Technical Assistance Question of the Week

Q: Can a 501(c)(3) organization make a unrestricted grant to an affiliated 501(c)(4) organization?

A: A 501(c)(3) should never provide a general support grant to a 501(c)(4). The restrictions on the use of 501(c)(3) funds stay with the money, even upon the transfer to a 501(c)(4). The grant agreement must specify that the 501(c)(4) cannot use the funds for political campaign intervention, and should specify how much money can be used for direct and grassroots lobbying. Without specifying how much can be used for lobbying, the IRS will presume all the money will be for grassroots lobbying, and the 501(c)(3) will need to count the entire amount against its lobbying limit. This is true for all transfers between 501(c)(3)s and 501(c)(4)s, regardless of the extent of affiliation between the two organizations. For more information about the relationship between 501(c)(3)s and 501(c)(4)s, see our publication The Connection.