Nonprofit Law Prof Blog

Aprill on the Tax Bill and 501(c)(4) Social Welfare Organizations in The Hill

Professor Ellen P. Aprill of Loyola Law School, Los Angeles has published an interesting op-ed in The Hill, arguing that the tax bill may cause an increase in the number of organizations that opt for 501(c)(4) social welfare status, rather than 501(c)(3) charity status. Donations to 501(c)(3) organizations are potentially tax deductible, but the organizations cannot engage in substantial lobbying or any campaigning. While donations to 501(c)(4) organizations are not deductible, the organizations can engage in substantial lobbying and at least some campaigning (arguably as much as 49% of their activities).

Aprill observes that the tax bill's increase in the standard deduction will significantly decrease the number of taxpayers who itemize. Because only itemizers benefit from the charitable contribution deduction, many commentators have observed that charitable giving may decrease significantly.

But Aprill observes that if non-itemizing taxpayers continue to give, they should also become indifferent between donating to 501(c)(3) charities and 501(c)(4) social welfare organizations. This may encourage more organizations to choose 501(c)(4) status, rather than 501(c)(3) status, especially because the choice would come with the ability to engage in considerably more political speech. In other words, the tax bill may (inadvertently?) lead to more 501(c)(4)s, more lobbying, and more campaigning.

It will be interesting to see how Aprill's observation plays out in practice. I can only imagine that at least some additional organizations will choose 501(c)(4) status. But there are benefits to 501(c)(3) status other than the charitable contribution deduction. Among other things, most foundations can only make grants to 501(c)(3) charities, and that is a larger source of funding for many organizations than individual donations.

UPDATE: Professor Aprill observes that private foundations can make grants to 501(c)(4) organizations by exercising expenditure responsibility, which is not necessarily a significant burden on the foundation or the use of its granted funds, so the benefits of 501(c)(3) status may be more limited than they appear at first glance.

Brian L. Frye

2018 Outstanding Nonprofit Lawyer Award Nominations

Nonprofit Organizations Committee

 

FOR IMMEDIATE RELEASE

CONTACT: David A. Levitt

(415) 421-7555

levitt@adlercolvin.com

Seeking Nominations for the

2018 Outstanding Nonprofit Lawyer Awards

WASHINGTON, D.C.—February 27, 2018:  The Committee on Nonprofit Organizations of the American Bar Association’s Business Law Section is calling for nominations for the “2018 Outstanding Nonprofit Lawyer Awards.” The Committee presents the Awards annually to outstanding lawyers in the categories of Academic, Attorney, Nonprofit In-House Counsel, and Young Attorney (under 35 years old or in practice for less than 10 years). The Committee will also bestow its Vanguard Award for lifetime commitment or achievement on a leading legal practitioner in the nonprofit field. Nominations are due by April 2, 2018.

For a nomination form, please go to the Nonprofit Lawyer Awards Subcommittee's webpage and scroll down to find the form under "Nonprofit Lawyer Awards Documents" on the right hand side.  You will also find a list of prior award recipients. The Awards will be announced at the Business Law Section's Spring Meeting in April.

Send nomination forms by April 2, 2018 to:

David A. Levitt
Adler & Colvin
235 Montgomery Street

Suite 1220
San Francisco, California 94104
(415) 421-7555
(415) 421-0712 (fax)
levitt@adlercolvin.com