Since the founding of ClearWord nearly 20 years ago, the majority of our clients have been state and national think tanks recognized by the Internal Revenue Service as 501(c)3 educational organizations. This is in contrast to 501(c)4 organizations, which can more directly engage in policies and issue advocacy.
501(c)3 organizations have done amazing work advancing the causes of economic freedom: less government regulation, lower taxes, educational choice, and conservative/libertarian voices on our nation’s campuses. And donors enjoy the perk that their contributions to them are tax deductible.
Should You Start a 501(c)4? Yep!
More recently we’ve observed that donors recognize that IRS restrictions on the “C-3” community, to a degree, might hamper your effectiveness. This is especially true since the Citizens United Supreme Court ruling. This allowed 501(c)4 advocacy groups to both lobby legislators, as well as support or oppose their election to office. For the most part, donor giving remains unrestricted and confidential, both very attractive benefits.
Our clients frequently tell us they are considering the formation of an advocacy affiliate and ask us what we think about this.
The answer: Do it!
Of course, we’re not attorneys and won’t presume to share legal advice. We are, however, fundraisers and can share our experiences as well as a marketing model for consideration.
501(c)3 Organizations and the “Transformational Gift”
As noted repeatedly here (and just about every website pontificating on the subject of fundraising) getting the first gift from a donor is the most challenging and important. The issues we address in the appeal range across the board, but the fundamental messaging is structured in a similar way.
We approach a donor with details of the problem and present an opportunity for them to partner with us to do something about it. Our appeal may detail past history related to the issue and how we got in the mess we are today. Then we explain a solution that involves studies, education, legal action, or perhaps grassroots activity of some kind.
Next, we relate how your group has a plan to repair elements of our culture or society with their work. The more details about the strategy, the more credible the appeal. Given the severity of the problem being addressed, we explain that there are no shortcuts to victory; it may take years or decades to fix a problem that is systemic.
Spoiler Alert: Transformational Gifts Can Be Hard to Get
The donor who is responsive recognizes that their gift is “transformational” and the first gift is just the beginning of a long term partnership with your group. Hopefully, it will be a life-long relationship resulting in major gifts annually and ultimately a substantial bequest. This is a major commitment and is not taken lightly by your donor.
To be effective, we also want that donor to invest at a more significant level with a first gift of $100, $500, or even $1,000. This is possible to achieve with effective targeting and compelling copy. For this reason, unless the donor is already very familiar with you, your work, and effectiveness, it is challenging to get that first “transformational” gift.
501(c)4 Gifts May Start Out As “Transactional”
The advocacy group, however, has the opportunity to engage the donor by appealing first for a more “transactional” gift. Emotions drive decision making in many elements of our life, but especially when considering our personal philanthropy. If we are good at targeting the prospective donor, we know that they are likely to share our viewpoint on any number of public policy issues. They want to join the fight for our cause.
But to respond to an appeal for an initial investment of $500 to your 501(c)3 organization typically requires more consideration. The donor wants to know what they are going to get besides a tax deduction. Your appeal for a long-term, strategic plan doesn’t necessarily provide instant gratification. It doesn’t answer an emotional need.
A transactional gift of $50 to help fund an advocacy project for the next month requires less thought. It’s often more of an emotional response. It makes the donor feel good, similar to that fat-filled, calorie laden ice cream cone bought on impulse. You’re not considering the future. It’s all about the here and now.
Transactional Gifts to a 501(c)4 Can Become Transformational with Time
We’ve observed that a transactional 501(c)4 advocacy gift on a specific issue is often the “gateway” to more serious transformational giving in the future. A first gift to our fictional group, “FreedomAction” initiates a relationship with the cause. Once the donor invests in advocacy, they are ripe for introduction to the transformational activities of the sister 501(c)3 group, “The Freedom Institute.”
This explanation is simplistic, but it should whet your appetite for more information on how your group may be able to create another channel of donors for your cause. A friendly reminder: our goal is to acquire and cultivate donors so that you and your personal solicitation team have a large pool or prospects for major and planned gifts.
If you’d like to hear more about our experience with this, we’d love to share it. Contact us here.