Wednesday, September 17, 2008

Will ADF's "Pulpit Freedom Day" Raise a Debatable Constitutional Question, or is the First Amendment Issue Reasonably Clear Such that No Real Question Exists?

On September 8, 2008, I blogged about ADF's proposed "Pulpit Freedom Day" on Sunday, September 28, 2008.  Since then, my colleague Linda Beale indicated on her ataxaingmatter blog, that she does not see things the way I do.  Linda says, in part, "I simply don't see how a constitutional 'right' to tax-exemption in support of political campaign intervention can accord with freedom from the establishment of a government-sponsored religion."

Well, obviously, Linda and I disagree on this point.  To me, the matter is not so clear as to be a "slam dunk" issue.  When you consider not just the income tax exemption itself, but the myriad of other things that accompany 501(c)(3) charitable tax exempt status, it is conceivable that the "tax exemption is a privilege not a right" argument just might not be enough when religion is involved.  Remember, in Taxation Without Representation, 461 U.S. 540 (1983), the one thing that arguably tripped the scale in favor of the government on the First Amendment lobbying issue there was the presence of the 501(c)(4) alternative - and that case did not involve religion.  As Justice Blackmun explains in his concurrence (joined by Brennan and Marshall):

I also agree that the First Amendment does not require the Government to subsidize protected activity . . . and that this principle controls disposition of TWR's First Amendment claim. I write separately to make clear that in my view the result under the First Amendment depends entirely upon the Court's necessary assumption -- which I share -- about the manner in which the Internal Revenue Service administers [sec.] 501.

If viewed in isolation, the lobbying restriction contained in [sec.] 501(c)(3) violates the principle, . . . "that the government may not deny a benefit to a person because he exercises a constitutional right." Section 501(c)(3) does not merely deny a subsidy for lobbying activities . . .; it deprives an otherwise eligible organization of its tax-exempt status and its eligibility to receive tax-deductible contributions for all its activities, whenever one of those activities is "substantial lobbying." Because lobbying is protected by the First Amendment. . . [sec.] 501(c)(3) therefore denies a significant benefit to organizations choosing to exercise their constitutional rights.

The constitutional defect that would inhere in [sec.] 501(c)(3) alone is avoided by [sec.] 501(c)(4). As the Court notes, . . . TWR may use its present [sec.] 501(c)(3) organization for its nonlobbying activities and may create a [sec.] 501(c)(4) affiliate to pursue its charitable goals through lobbying. The [sec.] 501(c)(4) affiliate would not be eligible to receive tax-deductible contributions.

Given this relationship between [sec.] 501(c)(3) and [sec.] 501(c)(4), the Court finds that Congress' purpose in imposing the lobbying restriction was merely to ensure that "no tax-deductible contributions are used to pay for substantial lobbying." . . . Consistent with that purpose, "[the] IRS apparently requires only that the two groups be separately incorporated and keep records adequate to show that tax-deductible contributions are not used to pay for lobbying." . . . As long as the IRS goes no further than this, we perhaps can safely say that "[the] Code does not deny TWR the right to receive deductible contributions to support its nonlobbying activity, nor does it deny TWR any independent benefit on account of its intention to lobby." . . . A [sec.] 501(c)(3) organization's right to speak is not infringed, because it is free to make known its views on legislation through its [sec.] 501(c)(4) affiliate without losing tax benefits for its nonlobbying activities.

Any significant restriction on this channel of communication, however, would negate the saving effect of [sec.] 501(c)(4). It must be remembered that [sec.] 501(c)(3) organizations retain their constitutional right to speak and to petition the Government. Should the IRS attempt to limit the control these organizations exercise over the lobbying of their [sec.] 501(c)(4)  affiliates, the First Amendment problems would be insurmountable. It hardly answers one person's objection to a restriction on his speech that another person, outside his control, may speak for him. Similarly, an attempt to prevent [sec.] 501(c)(4)  organizations from lobbying explicitly on behalf of their [sec.] 501(c)(3) affiliates would perpetuate [sec.] 501(c)(3) organizations' inability to make known their views on legislation without incurring the unconstitutional penalty. Such restrictions would extend far beyond Congress' mere refusal to subsidize lobbying. . . . In my view, any such restriction would render the statutory scheme unconstitutional.

Thus, while I am not saying that the churches would necessarily WIN a First Amendment Constitutional fight over the right to campaign for candidates while maintaining 501(c)(3) tax-exemption, I do not see the case as clearly favoring the government's presumed position.


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For reasons I detail in a draft article that I plan to post on SSRN early next week, I believe that post Employment Division v. Smith there is only a First Amendment free exercise clause issue here if the federal courts were to accept an expanded view of what has come to be known as the church autonomy doctrine. While I argue for such an expansion in my paper, it would be a siginificant extension of existing case law. Otherwise, I believe the main concern with applying the political campaign intervention ban in this context is under the Religious Freedom Restoration Act and not the First Amendment.

Posted by: Lloyd Mayer | Sep 19, 2008 5:38:48 AM

I hope this doesn't come across as too shameless a plug for my own article (recently posted to SSRN and forthcoming in the Virginia Tax Review). In it, I argue that it is unconstitutional for the government to take the position (as the IRS currently does) that 501(c)(3) organizations are not permitted to express their opinions about candidates, even if they attempt to shift all costs to a non-501(c)(3) affiliate. The argument (which is essentially the same as one made by Laura Chisolm 18 years ago) is based on free speech, not free exercise, concerns.

Because of the current state of free-exercise jurisprudence (mentioned by Lloyd above), I think the argument is both stronger and less confusing under the free speech clause, for reasons that should be apparent from the quotation from Taxation With Representation reproduced in the post.

By the way, if you choked on my use of the phrase "attempt to shift all costs" above, and thought to yourself "that's just impossible," that's what the article actually attempts to address: is it possible to come up with an adequate theory to account for all the "costs" associated with campaign-intervention speech.

Posted by: Ben Leff | Sep 19, 2008 11:25:01 AM

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