When a “Charity” is Actually a 527 Political Organization

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calendar icon Feb 14, 2024

BBB Wise Giving Alliance produces evaluative reports on nationally soliciting charities that are tax-exempt under section 501(c)(3) of the Internal Revenue Code. Some Better Business Bureaus similarly report on regionally soliciting charities. As a matter of long-standing practice, however, BBBs do not seek to report on political parties or other entities raising funds for political candidates. In recent weeks, people have been asking about organizations that have charity-sounding names but are actually political organizations tax exempt under section 527 of the Internal Revenue that are raising funds for political candidates and/or political purposes.

The organizations may have names that include the words police, firefighter, veterans, breast cancer, or other popular causes. Some of them are using robocall messages to get people to make donations. But when one reviews the organization’s website, one finds statements announcing that they are not a charity, but a 527 political organization raising funds to support “public officials who advocate” for their issues and to educate members of Congress.

As in every category in the fundraising marketplace, there are well managed and sincere efforts as well as those that unfortunately take advantage of generosity for popular causes. As a result, we provide the following tips to help individuals make more informed giving decisions:

Watch Out for Possible Name Confusion

The use of the words “police,” “firefighter,” “veterans,” or “cancer” in the name of the organization does not necessarily mean that a charity engaged in these issues is asking for your help. The activities described in appeals can sometimes be vague. When in doubt, visit the organization’s website and review their description of activities.

Verify Tax Deductibility

Contributions to police, firefighter, veterans and cancer organizations that are tax exempt as charities under section 501(c)(3) of the Internal Revenue Code are deductible as charitable donations for federal income tax purposes. But not all such groups are charities. Some are actually tax exempt as a 527 political organization. Unless the organization is a charity, a contribution will probably not be deductible. 

Excessive Pressure to Donate is a Red Flag

No matter which organization is calling, don’t be pressured into making an immediate donation decision. Honest efforts will welcome your donation at any time and will encourage uncertain call recipients to check them out.

Telemarketing Can Result in High Fundraising Costs

Like all forms of fundraising, telemarketing can be managed well but it can also result in high expense. This is especially true for “cold” calls that solicit people who have not previously contributed. Those types of efforts can result in less than 20% of what is collected going to the named organization. Visit the latest financial statements that can be found on the group’s website. If the site does not provide access to financial information, that lack of transparency is a red flag. Visit the IRS website to access the latest IRS Form 990, the financial form annually filed by most nonprofit organizations. In Canada, visit the Revenue Canada website.  If the organization is a PAC tax exempt under section 527 of the Internal Revenue Code, financial information would be available from the Federal Election Commission.

We recommend giving to charities that meet all 20 of the BBB Standards for Charity Accountability. Visit BBB's Give.org to access free evaluative reports on charities. 

Heart of Giving Podcast

This week’s Heart of Giving Podcast features BBB WGA President & CEO, Art Taylor. Art provides highlights of the Microsoft Global Nonprofit Philanthropy Summit which focused on responsible AI development and strategies for nonprofits.

Recent Reports

We are always working with charities to publish or update reports for donors. Visit Give.org or local BBBs to check out any charity before giving. Our recently evaluated charities include:

Finally, remember to let us know by going to give.org/charity-inquiry if you are interested in seeing a report on a charity not on the list and we will do our best to produce one.

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