Monday, October 29, 2018

David J. Herzig and Samuel D. Brunson on White Supremacist Groups and Tax Exemption


David Herzig (previously at Valpo, now at EY)) and Samuel Brunson (Loyola Chicago) wrote an opinion piece last year on whether alleged hate groups should be allowed exemption from tax under 501(c)(3).  I thought it was worth considering after Charlotesville, then again after the alt-right's tax exempt status was restored recently, administratively and without much consideration for their ideas, as would [apparently] not be appropriate under the American conception of speech and thought.  I thought about it again after the shocking events in Pittsburgh on Saturday morning.  Here is some of what Hertzig and Brunson said in challenging my initial thinking:

But some viewpoints are fundamentally untethered from American values and should no longer receive any state support or endorsement. We are not arguing that such despicable views be excluded from the public sphere; free speech is too important a value to dismiss just because some people’s speech is repugnant. But under current law, tax exemption represents something more than merely permitting free speech.

In 1983, the Supreme Court declared an extra-statutory rule for tax exemption — the “fundamental public policy” doctrine. In Bob Jones University v. United States, the court held that the I.R.S. could constitutionally revoke the tax exemption of a religiously affiliated university because its racist policy violated a “fundamental public policy.”The court did not explain how to determine when a societal value became a fundamental public policy. But it pointed out that the courts, the executive branch and the legislative branch had all been working to eliminate school desegregation; that concerted effort indicated that nondiscrimination in schools was a fundamental public policy.

Despite the rhetoric of various white supremacist and white nationalist groups, an important bipartisan consensus emerged out of the chaos of the Charlottesville rally: Advocacy of white supremacy and hatred by the K.K.K., neo-Nazis and the far right are not acceptable public viewpoints. Robust denunciations came from politicians across the political spectrum and included leading Republican politicians like Mitch McConnell, the Senate majority leader, and Paul Ryan, the House speaker. The list also included members of the executive branch, including Attorney General Jeff Sessions and Vice President Mike Pence.   If it was not clear that white supremacy violated a fundamental public policy in the era of the Bob Jones case, it is clear now. The widespread condemnation of racism expressed by both the executive and legislative branches of the government provides convincing evidence that white supremacist actions violate fundamental public policy. Thus, those organizations that advocate white supremacy and organize white supremacist events do not qualify as tax-exempt under the Supreme Court’s reasoning, and the law requires the I.R.S. to revoke their tax exemptions.  If the administration is going to “take the most vigorous actions” against white supremacists and neo-Nazis, the first step would be to review and revoke the tax exemption for any organizations that espouse these ideologies.

How will the government determine which organizations violate this fundamental public policy? Certainly, any group that sponsors violence against racial or ethnic minorities should not qualify for a tax exemption. Moreover, any group that proclaims the superiority of whites, or supports the separation of the population by race, should be scrutinized. Where an organization’s mission statement suggests a focus on the superiority of whites, or the inferiority of other groups, the I.R.S. should look closely at what the group does. (Though surprising, it is not unheard-of for a group to explicitly state its white supremacist purposes. The New Century Foundation, for example, says in its mission statement, “We also believe the European-American majority has legitimate group interests now being ignored.”)  Unless the I.R.S. is able to determine that an exempt organization does not advocate a racial policy that violates the fundamental public policy against white supremacy, it should lose its exemption.  Since the Bob Jones decision, the I.R.S. has been reluctant to apply the fundamental public policy doctrine. With exceptions that could be numbered on one hand, the I.R.S. has invoked fundamental public policy only to revoke the exemptions of private schools that discriminated on the basis of race. Moreover, after accusations that the I.R.S. discriminated against Tea Party groups by delaying or denying their applications for nonprofit status, the agency has been treading more carefully than ever.  The case of white supremacist groups is different: Politicians and citizens on the left and the right have recognized the odiousness of white supremacist groups.  To be clear, public charities have an important historic role in espousing minority and unpopular views, and these groups should not be punished or censored simply because of their speech. Moreover, their articulating their bad ideas ultimately leads to society’s forcefully refuting those ideas, which, in the end, makes the cause of anti-racism stronger.  But a tax exemption is something different. The Constitution protects these groups’ right to free speech, but it doesn’t promise anyone freedom from taxes.

The problem, of course, is that the groups don't explicitly say or teach that we should "kill all the [fill in the blank]."  They say things that in other countries are considered to incite others to "kill all the [fill in the blank].  Usually, they teach the inferiority or superiority of one group or another, or blame some social malady on one group or another.  Then, when violence erupts they argue that violence is entirely antithetical to their viewpoint.  Some countries, Canada and Germany, for example, don't view that as an insurmountable obstacle to the preservation of free speech and the simultaneous prohibition of hate speech.  Consider this article comparing American and German treatment of free speech.  The article discusses Germany's constitutional free speech protection and then quotes a provision of German law that states "Whosoever, in a manner liable to disturb public peace, (1) incites hatred against parts of the population or invites violence or arbitrary acts against them, or (2) attacks the human dignity of others by insulting, maliciously degrading or defaming parts of the population shall be punished with imprisonment of no less than three months and not exceeding five years."  Still, countries that wrestle with hate speech have a hard time enforcing prohibitions.  Denying tax exempt status for groups that engage in hate speech may not be the same thing as prohibiting speech, but, it seems to me, would be just as difficult and would simply move the burdens and problems of enforcement to a different arm of government.   In the wake of Pittsburgh, I am willing to try though.


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I wonder whether Peter Dobkin Hall's writings on the historical relationship between tax exemption and governmental policy aims might be relevant here? In short, Hall argued that, historically, there was significant alignment between the two, but that the trend was moving toward a more independent (from government-identified) interpretation of "public benefit purpose" in tax exemption.

Posted by: Michael L. Wyland | Oct 30, 2018 6:35:50 AM

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