There has been growing interest over the past few years in the concept of socially-oriented businesses.  This interest has been manifested in many different ways.  More and more mainstream companies are trying to do business in what they describe as a more ethical or socially conscious way.  Increasingly, they do this because it makes good business sense — it results in better products, happier employees, and more satisfied customers.

There is a movement to brand certain companies as “B Corporations” if they meet certain social and environmental performance standards.  Some states are even considering a new type of business entity called an L3C, which is sort of a hybrid for-profit/non-profit structure.   This structure is specifically for organizations that want to marry the advantages of the for-profit model (efficiency, scalability, and ability to attract capital) with the social mission of a non-profit.

The For-Benefit concept takes this idea even further.

We support this type of experimentation.  Though the vast majority of projects on GlobalGiving are run by non-profits, we have had a handful of projects run by for-profits.  For years, IRS guidelines have permitted for-profits to accept donations for activities that have a charitable purpose and that cannot be carried out under normal market conditions.  We welcome such projects as long as they comply with IRS guidelines and our due diligence processes.  Making the world a better place requires a combination of for-profit companies that generate wealth and jobs along with non-profit organizations that make sure that public goods are provided for everyone, and in particular, that the less fortunate have a fair chance in life — i.e., that the poor are able to participate in wealth creation and employment. Donations to these projects are fully deductible for tax purposes.

Giving the growing interest in this concept, we are now going to specifically highlight projects on GlobalGiving run by for-profit companies.  Though there are currently only two projects on the site run by for-profits (Building a Library in Morocco and Building a School in South Africa), there could be more in the future.

Look for the following text in the project description:

This project is being run by a socially-oriented for-profit company.

From time to time, GlobalGiving posts projects run by socially-oriented for-profit companies, whose work includes charitable activities in the public interest. ALL projects on GlobalGiving have a bonafide charitable purpose, and are required to submit extensive documentation for due diligence. GlobalGiving reviews all due diligence, and vets the projects to ensure they are legitimate, well- run, and satisfy IRS guidelines for international grantmaking as well as the new voluntary guidelines for anti-terrorism set forth in the Patriot Act. Provided projects meet all these criteria, the IRS allows public foundations such as GlobalGiving to make grants in support of this work.

Projects in this category are required to undergo an expenditure review - meaning they must detail the charitable activities for which they are requesting funding, and provide an actual review of how the funds were spent.

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Election season is in full swing, and today the spotlight is on the Potomac Primaries in Maryland, DC and Virginia.  Yesterday, Wired News published an article about the emergence of nonprofits as a vehicle for campaigning.  Today the Chronicle of Philanthropy published the transcript of a live chat that it sponsored about the effects this election will have on charities and how they can (if they want) play a role in the election.  The Chronicle’s guests included Kay Guinane, the director of nonprofit speech rights for OMB Watch in Washington, DC and Laurette Edelmann, assistant director of the New Hampshire Center for Nonprofits.Says the Wired article:

…a new type of Web 2.0-enhanced nonprofit advocacy group is streamlining the process like never before, producing and distributing slick, effective videos in internet time.  Thanks to converging developments in campaign finance law, the improving technology of digital cameras and the rise of online social networking, voters’ inboxes this election season will be filled at strategic moments with forwarded web addresses for issue-oriented ads…

Brave New Films, the production company whose ads sparked the article, is a registered 501(c)4 - a “social welfare organization.”   These groups are allowed to participate in political campaigning, as long as that isn’t their primary objective.  Because political campaigning is not, theoretically, their main activity, they are not required to disclose their donor lists, unlike the the “issue advocacy” 527s, which were popular during the 2004 election.

In the Chronicle interview, Kay Guinane comments on the role played by 501(c)4 organizations in the election:

IRS rules do not limit how much lobbying 501(c)(4)s can do, but their electoral work cannot be their major purpose. (A nonprofit whose major purpose is to influence elections is tax exempt under Section 527 of the tax code.) The sticky question for 501(c)(4)s is how much electoral work they can do before it becomes their major purpose. The IRS has not cleary defined this. It is also important that the electoral work be related to the 501(c)(4) group’s overall mission.

 She also argues that it is important for nonprofits, even 501(c)3 organizations to get involved in the political process by educating voters, but there is still a danger of diluting the mission and becoming targets of political fundraising if they get too deeply involved.

So how involved is too involved?  Where should the line be drawn for 501(c)4 organizations that are flooding the airwaves with political ads?  Should a line be drawn?  Do nonprofits need to be more involved? Are unregulated 501(c)4 organizations setting a bad precedent for other nonprofits, including 501(c)3 organizations?

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