Protest as “charity.”
The line between charity and politics can be extraordinarily blurry. This is problematic, as politics is inherently quarrelsome and divisive, and these are words that very few would use to describe charity. It would also likely come as a surprise to ordinary Americans—the ones ultimately incentivizing the tax-exempt sector—since most people have a rather-solid personal understanding of the sorts of things that are “charitable” in nature.
To illustrate just how easily these two concepts can become intermingled within and related to those activities covered by the Internal Revenue Code’s § 501(c)(3), consider those private foundations that highlight their grantmaking to activist groups engaged in public demonstrations over controversial sociopolitical issues—a phenomenon that might be called “megaphone philanthropy.” Peaceful protest is constitutionally protected and crucial to a functioning democracy, but would Americans collectively consider it to be “charitable”?
Charity and the tax code
Section 501(c)(3) is the nonprofit classification for charities and the private foundations that fund them. The word “charitable” in this context has essentially the meaning that most people would probably assign to it: religious, scientific, educational, assistance to those in need, protecting civil and human rights, etc. Notably, the Internal Revenue Service takes an expansive view of the concept. It has stated that even a group that “advocates social or civic changes or presents opinion on controversial issues with the intention of molding public opinion or creating public sentiment to an acceptance of its views” can qualify as tax exempt under § 501(c)(3).
The specific means through which (c)(3) groups pursue their charitable ends will naturally vary widely, and deference to this eclecticism is generally a good thing. To be overly prescriptive about what charities can do would defeat perhaps their most-important purpose: effectively meeting societal needs and addressing societal problems outside of government.
Still, it is always worth thinking about just how well the actions of any given (c)(3) actually align with Americans’ collective understanding of what charities should be doing. After all, the American people have made a public-policy choice to incentivize charity through the tax code. If large swaths of ordinary people don’t consider some of what is being incentivized to actually be charitable, what does that say about the current state of the tax-exempt sector?
Consider the “grandmother test” articulated by former U.S. Senate tax expert Dean Zerbe. It quite reasonably asks “can you explain [a charitable activity] to your grandmother and have her think, yeah, that’s a charitable activity—where Grandma will say, sure, that makes sense, we’re helping these people. As opposed to, wait, what are we doing, what’s going on here?” In other words, the American people have a pretty-solid, intuitive grasp of what is or is not charitable. The question is: are tax-incentivized charities always doing the sorts of things that Americans would consider to be charitable?
Philanthropically supported protests
The Capital Research Center (CRC), where I work, published a four-part article last week about the Marguerite Casey Foundation—a 501(c)(3) private foundation—and its far-left grantmaking priorities. The article posed an open question as to whether Americans would consider its support of left-wing public policy agitation to be charitable based on their own understanding of that word. Many of the foundation’s grantees advocate dramatic and controversial sociopolitical changes, including through engaging in public demonstrations.
Indeed, to go strictly by the public image projected by both the Marguerite Casey Foundation and its grantees, support of protest activity in the streets and elsewhere would appear to be among the foundation’s very-highest funding priorities. On its website, the foundation maintains a page devoted to what it calls its “core grantmaking.” It explains:
Marguerite Casey Foundation provides general operating grants to leaders of organizations and initiatives with the potential to shift the balance of power in their communities. We primarily support locally-based community organizing efforts focused on communities of people who are consistently excluded from influencing the decisions that shape their lives and futures, and who are excluded from sharing in the rewards and freedoms of society.
This is accompanied by pictures of people demonstrating with their fists in the air, marching with signs, and speaking into megaphones—imagery that appears designed to convey the foundation’s financial support for public displays of sociopolitical dissatisfaction. To a remarkable degree, this also extends to the foundation’s grantees, which publicly portray their own operations in much the same way.
As of May 2024, the Marguerite Casey Foundation listed 56 different nonprofit recipients on its “core grantmaking” page, along with links to their respective websites. Seventy-six percent of those grantees featured, somewhere on their own homepage, imagery of a megaphone, a raised fist, or people demonstrating with signs or banners—typically in what would clearly be understood as a political context. If other pages on their websites are included, the number jumps to almost 90%. Accordingly, one would reasonably conclude that public-policy protest is an activity that is both highly valued as a grantmaking criteria by the Marguerite Casey Foundation and heavily prioritized by its (c)(3) charitable grantees.
Interestingly, CRC’s Ken Braun noticed precisely the same phenomenon at a much-larger grantmaker, writing that “promoting a militant leftist agenda or adorning a website home page with pictures of protesters yelling into amplified megaphones correlates closely with getting grants” from the Ford Foundation.
Public perceptions
The right to demonstrate peacefully is obviously fundamental and constitutionally protected. There are also important First Amendment barriers to restricting nonprofit speech. That said, how many Americans would consider protest to be a “charitable” activity based on their own understanding of that word? If a poll asked respondents whether financial support for groups engaged in political issue demonstrations should be incentivized through both tax-exemption and tax deductions purely as a matter of federal public policy, how would Americans respond?
Some recent surveys have looked at how Americans perceive the nonprofit sector. A 2023 report from the Lilly Family School of Philanthropy at Indiana University asked respondents about the sorts of activities in which they believed charities should be allowed to engage. Top marks were for disaster relief (94.6%), research and exploration (88%), and direct services to recipients (87.9%). The lowest percentage of respondents believed that (c)(3) nonprofits should be permitted to engage in policy advocacy and litigation (50.9%), religious services (48.5%—a surprising finding), and political campaigns/elections/candidates (14.2%).
There is also the fourth annual Trust in Civil Society report, released by Independent Sector in September 2023. One of its findings was that “the nonprofit sector is almost completely identified with charities in the mind of the public; its role is seen as providing aid and support to those in need.” When asked about the proper role of nonprofits, 35% of respondents said they should “help the broader community,” 30% said they should help the needy/poor, and 28% said they should provide some specific charitable service. Just 9% said they should advocate change or raise awareness of issues.
A separate poll, also published by Independent Sector that same month, found that while 90% of respondents supported charities “educating policymakers and businesses about the needs of the communities they serve,” 73% believed that charities should continue to be prohibited from endorsing political candidates. However, 71% agreed that the law on permissible “nonpartisan civic engagement” by (c)(3) groups should be clarified. The report rightly noted that in practice, there are “many gray areas.” This is aptly illustrated by the Marguerite Casey Foundation and its grantees. Much of what they do would almost certainly strike Americans as awfully political, if not quite directly electoral.
Consensus charity?
Politics is divisive, but philanthropy shouldn’t be—at least not in the same way. It is the integrity of the charitable sector that must be protected from the taint of politics, not the other way around. The “megaphone philanthropy” phenomenon encompasses 501(c)(3) grantmaking that prioritizes (or at least seems to value) public protests and demonstrations on often-controversial sociopolitical issues. These issues can be functionally inseparable from political outcomes—indeed, they often depend upon them.
A question worth pondering: if megaphone philanthropy fails Zerbe’s “grandmother test”—that is, if Americans do in fact consider it to be substantively different and considerably less charitable than (for example) giving to a homeless shelter, museum, food pantry, or youth-development program—is there something that should or could be done about that? Is it possible to encourage philanthropy—especially Big Philanthropy—to redirect its vast tax-advantaged resources to fund more consensus “charity?” That would seem to be a worthwhile endeavor, both for the sector and society.
