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501(c3), 501(c4), 527s and PACs - a quick primer before the General

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Political Heretic Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 05:11 AM
Original message
501(c3), 501(c4), 527s and PACs - a quick primer before the General
Edited on Thu Feb-21-08 05:24 AM by Political Heretic
PLEASE - I took to the time to do this, purely because I thought it might be helpful to others. The boards are moving pretty fast these days, so PLEASE give me some kicks and recommends along the way. There's a little bit of ego, in the sense that this took a long time and I don't want it to feel like wasted effort.

PLEASE - ADD CORRECTIONS OR ADDITIONS. This is my limited knowledge from working in a 501(c3), 501(c4) and PAC (never worked in a 527).

As we near the General Election, its going to be important to understand the difference between 501(c3), 501(c40, 527 and PAC organizations. I'm this is pure review for bunches of people, but in case anyone is confused about what these organization types are and what kinds of political activity they can engage in, consider this a primer:


501(c3)s are non-profit organizations that fall under a certain tax designation - that is where the number and letter identifier comes from. The key point to remember is that 501(c3)s are tax exempt and donations to 501(c3)s are tax deductible. Many people think of religious houses of worship when they think of 501(c3)s and they would usually be correct. But more importantly for election year purposes, 501(c3)s include non-profit corporations or institutions that are formed for the purposes of charity and public education among other things.

Because 501(c3)s are tax-exempt, there are stronger limits to what they can do. But its complicated, so you should read carefully if you're not already familiar. It is not correct that 501(c3)s cannot engage in any political activity. So be careful when you hear someone telling you that. I'll try to explain:

501(c3)s are prohibited from most campaign activities - activities that are designed to directly effect the outcome of an election. Please note this is true for both human candidates and ballot issues. The complexity begins: they are allowed to engage in a limited amount of lobbying, and the exact amount allowed is vague. The law says that no substantial part of the organizations budget may be used for lobbying, and there are various convoluted tools to calculate whether an organization's lobbying expenditures are under the cap. But keep in mind - some 501(c3) organization with a hundred million dollar budget could easily spend millions of dollars on lobbying and not be breaking the law even as a tax exempt organization.

Additionally, there is another grey area. 501(c3)s are allowed to engage in "public education." Public education can look an awful lot like political advocacy, except for the fact that its not specifically endorsing a candidate and / or not specifically telling a voter how to vote on a particular issue. So for example, a 501(c3) could organize and host multiple "educational" rallies in which they list all the reasons why being gay is a sin, and why marriage needs to be protected in a year when there is a marriage amendment on the ballot and not be breaking the law until they say "go vote YES on x Bill." Lame, huh?

An example of a 501(c3s) are the Center for American Progress. Typically anything with "foundation" in the title is a 501(c3). However, in this case the same group also has a 501(c4) called the American Progress Action Fund. Why have two separate designations in the same organization? We'll get to that next.

Summary: 501(c3)s are non-profits, tax-exempt and donations to them are tax deductible. As a rule, the are not allowed to engage directly in election influencing. Their primary roles are public education, charity, research, etc. However, they can engage in limited lobbying expenditures and limited political advocacy if they do it carefully.


501(c4)s differer in that they are formed for the purposes of social advocacy, and most importantly, there are no restrictions on the amount of their budget they can spend on political lobbying. Donations to 501(c4) organizations are not tax deductible. Important point: many, many 501(c3) organizations also have 504(c4) wings as well. The ACLU Foundation, also has what is commonly thought of by the public as the ACLU - they are two distinctly designated segments - the 501(c3) and the 501(c4).

To use our earlier example, the Center for American Progress is a 501(c3) and engages in public education and research. The American Progress Action Fund is a 501(c4) and is the political advocacy wing of what most people usually just think of as "The Center for American Progress." The Action Fund puts out the position blog, it can lobby either through advocacy advertising or with lobbyists on Capitol Hill. If it seems to you like having a 501(c3) and a 501(c4) essentially function as the same organization kind of defeats the point of separating them - I wouldn't disagree with you.

Another thing to remember is that 501(c4)s are usually more permanent organizations. They share some similarities with PACs and 527s, but there are some differences. You might not have known it, but which I often here described as a 527, is actually a 501(c4) organization. It has not 501(c3) companion (that I am aware of) so remember that 501(c4)s can stand on their own. Because 501(c4)s are permanent organizations, they don't come under quite the same election laws as PACs do, although they have a few more limits on exactly what kind of "campaigning" they can engage in. Clear as mud?

Summary: when you think 501(c4)s think lobbying and public education (moveon's Petraeus Ad is considered a "public education" piece - educating the public on their perspective on an issue). Donations to 501(c4)s are not tax deductable, and they do not have limits on how much of their budget can be spent on lobbying activities.

Political Action Committees (PACs)

Political Action Committees, or PACs are damn complicated. The exact definition of a PAC is a combination of both federal and individual state law. Some states do not even have PACs as a formation option. But many states do. The best basic definition I can give is PACs are usually any size of private group that is organized for the specific person of electing or defeating a candidate or passing or defeating a specific piece of legislation.

The campaigns of our current candidates are almost certainly PACs. Obama For America, for example, is a PAC. In 2006 when marriage amendments were on so many state ballots, PACs formed to defeat those measures - Fair Wisconsin is one example of a PAC that formed for that specific purpose. It is also not around any more. PACs form around a specific political goal and usually either evolve into a permanent 501(c4) (or 501(c3) or disband.

Rules governing federal PACs are different thant State PACs where the laws may vary. But there are certain things in common. PACs fall under election commission reporting laws. In my state, PACs must submit disclosure reports (called the sunshine reports) of all their donors and donations - if you donate to a PAC your personal information will become a matter of public record. All donations over 49.99$ must be reported, and all PAC expenditures must also be reported. In addition there are a lot of other paperwork filings that go to the Secretary of State (in my state.)

The benefits of PACs is that they can flat out say, "Vote For Joe." or "Vote NO on HJR3" and they can spend whatever they can raise on doing that very thing.

Summary: Political Action Committees (PACs) are short-term, private organizations that come together around the election / defeat of a candidate or the passage / defeat of a specific piece of legislation. They fall under strict election laws, though the specifics vary if the PAC is a state and not federal PAC. Donations to PACs are a matter of public record, as all PAC contributions and expenditures are reported, and published every few months. PACs can spend whatever money they can raise on any kind of direct political action.


527s are where the real mess begins to happen. Whereas PACs can work directly and do anything to influence an election but are regulated by the Federal Elections Commission, 527s can only indirectly influence an election in exchange for being completely unregulated by the FEC. What does "indirectly" mean? Basically, it means "issue ads." That seems to be the biggest thing 527s do.

527s can raise money basically any way they want, spend basically as much money as they want, but they can not tell a person how to vote. In other words they cannot say "Vote for McCain this November. However, they can run an entire ad celebrating all the amazing virtues of conservatism and say "please vote with these issues in mind in November." Or, the can totally trash another candidate and say, "remember this when you vote in November." They do this because trashing another candidate can be defined as an "issue" and they don't specifically tell you how to vote, and are not directly affiliated with a specific campaign.

Sometimes 527s can do things that feel "fair." For example, if there was a 527 called Citizens for Health Care Reform, they might run and honest-to-god issue ad, talking about how broken our health care system and how urgent health care reform is. The ad would basically say, "hey we feel like this is one of the most important issues facing Americans today, and we urge you to vote with this issue in mind in November." That's a pretty pure issue ad. Of course, that's not how most 527s work. Most 527s are attack groups dedicated to trashing an opponent under the guise of an "issue ad."

Opinion time: 527s basically suck. They are not regulated, and they cheat the system so bad that they basically end up running what are clearly candidate ads and direct advocacy ads under the pretense of being "issue ads." They can spend infinite amounts of money with little accountability. And its more difficult (though not impossible) to trace their funding.

Summary: 527s are not regulated by the FEC, can raise as money money as they want and spend as much money as they want, as long as their ads are considered "issue ads" and not ads directly telling people how to vote or endorsing a candidate.

I hope this helps. Again, please add corrections (I'm sure there are some to be made) or additions, and please recommend this for the benefit of others.
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Angela Shelley Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 05:34 AM
Response to Original message
1. Thank you for the clarification!
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legin Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 06:59 AM
Response to Original message
2. Great stuff Political Heretic !!!! thnx n/t
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meegbear Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 07:33 AM
Response to Original message
3. Ex-cellent!
Thanks! :hi:
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Rosemary2205 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 08:06 AM
Response to Original message
Good work. Thanks!!

K R and saved!! :)
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Rosemary2205 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 08:11 AM
Response to Reply #4
5. And a question - were 527's created and/or given a push by McCain Feingold??
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Political Heretic Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 05:45 PM
Response to Reply #5
12. I didn't have clear knowledge of this, but wiki has a good answer:
It also gives even more detail about 527s including info of a law passed in 2004 requiring that 50% of their money expenditures be from "hard money donations" (regulated FEC donations) -- didn't know that had changed.

I can't edit my original post anymore, but this means that there are some "regulations" the amount of money they can spent. The "soft money" they can spend is limited by however much "hard money" they raise.

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End Of The Road Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 08:32 AM
Response to Original message
6. May I add 501(c)(6) to the mix, please?
501(c)(6) organizations are non-profit corporations but they are not charities. A good example is trade associations. Are you a plumber? You may belong to some sort of plumbing or subcontractors association, which would be a 501(c)(6).

You've heard candidates say that lobbyists represent hard-working Americans. That's where the 501(c)(6) often comes in, because they have PACs. The PACs are legally separate from the corporation and any dues you pay to your association (except see below), and you can't contribute corporate money to the trade association's PAC. But many associations will hit up individual members for personal donations to the PAC to represent the members' interests at the local, state or federal level. The association's leadership oversees the lobbying efforts on the members' behalf.

Don't discount some of these -- because they can be hugely powerful.

Now about your dues: You may get a notice only part of your dues to an association are deductible as a business expense. If your association is engaged in lobbying, the percentage of the overall activity of the association that is lobbying activity determines the amount you may not deduct. However, some associations pay additional "lobby tax" so that their members can deduct the full amount. Lemme tell you, I used to have to calculate this "nondeductible dues percentage" for a small trade association and it's a nightmare.

But again, trade associations DO represent the interests of workers, and depending on their number of members and the balance in their PAC, can wield enormous power.
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Political Heretic Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 05:46 PM
Response to Reply #6
13. Excellent - thank you!
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pleah Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 09:34 AM
Response to Original message
7. K&R Thanks.
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JVS Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 09:42 AM
Response to Original message
8. Kicked, rec'd, and bookmarked.
Great post
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sicksicksick_N_tired Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 09:57 AM
Response to Original message
9. K & R! Particularly relevant in the "bible belt".
If ya' know what I mean. ;)
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Jim Lane Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 10:18 AM
Response to Original message
10. Small correction re PACs
Most PACs are, as you say, devoted to a single candidate or ballot issue. In addition, however, there are "leadership PACs". A politician sets up a leadership PAC, solicits donations for it, and makes contributions to other politicians' campaigns. The leadership PAC can't make contributions to the politician who set it up. According to, these leadership PACs handed out more than $40 million in the last election cycle (2005-06).
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Political Heretic Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 05:47 PM
Response to Reply #10
14. Thank you for the clarification!
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Indenturedebtor Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Feb-21-08 10:34 AM
Response to Original message
11. Thanks I feel a little more clear about this now
Much appreciated!
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Political Heretic Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Feb-23-08 05:08 AM
Response to Original message
15. kick
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