A bunch of people followed me when I posted that thread with tax advice today so I figured it's a good time to talk about the way that the state uses financial bureaucracy and the concept of "legitimacy" to stifle mutual aid and direct action.
So mutual aid and direct action groups like harm reduction collectives, food not bombs, jail support and other sorts of groups that gather donations and share resources with vulnerable people usually do not have 501C status, which means they are not beholden to the rules and limitations that 501C status nonprofits must conform to. It also means those groups can encounter problems as they grow larger in their reach.
A 501c3 non profit can accept large donations and scale up without incurring tax penalties, but 501c3s are limited in the political activities they can participate in, they can also risk losing tax exempt status for operating outside of their intended scope. Some radical and anarchist organizations obtain 501c3 status in order to scale and operate in certain areas of work that small groups of individuals cannot operate in as easily, but it comes with limitations and risk. For example, the Atlanta Solidarity Fund was charged with charities fraud in relation to some reimbursements it allegedly gave to activists involved in the Stop Cop City campaign.
A mutual aid group without tax exempt status that receives too many financial donations may run into a very different problem, whoever is administrating the bank account, patreon, venmo etc for the group may end up being taxed on the donations the group receives, and they may be locked out of transferring donated money on certain platforms if they do not provide a tax ID number. This is a problem, say your affinity group collects $10,000 in a year and buys bus passes and motel stays for unhoused people, but then the person on the venmo gets a 1099 showing the $10k as their own income, and now owes additional taxes on it. I have seen stuff like this happen several times, especially during and after the 2020 uprisings.
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I spend a lot more than the average amount of time looking at public financial records of nonprofits (form 990). A ton of nonprofits with 501c3 status are functionally money laundering in my opinion. Not all of them for sure but I've seen a shocking amount of them where the contributions they receive are largely spent on executive salaries, acquiring assets, and other luxuries that do not go towards the intended purpose of the charity (expensive fundraising galas, travel, meals, vehicles etc). Many rich people give large donations to charities that they are involved in, then write off that donation in their taxes, then travel and dine on the charities expense. This shit is rampant. Before you donate money to a charity, look up their form 990 and see how they're spending the money you give them. Make sure to check the Schedule J for officer and director salaries.
Money you donate to "legitimate" charities can be deducted from your taxes, but money you give directly to mutual aid groups or to individuals in need cannot be. This is a way for the state to control and influence who you are allowed to share with, and encourage donations to organizations that conform to the state's rules and discourage direct aid in your community or towards radical political efforts. The legitimized middle man is made mandatory or you forfeit the tax deduction.
This makes it extremely difficult for mutual aid groups to collect large donations. The people making large donations don't want to forfeit the tax deduction, and the individuals collecting the donations outside of a legitimized financial entity are liable to have those donations taxed as their own income.
Some radical nonprofits sponsor other groups without tax ID status, which rules. They use their tax exempt status to receive larger donations of behalf of other grassroots groups, then give it back to them as grants to be spent how the non status group intends. This is the best model I've seen for getting around this problem. But it is not without risk as seen in the Stop Cop City RICO cases.
If you guys like this kinda stuff maybe next time I'll talk about how politicians writing books is another way to launder money and get around campaign finance laws.
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@temerity
Do you know the website https://www.charitywatch.org/ ? I feel like you should volunteer for them if you're not already doing so! :-)
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@HunterAnton I did not know about it but it's really cool to see all of the CEO compensation data organized like that!
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