Removing Federal Grants from 501C Nonprofits 6-29-25

501C Nonprofits should not be eligible for federal grants. They should be funded by their supporters. 

Currently, 501C organizations are eligible for Federal Funding.

Generally, 501(c)(3) organizations face limitations on how they can use federal funding and conduct lobbying activities. These restrictions are in place to ensure that organizations maintain their tax-exempt status and that public funds are used for charitable purposes. 

Restrictions on Using Federal Funds:

·       Political Campaign Intervention: All 501(c)(3) organizations are absolutely prohibited from participating in or intervening in any political campaign for or against any candidate for public office.

·       Lobbying Activities: While 501(c)(3)s can engage in some lobbying, it cannot constitute a "substantial part" of their activities. Organizations can elect the 501(h) expenditure test, which provides specific limits on lobbying expenditures based on the organization's size.

·       Use of Federal Funds for Lobbying: Organizations that receive federal awards, such as nonprofit organizations, cannot use those funds for lobbying the federal government.

·       Unallowable Costs: Certain activities are deemed unallowable for federal grant funding, including attempts to influence elections, contribute to political parties, or influence legislation using federal funds. 

Lobbying Activities for 501(c)(3) Organizations:

·       Permissible Lobbying: Some lobbying activities are allowed as long as they are not a "substantial part" of the organization's overall activities and do not violate other restrictions.

·       Examples of Permissible Activities:

·       Conducting public education and training sessions about participation in the political process

·       Encouraging members and non-members to write letters to their elected officials

·       Sponsoring or co-sponsoring debates among all candidates

·       Meeting with policymakers to discuss legislation

·       Testifying at public hearings

·       Prohibited Activities:

·       Raising funds for candidates or making campaign contributions

·       Publicly supporting or opposing candidates

·       Using federal funds for lobbying 

Monitoring and Compliance:

·       Uniform Guidance (2 CFR Part 200): Nonprofits that receive federal grants are subject to this regulation, which outlines requirements for financial management, procurement, audits, and performance reporting.

·       Grant Agreements: Grants come with binding legal agreements outlining terms and conditions, including restrictions on the use of funds.

·       Reporting Requirements: Nonprofits must submit reports on the use of funds and program performance to the granting agencies. 

Important Notes:

·       Lobbying is the attempt to influence the passage or defeat of legislation through communicating with legislators.

·       Organizations can engage in issue advocacy, taking positions on public policy issues, as long as it does not function as political campaign intervention.

·       Organizations must maintain accurate financial records and prepare for potential audits.

·       Consult the IRS website and other relevant resources for detailed information on the rules and regulations regarding lobbying and political activities for 501(c)(3) organizations. 

501 c restrictions on federal funding

Organizations with 501(c)(3) status face certain restrictions regarding lobbying and political campaign activities, especially when receiving federal funding.

Organizations with 501(c)(3) status are subject to restrictions on lobbying and political campaign activities. Lobbying cannot be a "substantial part" of their activities, and direct or indirect participation in political campaigns is prohibited. 

Federal funding adds further restrictions. Federal funds cannot be used to lobby federal, state, or local officials or staff. Using federal funds to influence legislative or executive action, including advocating for or against legislation or regulations, is also prohibited. Grassroots lobbying using federal funds is restricted. Additionally, some provisions prohibit using appropriated funds to advocate for tax increases or restrictions on legal consumer products. 

Violations can lead to the loss of tax-exempt status and excise taxes. Organizations must comply with all applicable laws and regulations and keep detailed reports on how federal grant funds are used. 

Allowable activities include taking positions on public policy issues as long as it doesn't involve political campaign intervention, non-partisan activities like voter education, providing technical assistance upon written request, and communications regarding the organization's existence or tax status. 

In summary, 501(c)(3) organizations receiving federal funding must ensure these funds are not used for lobbying or political campaign activities. Understanding these rules and seeking guidance is important for compliance.

https://www.google.com/search?q=501+c+restrictions+on+federal+funding

Determining the exact amount of federal money allocated to 501(c) organizations in 2025 is difficult due to several factors:

1. Data Lag and Reporting Requirements:

·       Comprehensive government funding data for a specific year, especially for the current year (2025), might not be fully compiled and publicly available yet. It often takes time for agencies to report and process this information.

·       While IRS Form 990 filings provide some insights, they don't capture all forms of government revenue, such as contracts and cooperative agreements. This means the data available might underestimate the total federal funding received by 501(c) organizations. 

2. Government Funding Freeze in Early 2025:

·       An Office of Management and Budget (OMB) memorandum in January 2025 instructed agencies to temporarily pause the disbursement of federal financial assistance to some areas, including funding for non-profits.

·       Although a temporary restraining order blocked this directive, the initial freeze created uncertainty and disruption for nonprofits. 

3. Discretionary Spending Cuts:

·       Federal budget policies in 2025 reflect a tendency towards decreasing discretionary funding, which is a major source of grant revenue for nonprofits.

·       Some domestic programs are projected to see further cuts in areas like housing, education, and workforce development. 

Existing Data and Trends:

·       In 2021, public charities in the U.S. reported receiving over $267 billion in government grants. Inflation-adjusted, this figure rises to over $300 billion, significantly exceeding other forms of giving.

·       Over 100,000 nonprofits are estimated to receive a total of $303 billion annually in government grants.

·       While 30% of nonprofits overall receive government grants, 55% of large nonprofits with budgets above $5 million rely on this funding source. 

Therefore, while a specific dollar amount for 2025 is currently unavailable, it's clear that federal funding plays a significant role in supporting the nonprofit sector. However, the exact impact of the funding freeze and discretionary spending cuts on the total amount received in 2025 remains to be seen.

how much federal money did 501c organizations get in 2025

As of June 27, 2025, no official, comprehensive statistic exists for the total amount of federal money received by 501(c) organizations in 2025

However, information provides insight into the situation: 

Challenges with Federal Funding in 2025:

·       On January 27, 2025, the Office of Management and Budget (OMB) instructed federal agencies to pause obligations and disbursements of federal financial assistance during a review. This action effectively froze funding for many programs, including those for nonprofits.

·       A proposed federal budget for 2025 suggested a 22.6% ($163 billion) reduction in domestic discretionary spending. Significant cuts were likely in areas like housing, labor, and education, which directly impact many nonprofits.

·       Nonprofit leaders report financial instability due to uncertain revenues and rising expenses, coupled with increased program demand.

·       Some nonprofits have experienced delayed or reduced grant payments from federal sources, requiring stronger cash flow planning.

·       Eighty-four percent of surveyed nonprofits with government funding expect cuts to that funding. 

Information about Federal Funding to Nonprofits (Pre-2025):

·       In 2021, over 103,000 public charities reported receiving a total of over $267 billion from government grants.

·       Approximately one-third of U.S. nonprofits receive some form of government support.

·       Large nonprofits are more likely to receive government grants, with 55% of organizations with budgets above $5 million receiving at least one. 

Other Funding Trends in 2025:

·       Charitable giving saw an inflation-adjusted increase of 3.3% in 2024, although this may not fully offset the impact of reduced federal funding for many nonprofits.

·       Some nonprofits are exploring expanding their revenue streams to adapt to the changing funding landscape. 

In summary, while specific figures for 2025 are unavailable, the year has been characterized by significant uncertainty and challenges regarding federal funding for 501(c) organizations. The federal funding freeze, proposed budget cuts, and increasing demand for services all contribute to a difficult environment for nonprofits relying on government support. 

https://www.google.com/search?q=how+much+federal+money+did+501c+organizations+get+in+2025

Comments

The cost of compliance outlined above looks excessive. Yet 501Cs became a tool for political subsidies and money laundering.

Norb Leahy, Dunwoody GA Tea Party Leader