Mexico City     Reading almost anything on the op-ed page of the Wall Street Journal is risky business.  With few exceptions, this is where the wildest beasts of the right are allowed free rein to roam.  Not too long ago, I couldn’t resist, when both “IRS Reform” and “Lawless Nonprofits” were included in the same headline.  The author, affiliated with the arch-conservative Manhattan Institute’s real target, was a somewhat niche activity called “fiscal sponsorship.”  Though he didn’t quite understand anything about what he was talking about, he went in guns blazing spraying invective far and wide.

Fiscal sponsorship allows tax-exempt 501c3 organizations to house project activity by other organizations, perhaps newly organized startups or established entities without tax exemption, to operate projects under their umbrella.  The sponsors are essentially vouching for the tax-exempt work of the project.  Often this is temporary, from six months to a couple of years, while the organization or project gets large enough to stand on its own or decides to apply and wait for its own tax exemption.  Keep in mind, the purpose of seeking the tax exemption has to do with providing a tax break for donors and foundations, rather than being an explicit definition of an entities work.  Seeking a 501c3 is a critical organizational decision, not a simple knee-jerk response to donor requests, as often recommended by advisors to new groups.  Under IRS rules, having a 501c3 most favorable charitable classification requires operating for educational, charitable, and similar purposes while eschewing any but a smaller, undefined level of expenditures for anything that might be deemed political or partisan.

The op-ed author seeks to respond to Trump’s demand to punish leftwing activities and what he calls Antifa, so makes the claim that such dangerous outfits are hiding out of sight, unaccountably under the cover of more stable and anodyne nonprofits acting as their fiscal sponsors.  The first critical error he makes is believing that the projects being sponsored are free floating planets under the larger sun without realizing that it would be exceptional for there not to be explicit contracts with these projects requiring that their activities were equally aligned with IRS requirements, as well as reports to the sponsor detailing that is the case.  Not being required to report separately, but under the sponsor’s aegis is NOT the same as being “lawless” or footloose and fancy-free, as he describes. Having been either chair or board member of the San Franciso-based Tides Center for thirty years, which acted as the fiscal sponsor for sometimes as many as 250 to 300 groups at a time in some years, I can testify that the vetting process, paperwork mountains, and often nitpicking accountability is exacting.  More recently there was a lot of attention when Tides acted as the sponsor for the Black Lives Matter, handling hundreds of millions for them, until they reorganized independently with some tax-exempt formations.  Big fiscal sponsors are buttoned down tight and all of them, big or small, have been to the rodeo with the IRS, usually.

In his confusion, his big-ticket reform is a couple of sentences of adjustment that would force these projects to make independent reports.  Why? The sponsor is on the hook, not the project, unless and until it decides to apply independently, at which time the IRS has the stick and can determine whether the group hits its requirements.  This is no reform or much of anything here.  For even partisan organizations, often the vast majority of their work might still be characterized in such a way that such work qualified as tax-exempt.  A project of such an organization could easily be sponsored.  There are groups like Virginia Organizing that have performed huge services in that state by acting as a fiscal sponsor for smaller and new groups, as well as supporting their own work with fees received from providing such backend support.

The op-ed author’s other “big” reform was putting a time limit on how long a group could be fiscally sponsored.  This point stems from his obsession with individual reporting by the sponsored groups.  The vast majority of these groups are ad hoc, stay small, and then go on their way or out of business anyway, if he really looked at the record. Tides over the years has found it less productive and fiscally appropriate for its own operation, so currently resists sponsoring groups without six-figure funding commitments that can afford the administrative burden Tides requires to be their sponsor.  I think he’s hunting Yeti or Sasquatch without a clue.

The real burrs in his saddle are that he doesn’t like protected free speech activity and tactics that he finds disruptive, so he wants to define any and all civil disobedience as “lawless.”  He also believes virtually anything with Palestinian in its organizational name is a “terrorist” organization or supportive of terrorism.  Those are personal, political, and perspective problems that have nothing to do with the IRS, tax exemptions, or fiscal sponsorships, and likely even the op-ed page of the Journal can’t cure them and neither can any of us.