There’s another less altruistic side to this story you’d be forgiven for not knowing. Chouinard used a remarkable tool to preserve family control for future generations, minimize his ongoing tax liability, and protect philanthropic privacy.

Introduction to the 501(c)(4)

Meet the 501(c)(4)—the little-known Swiss army knife cousin to your standard 501(c)(3) entity. Contributions to C4s (as they are known) are not tax deductible, so they don’t get much love. However, for cases where we run into charitable deduction income cap limits, have illiquid assets that exceed the lifetime gift tax exemption, or have clients who want to bolster philanthropy with political advocacy, donating to a C4 is an attractive strategy.

Whether you’re a founder, operator, or generational owner, “heavy is the head that wears the crown,” as Shakespeare wrote. Walking the tightrope to balance family, employee, and business needs while managing IRS regulations can be a difficult trade-off. Getting something like heir liquidity often involves giving up business control (usually clipped significantly by taxes). 

The c4 has become an increasingly helpful vehicle for philanthropy beyond charitable donations to include community organizing and political advocacy. The Internal Revenue Service (IRS) has recognized it as a non-profit that promotes social welfare. While contributions to 501(c)(4) organizations are not tax-deductible, these entities enjoy tax-exempt status on their income, and our firm can help. 

Flexibility and Control

Transferring assets to a 501(c)(4) offers families control without the burden of those dreaded federal gift taxes, an appealing perk for estate planning. Unlike private foundations, these entities aren’t restricted by excess business holdings rules, no 5% minimum distribution, or 1.39% investment income tax. So, if you’re a business founder, you don’t have to retire to the beach just yet. You can stay in the game, keep steering your company, and make sure the profits are doing good in the world, whether for social causes or political goals. It’s like having your cake, eating it, and sharing a piece to make the world better, too!

Political Influence and Privacy

Regarding political influence, 501(c)(4) organizations are like the secret agents of the charity world. They can lobby and participate in some partisan activities, provided these aren’t their primary focus. This gives donors a powerful tool to support specific candidates and legislative causes, all while avoiding Schedule B requirements. In addition, these organizations are not required to disclose their donors, offering privacy unavailable to other charities. Ever wonder where the term “dark money” came from? Look no further. 

Tax Advantages

Did we mention the tax advantages? Well, it’s worth mentioning them again. 501(c)(4) organizations can engage in a wider range of activities than 501(c)(3) charities. While you don’t get a tax deduction for your donation, you can avoid capital gains and estate transfer taxes. In Chouinard’s case, this amounted to somewhere between $700-800 million on the $3 billion low-basis donation. 

You don’t have a place in the Hamptons? 

Let’s be honest for a second. You probably won’t be flying your private jet to the Hamptons for a weekend of champagne and caviar. It’s a small club, and as comedian George Carlin once said, “You ain’t in it.” 

Still, Tru West Financial provides alternatives like Donor-Advised Funds, Family Foundations, and super PACs for those with $2+ million in investable assets. These options deliver similar benefits regarding tax advantages, privacy, and political impact.

At Tru West Financial, we prioritize personalized financial strategies, focusing on relationships over transactions. Our experienced advisors help you navigate complex wealth management issues, offering custom solutions to maximize charitable impact, influence political processes, or secure your legacy. Contact us today to start your journey towards a secure and impactful financial future.

The post Stewarding the Family Business – How to be Nimble for Future Generations appeared first on Tru West Financial.

I immediately received a pleasant email—a thank you and an update about the campaign trail. But soon, the emails became more frequent and more urgent. The subject lines blared at me: “URGENT: We Need Your Help!” “MATCHING GIFT: Your Donation Doubled!” “ACT NOW: We’re Counting On You!” Each one seemed more desperate than the last as if the fate of the nation rested on my response.

Then came the texts. At first, they were from the candidate’s campaign—a reminder to donate again, a request to chip in just a little more. But before I knew it, I was also getting messages from other candidates, some I’d never heard of from both sides of the aisle. It was relentless. Every day, my phone buzzed at all hours with new demands for my money. My once-proud act of political engagement had turned into a dystopian Black Mirror episode.

According to Pew Research, a year before the presidential election, nearly two-thirds of Americans (65%) say they experience political fatigue. Whether it’s the constant calls for cash, overall dissatisfaction with the candidates or exhaustion from the endless sensationalized news cycle, people are more and more opting out of politics. Source

But how does one continue to ensure that the causes that most resonate with them are supported in a meaningful way? Here are some strategies to consider.

Direct Donations to 501(c)3

Direct financial contributions are one of the simplest and most effective ways to support a cause. Research and choose organizations that align with your values and have a clear, non-partisan mission. Charities focusing on education, health, environmental conservation, or community development often have clear goals that transcend political divisions. Look for organizations with strong track records and transparent financials to ensure your donations make the most impact.

Volunteer Your Time and Skills

Time is a valuable resource. Volunteering allows you to contribute hands-on, offering your skills to causes that matter to you. Whether it’s mentoring young professionals, helping build homes, or providing free legal or financial advice to those in need, your efforts can directly benefit the community. Volunteering is also a great way to meet like-minded individuals focused on making a difference without political motivations.

‌Support Social Enterprises

Consider supporting businesses that have a social mission at their core. Social enterprises often reinvest their profits into the community or environmental projects, allowing you to support causes through your everyday purchases. Whether buying products from a company that prioritizes sustainable practices or investing in businesses that hire underserved populations, your consumer choices can reflect your values without stepping into the political arena.

‌Educate and Advocate

Education is a powerful tool for change. By raising awareness about the issues that matter to you, you can influence others in a positive, non-political way. Consider writing blogs, hosting workshops, or using social media to share information about the causes you support. Rather than engaging in political rhetoric, focus on facts, personal stories, and the tangible benefits of supporting these causes. Advocacy can be about creating awareness and understanding rather than pushing a political agenda.

‌Participate in Community Projects

Get involved in local community projects that aim to improve the quality of life in your area. Community gardens, neighborhood clean-ups, or supporting local schools and libraries are all ways to contribute positively. These initiatives often unite people from all walks of life, focusing on shared goals rather than political differences.

‌Leave a Legacy

Consider how your support for a cause can extend beyond your lifetime. Through thoughtful estate planning, you can ensure that your wealth benefits the causes you care about. Setting up a charitable trust or leaving a portion of your estate to a favorite charity allows you to make a lasting impact. Working with a financial advisor to structure your legacy to maximize its benefit can help you avoid potential political entanglements.

Conclusion: Focus on Impact, Not Politics

Supporting causes you care about doesn’t have to be complicated by politics. You can make a meaningful difference in the world by focusing on direct action, community involvement, and education. At Tru West Financial, we understand the importance of aligning your financial decisions with your values. We’re here to help you navigate these choices, ensuring your contributions are as impactful and meaningful as possible. After all, supporting the right causes can be one of the most fulfilling aspects of your financial journey.

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