This blog was originally posted on the NEO Law Group website on May 20, 2017 by Gene Takagi.
It was an honor to participate at the Asian Americans-Pacific Islanders in Philanthropy (AAPIP) 2017 National Network Convening and Annual Meeting that took place May 19-20 in Los Angeles and speak on the subject of:
The Legal Aspects of Philanthropic & Nonprofit Advocacy in the Trump Era
Moderator: Suk Rhee, Northwest Health Foundation
Panelist: James Head, East Bay Community Foundation
Panelist: Gene Takagi
Communities need government and economic systems to work for marginalized groups. Charities and foundations may be able to fill in some gaps, but they can’t, and shouldn’t be expected to, take the place of government. What they can do, however, is push for government and systems to change. Unfortunately, there’s a lot of fear in doing so and it’s made worse by leaders who aren’t fully aware of all they can do in the areas of advocacy. As we wrote earlier, Nonprofit Advocacy is More Than Lobbying.
Review of the Basic Laws
We discussed the 501(c)(3) limitations on lobbying that too often unnecessarily serve as barriers to nonprofit advocacy. There are generous amounts of lobbying that are permitted for public charities that make the 501(h) election. And while private foundations generally are not able to lobby or fund lobbying, they can make grants used by public charities to engage in lobbying (though they are not permitted to earmark the grants for the purpose of lobbying). 501(c)(3) organizations may not engage in any political campaign intervention, though that does not necessarily mean that they cannot engage in significant amounts of policy research and analysis, public education, issue advocacy, get-out-the-vote drives, and voter registration efforts. See the handout we shared at the Convening: The Legal Aspects of Philanthropic & Nonprofit Advocacy in the Trump Era (pdf).
The Duty of Foundations
From a social justice perspective, we must recognize that philanthropy allows the exercise of concentrated, entrenched power over others by its ability to influence policy and law. The wealthy benefit from an economic, legal, political, and social system that fails to provide goods and services to everyone as required by reasonable social justice standards. Accordingly, some believe that the wealthy have a duty to replenish those minimal goods and services. Professor Chiara Cordelli states in her article The Problem With Discretionary Philanthropy:
Benefiting from a system that unjustly harms the worst-off by depriving them of what they have an entitlement to possess provides reasons to attribute to the wealthy a duty of reparative justice towards the worst-off.
Such duty is met not only through direct grants (because we know that’s not nearly enough to replace the role that government must play) but also through use of their power and privilege to change systems and demand that our leaders change systems (i.e., advocacy).
From a legal perspective, we should consider more carefully what a director’s fiduciary duties entail beyond where a breach crosses into risks of liability. Under fiduciary duty standards, a director must exercise reasonable care and in good faith act in the best interests of the organization. For charitable nonprofits, this means reasonably acting to most effectively and efficiently advance the organization’s mission. Failing to consider advocacy and in many cases lobbying as a tool to advance the organization’s mission may be a breach of a director’s fiduciary duty and collectively, a failure of the board. See our earlier post: Advocacy: An essential board responsibility.
It’s also important and empowering to be aware of the following public opinions published by Independent Sector:
- A strong majority of voters (78 percent) support a bigger role for the charitable sector in working with the federal government to produce more effective and efficient solutions to problems.
- 70 percent of voters are more likely to vote for a candidate who supports policies that help the charitable sector become more involved in government policy making.
Charitable organizations should consider using this powerful 1-page infographic with policymakers whenever lobbying on a bill, advocating for policy change, or otherwise seeking their attention. Help policymakers understand the charitable sector, its influence, and its (too often untapped) power.
In connection with the announcement by the Ford Foundation that it was committing $1 billion of its endowment to mission-related investments, its president Darren Walker stated:
If philanthropy’s last half-century was about optimizing the 5%, its next half-century will be about beginning to harness the 95% as well, carefully and creatively.
This change will be revolutionary if more foundations follow the lead of the Ford Foundation (which itself followed the lead taken by several other foundations and philanthropists).
Other Organizational Options
501(c)(4) organizations can engage in unlimited lobbying that advances their social welfare missions. They can also engage in political campaign intervention so long as such activities are not their primary activity.
For-profits are generally not constrained by tax law restrictions on how much lobbying or electioneering they can do. This has been identified as one of the motivating factors for some philanthropists to use for-profit entities instead of private foundations to pursue their philanthropic and social goals. See, for example, our earlier article: Chan Zuckerberg Initiative – Taxable Social Enterprise – Part 2.
Public charities and private foundations can each create affiliations with 501(c)(4) or for-profit organizations. For more information on this topic, see:
- When Should a 501(c)(3) Consider Creating an Affiliated 501(c)(4)?
- Starting a Related Nonprofit: 7 Initial Considerations (which reviews the topic from the perspective of the affiliated for-profit)
How vulnerable are nonprofits under Trump’s skinny budget? (Urban Institute)
Strategic threats to the nonprofit & philanthropic sector in the USA (PHILANTHROPY 2173)
The Trump Effect, at The Whitman Institute (and Elsewhere) (Nonprofit Chronicles)
When the Ford Foundation Leads, Do Others Follow? (Inside Philanthropy)