Cutting to the Heart of Nonprofits' Political Activities
A leak of documents allegedly produced by the Heartland Institute, a libertarian think tank organized as a 501(c)(3) institution, is just the latest contribution to the controversy surrounding politically active nonprofit organizations as the 2012 elections approach.
The Heartland Institute bills itself as a "national nonprofit research organization dedicated to finding and promoting ideas that empower people." Some of the leaked documents – which include a fundraising plan, a budget, and materials for a February 2012 board meeting – suggest that its actual work may be more than just research and idea promotion.
On Feb. 20, Heartland released a statement acknowledging that most of the leaked the documents were genuine, while alleging that a project strategy memo was a fake.
The fundraising plan notes that Heartland, as part of "Operation Angry Badger," has been "following the Wisconsin debate [over legislation stripping public employee unions of collective bargaining rights] closely," and then goes on to note that:
The recall elections of 2012 amount to a referenda on collective bargaining reform at the state level, making them of national interest. Successful recalls would be a major setback to the national effort to rein in public sector compensation and union power. Heartland is the largest and most influential national free-market think tank in the Midwest, so we are in the right place and with the right resources to help defend and secure Wisconsin's recent gains.
Heartland says it is "contemplating five projects" as part of Operation Angry Badger, including "recruit[ing] and promot[ing] superintendents who support Act 10 [the law that stripped collective bargaining rights from public employees]." In Wisconsin, the state Superintendent of Public Instruction is a nonpartisan official who is elected every four years, while local superintendents are appointed by local, elected school boards.
The fundraising plan also notes that, so far, the organization has not "yet attempted to raise funds from businesses with a financial interest in fracking" to support its work advocating for hydraulic fracturing. However, Heartland plans in 2012 "to correct that oversight and approach dozens of companies and trade associations that are actively seeking allies in this battle."
The organization denounced the release of the documents, and while the security breach and the damage to Heartland's credibility and reputation are likely driving most of its outrage, the group's leadership may also be concerned about its status as a 501(c)(3) organization.
The laws regarding 501(c)(3) organizations' political activities are complicated, but the Internal Revenue Service (IRS) has clearly stated that (among other things), a 501(c)(3) "may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates" and "must not be organized or operated for the benefit of private interests." Very little else about the rules defining and regulating nonprofits' political activity is clear – in fact, the basic "facts and circumstances" standard is widely acknowledged to be vague and difficult to apply consistently.
At least one whistleblower has asked the IRS to examine whether Heartland's activities violate the restrictions imposed by its status as a 501(c)(3) charity. If questions about Heartland's or other 501(c)(3)'s political activities during the 2012 election become a subject of public debate, they will stand alongside questions about the proper roles of 501(c)(4), 527, and "superPACs" (independent expenditure-only political action committees). Concerns about whether and how nonprofits are engaging in political activity are nothing new to our political system. However, the onslaught of political spending unleashed by the Citizens United decision may have made them more urgent.
As the election approaches, the IRS has not made its position on nonprofits' political activity clear. To the contrary, it has been sending conflicting signals for the past several months. The Political Activities Compliance Initiative, run through the Exempt Organizations office, was quietly wound down. The Services and Enforcement division announced that it would investigate whether major donors to 501(c)(4)s should have been paying gift taxes – then dropped the effort. Senators from both sides of the aisle have gotten involved, with dueling letters either urging the IRS to initiate investigations into nonprofits' political activities or alleging that the investigations could show political bias.
With a hotly-contested election looming, it is difficult to imagine that the IRS will wade into the fray by clearing up the rules or attempting to flag anything other than a blatant violation of the rules. It is clear, however, that the calls for change are louder, more multi-layered, and coming from more corners of the political arena. Perhaps soon, even the Heartland Institute will acknowledge that additional clarity from the IRS about which activities in what amounts are permitted under the law will help all nonprofits better understand their rights to speak and act on important public policy issues.