WHEN A 501(C)(3) GOES 501(2)(FAR)
Most 501(c)(3) non-profits follow regulations dictating their existence, and abide by a general disposition of openness and inclusiveness. likewise, Most Neighborhood and Community Councils echo these values. but what if neither do, with both focused on the same outcome, creating an alliance shrouded in mystery and fortified through bully tactics?
Your local Council — whether it be Neighborhood, Community, or Parish — decides to take a decidedly partisan stand on a hot-button matter within your community. This could be a land development, a social cause, or political stand. You suspect several members of the Council are directly aligned with an activist non-profit organization inflexible in the pursuit of their objectives. You object at a Board meeting regarding this Council slant, and are met with a subsequent verbal tarring on social media platforms by those aligned with the non-profit. The Council President or Chair sends you an email, basically daring you to take your “accusations” to a higher level. The Council is self-governing, and the local municipal Department overseeing the Council system is, for all intents and purposes, a useless bureaucracy concerned only with their aspirations in achieving Bureaucratic Enlightenment: The appearance of work equates to actual work only in the eyes of the benighted.
So, what to do? The non-profit will defend their ground no matter the cost, and the Council appears to mirror the sentiment to the point of abject complicity.
Solution one is to simply walk away. After all, it’s not YOUR fight. Yet that stance of non-involvement is what’s brought our society to the precipice of civil disorder. Those owning the absolute belief their words shall be unchecked, their actions untested, move forth with a debilitating hubris that grows stronger with each Solution two, is to do something about it.
WHO, WHAT, WHEN, WHERE, WHY
We already know the what, the why, possibly the where and the when. But the “who” can get tricky.
In a call with the United States Internal Revenue Service’s Exempt Organizations Department, it was emphasized that the IRS isn’t about controlling the operation of the organization, only the handling of the financials accumulated and spent. In fact, unless it’s addressed on Form 990 or 990 EZ, or if the organization amends its organizing documents, the IRS at any given moment is unaware of any names associated with that organizations’s officers. As to who is considered an officer, the IRS does not differentiate between the Executives or Board of Directors
As for U.S. state requirements, they obviously differ. Here is California, the Office of the Secretary of State requires the filing of annual Statement of Information forms. On it lists only the Executives (CEO, CFO, Secretary) but not the Board.
As for the non-profit itself, there is no federal requirement to publicly disclose any officers of a private organization, nor the minutes of any Board of Directors meeting, unless dictated by court order. And, since the Board of Directors and Executive Officers may have changed since the organization’s IRS Form 1023 or 1024 application for exemption, and there is no federal standard for term length on a Board, any information received from the IRS may be out-of-date. If this process can be metaphorized as a day, then it might be described as “foggy with a visibility of 500 feet”.
TO CAMPAIGN OR NOT TO CAMPAIGN…IT’S NOT EVEN A QUESTION
However, the IRS is quite strict when it comes to a 501(c)(3) campaigning for a political candidate. This is an absolute non-starter, and “may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.” The IRS defines “campaigning” as:“participate in, or intervene in (including the publishing or distributing of statements) any political campaign on behalf of (or in opposition to) any candidate for public office.”
So, would a billboard cheering or admonishing a politician for their stand on a particular matter within the crosshairs of that non-profit count as campaigning? Well, if close to or in the midst of a campaign cycle, yes. This might also apply to websites and social media posts.
From IRS.gov: The ban on political campaign activity does not restrict leaders of organizations from expressing their views on political matters if they are speaking for themselves as individuals. Nor are leaders prohibited from speaking about important issues of public policy. However, for their organizations to remain tax exempt under section 501(c)(3), leaders cannot make partisan comments in official organization publications or at official functions of the organization.
THERE ARE TWO SIDE TO EVERY COIN
So, what’s one to do with a non-profit possibly taking liberties with its political skulduggery? The best answer: flip the coin, and take a hard look at the governmental side, for on THAT side the sky is a bit more clear.
Every municipality houses some sort of Ethics Commission. In D.C., it’s BEGA (Board of Government Accountability) and within that is the OGE (Office of Government Ethics). In Honolulu and Los Angeles, it’s simply the Ethics Commission.
[In the UK, it’s a bit more complicated when it comes to the association between non-profits and local government. There’s the Committee on Standards in Public Life and its Nolan Principles, but each Council must hold its own Code of Conduct in line with the SPL recommendations. However, a Local Government and Social Care Ombudsman exists to act as a quasi-enforcer of standards]
Regardless, if one suspects malfeasance, the best manner in verifying such wrongdoing is through the municipality itself. It sounds counter-intuitive, since the common thinking is City bureaucracy might be the second most inefficient thing on planet Earth outside of a 1960’s muscle car, but the ONE THING any municipality will move mountains to avoid is a scandal and the costs associated with said scandal, both monetary and repute.
If the City Attorney’s Office believes, after review, that an association exists between the Council and the non-profit which belies public transparency and trust, and If the initial request seeks neither damages nor criminal prosecution, then the Office may seek as quick a remedy as possible. We’re not talking major City Councils, but instead localized community and neighborhood councils. Even then, it can be argued that the City does business as Neighborhood or Community Councils, and thus is (at least in some form) responsible for their actions.
So, what to do?
SET THE COIN ON ITS EDGE
Weighing the benefits and drawbacks of such an undertaking cannot be over-estimated. This includes the temperament of the Council President. If the President didn’t quite understand the rules, nor fathomed the extent of wrongdoing, then perhaps an amicable solution can be found independent of any City involvement. If, on the other hand, said President exudes the grace of Idi Amin, then civil discourse might not be your best option. Assessing the activism of the non-profit is also a gauge to be measured. The more passive, the better chance for a sit down resolution. The more aggressive, then human experience may suggest a preemptive approach to offset any form of intimidation designed to silence such an inquiry. In the latter’s case, getting outside entities involved may help neuter such an organizations reckless behavior, and act as a check against future bullying.
Though little may be achieved in punishing the non-profit (aside form the above-mentioned ban on campaigning), the goal here is to uncouple the non-profit from the local Council. If Board members who are who have recently been directly associated with the non-profit had failed to recuse themselves on votes directly relating to and assisting the non-profit, then those actual motions and any attached documents may be subject to dismissal by the City.
BUT BUT BUT… I DIDN’T KNOW
Even if the Board member was as savvy as Harold Hill, it’d be a tough pitch to transact, with Ethics training in their back pocket and an acute awareness that their non-recusal led to a positive outcome for the non-profit of which they’re associated. This is no sitcom, where simply saying “oops” is followed by a laugh track. The application of a reasonable person test would yield a failing grade, which the Board member unable to commit to any semblance of a logical reason WHY they didn’t recuse when ethics clearly stated they should have. In Los Angeles we have Municipal Code Section 49.5.5.(a):
City officials, agency employees, appointees awaiting confirmation by the City Council, and candidates for elected City office shall not misuse or attempt to misuse their positions or prospective positions to create or attempt to create a private advantage or disadvantage, financial or otherwise, for any person.
Note that the line: “…financial or otherwise…” determines the advantage need not be monetary in value. And, such a failure to recuse, which includes discussion and debate intended to sway vote, could be a violation of the Code. And while the argument “Neighborhood Councils don’t legislate, only advise” seems to have some superficial merit, the fact is all Council members — whether it be City, Borough, Neighborhood, or Community — are elected and appointed officials. The law does not differentiate between tiers of authority: a municipal official is a municipal official.
In short, when you’re an official, it’s your job to know.
