The Dark Money Subsidy? Tax Policy and Donations to 501(c)(4) Organizations

51 Pages Posted: 27 Nov 2017 Last revised: 2 Aug 2018

See all articles by Brian D. Galle

Brian D. Galle

Georgetown University Law Center

Date Written: July 19, 2018


This Article presents the first empirical examination of giving to § 501(c)(4) organizations, which have recently become central players in U.S. politics. Although donations to a 501(c)(4) are not legally deductible, gifts to c(4) organizations are highly elastic to the top-bracket tax-price of charitable giving. Donor responses to benefits for which they are not eligible may reflect the low salience of legal limitations or deliberate over-claiming. Alternately, firms’ strategic responses to tax changes, such as fundraising, may drive the result.

I find evidence consistent with all these explanations. 501(c)(4) fundraising is highly responsive to the value of the deduction, with an elasticity of -2.0, but does not fully explain changes in donation behavior. These results imply the U.S. is currently granting much larger subsidies to c(4) firms than is generally understood, and that subsidies for charity cause previously unobserved pressures on competing c(4)s.

Keywords: 501(c)(4), Charity, Charitable Contribution Deduction, Dark Money, Lobbying

JEL Classification: H29, H32, K34, L31

Suggested Citation

Galle, Brian D., The Dark Money Subsidy? Tax Policy and Donations to 501(c)(4) Organizations (July 19, 2018). Available at SSRN: or

Brian D. Galle (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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