Power Grab

by Jason Chaffetz

  Though SPLC is an extreme example of a nonprofit that has completely subjugated its charitable mission to the demands of its political and fund-raising work, we’ll see in the next chapter that SPLC is not alone in weaponizing its charitable work for political purposes.

  Following the Rules

  To understand how nonprofits can be weaponized, you first have to understand a few key facts about the framework of rules that govern them. Because they operate under a different set of rules than political campaigns, they have become the key conduit for the so-called dark money that flows into political Super PACs. But before we get to that, let’s zoom out and look at the bigger picture.

  The ability to operate tax free is an advantage that comes with a price. These organizations must actually do charitable work. They can’t just be fronts for business or politics.

  There are more than 1.6 million nonprofits approved for tax-exempt status in the United States. They fall under twenty-seven different classifications, encompassing everything from religious groups to trade unions. For our purposes, we are focused on two of the most common: the 501(c)3 charitable organization and the 501(c)(4) advocacy organization. Both types of nonprofit are required to file an IRS Form 990 each year showing revenues and expenses, which is the only way we’re able to ferret out the political activities.

  The most common and most sought-after classification is the 501(c)(3). Donations made to a 501(c)(3) are tax deductible, but these organizations must adhere to rigid restrictions on political activity or risk losing their own tax-exempt status. They may lobby legislative bodies on specific pieces of legislation that impact them, but even then they have to report that activity and demonstrate that it stays below a very low threshold governed by statute. With that one exception, they simply cannot engage in political or campaign-related activity directly or indirectly.

  My research indicates some of them have found a way around that prohibition. What would be the incentive to use charitable nonprofits to influence elections?

  For one thing, the restrictions on donors are much looser than they would be on campaign donations or even the kind of advocacy group donations we’ve discussed thus far. Charities can take money from sources political groups cannot—corporations, citizens of other countries, foreign governments. The tax advantages for donors make 501(c)(3) charities a much more attractive option than an advocacy nonprofit. Amounts donated to charities can be written off on taxes. For another thing, large and venerable American charities maintain massive endowment funds that generate an income of their own. This would make them a perfect political dark money vehicle—if only the law allowed it. It unequivocally does not. Don’t forget that charities are not required to report who gives them money. They shouldn’t be. But that lack of disclosure makes them a tempting target for those looking to bypass campaign finance regulations.

  Advocacy organizations, on the other hand, have a little bit more political latitude. There are more than 80,000 such organizations approved by the IRS. They are classified as 501(c)(4) groups and are subject to very different rules than charities. They still operate with tax-exempt status like charities, but they cannot offer a tax deduction to donors like a charity could. They also have no restrictions on who can donate or how much, nor are they required to disclose their donors.

  They are allowed to engage politically under very specific conditions. A 501(c)(4) may participate in politics, provided politics is not the primary purpose of the group. That means they must spend less than 50 percent of their revenues on politics. When you hear the term “dark money groups” it is usually a reference to 501(c)(4) nonprofits that are doing some political work and do not have to disclose their donors.

  Advocacy groups classified as 501(c)(4) have traditionally been required to disclose their donors to the IRS, although not to the public. But in July 2018, Treasury secretary Steven Mnuchin removed that disclosure requirement both for 501(c)(4) social welfare organizations and for 501(c)(6) labor unions amid evidence that the IRS was using those reports to target organizations based on the identity of specific (conservative) donors.

  By contrast, the world of campaign finance is subject to very different and more complicated rules. Candidates for federal office have the most restrictions. They must strictly adhere to limits on who can donate (no corporate donations, no foreign governments, etc.) and how much they can give. In 2018, an individual donor was limited to giving $2,800 per election, although primary and general elections count as two separate elections. Parties and political action committees (PACs) are also strictly regulated, although the contribution limits are higher. For example, in 2018 an individual could give $5,000 per year to a PAC, $10,000 to a state or local party committee, $35,500 to a national party committee, and $106,500 to the national party.

  Less restrictive are the regulations on independent expenditures—essentially free speech campaigns (you probably know them as Super PACs). Since the Supreme Court’s Citizens United decision overturned restrictions on independent expenditures from corporations and labor unions in 2010, more and more political spending has been routed through Super PACs. Typically, conservative Super PACs have outraised liberal ones in the dark money spending race. These groups can accept unlimited contributions from any nonforeign source for political use, provided they do not coordinate with specific candidates and campaigns. They must disclose those donations—eventually. But donors wishing to remain anonymous may simply donate to a 501(c)(4), which does not disclose the names. Then the Super PAC lists only the name of the 501(c)(4) on its disclosure. This is known as dark money because the money cannot be traced back to its original source.

  The Problem with Donor Disclosure

  The solution seems easy. Just require nonprofits to disclose their donors. Problem solved.

  It’s not that easy. All politics aside, people would be less likely to donate to charity if they knew their donation would trigger calls and targeting from every other charity that sees their name on a donor list.

  There are numerous other legitimate reasons American citizens or corporations may not want to make donations public, not the least of which is the threat of retaliation, intimidation, or boycotts. In 2015, watchdog group Judicial Watch released documents showing the IRS itself had used donor lists to select audit targets. The Wall Street Journal’s Kimberley Strassel wrote a book thoroughly detailing the many ways public disclosures have been used—particularly on the left—to intimidate. In The Intimidation Factor, she explained how campaign finance disclosure laws have been successfully used to persecute private individuals who supported specific candidates.

  I take the position that “dark money”—ominous though it sounds—is still constitutionally protected free speech. Our First Amendment rights do not end when we reach a certain income level. Furthermore, no donors should have to risk their livelihood in order to influence a political issue. In this country, you can donate anonymously to political causes and still be completely within the law. Democrats are doing it. Republicans are doing it. It is neither illegal nor immoral.

  In one of many real-life demonstrations of why nonprofits oppose disclosure laws, the Obama campaign in 2012 waged an intimidation campaign against donors to the Republican nominee, Mitt Romney. A campaign-sponsored website, keepinggophonest.com, called out eight Romney donors by name and followed up with tweets disparaging those individuals. Democrat-friendly media followed up with profile pieces that intensified the trolling and harassment. The onslaught targeted not just the individual donors, but their businesses, and by extension, their families and employees. How could such tactics not have a chilling effect on free speech?

  Disclosure laws for nonprofits would eliminate dark money in American elections, but at a cost of compromising our First Amendment right to free speech. That price is too high.

  The Changing Nonprofit Landscape

  Americans gave $410 billion to charity in 2017. That represented a 5.2 percent increase in charitable giving over the previous ye
ar. The sector is the third-largest workforce in the United States, behind only retail and manufacturing in the number of people it employs, according to the Johns Hopkins Center for Civil Society Studies. In twenty-four states and the District of Columbia, nonprofit jobs even outnumber manufacturing jobs.

  Charitable donations are a huge part of who we are as a nation. But the nonprofit charity sector is also becoming a huge part of who Democrats are. The sector has become so politicized that conservatives in the industry tell me they have to hide their politics or risk being ostracized. I’ve heard anecdotal stories of how uncomfortable they feel at ostensibly apolitical conferences when speakers routinely use their time to bash the president or the Republican Party.

  What I have learned since that first meeting in my office about nonprofits is terrifying. It raises important questions that can probably only be answered by IRS audits, which seldom seem to target left-leaning groups.

  Increasingly, traditional 501(c)(3) charitable organizations are becoming fronts for partisan political campaigning. When they leverage the power of their charitable assets, nationwide infrastructure, and grassroots networks obtained through decades of legitimate charitable work to engage in partisan political activity, that is deceptive, wrong, and potentially illegal.

  Over the last decade, some of America’s legacy nonprofits have figured out how to convert their vast fund-raising and grassroots apparatus into political weapons of war. They have pioneered new methods of fund-raising that may enable them to bypass campaign finance limits and disclosure and potentially access huge charitable reserves. They devised strategies to get out the vote, a nonpartisan activity, that would get out only the Democratic vote. Even as Democrats in Congress point to conservative Super PACS and run bills to “end corruption,” you’ll notice that little in their proposals will endanger their political support from the nonprofit sector.

  Charity as a Means to a Political End

  The focus on diverting charitable donations away from social welfare and using them instead to facilitate political power grabs reflects classic liberal thinking. Liberals believe government is the answer to every social ill. That perspective renders charities superfluous—entities to be used as nothing more than means to a political end.

  Attitudes toward philanthropy reveal a deep chasm between left and right. A recent county-by-county study of charitable giving found a correlation between partisan affiliation and charitable giving. The New York Times reported the study’s conclusion that “the more Republican a county was, the more its residents report charitable contributions.” Conversely, Democratic-leaning counties tend to give less to charity, but support much higher taxes to fund a government safety net.

  This contrast between voluntary and involuntary giving, between freedom and force, can also be seen among presidential hopefuls. Tax returns released by 2020 Democratic hopefuls reflect high incomes, relatively small charitable contributions, and an agenda of higher taxes.

  Front-runner Bernie Sanders in 2016 made over $1 million, but gave just 1 percent (just over $10,000) to charity. With an eye to another presidential run, Sanders tripled his charitable giving in 2017 and 2018 to 3 percent and 3.4 percent respectively. Beto O’Rourke gave just three-tenths of a percent of his income to charity that same year, a figure that was fairly consistent throughout the ten years of returns released by O’Rourke. Kamala Harris gave just 1.4 percent to charity in 2017. Kirsten Gillibrand and Amy Klobuchar each donated less than 2 percent in 2018. The 2020 candidate with the largest charitable contributions was Cory Booker at 15 percent.

  On the Republican side, President Trump’s decision to withhold his personal tax returns makes any assessment of his charitable giving claims incomplete. We do, however, know he gives away his full presidential salary each quarter to charitable endeavors run by federal agencies. Those range from Science, Technology, Engineering, and Math (STEM) camps for children to military cemeteries to the National Institute on Alcohol Abuse and Alcoholism.

  Republican 2012 presidential nominee Mitt Romney is perhaps the poster child for philanthropic giving, reportedly donating 29.4 percent of his income to charity in 2011, the year before he became the Republican nominee for president. This was despite a clumsy attempt by Democrat Senate majority leader Harry Reid to tar Romney as a tax cheat from the Senate floor. That allegation was proven to be a lie, but as usual, the correction didn’t get anywhere near the traction of the original allegation.

  That same year, President Obama gave a healthy 21.8 percent to charity, but Vice President Joe Biden reported donating just 1.5 percent of his income. Biden’s numbers were even more anemic pre-2008, when the Obama campaign released past tax returns of its vice presidential nominee showing total charitable donations of just $3,690 over ten years.

  These numbers reflect profound philosophical differences in the perceived role of charitable institutions in American life. Republicans treat charities as an indispensable part of the social safety net to which Americans have an individual responsibility to voluntarily contribute. At best, Democrats see them as an extension of government, to be dependent on government and politicians for ongoing funding. At worst, they treat charities as pass-through entities from which political donations can be laundered.

  Progressive ideology already dominates the 501(c)(4) nonprofit sector. Right-leaning charities exist, but in quantity and size they are dwarfed by left-leaning ones. If Democrats can co-opt the charity nonprofit sector for political purposes, they can gain access to immense reserves. Instead of having to build a whole new political apparatus, they would be able to leverage the existing staff, buildings, donor lists, and credibility of powerful nonprofit organizations to act as virtual subsidiaries of the Democratic National Committee.

  With anger over the 2016 election result driving donations, one might expect to see those contributions isolated to 501(c)(4) groups that have more flexibility to engage in elections. But that hasn’t been the case. The supposedly apolitical charity arms of progressive nonprofits also benefited from the spike in donations. Why would charitable nonprofits, legally prohibited from engaging in politics, benefit from the Trump Bump? I did a deep dive into their IRS tax filings to look for the answer. What I found is far more disturbing than anything the IRS hoped to find in its audits of conservative nonprofits.

  Chapter 2

  The Weaponization of Public Charities

  We expect nonprofit 501(c)(4) advocacy groups to engage in politics. But we see charities as nonpolitical. The 501(c)(3) charities legally have very little latitude to engage in partisan politics. But because the assets and income they control are so much more substantial than those of advocacy groups, the temptation to repurpose them for political use is real. Weaponizing 501(c)(3) charities for political purposes is not easy. But where there is a will, there is a way.

  It’s important to understand the enormity of the resources some of these charities control. Let’s start by looking at the Planned Parenthood Federation, a 501(c)(3) charitable organization.

  In their 2016 Form 990 return, the Planned Parenthood Federation had assets totaling more than $446 million—almost half a billion dollars. We looked at a cross section of thirty-four independent U.S. Planned Parenthood organizations, including the Federation, and calculated combined total assets of $1,726,804,908 (yes, $1.7 billion) at the end of 2016. In most cases, this reflected large increases across-the-board in donations during the 2016 election cycle. This was not even the full complement of Planned Parenthood organizations—just a cross section.

  The Federation’s endowment funds were valued at almost $88 million in 2013 and had grown to over $157 million in their 2016 financial report—an incredible rate of growth. Keep in mind that the Federation does not supply direct services to the public. That is done by the various Planned Parenthood organizations throughout the country, each with its respective revenue and budgets. The Planned Parenthood Federation is a coordinating and advocacy body.

  Even this is not the com
plete picture. Planned Parenthood has international organizations that are directly related to its Federation in the United States. It has forged relationships with UNESCO and UNFPA, the former referring twenty times to Planned Parenthood as a source for sex education and abortion in its revised “Comprehensive Sexuality Standards” (February 2018). It is also in partnership with more than one hundred organizations across Africa and Latin America.

  In its 2016 IRS report, International Planned Parenthood Foundation/Western Hemisphere Region stated that it worked with fifty partner organizations in forty countries. It described “averting two million unintended pregnancies” and working with partners to facilitate nineteen country-level policy changes.

  At CSW62 (Commission on the Status of Women, 2018), African country delegates described how sexual reproductive health services now received more funding in Africa than those providing for fresh water, education, or economic development. That’s a shocking statistic, but it got hardly any play in the U.S. media. Funding for sexual reproductive health services has increased 1,923 percent between 1993 and 2012. They are experiencing pushback from traditionalist countries such as Burkina Faso, which described how they resented having funding for humanitarian purposes tied to whether they would create abortion clinics. The work of Planned Parenthood Global and other similar organizations was described by them as ideological colonization. This Western institution has swept into Africa, looking to decrease the African population rather than offer life-supporting services and education. Imperialism is alive and well on the left.