossroads-gps-beat-the-irs-and-became-a-social-welfare-group/">ultimately persuaded</a> the IRS in 2015 that it was organized for social welfare and not political purposes, even though critics charged that well over half its activities furthered political ends.</p>
<p>Indeed, determining whether an organization is primarily organized for political or social welfare purposes was at the <a href="http://cornelllawreview.org/files/2013/09/99CLRO411.pdf">bottom of the Obama-era allegations</a> that the IRS unfairly subjected conservative groups seeking 501(𝚌)(4) status to excessive scrutiny, which in turn led to <a href="https://www.forbes.com/sites/kellyphillipserb/2016/12/07/house-says-no-to-renewed-efforts-to-impeach-irs-commissioner/#8988e1f3fc6b">calls for impeaching</a> IRS Commissioner John Koskinen and <a href="https://www.nytimes.com/2017/03/02/us/politics/trump-mnuchin-irs.html?_r=0">budget cuts</a> for the agency.</p>
<p><strong>What will it take to fix the disclosure problem?</strong></p>
<p>A rule of thumb is that up to 50 percent of a social welfare group’s activity may be political, but this is not a rule of law. </p>
<p>Prior IRS efforts to clarify how it defines political activity through <a href="https://www.irs.gov/uac/newsroom/treasury-irs-will-issue-proposed-guidance-for-tax-exempt-social-welfare-organizations">proposed regulations</a> were <a href="https://www.bna.com/irs-redraft-501c4-n17179890838/">widely criticized</a> by all sides. Congress <a href="http://www.politico.com/story/2015/12/white-house-dark-money-216956">shut down</a> that process in 2015.</p>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2476435">Yet as I</a> and <a href="http://digitalcommons.law.umaryland.edu/cgi/viewcontent.cgi?article=2478&context=fac_pubs">others</a> have <a href="http://online.liebertpub.com/doi/pdf/10.1089/elj.2011.0109">argued</a>, the main problem in this area is not driven by tax law concerns, IRS malfeasance or even vague standards. Rather, it is the need for uniform disclosure rules for political speech. </p>
<p>Maybe if the public decides that both Republicans and Democrats are abusing the social welfare designation, bipartisan legislation will eventually close the dark money loophole. Now that would truly serve the public interest.</p><img src="https://counter.theconversation.com/content/78221/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roger Colinvaux does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Social welfare groups have become more common – and more controversial – in recent years. Fixing gaps in the oversight of this kind of nonprofit will take bipartisan action.Roger Colinvaux, Director, Law and Public Policy Program and Professor of Law, Catholic University of AmericaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/747982017-04-11T02:00:45Z2017-04-11T02:00:45ZWill Trump’s cuts inspire more DIY foreign aid?<figure><img src="https://images.theconversation.com/files/162470/original/image-20170325-12127-zjwg8j.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Paul Odihambo shows off a bore well in his village outside of Kisumu, Kenya that a DIY aid group donated. </span> <span class="attribution"><span class="source">Susan Appe</span>, <span class="license">Author provided</span></span></figcaption></figure><p>Running on a shoestring budget, <a href="http://www.futureinourhandsusa.com/">Future in Our Hands-USA</a> helps people living almost 7,500 miles away in Kisumu, Kenya, get clean water from new wells. The tightly focused and volunteer-driven nonprofit based in Clarence, New York, also encourages school attendance by paying fees and lends money to local women’s cooperatives.</p>
<p>More than 11,000 do-it-yourself (DIY) aid groups like this one scattered across the country power small-scale development initiatives. Given how much of their work is an unpaid labor of love, it’s hard to gauge their impact.</p>
<p>With <a href="http://www.reuters.com/article/us-usa-trump-budget-state-idUSKBN16N0DQ">U.S. funding for overseas economic and development projects slated for deep cuts</a> – the Trump administration’s proposed budget would slash foreign aid and diplomacy spending by 28 percent – will this kind of giving ramp up as concerned Americans seek to fill needs abroad that their government won’t? My own research suggests that steep cuts would further motivate American donors and volunteers to engage in small-scale development initiatives.</p>
<h2>‘Altruism from afar’ powers the spread of MONGOs</h2>
<p>Linda Glaeser, one of Future in Our Hands-USA’s founders, first traveled to Kenya with her niece, a teacher who had volunteered in Kisumu, a city on the shore of Lake Victoria. Glaeser says she was saddened when she saw children facing health problems that were directly related to the lack of access to clean water. She decided something needed to be done.</p>
<p>“I might not have specific skills, but I have heart,” says Glaeser, a physical therapist who lives in Clarence, a Buffalo suburb with about 31,000 residents.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=840&fit=crop&dpr=1 600w, https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=840&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=840&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1055&fit=crop&dpr=1 754w, https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1055&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/162949/original/image-20170328-3803-w2ly5x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1055&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Linda Glaeser presents an award to students receiving Future in Our Hands-USA scholarships.</span>
<span class="attribution"><span class="source">Courtesy of Linda Glaeser</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Like many small aid groups of its kind, Glaeser’s group has no paid staff. It pumps 97 percent of the money it raises annually, about US$45,000, into its Kenyan projects. The rest covers operating expenses like website maintenance and bank fees. As with most DIY foreign aid groups, most of its board members and donors belong to the Glaeser’s personal and professional networks. Accountability stems from trust and relationships in the absence of formal mechanisms.</p>
<p>Spurred by the acceleration of globalization in the 1990s, DIY aid groups – sometimes called <a href="http://foreignpolicy.com/2009/11/17/an-ngo-by-any-other-name/">MONGOs</a>, as in “my own nongovernmental organization” – are growing more common.</p>
<p>Sociologists Ann Swidler and Susan Cotts Watkins call this trend “<a href="https://books.google.com/books?id=GglpDQAAQBAJ&dq=%E2%80%98altruism+from+afar%E2%80%99&source=gbs_navlinks_s">altruism from afar</a>.” These initiatives differ from traditional foreign-funded aid because volunteers do most of the work. Most lack formal training in international development or nonprofit management. </p>
<h2>Number of DIY aid groups soars</h2>
<p>The number of amateur-run global do-good groups based in the United States is soaring. </p>
<p>International development professor <a href="https://spea.indiana.edu/faculty-research/directory/profiles/faculty/full-time/schnable-allison.html">Allison Schnable</a> at Indiana University, Bloomington, estimates that there were more than <a href="https://academic.oup.com/socpro/article/62/2/309/1618650/New-American-Relief-and-Development-Organizations">11,000 of them in 2010, up from 1,000 two decades earlier</a>, operating in every state in the nation. Nearly 60 percent of these initiatives had an annual budget below $25,000. </p>
<p>The spread of mobile devices and digital communications tools in countries rich and poor since 2010, including Facebook and Whatsapp, has simplified the logistics of running DIY aid efforts. That means the current number is surely much higher.</p>
<p>Along with three Binghamton University doctoral students, I have identified 147 DIY foreign aid groups headquartered in New York state but located outside New York City – a traditional hub for bigger aid groups. Like Future in Our Hands-USA, these groups primarily specialize in water and sanitation, education and female empowerment. Among other things, we looked into what motivates Americans to donate their money and volunteer their time to these small-scale development initiatives.</p>
<p>For example, <a href="http://www.etc-nepal.org/">Educate the Children</a> sponsors school scholarships and lends women small amounts of money to buy garden supplies in Nepal. The Ithaca-based group arose when its founder, Pamela Carson, visited Nepal in 1989 and wanted to help alleviate the poverty she saw there. Through appeals via social media and fundraising events, Educate the Children manages to give about $100,000 annually to its projects in Nepal.</p>
<p>Thomas and Liz Brackett founded the <a href="http://www.brackettfund.org/">Brackett Refugee Education Fund</a> after living with refugees in Thailand for six months as volunteers in 1997 and making yearly visits to do additional service-related work. The Hamilton, New York-based nonprofit aid group, also running on about $100,000 a year, covers school costs for Burmese refugee families living in India, Bangladesh and Thailand, as well as internally displaced people in Myanmar. </p>
<h2>Will foreign aid cuts boost DIY foreign aid?</h2>
<p>U.S. private giving in 2015 to international causes totaled $15.75 billion, 4 percent of the private donations charities of all kinds received, according to the <a href="https://givingusa.org">Giving USA 2016</a> report, a publication of Giving USA Foundation, researched and written by the Indiana University Lilly Family School of Philanthropy.</p>
<p>Those aid flows complement the roughly $25 billion <a href="https://www.washingtonpost.com/graphics/world/which-countries-get-the-most-foreign-aid/">the federal government</a> has long spent yearly on economic and development aid.</p>
<p>Americans donate most often in response to humanitarian crises, such as Nepal´s earthquake, the Syrian refugee crisis and West Africa’s Ebola epidemic. It’s unclear how much of the money Americans spent on aid supported small-scale development initiatives. Interestingly, while overall charitable giving grew 4 percent from 2014 to 2015 to a record $373.25 billion, international causes soared 17.5 percent, according to <a href="https://givingusa.org/giving-usa-2016/">Giving USA 2016</a> data.</p>
<p>Fans of the DIY foreign aid “revolution,” as Nicholas Kristof called it in <a href="http://www.nytimes.com/2010/10/24/magazine/24volunteerism-t.html">a 2010 New York Times column</a>, tend to attribute the trend’s rise to the growing exchanges of people and ideas through international travel, study abroad, service and mission trips, Peace Corps stints and other experiences. The motivation behind these small-scale development initiatives has not previously been linked to official foreign aid spending cuts. Rather, it has been driven by very individual and personal experiences.</p>
<h2>The future of US foreign aid</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=494&fit=crop&dpr=1 600w, https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=494&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=494&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=621&fit=crop&dpr=1 754w, https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=621&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/164727/original/image-20170410-31893-h9qcrh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=621&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Through their DIY foreign aid efforts, Americans can feel they are fighting global poverty.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/wildrose115/27623264486/in/photolist-J5Ys9N-dDRp3W-bvXQZZ-8jzvTU-6nJKJu-7odsDE-ap1auw-9tkkhW-7Sj7nt-6tvoxt-8Li6Rk-J6rjP-dKtFBp-gR1kL-D7RaZi-dTikAW-TED1WK-RP6rK9-Ts2jea-gKD2Eq-7oU666-TAr9og-SW6CsX-Sbr2u7-SYWQxc-TpWK6a-Tf3YgT-27i8Dn-SjD9Fu-6YCQgs-6jWpob-SCCKrc-TrspR2-Trg6yy-6q3Yyc-RqoiAV-qJS36m-RLqyyB-RwrzYU-59A81b-dVy7PS-SKGfGH-bkpnsw-SasG5V-j32XTD-RJidXW-oCpomm-okSvMS-s2T93f-onWKYE">EL gazette</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Small-scale development initiatives offer an alternative to larger aid efforts that development scholars and practitioners alike <a href="https://www.theguardian.com/global-development-professionals-network/2016/mar/13/do-international-ngos-still-have-the-right-to-exist">have criticized</a> for failing to wipe out global poverty after decades of constant effort. </p>
<p>DIY aid’s low operating costs and its emphasis on personal relationships and long-term impact rather than short-term outcomes is inherently appealing to donors who want to know where their money is going and how it is spent. </p>
<p>But there are challenges to small-scale development initiatives. Their voluntary nature and tight budgets can <a href="http://foreignpolicy.com/2010/10/26/dont-try-this-abroad/">oversimplify barriers to development</a>. And while informal relationships based on personal networks can be considered a strength for donors, the long-term sustainability of these relationships has not been entirely tested. </p>
<p>Providing a channel for people who want to make a difference and take action with their time and money makes sense. However, more evidence is needed to assess their sustainability, effectiveness and comparative advantages over bigger, more professional aid organizations. </p>
<p>Can private individuals fill the foreign aid gap if Congress goes along with the Trump administration’s request to slash funding? Small-scale development initiatives and DIY foreign aid might be the best way for Americans to at least feel they are fighting global poverty. Whether or not it can fill the gaps produced by the pending government foreign aid cuts is hard to predict. However, there are signs that looming budget cuts are inspiring people like Glaeser to work even harder.</p>
<p>At their March meeting, Future in Our Hands-USA’s board planned a garage sale. If they meet their goal, it will raise several hundred dollars for projects in Kenya.</p>
<p>Whether the funds pay for a new well, cover transportation costs for HIV/AIDs patients or finance schools for girls, these residents of Clarence, New York will know they’ve made a difference for people who live a world away from them.</p><img src="https://counter.theconversation.com/content/74798/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan Appe does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With steep budget cuts looming, a growing number of tiny volunteer-driven organizations are delivering aid on their own. Will the Trump administration inspire even more small-scale global giving?Susan Appe, Assistant Professor of Public Administration at Binghamton University, Binghamton University, State University of New YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/745162017-04-06T01:06:49Z2017-04-06T01:06:49ZDonor-advised funds: Charities with benefits<figure><img src="https://images.theconversation.com/files/163953/original/image-20170404-5702-t4apfh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mark Zuckerberg and Priscilla Chan are giving billions to charity through their donor-advised fund instead of a traditional foundation.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Zuckerberg-Philanthropy/f3e7806b1a40426c93cc2676832e499a/11/0">Jeff Chiu/AP Photo</a></span></figcaption></figure><p>Can you guess which U.S. organization raised the most money through charitable contributions in 2015? When we ask our students this question, most figure it was the United Way, the Salvation Army or the American Red Cross.</p>
<p>However, according to the Chronicle of Philanthropy, while these traditional charities raise a lot of cash, a “donor-advised fund” known as <a href="https://www.philanthropy.com/article/Fidelity-Charitable-Knocks/238167">the Fidelity Investments Charitable Gift Fund</a> topped the list that year, the most recent for which data are available. </p>
<p>Fidelity’s perch at the top – a first for a donor-advised fund – is no aberration. Fidelity is joined on the list by similarly named “charities” that sound unfamiliar, such as <a href="https://www.philanthropy.com/specialreport/philanthropy-400-a-new-no-1/111">Schwab Charitable, the fourth-largest; and Vanguard Charitable in 11th place</a>. All told, more than 13 percent of donations to the nation’s top 400 charities flowed into the coffers of donor-advised funds in 2015, the Chronicle found.</p>
<p>These tax-exempt behemoths – <a href="https://www.philanthropy.com/article/Fidelity-Charitable-Knocks/238167">Fidelity alone raised US$4.6 billion in 2015 and held assets of $15 billion</a> – are increasing in prominence, yet have largely avoided the public eye.</p>
<p>But these charitable vehicles are facing more scrutiny and <a href="http://www.nybooks.com/articles/2016/07/14/the-undermining-of-american-charity/">talk of regulatory oversight</a> as their growth catches the eye of lawmakers. And with tax reform heating up, Congress or the Trump administration may follow the lead of the previous House Ways and Means Committee chair and propose <a href="http://www.taxpolicycenter.org/taxvox/should-congress-curb-donor-advised-funds">new restrictions on donor-advised funds</a>. </p>
<p>As experts in the tax and accounting issues surrounding charitable giving, we would like to explain what donor-advised funds are, what has fed their growth and some of the questions they raise.</p>
<iframe src="https://datawrapper.dwcdn.net/k5si4/2/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="393"></iframe>
<h2>What are they?</h2>
<p>Donor-advised funds are essentially private foundations for the masses. Much as mutual funds make it easy for everyday investors to maintain diversified investment portfolios without too many hassles, donor-advised funds let anybody establish what amounts to their own foundation. In other words, they get to run a grant-making philanthropic institution of their own – minus all the red tape such an endeavor would otherwise require.</p>
<p>The amount of money managed by institutions like Fidelity and Vanguard that sponsor these funds climbed 12 percent to $78.6 billion in 2015, according to the <a href="https://www.nptrust.org/daf-report/recent-growth.html">National Philanthropic Trust</a>. </p>
<p>Here’s how they work. Individuals transfer money or assets to donor-advised funds. Whenever they like, they contact the fund’s “sponsor” and “advise” it to, say, give the Red Cross $500. In the meantime, the rest of the assets set aside are invested, accruing gains for charity, not the donor’s benefit.</p>
<p>To elaborate, people establishing donor-advised funds transfer the money and assets to sponsoring organizations that are <a href="https://www.nptrust.org/what-is-a-donor-advised-fund">registered as 501(𝚌)(3)charities</a>. Those organizations are often tied to investment management powerhouses like Fidelity, Schwab and Vanguard. Many <a href="https://www.nptrust.org/daf-report/sponsor-type-comparison.html">national charities and community foundations</a> also sponsor these funds. Charities of all kinds later get donations from the investment pools. Donors, at least technically, only “advise” financial institutions, like Fidelity. Those institutions earn fees for their services as fund managers.</p>
<p>Except to the extent specific charitable-purpose limitations are placed on the use of the funds, legally, donors cede control over the funds when they make the initial donation. This feature <a href="https://www.irs.gov/pub/irs-tege/donor_advised_explanation_073108.pdf">permits a tax deduction</a> for that tax year, as would be the case with a more traditional charitable donation. However, because sponsoring organizations want donations to keep flowing, they typically heed donors’ subsequent guidance.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=343&fit=crop&dpr=1 600w, https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=343&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=343&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=431&fit=crop&dpr=1 754w, https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=431&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/163491/original/image-20170331-27259-1j6iv8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=431&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The rise of donor-advised funds raises many questions, including whether they spur more giving.</span>
<span class="attribution"><a class="source" href="http://www.picserver.org/d/donate.html">Nick Youngson/nyphotographic.com</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>While following donor advice often entails making quick and targeted grants to operating charities, sometimes it means funds sit dormant when donors fail to make any choices. The pace of giving, measured as the <a href="https://www.nptrust.org/daf-report/recent-growth.html">share of assets</a> annually paid out, varies among the funds. Every year, in fact, one in five donor-advised funds <a href="http://www.economist.com/news/finance-and-economics/21719494-rise-dafs-may-be-much-about-tax-charity-philanthropic-boom">neglects to deliver any money to charities</a> at all. </p>
<p>For example, in 2015 these funds took in a total of $22.3 billion and passed $14.5 billion along to charitable causes, according to the <a href="https://www.nptrust.org/daf-report/recent-growth.html">National Philanthropic Trust</a>.</p>
<h2>Who benefits?</h2>
<p>Critics of these ascendant fundraising vehicles say <a href="http://www.nybooks.com/articles/2016/07/14/the-undermining-of-american-charity/">they primarily benefit the investment firms</a> that manage these assets worth billions of dollars. Also, the tax break investors get when they build up donor-advised funds with appreciated assets, such as stocks and bonds, rather than cash is helping to fuel their growth and raising eyebrows.</p>
<p>Consider the following example with two donors. One transfers $100 cash from his salary to a donor-advised fund. The other moves stock – an appreciated asset – currently valued at $100 but originally purchased for $10. While both donations are worth $100 to a charity, the donor with the stock reaps a bigger tax break at the time of the transfer. That is, the cash donor gets a $100 deduction but still must claim that $100 in salary as income. The stock donor gets to deduct the $100 gift after claiming only $10 as income – leaving out the stock’s $90 gain.</p>
<p>In other words, shuffling such assets from their portfolios to donor-advised funds lets donors secure a tax advantage now with investments that have grown more valuable while postponing decisions about what to do with that money until later.</p>
<p>Perhaps unsurprisingly, taking advantage of this tax break is the rule, not the exception. For example, <a href="http://schwabcharitable.org/public/file/P-8142068/">Schwab Charitable reports</a> that 59 percent of the contributions it received in 2016 were “noncash,” a term that most likely means appreciated assets. Similarly, Fidelity Charitable reported that 55 percent of its contributions in 2014 were <a href="http://www.fidelitycharitable.org/docs/giving-report-2015.pdf">securities and other assets rather than cash</a>. </p>
<p>Despite the appearance of an unfair windfall for privileged taxpayers, some experts have argued that the tax benefits for donors are overstated. John R. Brooks, a Georgetown University Law Center professor, even argues that many donors could fare better by waiting and <a href="http://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=2674&context=facpub">giving directly to the charities of their choice when they are ready</a> to do that. </p>
<h2>You only give once – for tax purposes</h2>
<p>There’s another problem with these donor-advised funds. With typical donations, money moves immediately into an operating charity’s coffers, constituting an unconditional gift for tax purposes. With donor-advised funds, there’s a time lag before the charitable institutions get a boost. Can these still be called gifts?</p>
<p>The IRS says yes, based on the fact that the sponsoring organization is technically a charity. It, not the donor, technically controls the funds.</p>
<p>Yet many experts don’t agree. We often hear people refer to donors to a donor-advised fund as its “owners.” Donors, in fact, are often praised when distributions from their funds support operating charities, as happened when <a href="https://www.cdcfoundation.org/pr/cdc-foundation-receives-25-million-donation-mark-zuckerberg-and-priscilla-chan-ebola-response">Facebook founder Mark Zuckerberg and his wife Priscilla Chan’s donor-advised fund</a> gave $25 million to the CDC Foundation to fight Ebola. Donors sometimes try to use distributions from funds to <a href="https://www.philanthropy.com/article/Opinion-Strings-on/232197">satisfy their own personal pledges</a>, as if they were making those gifts – again. </p>
<p>Sponsoring organizations going their own way rather than heeding donor advice is a rare exception. That contradicts the notion that the initial donation is truly an unconditional gift. </p>
<h2>Do donor-advised funds spur more giving?</h2>
<p>Some experts who tout the rapid growth of donor-advised funds say this relatively new philanthropic arrangement democratizes giving. They also say that the potential downsides have not come to fruition and that donor-advised funds could <a href="https://www.manhattan-institute.org/sites/default/files/cr_97.pdf">bolster overall giving</a>.</p>
<p>However, <a href="https://www.philanthropy.com/article/Donations-Grow-4-to-373/236790">the data suggest otherwise</a>. Total giving in the U.S. has either flatlined, relative to the size of the economy, or scored modest gains, largely following stock market growth over the past 40 years. There’s no evidence that the rise of donor-advised funds has increased the volume of money supporting charities overall.</p>
<p>Further, the <a href="https://www.fidelitycharitable.org/docs/giving-report-2015.pdf">groups that get the most grants</a> from donor-advised funds are often among the country’s largest charities. Fidelity lists Doctors Without Borders USA, the Salvation Army, the United Way, Habitat for Humanity and American National Red Cross as its top five. As these groups themselves already have easy avenues through which donors can give, this suggests that donor-advised funds play more of an intermediary role rather than spurring new giving.</p>
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<h2>The dynamic of charity deferred</h2>
<p>Concerns that donor-advised funds <a href="http://www.economist.com/news/finance-and-economics/21719494-rise-dafs-may-be-much-about-tax-charity-philanthropic-boom">warehouse charitable funds</a> and take too long to give money to groups that will do good with it are on the rise, leading to calls for more regulation and oversight.</p>
<p>People like Ray D. Madoff, a Boston College law professor who directs the Forum on Philanthropy and the Public Good, see donor-advised funds as a place where charitable assets sit when they could be <a href="https://www.philanthropy.com/article/Opinion-Charities-and/238202">put to work faster</a>. </p>
<p>One way that tax reform could resolve some concerns like these is by bringing about greater consistency. The minimum payout rules that already apply to foundations could be extended to other charitable vehicles, including donor-advised funds and university endowments. Alternatively, the government could stop forcing foundations to give away <a href="https://www.ncfp.org/blog/2008/oct-what-is-the-five-percent-payout-rule.html">at least 5 percent of their assets</a> every year.</p>
<p>Even in the face of possible tax policy changes, the ease with which the wealthy and everyone else can use donor-advised funds to oversee their giving plans will remain appealing. For this reason, their growing role in modern philanthropy will likely continue unabated.</p><img src="https://counter.theconversation.com/content/74516/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As these tax-exempt vehicles transform philanthropy, they’re drawing more scrutiny. Will Congress or the Trump administration tinker with the rules that encouraged their rapid growth?Philip Hackney, James E. & Betty M. Phillips Professor of Law, Louisiana State University Brian Mittendorf, Fisher College of Business Distinguished Professor and Chair, Department of Accounting & Management Information Systems (MIS), The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.