Filthy Lucre: Or, How Non-Profits Get Money but Lose their Souls
No Politics Please, We’re a Non-Profit
Until recently, the only thing I knew about non-profits was that they are poison for radicals. To paraphrase Gil Scott-Heron: The revolution will not be led by a 501(c)(3). Once you start hunting for filthy lucre (aka foundation support), militancy is out; it offends funders and alienates the leaders of other non-profits with whom you must collaborate. Your politics drift toward the center. And, while your table manners and dressing style might improve, your sex life will not. If you’re single and hoping for a date with a hot anarchist-atheist-vegan, you’re out of luck.
So it was with trepidation that in 2017 I agreed to co-found, with my wife Harriet, an environmental justice non-profit with the hard-to-pronounce name, Anthropocene Alliance. Given that my sex life was what it was, I focused my concern on the matter of protecting the effectiveness of our work and the sanitation of my soul while becoming part of a 501(c)(3), operated according to Title 26 of the United States Code as authorized by the U.S. Congress. The challenges are many and they start as soon as you examine applicable tax law.
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office…. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
It’s that last sentence which commands attention; it’s what’s known in the non-profit world as “the death penalty.” Revocation of non-profit status means you lose your funding: Game over. Few foundations or wealthy individuals make charitable contributions to non-profits without assurance of a tax deduction. And while “intervening in a political campaign” may not be the main occupation of a non-profit, doing so can advance the organization’s mission; it can even mean the difference between success and failure.
Here’s an example: About a decade ago, I was involved in an effort to close Illinois’ only supermax prison, Tamms Correctional Center, located near the Missouri border. The place was notorious for its antiseptic brutality, like Camp Six at Guantanamo Bay. The isolation drove prisoners mad, but only a few state legislators were willing to help us. Prisons are big business and valued employers in small towns, and we were just a ragtag group of artists and activists operating on a shoestring budget. But we knew how to canvas for votes. I remember one especially frigid, Milwaukee morning going door-to-door with two others in support of one of our legislative allies, the late Rep. Eddie Washington Jr. He won his race and never forgot our help.
We campaigned for other legislators too, and it’s one reason we were ultimately successful in closing the prison. The other reason is we were great at lobbying. That meant meeting legislators in their district offices, in the “lobbies” outside the Senate and House chambers in Springfield, and even after hours in nearby restaurants and bars. Politics is best done face to face.
But lobbying by 501(c)(3) organizations is also prohibited — though not entirely. Here’s the confusing language:
In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying….)
Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying.
There follows a list of permitted activities, most of which fall under the category “educational.” It’s a potentially significant loophole. In theory, Fidel and Che were educating campesinos in the Sierra Maestra mountains of Cuba, but few non-profits are willing to test the law. And in the absence of clarity, most simply forgo lobbying altogether, leaving the field to the K Street professionals.
The Conservative Bias of Tax law
None of this is accidental. The legislative and regulatory history of the law of charities reveals that from the beginning it was intended to be politically disabling — for the left. As early as 1917, Congress passed a law providing tax deductions for contributions to “religious, educational and scientific” organizations. But in 1920, amid the Palmer Raids and a national red scare, the Department of the Treasury ruled that: “associations formed to disseminate controversial or partisan propaganda are not educational within the meaning of the statute.”
Two years later, the Solicitor General interpreted Treasury’s ruling to allow a tax break for an organization supporting alcohol prohibition but deny one for a group that “encouraged the study of labor conditions in the United States with a view of promoting desirable legislation.” In 1930, Treasury denied charitable status to the socialist League for Industrial Democracy because it advocated “drastic political and economic changes which are directly at odds with existing economic theories and practices upon which society is founded.” The League much later spawned Students for a Democratic Society (SDS) which in turn gave birth to the Weather Underground. The latter weren’t 501(c)(3)s either.
Legal historian and environmental lawyer Oliver Houck summarized the early history of non-profit law this way: “If an organization’s agenda was in the mainstream of public opinion, it could include a healthy element of political action. If, however, its agenda proposed ideas not (yet) widely accepted, it would not be recognized as a charity, even though no political action was involved.”
Revisions to tax law in 1934, 1954, and 1969, followed much the same path, although with some detours. It was Texas Senator Lyndon Johnson who in 1954 was responsible for the amendment to section 501(c)(3) of the tax code prohibiting charitable organizations from participating in political campaigns. A candidate opposing his re-election was receiving funds from a far-right charitable foundation from New York. Without discussion or debate, Johnson inserted a single line into a broader bill authorizing changes to the Internal Revenue Code. And that was that.
In 1969, Richard Nixon narrowed the definition of non-profit foundations and limited their fundraising options. But being a less subtle political operative than Johnson, he failed in his larger plan: The following year, Nixon’s IRS published a regulation that excluded from tax protection organizations “opposed to specific industrial undertakings that may affect the environment,” or that “litigate on behalf of consumers specifically.” (The latter was a tax aimed at Ralph Nader.) Liberal senators, including future Vice President Walter Mondale, loudly protested this clearly partisan revision to the tax code. “It is time for IRS officials,” the NYTimes thundered, “to relax their tender solicitude for the big polluters and come to the rescue of the ordinary citizens who pay their salary.” The controversial provisions were stripped from the code.
Two other episodes in the legal history of non-profits should also be briefly mentioned. In 1983, in a case before the Supreme Court called Regan v. Taxation with Representation, the latter charged that IRS rules against lobbying by tax exempt organizations were violations of First and Fifth Amendment protections of free speech and due process. The court decided against the plaintiff, stating that “a legislature’s decision not to subsidize the exercise of a fundamental right does not infringe that right.” In other words, the government may choose sides, granting tax exemptions to organizations it likes and denying it to those it doesn’t. That position was reaffirmed in 1991 by the Supreme Court in Rust v. Sullivan. In a decision written by conservative Chief Justice William Rehnquist, the court stated that the executive branch could deny federal funds to any organization that offered abortion information. Doing so, they affirmed, was not an abridgement of free speech because doctors at family planning clinics “remain free to say whatever they wish about abortion” outside their place of business.
Though Rust didn’t concern 501(c)(3) status, it reaffirmed what had been true since the onset of U.S. lawmaking on charities: Through its policy on non-profits, the government was free to pick sides; some individuals and organizations would have freer speech than others. To be sure, there are limits to this power, not least bureaucratic uncertainty about what to support and what to oppose — preferences that can change with each election. And enforcement regimes may be strict or lax depending upon leadership. But, in practice, few non-profits push against the boundary of political prohibitions for fear of “the death penalty.”
Non-profits that want to engage in partisan politics do have another option however: organize as a 501(C)(4). The latter may support candidates for political office and lobby, but the contributions they receive are not tax deductible. This provision of the tax code, like the rule against supporting political candidates, came about almost by accident. A single aside in a concurring opinion in Regan v. Taxation, intended to justify the court’s denial of tax exemption, essentially re-wrote the tax code allowing non-profits to establish parallel 501(C)(4)s. They could engage in partisan politics and even share the same leadership, staff, and organizational infrastructure, just so long as they didn’t receive tax-exempt donations. Non-profits with a large member base—such as the NRA and the ACLU—can thrive as 501(C)(4)s. The NRA has even set up an ancillary 501(c)(3), the NRA Foundation, that engages—so it claims—in purely educational, charitable activities. Smaller non-profits like ours, dependent on grants and foundation support, couldn’t easily survive as 501(C)(4)s.
Whether registered as tax deductible charities or not, all voluntary organizations need money. Activism takes time, which means money for salaries. And then there is the cost of renting meeting rooms, travel, communication, food, printing, posters, T-shirts, buttons, musicians, and a million other things. In the case of Anthropocene Alliance, our communities need professional expertise—engineers, hydrologists, lawyers, computer technicians and grant writers—to help them understand and respond to their risk from flood, fire, or toxic industry. And needing money means we face an obstacle even more fundamental than conservative tax policy: The Iron Law of the Gift.
No Gifts Are Free.
Cross-cultural study of gifts (“prestation”) is one of the bases of the modern discipline of anthropology. For example, in Argonauts of the Pacific (1922), Bronislaw Malinowski studied the gift-exchange of shell-disk necklaces among Trobriand Islanders scattered across thousands of miles of the Pacific Ocean. He argued that these ritual transfers—nobody keeps the gifts very long—serve the purpose of establishing hierarchies, creating alliances, and maintaining communication. They are the basis for productive and gratifying relationships across time and space. Since the time of Malinowski, anthropologists of every stripe—functionalist, structuralist, linguistic, Marxist, feminist etc.—have examined gift-giving in multiple cultures and societies and determined that gifts are, at the very least, “entangled,” meaning their significance changes according to context. In addition, they can move back and forth between alienable commodities (something bought and sold) and singular objects (which can be re-gifted but never sold).
Non-incorporated groups, 501(c)(3)s, and 501(C)(4)s, all must wrestle with the ethics and entanglement of gifts. And “every exchange,” as the anthropologist Marshall Sahlins wrote in Stone Age Economics, “embodies some coefficient of sociability [that] cannot be understood in its material terms apart from its social terms.”
Take for example, what Sahlins called “negative reciprocity” whereby individuals demand a repayment greater than the original value of a gift. Here’s a hypothetical: The Dogooder Foundation gives a non-profit $1 million to support the creation of bioswales and rain gardens as part of a flood mitigation effort. The work is performed but the donor is unsatisfied—its boss wants the gardens to be called “The Dogooder Foundation Meadow.” The request seems harmless enough and the non-profit agrees. In this case, however, the return on investment is arguably greater than the value of the original gift—not in the form of money but of public legitimation or prestige. In future generations, the public, local politicians, company officials and shareholders will all associate the Dogooder name with sound environmental stewardship, regardless of its actual corporate record. In the worst instances of negative reciprocity, the repayment grants moral license to continue to operate in unethical or environmentally harmful ways while at the same time burnishing a reputation for civic responsibility.
There are lots of examples of this. U.S. zoos are mostly non-profits, dedicated to education and the conservation of species. But their chief funders include organizations engaged in activities that are species-destroying. The Smithsonian National Zoo, the San Diego Zoo and the Wildlife Conservation Society (the five NYC zoos) include among their sponsors Boeing, Chase, ConocoPhillips, Land O’Lakes, Charles Schwab, Bank of America, Alaska Airlines, Chevron, Citi, Dow and Goldman Sachs. All of these are animal killers, though rarely recognized as such. Since the 2015 Paris Climate Accord, Goldman Sachs has invested more than $100 billion in fossil fuels. In 2020, Chase spent over $51 billion in fossil fuel financing. The resulting greenhouse gasses are destroying animal habitats and driving extinctions. Those corporate sponsorships, in addition, have vitiated the conservation and protection messaging of American zoos; visitors will search in vain for educational messages that call out specific oil companies, airlines, meat processors, and investment bankers for their role in the global warming and extinction crisis. (For more on this, see my book with Sue Coe, Zooicide.)
Dozens of U.S. environmental groups have in the last decade received funding from corporate polluters such as MacDonald’s, Blackrock, Coca-Cola, Alcoa, General Motors, PSE&G, and Amazon. Others have received donations from hunting clubs, timber, and biomass companies, or profited from meaningless carbon offsets paid for by large corporations. The corruption is hardly unique to the U.S. In London, the Science Museum last year received a significant donation from Shell Oil for an exhibition about climate change! Some large environmental organizations, including 350.org and Friends of the Earth have good records of resisting corporate influence. Since an onslaught of bad press in the late 2000s for accepting millions from the natural gas industry, the Sierra Club, has become a much more progressive organization and instituted strict rules about corporate gifts.
So, what’s the best course for an environmental justice organization to follow? Abjure 501(C)(3) status and pursue politics on a shoestring; or accept the contradictions that come with gifts, and remain mute about pending legislation and elections? We chose the latter course but are exploring the formation of a parallel 501(C)(4). In the meanwhile, we have begun to draft a set of internal rules we can live by, informed by our own experience, knowledge of U.S. legal history, the Law of the Gift, wariness about “negative reciprocity,” and the scale of the crisis.
1) Don’t take money from a corporation, individual or foundation if it will undermine the mission of the non-profit. The point seems self-evident but isn’t quite. We recently had a conversation with a philanthropist who supports natural gas as a clean “bridge fuel” (it’s not), and nuclear energy for being zero carbon (it’s not). He wanted to collaborate with us to help flood ravaged communities along the Atlantic and Gulf coasts – a worthy endeavor right in our wheelhouse. We had visions of eight figure checks dancing in our heads but felt obliged to politely tell him our position on fossil fuel and nuclear energy as well as our broader support for systemic or structural change. We told him in addition, that his strategy to “quietly work within the system” had failed to achieve results nearly commensurate with the scale of the crisis. He sent us a low, five figure check. We happily cashed it.
2) Don’t take money from any individual or organization that requires you to establish new programs contrary, or even ancillary to your original goals. Again, that seems an easy call, but money has a way of clouding vision. Anthropocene Alliance is the nation’s largest coalition of frontline communities fighting for climate and environmental justice. Many of our communities have residents who experience food insecurity, but if a reputable donor offers us a million bucks to set up soup kitchens we’ll say: “Thanks, but please give it to local food banks in the neediest communities.” We can’t do everything.
3) Accept good advice when it is offered, even if by a funder. Soon after our establishment in 2017, the Kresge Foundation said to us: “We like what you are doing and we want to fund it but think you should focus your efforts even more than you already are on underserved, environmental justice communities.” They were right, and we did! But here’s the hard part: Knowing whether it’s only the lure of the money that makes an idea seem smart. Rich and clever don’t necessarily (or even usually) go together.
4) Don’t accept support from anybody that expects you to send business their way. Again, that’s an easy call; to do otherwise, is simple corruption. But what happens when a member of your board offers services you need at a discount rate? I’d say the answer should still be “no”: too messy. But it’s not a slam dunk; the value of the discounted services may be considered a valid donation to the organization.
5) Refuse gifts from major polluters, or any entity that’s widely associated with damage to the environment. Also reject gifts from political or corporate antagonists of environmental organizations or its allies. To do otherwise invites charges of hypocrisy, and conflict of interest. BUT…
6) Remember that money doesn’t care who owns it. Money is the one thing poor people lack, and if you can find a way to transfer it from rich people to poor people, that’s a good thing! In the case of grants and donations channeled directly to community members, the origin of the money (assuming it’s legal!) is less important than money that comes to us. Knowing how to find and disperse money—as well as when to refuse it—is the essence of non-profit wisdom.
Cleansing the Temple
In Quenten Massy’s famous painting, The Money Lender and His Wife (1514), the artist shows us one of the new class of businesses that emerged in Antwerp in the decades following the eclipse of Bruges as the leading port city in northern Europe. Products from all over the world, including silk and porcelain from China, pearls from the India Ocean (depicted at the bottom left of the picture), and gold and silver from the Americas began to flood into the city, and with them arose the need for money lenders to facilitate the exchange of money and goods, and painters like Massys to memorialize the transactions. But the painter does so with some trepidation. While the man weighs the value of specie (money whose value derives from the metal from which it is made), his wife turns away from her prayer book—opened to a page showing the Virgin Mary and Christ child—to gaze wide-eyed at the variety of coins from across the known world. Her sacred devotions are disrupted by the exchange of filthy lucre.
That wider conflict between faith and money is also signaled by the convex mirror in the foreground which shows the money lender’s client reading, while a leaded glass window above provides a view to a blue sky and church steeple in the background. The proximity of church and money lender invokes the New Testament narrative (found in all four gospel books) of “Christ Chasing the Money Lenders from the Temple,” (also known as “Cleansing the Temple”), a subject represented by Rembrandt in his etching shown at the start of this essay. The moral lesson again is obvious – that a focus on worldly matters risks alienating people from God. A Netherlandish proverb of the day states: “a usurer, a miller, a money-changer, and a tax-collector, are Lucifer’s four evangelists.” (Millers were sometimes seen as swindlers, profiting excessively from the processing of grain into flour.) That the two main figures in Massys’ painting are wearing costumes from almost a century earlier—the age of Jan van Eyck—further transporting the image into the domain of religious metaphor and away from historical reportage. It isn’t just money that’s being weighed here, it’s souls.
Massys’ painting was created at the dawn of a capitalist era, the end of which—for better or for worse—is approaching. But the same association of money with sin or filth still governs the political culture of the non-profit world. On the one hand, the U.S. government has determined that using charitable contributions for political purposes is corrupt, thereby disabling non-profits—particularly those on the left—from doing some of the essential work necessary to forestall environmental catastrophe. And on the other hand, non-profits, recognizing the cruel fate (“the death penalty”) meted out to anyone who violates IRS rule—as well as the risk of negative reciprocity—has quietly expanded the federal ban on campaigning and lobbying to a blanket proscription of all politics. What is needed instead is not so much the partisan politics of state and federal elections and lawmaking, as the mass politics of the street: protests, student walk-outs, boycotts, strikes, sit-ins and mass rallies in every city, to slow and then stop the current politics of environmental extermination. That’s what revolution will look like, and there is nothing in the tax-law to stop it.
Stephen F. Eisenman is Professor Emeritus of Art History at Northwestern University and the author of Gauguin’s Skirt (Thames and Hudson, 1997), The Abu Ghraib Effect (Reaktion, 2007), The Cry of Nature: Art and the Making of Animal Rights (Reaktion, 2015) and many other books. He is also co-founder of the environmental justice non-profit, Anthropocene Alliance. He and the artist Sue Coe and now preparing for publication part two of their series for Rotland Press, American Fascism Now.
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