Tuesday, January 14, 2014
Several blogs, including Paul Caron's Tax Prof Blog, reported earlier in January about Cornell professor William A. Jacobsen filing a complaint with the IRS challenging the tax-exempt status of the American Studies Association for its decision to join a boycott of certain Israeli academic organizations. You can read all about Professor Jacobsen's rationale and his complaint at his own blog, Legal Insurrection.
While ASA's boycott action is not in accord with my own beliefs regarding academic exchange, I also think Prof. Jacobsen's complaint is going nowhere. The complaint appears to rest on two grounds. The first is that ASA's boycott is not an "educational activity" and therefore violates the organizational and operational tests for exemption. The second is that the boycott essentially violates the "public policy" limitation on exemption created by the Bob Jones University case.
Neither argument, in my view, should be sustained. As to the first, even if one believes that the boycott action by ASA is not "educational," the law is quite clear that a charitable organization can engage in some ("insubstantial") amount of non-charitable activity. See Treasury Regs. 1.501(c)(3)-1(c)(1). Of course, we could argue about whether ASA's action is "insubstantial" - this is a word that the IRS has failed to define over the 50+ years it has been part of the regulations - but ASA continues to carry on a very real and substantial charitable program apart from its boycott action. The boycott is hardly the "only" thing ASA does, or arguably even a very large part of it; a visit to the ASA web site will show that the organization carries on a very active program of academic conferences and exchange.
Second, it is not nearly as clear as Professor Jacobsen seems to believe that the boycott itself is not an "educational" activity within the meaning of the IRS regulations. The regs. state that "educational" involves both "training of the individual" and "The instruction of the public on subjects useful to the individual and beneficial to the community." Regs. 1.501(c)(3)-1(d)(3). The latter phrase encompasses all sorts of activities designed to inform the population; a planetarium, a zoo, a symphony orchestra - all are organizations that are "educational" because they provide useful information to the public. The boycott by ASA, whether you agree with it or not, arguably is bringing information to the public about the treatment of Palestinians by Israel; it is a technique to shed light on certain information. Boycotts have long been used "to get a point across." Do we really want the IRS to make value judgments regarding when boycotts are "good" and therefore educational and when they are "bad" and therefore not educational? I sure don't. Boycotts serve an information-dissemination purpose. In my view, that is "educational" even if I find the purpose distasteful, stupid, or both.
Professor Jacobsen's second argument is that the boycott violates the "public policy" limitation on exemption by violating U.S. public policy against boycotting Israel and by violating public policy against discrimination on the basis of national origin. This, too, is unlikely. In the Bob Jones University case (461 U.S. 574), the Supreme Court found that discrimination on the basis of race, even if not illegal, was nevertheless a violation of such a fundamental public policy that it should result in revocation of exemption. Much has been written about the scope of Bob Jones - including excellent analyses by fellow blog contributors David Brennan and Johnny Rex Buckles - but suffice it to say that the IRS has never expanded the holding of Bob Jones beyond the proposition that discrimination against a minority class on the basis of race in the educational context is grounds for revoking exemption. Not gender discrimination; not religious discrimination; not sexual orientation discrimination; not national origin discrimination; not a public policy against boycotting Israel; not a host of other things. Again, we all can legitimately argue about what the scope of the public policy limitation ought to be, but under current IRS doctrine, the ASA boycott simply isn't a public policy violation. And I very seriously doubt that the IRS will take this opportunity to dramatically expand its reading of Bob Jones.
So I'm going to go out on a limb here and make a prediction: Professor Jacobsen's complaint has had its 15 minutes of fame and you won't be hearing any more about it, at least not from the IRS.
And for the record, I think the ASA's boycott is really dumb.