A tax-exempt nonprofit spent less than 1% of its money on its own programs in most recent years, re-granting the rest to its affiliated advocacy groups. Between 2010 and 2024, those transfers totaled roughly $146 million.

Third Way Institute is a tax-exempt nonprofit, meaning its donors are able to deduct their contributions from their taxes. But in recent years, the organization has spent around 3% of its money or less on its own charitable programs, instead routing the overwhelming majority of what it raised to a single affiliated advocacy group, according to the organization’s own Form 990 tax filings.

The affiliate, Third Way, positions itself as a centrist Democratic think tank, organized as a 501(c)(4) social-welfare group. The distinction matters for taxpayers: gifts to the Institute, a 501(c)(3), are tax-deductible, while gifts to Third Way itself are not.

The pattern in the filings raises questions about whether the deduction the public underwrites is financing independent charitable work, or chiefly feeding an affiliate that conducts the group’s political and advocacy activity.

The Trump administration is cracking down on what they see as nonprofits playing fast and loose with IRS rules.

Treasury Secretary Scott Bessent recently told Just the News that his department was looking into large 501(c)(3)s with attached (c)(4)s to review “how the money moves back and forth between those entities” and whether they have “gone over the line.” Bessent did not name any specific organization that could be targeted.

The Institute and Third Way are legally separate, with distinct IRS registrations, but closely tied. They also share top leadership — Jonathan Cowan is president of both, while Matthew Bennett is an officer of each.

The organizations don’t conceal the transfers between them, reporting everything on their Form 990s, and while paired charitable and social-welfare arms are common across the ideological spectrum and lawful, the extent to which the Institute gives money to its affiliated (c)(4) is overwhelmingly large.

Between 2019 and 2024, transfers to the affiliate equaled roughly 97% to 99% of the charity’s total spending. By contrast, the conservative 501(c)(3) Heritage Foundation provided its political action arm, Heritage Action for America, with about $9.5 million in 2024, or less than 7% of the (c)(3)'s total operating budget and about 64% of Heritage Action's total operating budget.

Intend to "really challenge the lefties," Third Way says

Earlier this year, Cowan told The New York Times that Third Way would be “the chief opponent of the left in the 2028 Democratic presidential primary, and we’ll be working both sides: Make the moderate lane as deep and as wide as possible, and really challenge the lefties.”

He added that the organization plans to “spend $30 million to $50 million doing all of what we’re trying to do.”

Third Way does bring in some money of its own, but the vast majority comes from the Institute. In 2024, for example, the money transferred between the Institute and Third Way accounted for 70% of the (c)(4)’s revenue. In that year, Third Way brought in less than $10 million on its own, making the $30 million to $50 million spend over three years a bit of a stretch without using (c)(3) funds.

It can be easy for a (c)(3) to lose its tax-exempt status, IRS guidance says. Such organizations must use their funds for tax-exempt purposes and “should not serve the private interests, or private benefit, of any individual or organization more than insubstantially.” (Emphasis added.) 

They are also prohibited from “participating in any political campaign on behalf of (or in opposition to) any candidate running for public office.” A (c)(4) can do this, but if (c)(3) dollars going to that (c)(4) are used for a political campaign, then enhanced scrutiny may come.

Dean Zerbe, former Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance, told Just The News that generally, a (c)(3) has a responsibility to ensure the money it provides to a (c)(4) is “sequestered and earmarked and used only for purposes that are allowable.”

"A scheme to hide and disguise source of funds for political lobbying," says financial crime consultant

John Moynihan, a consultant known for investigating and prosecuting financial crimes and a retired DEA financial crimes analyst, suggested Third Way’s habit of transferring nearly all money from its (c)(3) to its (c)(4) is a form of “political money laundering.”

“It’s really a scheme to hide and disguise source of funds for political lobbying by getting a tax deduction on the (c)(3) donation and then moving it to (c)(4) for political lobbying, which can’t be done in (c)(3). It can be done in (c)(4) but (c)(4) doesn’t allow for tax deductions,” he told Just the News in an email.

Third Way’s Matt Bennett, disagreed, telling Just the News that it is “inaccurate” to suggest that Third Way Institute simply diverts funds to its (c)(4).

“In fact, the independent Third Way Institute board approves all grants of funds to Third Way, and those funds cover only the charitable (501(c3)) expenses of the (c)(4). Third Way is a think tank, so most of what our policy teams do is (c)(3) activity,” he said, adding that “such a relationship is not only completely legal, it is commonplace.”

Third Way did not provide an answer to a question about the kind of firewalls it has in place to avoid spending (c)(3) funds on political action.