“The Connection” Helps a Nonprofit Coalition Under Attack

Alliance for Justice offers resources and technical assistance to nonprofits and foundations to support their advocacy. We often hear from organizations around the country that our support is invaluable and relieves some stress they experience when navigating complex legal rules. While the information we provide is not a substitute for legal advice, we believe our resources are a great place to start.

Recently, a progressive nonprofit shared an experience from many years ago that highlights the value of our resources and reminds us why we do what we do. Note: We recommend a nonprofit consider retaining counsel in any interaction with the IRS.

The progressive nonprofit leader—who asked not to be identified—told us about a chain of events that led to a political attack and subsequent contact by the IRS.

The leader was successful in incorporating three entities, including a 501(c)(3), a 501(c)(4), and a state political action committee (PAC).In setting up this structure, the leader consulted AFJ’s “The Connection” guide for how to legally structure the relationship, as well as an AFJ attorney who provided technical assistance.

The (c)(3), (c)(4), and PAC had success partnering with a coalition to work on a variety of issues, including issue campaigns and candidate elections as appropriate for each entity. Unfortunately, that drew the attention of a state political party that did not appreciate the coalition’s activities. In a front-page article in the metro section of a major state newspaper, the executive director of the political party charged that the 501(c)(3) improperly granted funds to its affiliated 501(c)(4) for partisan political activity. Shortly thereafter, the nonprofit leader got a call from the IRS, announcing an investigation into the charge.

The leader told us that’s when AFJ’s resources really saved the day. The IRS agent set up an interview to begin the investigation. The leader told the agent how the arrangement had been structured—and showed her a copy of AFJ’s “The Connection” guide, which had been helpful.  The next day, when the IRS agent returned, she said she had spoken to her supervisor and had mentioned the AFJ guide that she had borrowed. Her supervisor told her it was an excellent guide and it would be helpful to the IRS in their evaluation of whether the coalition was correctly following the law.

And the outcome was great; after saying they would consult “The Connection,” IRS authorities notified the coalition that it was indeed correctly following the law. The investigation resulted in a “no change” letter from the IRS— a tribute to the leader’s care in setting up its structure, and to the value of AFJ’s free resources to nonprofits and even, sometimes, to the authorities themselves.