THE LIBERTARIAN ENTERPRISE
Number 269, May 2, 2004
My Struggle with 501(c)(3)
Special to TLE
I started out very firmly against 501(c)(3) for the Free State Project. I was unyielding in my belief. I didn't understand how we could justify using government to get less government. I didn't like the idea of the loss of privacy I thought (c)(3) brought about. I didn't want to give any more information to the government than was necessary. I'd heard that (c)(3) status could open us up to serious harassment by the IRS. I thought we could get by with less money and/or ask the membership for regular donations. I wasn't clear on why we needed more money. I thought people should be willing to donate to FSP without the tax benefit. And then, unexpectedly, I was put into a position to help make decisions about the future of FSP.
Every once in awhile I find I've adopted a position that I need to reexamine. I dislike this process because I usually adopt positions with careful thought and hate to think I erred. But reexamination often reinforces my positions. And being able and willing to question and accept questions is a strength I admire in others and try to do myself. So I began reexamining my position on 501(c)(3).
My husband and I contribute to Oregon Firearms Federation (OFF), among others. OFF has two arms, the Oregon Firearms Federation, a (c)(4) entity involved in lobbying, and the Oregon Firearms Educational Federation, an educational arm with (c)(3) status. As part of my due diligence process I phoned Kevin Starrett who runs both organizations.
Kevin was very forthcoming about the (c)(3) tax-exempt status. No bones about it, he said, the (c)(3) brings in donations in large amounts and with regularity. People want to contribute and really like to give the IRS a smaller cut of their income. Kevin doesn't know why anyone with an appropriate mission wouldn't be a (c)(3). The benefits far outweigh the costs in his opinion.
With respect to the IRS coming in and making a ruckus Kevin didn't think that was a problem. "Keep clean books and don't cross the political line and you'll be fine." "But, of course, we could be a target", I countered. But Kevin pointed out that if the government wants to get you they don't need you to be a (c)(3) to do so. If the government wants to harass you, it will, regardless of your tax status. "What about loss of privacy?" I asked. Kevin pointed out that the reporting requirements are pretty much the same though larger (c)(3) donations do need to be specifically reported. However, he added, the powers that be can subpoena records at any time, again regardless of tax status.
I must admit, I was somewhat depressed after my conversation with Kevin. My biggest concern was potential IRS harassment and he pretty much eliminated that argument. I dislike changing my position on something, especially something I was quite vehement about. And I was surprised by how wrong some of my assumptions were. As I processed all of this I realized I still had some concerns.
Why get into bed with the government? Unfortunately, this is just not avoidable. As many told me we already crossed this line when we needed a bank account. We had to form a corporation and get a tax id number. We are a Nevada corporation and have to file tax returns. Getting into bed with the government isn't an optionit's a requirement.
Why use government to get less government? Well, the first benefit is that the government gets less money if we have (c)(3) status. People who donate can reduce their taxable income. So, in a way, using government in the form of (c)(3) is getting less government. It is true, however, that this is a very, small difference!
Another significant factor is that 501(c)(3) is a passive use of government. We are not asking for a handout or unearned wealth. We are asking for government sanction so that people who give us money get a small benefit. The libertarian quandary about wanting less government but do we use government in the meantime is not trivial. If we want to live "on the grid" some things are just not an option. I apply for a driver's license and pay property taxes. Sometimes, however, it is a choice. Do I take tax deductions? Do I apply for food stamps? Taking tax deductions is passive and I don't have any problems using them. But an active use of government, such as food stamps, is not something I would sanction.
Perhaps most importantly, it is FSP's mission is to get 20,000 people to New Hampshire, our chosen state. We are not yet officially working on getting less government and that has never been FSP's mission anyway. It's the mission of the 20,000 of us who will be there. FSP is the conduit for migration, not the political implement of change.
So why do we need money? Why can't we work with less? Well, I had a harder time with this one. But I realized that the issue here was time.
FSP's goal has been to get 20,000 people signed up by September 2006 and then have everyone move and be active. Our mission has a short and fixed timeframe. September 2006 isn't far away. This was one of FSP's great appeals for me. We are not a liberty movement, limping along, looking for change some decades ahead. It is a project for liberty in our lifetimes ... not our descendants' lifetimes! We still have 14,000 odd members to sign up! We need to get the word out! Can we do that with less money? Maybe. I don't know. I am not willing to risk it. I don't want the Project to fail. It just can't. Extra money can pay for more advertisements, more speaking engagements, more banners on the Internet, more ways to spread the word about FSP's mission and get new members.
The short time frame works to our advantage with respect to IRS harassment too. Since we'll accomplish our mission in the next two years the IRS is unlikely to have enough time to begin harassing us!
And I can't ignore that one of the reasons espoused for increased funding is the need for a paid president (and/or other paid staff). At first I thought that paying for a president was unnecessary. We are a volunteer organization; we can certainly find volunteers for this job. And, in fact, we have. But the presidency is a full time, no, really more than a full time job. Jason did it for a long time, while pursuing his academic career and having a family life. Ultimately, though, everyone has to pay their bills, have time off, have a personal life ... Most people just can't handle both a full time paying job and a full time volunteer one ... at least not for long. Every time we change presidents we lose momentum, momentum we can't afford to lose over the next two years. Having one key person, who can devote full time for an extended time to our mission, is a very critical milestone. With a person at the helm, who can focus on FSP, without interruption (except for that pesky personal life thing), without worrying about paying the mortgage, ... well, with that situation I have no doubt we will all be in NH before the decade is out.
I know that not everyone agrees with 501(c)(3) status. People are quite passionate about it. I know I was. But I encourage everyone to reconsider in the light of my experience. And I hope that all of us will support FSP even if we disagree with a specific decision. And 501(c)(3) detractors know this ... having been the "swing" vote in paving the way for (c)(3) status I am the bull terrier watching for compliance problems. Watch out! ;-)