This post started its life as an Obama Center article. Then one of their grants was so interesting that it just took over. We’re going to talk about dark money in politics. That isn’t the kind of money that leads a candidate to say, “I authorized this ad” at the end. This is the other kind.
At the end, I have a section written by a good friend of mine with deep experience in fiscal sponsorship.
According to the Chicago Tribune, the cost to build the Obama Center has risen to $615 million through 2024. This is not just a presidential library, of course; it includes a forum building, a public library branch, and an athletic center.
The Tribune, Chicago’s leading newspaper, to its credit seems to have done some actual journalism in this story:
While the economic benefits of the Obama Presidential Center remain in question, what has become clear is that the Barack Obama Foundation’s top staffers are commanding high-end salaries that are not only out of sync with the more modest pay earned by those living in the surrounding neighborhoods but also exceed salaries for counterparts at other presidential foundations.
A Tribune review of annual tax filings shows the median pay for the 10 highest-paid employees from 2017 through 2020 at the Obama Foundation is just shy of $344,000.
So the Foundation pays very large salaries to its executives. Although I didn’t include that part, the Trib also compared Obama Foundation salaries to other Chicago non-profits. Let’s look at them:
This is just the top 12 officers, in descending order of salary:
VALERIE JARRETT DIRECTOR/CEO 754,064
DAVID SIMAS PRESIDENT 695,712
ROBBIN COHEN EVP, OPC & STRATEGY TECH. 651,929
ALFREDA BRADLEY-COAR EVP, CHIEF LEGAL & PEOPLE OFFICER 426,113
ROBERT STRAUTMANIS AVC, CIVIC ENGAGEMENT 373,439
IORT T HEALEY SVP, EXECUTIVE PROJECT OFFICER 359,547
LAURA LUCAS MAGNUSON EVP, GLOBAL PROGRAMS 353,755
JAMIE-CLARE PICKENS VP, DEPUTY GENERAL COUNSEL. 310,927
LOUISE BERNARD SVP, MUSEUM DIRECTOR 299,460
KORI SCHULMAN SVP, CREATIVE & COMMUNICATIONS 286,400
ELIZABETH SICILIANO VP, GOVERNANCE STRATEGY & RISK. 280,846
RACHEL RAUSCHER VP, DEVELOPMENT OPERATIONS 273,382
JIM GILMORE VP, RAISING & DEVELOPMENT 265,584
GABRIELA FRAGA FORMER SVP, PRODUCT 247,141
The Foundation spends a lot of money on construction, as you’d expect from an organization set up to build things. However, on page 56 of the 990 form, we see what else the money goes to.
$1 million to the Tides Center. The Tides Center and Tides Foundation have a long history of laundering contributions to radical left-wing causes. A donor who wishes to back an extremely radical group but doesn’t want their name associated with it can donate to the Tides Foundation, or use a donor-advised fund the Foundation will set up for them. But wait — there are two organizations here! The Obama Foundation gave to the other one.
Screenshot courtesy of https://datarepublican.com/
Applying for, getting, and keeping charitable status is a long, arduous process. The IRS and various charity-watching groups impose a lot of bureaucracy. But there’s a way a group can get charitable contributions immediately while they wait for the IRS to approve them: let’s talk about “fiscal sponsorship” and the Tides Center.
Philanthropy.com has an explanation of how this works. Let’s make up a hypothetical “charitable” group here, and later we’ll see how a real-life story is playing out right now.
You and your urban friends want to advocate for No Bail (it sounds better than “free the criminals”). You don’t know anything about charity, but you’d really like to tell wealthy people their contributions will be tax-deductible. What to do?
Enter the fiscal sponsor. We’ll call them CharitySponsor. CharitySponsor meets with you, agrees that your idea sounds great, and lets you announce that a donor can designate No Bail as their intended recipient, even though you’re not a 501(c )(3) yet. Maybe you never will be. They hold most of “your” donations until you are, but they might give you an advance to get you started. Now you have an address, a phone number, a lawyer, an accountant, and all the other accoutrement of a real business.
Your journey toward 501(c )(3) status may take years, but in the meantime, CharitySponsor takes care of you. Technically, the donations are to them, not you, but you have a verbal agreement that they’ll pass the money on to you. But that’s not an enforceable contract.
Tides Center is a fiscal sponsor. That’s who the Obama Foundation gave $1 million to.
Discover the Networks published this years ago:
The Foundation was set up as a public charity that receives money from donors and then funnels it to the recipients of their choice. Because many of these recipient groups are quite radical, the donors often prefer not to have their names publicly linked with the donees. By letting the Tides Foundation, in effect, “launder” the money for them and pass it along to the intended beneficiaries, donors can avoid leaving a “paper trail.” Such contributions are called “donor-advised,” or donor-directed, funds.
Through this legal loophole, nonprofit entities can also create for-profit organizations and then funnel money to them through Tides — thereby circumventing the laws that bar nonprofits from directly funding their own for-profit enterprises. Pew Charitable Trusts, for instance, set up three for-profit media companies and then proceeded to fund them via donor-advised contributions to Tides, which (for an 8 percent management fee) in turn sent the money to the media companies.
……….
In 1979 Pike established the Tides Center to: (a) function as a legal firewall insulating the Tides Foundation from potential lawsuits filed by people whose livelihoods or well-being may have been harmed by Foundation-funded projects, and (b) incubate new political advocacy groups and provide them with whatever organizational help they might need. While the Foundation’s activities focus on fundraising and grant-making, the Center — in its role as fiscal sponsor — offers newly created organizations the shelter of Tides’ own charitable tax-exempt status, as well as the benefits of Tides’ health and liability insurance coverage.
The Capital Research Center has also written about them:
Authors Tom and Gretchen Randall described Tides operations in a previous Capital Research Center report: “The Tides Foundation and its offspring, the Tides Center, effectively ‘launder’ donor dollars when they give to other nonprofits. The San Francisco-based foundation receives donations for individuals and foundations and then channels them to activist groups. The result is that the original donor can’t be linked to the ultimate recipient … In theory the Foundation raises and grants money, while the Center manages projects and organizations. A legal firewall divides the two organizations and keeps their functions separate. In fact, each does both. The Foundation awards grants to groups, including groups not managed by the Center, that are promoting a kaleidoscope of liberal issues.” (See Foundation Watch, December 2003.)
Donor-Advised Funds
I have one of those myself. You probably should get one, too; then you can donate to charities without them pestering you for more money, forever. Fidelity (which offers them) gives an explanation here.
This is how they work (“you” are a donor with some money or securities, who wants to give to charities but doesn’t necessarily know where, yet). “DAF” is our abbreviation for donor-advised fund.
You fund your DAF with cash or negotiable assets. You can deduct the entire amount on your taxes, immediately. If you have stock that’s gone up (this means you, Meta engineer), you deduct the current value of it. No capital gains tax on the money you made!
The DAF is administered by a financial organization, or (as we see with Tides) a political organization masquerading as a charity. They invest it, and take a management fee for that.
You can’t get the money back. You already deducted it on your taxes. The money can only go to an approved 501(c )(3) charity (and don’t even think of scamming the IRS with your own fake “charity.” They’re wise to that one).
When you want to donate to an actual charity, you “advise” the organization that administers your DAF, and they verify that the charity is eligible. Thus, the organization doesn’t give out your money on its own, but on the other hand, they can hand you a list of charities that they like. We have to assume that Tides does that.
When your grant goes out, it can be anonymous. That’s why I said, “you can donate to charities without having them pester you for more money.”
Now, let’s assume you’re a Meta engineer with $20 million or so, and you think you want to donate to left-wing groups, but you don’t want your name associated with them, and you definitely don’t want to get fundraising emails and texts every day from them. Or maybe you don’t know what charities you like, but you trust Tides Foundation’s judgment. So instead of picking charities immediately, you establish a DAF with Tides Foundation. Now you’ll have your very own charity advisor, who’ll be happy to give you a list of left-wing charities that they give to. Furthermore, your name doesn’t have to appear on anyone’s IRS filings: yours or those charities!
You might be thinking, “OK, isn’t that good enough? I’ve got my anonymity. Tides Foundation gets all the management fees. So what’s the Tides Center for?”
Black Lives Matter is a useful case, where the rock’s been lifted up so you can see what’s crawling around under there.
Black Lives Matter vs. Tides Center
Now we return to our hypothetical “fiscal sponsorship” case and make it real. “No Bail” == Black Lives Matter Global Network Foundation and “Charity Sponsor” == Tides Center.
Black Lives Matter had its big moment after the George Floyd riots in 2020. It desperately wanted tax-exempt status, and yet it didn’t have it yet. Enter Tides Center, which, allegedly, promised to hold the money for them until they were blessed by the IRS. What exactly they promised, and what BLM believed they promised, is a subject of ongoing litigation and I have no non-public information on it.
Here is the legal gray area: if you’re not a non-profit, another non-profit can promise to accept donations for you, but they can’t be required to. A law professor parses this out here. Oversimplifying: if your contribution to Tides Center is considered tax-deductible, then they can’t be required to give it to BLM. Tides Center has the final discretion. Otherwise, they would be an agent of BLM, not a sponsor of it. Agents and sponsors are different.
In this case, Tides Center interpreted all donations to Black Lives Matter as a generalized wish to support BLM’s causes, not as money earmarked for Black Lives Matter Global Network Foundation. Here’s a relevant paragraph from BLM’s legal filing:
From August 14, 2020 onward, BLM GNF used Tides to form a “Collective Action Fund.” Under the contemplated arrangement, BLM GNF authorized the transfer of the $7.4 million from the Project Fund (previously donated to or for the benefit of BLM GNF) to the Collective Action Fund. BLM GNF also did not believe that it needed that additional capital at the time of transfer, as BLM GNF was not short on funds. In addition to the $7.4 million transferred from the Project Fund, Tides has received $26 million of donations in the Collective Action Fund that are designated for the benefit of BLM GNF and its grantees. Donors often believed they were giving directly to BLM GNF when they donated to the Collective Action Fund. [emphasis added]
The donors might have believed that, but they weren’t. Personally, I have a hard time imagining how Tides attorneys, who are well schooled in charity law, could have left BLM GNF with the impression that Tides would act as their agent.
BLM’s history and legal troubles could fill volumes and bore you to tears, so I won’t recount them here.
Tides Center does more than collect money for nascent non-profits and shield them from transparency, of course: they mentor them and sometimes help them grow into full-fledged non-profits. There are other organizations across the ideological spectrum that do the same thing.
Fiscal sponsorship is not trivial for the sponsors. It imposes a burden of paperwork and oversight. If they’re sponsoring your organization, they’re responsible for anything you do. Philanthropy.com tells us:
In recent years, many nonprofits that serve as sponsors have been strained as they’ve struggled to keep up with demand from new and growing projects.
Twenty-eight percent of survey respondents reported that they temporarily suspended or stopped accepting new projects during the survey period. Of those, 80 percent cited lack of operating capacity as the main reason.
Even large sponsors have been stretched. In 2020, the Tides Center took a pause from accepting new partners to ensure it could adequately provide support as the volume of transactions grew, says Lisa Jackson, executive director. Tides, which reported more than $506 million in assets in 2021, currently supports 128 projects and employs around 800 people through those projects.
Wikipedia says:
The New Venture Fund is a 501(c)(3) nonprofit organization that is part of a Democratic "dark money" network administered by Arabella Advisors. The New Venture Fund serves as the fiscal sponsor for various left-leaning political projects.It has annual revenue of nearly $1 billion.[
The Sixteen Thirty Fund is one of their incubated charities. Again from Wikipedia:
The group spent money opposing the nomination of Supreme Court Justice Brett Kavanaugh and other Donald Trump judicial nominees and supporting various ballot measures. In 2020, the Sixteen Thirty Fund's $410 million in expenditures focused on helping Democrats defeat Trump and win back control of the United States Senate. The Sixteen Thirty Fund spent $196 million in 2022 on political causes including protecting abortion rights and helping Democrats in the 2022 midterm elections.
This is the Republican / conservative version of Tides Foundation.
DonorsTrust is an American nonprofit donor-advised fund that was founded in 1999 with the goal of "safeguarding the intent of libertarian and conservative donors" As a donor advised fund, DonorsTrust is not legally required to disclose the identity of its donors, and most of its donors remain anonymous. It distributes funds to various conservative and libertarian 501(c)(3) organizations.
This is strictly for arts-related non-profits. They say here:
Fiscal sponsorship is a contractual relationship between a 501(c)(3) nonprofit organization and a group or individual whose activities fall within the sponsoring organization's mission. This relationship enables the 501(c)(3) to extend certain benefits of being nonprofit to the sponsored group, without the group having to go through filing for nonprofit status by itself.
In other words: we built an entire organization so that you don’t have to AND you can use our organization to catalyze your creativity.
Raise funds. Motivate donors. Create something excellent. Handle your business.
An environmental non-profit. They say
Our fiscal sponsorship has grown to cover a wide range of environmental issues, campaigns, strategies, and regions. From protecting pristine pockets of wilderness to training women in sustainable water technology, our projects are creating solutions across every sector of the environmental movement and, in many cases, solving for more than one problem at once. We seek projects that align with our values and mission, and also enhance the existing network of leaders at Earth Island. We take chances on new projects that have the audacity to embrace ambitious transformational change. We welcome initiatives and leaders who are currently proving models of that change in the places where they are needed most, often against great odds.
Ironically, if you have an environmental group and decide, “Hey, that sounds great! How do I sign up?” and follow their links, you see:
Note: Earth Island is not currently accepting new project applications while we are in our strategic planning process. We anticipate evaluating new applications in Spring, 2026.
Remember this article. Applying to a fiscal sponsor is somewhat like submitting your novel to a book publisher. It’s life-changing if they take you, but a lot of responses are “no.”
This is from a good friend of mine who has done fiscal sponsorship for years.
This is based on my recollections and limited web research, so some details may be wrong. Also, the laws are pretty intricate, and I’ve omitted (and in many cases don’t know) many of the details.
501(c)(3) organizations are only allowed limited participation in the political process (other than private foundations, which are allowed none). If they want to do any lobbying in support of their missions, they must show that this is not a significant part of their operations, or they can make an election to the IRS that gives them a safe harbor to spend a fairly small percentage of their expenses on it. If they do, there are disclosures they have to make in their 990 submission. “Lobbying” includes indirect lobbying (encouraging people to support legislation or ballot initiatives) and direct lobbying (encouraging legislators and some public officials to take some action or other) and the safe harbor percentage limit is different for the two. Lobbying expense includes money or other resources provided, including work by organization employees that meets the lobbying definition. Lobbying does not include candidate politics, which is completely prohibited. An organization cannot give to campaigns, work on campaigns, or publish opinions about candidates, even if the candidates oppose the organization’s mission.
Violating these rules can cause loss of 501(c)(3) status. My impression is that the rules are inconsistently enforced, I think because some officeholders don’t want the IRS to enforce them.
There is another category of non-profit, 501(c)(4)s, that are allowed to do most of the political things that 501(c)(3)s are not. The activity must be consistent with the organization’s mission, but it’s pretty easy define a broad mission. Donations to these organizations are not tax-deductible, but the organizations are exempt from paying income tax on their own operations. The ACLU and NRA are examples of 501(c)(4)s. Private foundations cannot make grants to 501(c)(4)s.
501(c) organizations are required to report their major donors to the IRS, but this information is redacted in public disclosure of the 990’s (except for private foundations, where the information is not redacted). I think that significant donors of any 501(c) engaged in politics in any way should be disclosed to the public, as are donations directly to political campaigns. Not likely, because, again, officeholders don’t want this. (I also think that corporations and organizations should not be making political contributions, but that’s not likely either.)
It’s a considerable trial to establish and maintain 501(c)(3) status. There are lots of small organizations doing good work that don’t have the means to do this, and therefore find a fiscal sponsor that is already tax-exempt. Or they can be regarded as “programs” of the parent 501(c)(3) even though they operate pretty independently.
This is not a way for the small charities to bypass the rules, because the parent organization takes full responsibility for compliance. If the “child” organizations break the rules, and the parent organization didn’t exercise due diligence in monitoring the child, the parent could lose its tax-exempt status.
We’ve contributed to a number of organizations like this. Ed100 makes available online a complete and up-to-date guide to California education for the benefit of legislators, district trustees, parents and others. Its parent is San Francisco’s Full Circle Fund. Lead By Learning runs communities of practice for teachers, and its parent was Mills College and is now Northeastern University. The Silicon Valley Math Initiative provides professional development in K-12 math instruction, mostly funded by school districts, but the program we support (Lesson Study) is supported partially by us, and that program’s fiscal sponsor is the San Mateo County Office of Education. These are all good organizations that may not have have been able to operate without these arrangements.
All of these rules and structures can be abused, like pretty much everything, particularly if the agency with a duty to ensure compliance doesn’t do a good job of it. Or perhaps because it is instructed not to do a good job of it, but who could imagine that happening? But it would be better to fix the problems than throw out these non-profits’ ability to do useful work. That’s my opinion, anyway.
Charitable Money-Laundering, The Center For Consumer Freedom Team (March 9, 2004)