As the 2020 elections heat up on the state and national level, voters likely will see more activity from certain non-profits – known as 501(c)(4) entities – that have increased in popularity in recent years and are allowed to engage in elections. Named for the Internal Revenue Code authorizing their creation, a 501(c)(4) is a non-profit organization that must be operated to promote a social welfare purpose. As the IRS stated, 501(c)(4) organizations are permitted to “engage in some political activities, so long as that is not its primary activity.” The organization’s social welfare mission must be its primary purpose and the political activity must be the secondary purpose of the C4. There is no clear line to determine when political activity constitutes the “primary purpose” of an organization, so many 501(c)(4)’s try to limit their political expenditures to 45% or less of the organization’s total expenditures.
Ordinarily, donors to 501(c)(4)’s do not need to be disclosed to the public, thus making these groups controversial to some people (but the organization must maintain donor name and address records that can be requested by federal officials). Although these organizations “previously had to give the IRS the names and addresses of donors who [contributed] more than $5,000. Under the new regulations, the groups won’t have to provide the information to the IRS at all.”(1)
Some of the election year activities that 501(c)(4) might engage in include:
- Voter education activities;
- Supporting, endorsing, or opposing candidates or ballot initiatives;
- Communicating with the public, including encouraging people to vote or conducting voter registration drives;
- Creating and distributing voter education guides on certain issues; or
- In certain situations, making financial contributions to political action committees (PAC’s) or “Super PAC’s” or independent expenditure committees.
The attorneys at Chilivis Grubman represent 501(c)(4)s and other non-profit organizations in various matters, and also represent clients in campaign finance and election-related matters. If you need assistance with such a matter, please contact us today.