The extraordinary reach and targeted nature of online advertising makes it an attractive option for any organization that wants to promote its work. Social welfare organizations, also known as 501(c)(4)’s, are often organized with the explicit goal of pursuing goals within the political realm. They can make use of online advertising in a number of ways, provided they take care to avoid certain traps. Here are a few tips.
- A social welfare organization is free to endorse a political candidate.
For people coming from the 501(c)(3) world, a social welfare organization’s relative freedom to express political views in public can feel unnatural. For a 501(c)(3), expressing support for a particular candidate or political campaign can put the organization’s tax status—and potentially its ability to exist—at risk. Not so for a 501(c)(4), which can use its communications to explicitly endorse candidates, ballot measures, and legislative proposals, provided that these are not its only purpose—see point 3, below.
- Carefully maintain independence.
Too much coordination between a 501(c)(4) and the campaign it endorses can violate election laws. Campaign finance rules are designed to prevent a candidate from circumventing them by forming a 501(c)(4) and directing how the nonprofit promotes the candidate’s campaign and related political ideas. Although an independent 501(c)(4) can follow the general thrust of a candidate’s messaging, it should take care to craft its own message and not allow itself to be directed by the campaign it supports.
- Take care with accounting.
One good thing about online advertising is that it can be relatively cheap when compared to some alternatives, like television. But take care. The IRS may scrutinize a 501(c)(4) that spends too much of its budget in support of a specific candidate’s campaign. Endorsing a specific candidate or campaign cannot be a social welfare organization’s primary purpose. There is no hard-and-fast rule about how much of an organization’s budget can be dedicated to an endorsement campaign before it is deemed to be its “primary purpose” from the perspective of the IRS. You may encounter a 50% “rule of thumb” as you explore the issue, but it’s best to take that standard with a heavy dose of salt. It can be good practice to limit spending on endorsements to no more than 40% of an operating budget, but again, it’s best to study the question with care before going too far.
The Church Law Center of California advises 501(c)(4) organizations
The Church Law Center of California works with religious and secular nonprofits to get them on the right compliance course. Many of our clients have questions about how they can express political opinions in a way that complies with the law. We’re happy to answer your questions. Call us today at (949) 892-1221 or reach out through our contact page.
