Tuesday, February 1, 2011

Pomeranz Provides Insight on the meaning of "Social Welfare Organization"

John Pomeranz (Harmon, Curran, Spielberg + Eisenberg, LLP) was kind enough to share his thoughts on a previous posts asking "what exactly is a social welfare organization."  His thoughts, with links to a great white paper on the topic are reprinted below:

John Pomeranz Just a quick note on your recent post on Nonprofit Law Prof Blog about 501(c)(4)s).  Lobbying in support of a 501(c)(4)'s "social welfare" mission is treated as a social welfare activity and counts toward fulfilling the requirement that social welfare be the "primary purpose" of the 501(c)(4).  One overly-simplistic but nonetheless helpful way to think about what qualifies as social welfare activity is to say that anything a 501(c)(3) can do -- including things that a 501(c)(3) can do in limited doses, like lobbying -- can be treated by a 501(c)(4) as a social welfare activity.  Thus, lobbying is social welfare but attempts to influence elections (verboten for 501(c)(3)s) are not.

It is, of course, more complicated than that.  To see how complicated, you might consider this excellent set of comments filed back in 2004 by several smart folks associated with the ABA Tax Section's EO Committee, including my partner Beth Kingsley, your co-blogger Lloyd Mayer, and a host of other experts in this area:  http://www.abanet.org/tax/pubpolicy/2004/040525exo.pdf.  Despite the years that have gone by, these comments are still relevant (probably even more so now in the wake of the Citizens United decision).

We're going to see a lot more 501(c)(4)s spending a lot of money on ads and other lobbying activities in the next few months.  Quite a few 501(c)(4)s were created in mid 2010 and spent a lot of money trying to influence the congressional elections.  Now they're going to need to spend at least as much money on non-electoral lobbying (and other social welfare activities) before the end of their fiscal year to make sure they meet their 501(c)(4) primary purpose requirement.  We'll see a similar increase in lobbying ads in anticipation of the 2012 presidential and congressional races as a host of old and new 501(c)(4)s try to make sure they've done enough social welfare spending to counterbalance the electoral spending they're going to do.




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