Lessons Learned from Left Field
Jon Caldara, Independence Institute
Groups committed to educating the public on behalf of principled beliefs in freedom, fiscal restraint and limited government – even if they refuse to take specific positions on particular issues – should come to expect personal attacks and legal aggression from their ostensibly non-profit counterparts that urge ever-higher taxes and always-expanding state power.
It is of paramount importance for free-market research institutions to develop a secure understanding and command of federal and state rules governing lobbying activity and campaign advocacy when they use their resources even subtly to influence political decision-making.
It is important for those of us in the freedom movement to understand the double-standard of 501(c)(3) organizations. Those that work toward expanding government use their power liberally during elections. When we limited government groups do our job, we can find ourselves spending more time talking with lawyers than with voters.
The recent experience of the Independence Institute might be helpful as you weigh the costs of fully utilizing your organization’s (c)(3) status.
In 2005, Coloradoans faced Referendums C and D - a massive tax increase and debt package. This election was a frontal attack on the state's Taxpayer's Bill of Rights. The entire spending lobby of Colorado, including our formerly conservative governor, came out to make sure this tax increase would pass.
And Independence? We did what we always do - the principled thing. We educated voters about the dangers of Referendums C and D, but never told voters how to vote. We knew the fight was coming; we discussed it with our board. We knew to go against 1,200 organizations promoting the tax increase and a powerful governor we would come under attack. But that's our job. But if we didn't do it, who would?
To actually advocate a "no" vote I created an issue committee called "Vote No - It's Your Dough." An issue committee is a creature of Colorado election law; it is a way to disclose contributions and expenditures of an advocacy campaign. An issue committee accomplishes largely what a 501(c)(4) does, but without all the hassle. An issue committee is really nothing more than a checking account that is fully disclosed to the Secretary of State. At the end of the election, one can close the checking account and the issue committee goes away. Unlike a (c)(4), all contributions to the committee must be reported.
Before your think tank rolls out a (c)(4) arm, you should check your state’s election laws to see if an issue committee might be useful when used outside and separate from your (c)(3).
Back to our story, Independence did what think tanks do – papers, op-eds and speeches. We did even more though, including a website dedicated to the issue, TaxIncrease.org - a portal for information on the issue. We posted the Spend-O-Meter, showing the growth of state spending. And we put out a series of creative and entertaining educational radio ads that spoke to the dangers of C and D.
The proponents of the tax increase claimed that Independence was campaigning with our (c)(3) money. Of course we weren’t. But we were remarkably effective in educating voters. So effective the well-funded proponents set out to silence us.
Editorialists, commentators and reporters went after us. One columnist called me a "one-man media monolith," claiming that my radio show, TV show and newspaper column were all weapons in our advocacy campaign. Mind you other media commentators continued pounding away on the pro-tax side of this issue. The Denver Post was so brazen as to put a “vote yes” editorial on its page.
Next came the outcry: Where did your Independence Institute money come from? Who are your donors!? The proponents went to every radio station trying to find out how much we spent, to newspapers to demand that they find out where our money came from. Editorials said, "The Independence Institute and Jon Caldara are operating in the shadows." The Governor weighed in, "We need to know where this money comes from." We respect our donors’ privacy and never disclose such information.
The C and D proponent sued Independence, claiming we violated state election law and failed to disclose our donors. Remember, for my "Vote No - It's Your Dough" Issue Committee everything was disclosed, as required by law. Nevertheless, opponents made the political move to link Independence to the issue committee.
Independence Institute staff members were subpoenaed. They were then deposed. On the trial day I spent eight straight hours on the witness stand. Independence was forced to spend tens of thousands of dollars on legal fees.
What did we say in court? The Independence Institute produced, paid for, and aired the radio ads as part of its educational effort to inform Colorado voters of the dangers of Referendums C and D. The judge concluded likewise. We won the case.
The ruling came out three days following the election. After five straight months of getting bludgeoned in the press, only the Rocky Mountain News reported the decision, on page eight.
The double-standard
The Colorado Association for Not-For-Profits proudly reported that half of the 1,200 organizations that endorsed and worked for the passage of C and D were nonprofits. They reported these nonprofits helped distribute 120,000 yard signs and mobilize 1,000 get-out-the-vote volunteers. Nonprofits contributed staff time, constituent communication, in-kind contributions and money to the C and D campaigns. Proponents boasted how their 501(c)(3)’s pushed the issue over the top. The Colorado Association for Not-For-Profits held town meetings to teach 300 not-for-profit professionals and 200 organizations about C and D and advocacy. They even sent campaign posters to every non-profit in the state, including to the Independence Institute, with instructions to hang them in their offices for their constituents to see.
None of the 600 plus not-for-profits who actually endorsed and advocated a “yes” vote were sued. Independence Institute, which never advocated a “no” vote, was.
Six hundred pro-government not-for-profit organizations knew how to use the system.
The lessons
Briefly, here are some lessons: Know your own state laws, not just IRS code. With the IRS, it can take years for an audit to be performed; however, your opponents can sue you immediately and directly under state law.
Be sure you have at the ready two good lawyers, one for federal issues and one for state issues so you know exactly what you're doing.
Expect journalists to go after you - they will and they will leave your opponents alone. In Colorado, the Independence Institute was the target for attack ads from the proponents, editorials, columns and news articles.
Understand the difference between education and advocacy. Make a clear distinction between what you're doing. If you are doing advocacy you need to report it. So keep a clean paper trail of all your expenses
The Independence Institute has an IRS H filing, and I'm glad we do. It's an insurance policy. Our 501(c)(3) designation is key to our existence; it is what we need to protect. If we lose that we go out of business. Having an H filing means if a different judge decided to rule a different way we still have protection.
Use outside organizations for your advocacy. In Colorado we use issue committees - it's handy, it's easy. A 501(c)(4) might be the best way in your state, but talk to an attorney.
Six hundred Colorado nonprofit organizations used their 501(c)(3) designations for political purposes, to push ballot measures, to do something that Independence never did.
The Right needs to figure out how to use our 501(c)(3)s as effectively as the Left does.
Jon Caldara is president of the Independence Institute in Golden, Colorado.