Why Funding 501(c)(4) Organizations is Critical for Systemic Change

In part one of this three-part blog series, Tuti B. Scott, a philanthropy and gender equity strategist and former board chair at Tides, highlights the importance of funding 501(c)(4) organizations. The series also discusses the issues philanthropists often face when trying to support them.

Social and systems change starts with movements of people at the community level saying ‘enough’ and standing up to power. Eventually, over time, lawmakers respond to movement pressure by enacting a policy or law to solve the injustice or right the wrong. This pattern of engagement, behavior change, and policy establishment is the only pathway to progress, from civil rights to environmental protection.

Movements working on systemic change often use ballot initiatives, legislative policy efforts and voter outreach and mobilization as strategies to achieve their goals. These activities are typically done by 501(c)(4) groups that have more expansive capacities (unlimited lobbying, direct democracy through ballot measures, as well as some partisan, political activity like electoral advocacy) to deploy to achieve their mission than 501(c)(3) organizations. Often 501(c)(4) organizations also have deeper policy expertise they can use to engage the public and lawmakers across a range of tactics. A 501(c)(4) organization is defined by the IRS as a “social welfare group”. By definition, it is trying to improve the well-being — access to essential social services, enjoying a strong quality of life, and living in a safe and healthy environment — of society.

For too long philanthropists have focused narrowly on 501(c)(3) organizations due to the tax benefits and clear guidelines for charitable giving. But supporting 501(c)(4) organizations offers unique advantages for driving systemic change and addressing complex social issues. The necessity of changing systems, structures, and policies to serve all of humanity is critical to progress.

At the same time, there is a pressing need for donors to accelerate the distribution of funds from donor-advised funds (DAFs). Too often donors find themselves afraid to move money forward, resulting in hordes of dollars intended for public good sitting untouched in their DAFs. Activating DAF funds, especially by contributing to 501(c)(4)s for charitable activity, demonstrates a commitment to addressing urgent societal issues and brings credibility and transparency to philanthropic efforts. It also encourages other donors to follow suit and ensures that funds are used to drive change, rather than sitting idle.

The philanthropic movement to accelerate grants from DAFs is gaining steam. #HalfmyDaf aims to unlock the substantial funds held in DAFs, converting them from stagnant accounts to active resources. The Give While You Live campaign calls on the world’s 2,000+ billionaires to donate 5% of their wealth every year to an important cause or issue area. It focuses on partnering with marginalized communities including people of color, those living in extreme poverty, and others facing discrimination. In Tides’ our Get Off Your Assets campaign, Tides encourages DAF partners to move their money now. By activating philanthropy to center leaders from communities historically denied power, Tides connects organizations to services, capacity building, and resources to amplify their impact.

Far too many donors we know are trying to drive change around bodily autonomy, affordable housing, racial and climate justice while donating only to 501(c)(3) organizations. A better approach is giving to multi-entity groups. Put more simply, does the 501(c)(3) charity you’re funding also have a 501(c)(4) organization?

A multi-entity ecosystem includes 501(c)(3)s, 501(c)(4)s, political action committees (PACs), and other legal structures. Engagement across categories is essential for building momentum around meaningful social change. Large scale problems require sustained and robust funding. Deborah Barron from New Left Accelerator and Ben Malley from Diaspora Alliance emphasized this when they spoke at a Women Donors Network Action Fund seminar. Accelerating DAF distributions to 501(c)(4) organizations can drive systemic change by supporting advocacy, policy reform, and political engagement efforts.

If you have a donor advised fund and are told that c4 contributions aren’t possible, that is untrue. They are. Tides Foundation Executive Director Peter Martin reminded me that it’s perfectly allowable for DAFs to contribute to 501(c)(4) organizations as long as the work being proposed is charitable, non-partisan activity. If your DAF provider does not make giving to 501(c)4s an option, you should ask them reconsider or find a DAF provider that will.

The DAF provider just chooses not to because it’s more administrative work to make an “expenditure responsibility grant.” Find a mission-driven DAF provider that will explore this option with you, such as Tides. A donor can also give money to a 501(c)(3) that has a 501(c)(4) and ask them to make a transfer between the two to support the charitable work of the 501(c)(4). Bolder Advocacy has extensive resources and online training to guide you on how to put your resources to work.