How The Tax Code Subsidizes Hate

Last Thursday, the Oversight Subcommittee of Ways and Means held a hearing entitled "How the Tax Code Subsidizes Hate."  The hearing lasted about two and a half hours and can be viewed in full by clicking on the YouTube video above.  The majority of the witnesses were relatives of victims of hate crime, such as the Pulse Nightclub shooting in Orlando in 2016.  The two legal experts were Marcus Owens, a well known expert on tax exemption doctrine, and Eugene Volokh, who might be best described in this context as a First Amendment purist.  Those two legal experts pretty much provided expected, if unimpressive, testimony.  Unimpressive only because they both agree that "hate speech" is something we hate, but also something that must be tolerated, and indeed subsidized through tax exemption, because that is the only way to preserve all forms of beneficial speech and debate.  Owens talked about the "methodology test" (Revenue Ruling 86-43) for determining whether a group is "educational," seemingly in support of applying that test in a manner which would deny tax exempt status to hate groups, though he didn't allow himself to explicitly state that much.  His principal contribution is that the IRS should more forcefully apply the methodology test, noting that the methodology test has been rarely utilized when perhaps it would be useful.

Having a standard, however, accomplishes little unless accompanied by an effort at enforcement.  While a few examples exist of Revenue Procedure 86-43 being used in the processing of applications for tax-exempt status, there is virtually no information regarding the extent to which the Revenue Procedure is utilized in IRS examinations of organizations after tax-exempt status has been recognized. Indeed, the data reported in the IRS Data Book for fiscal year 2018 reflects that the IRS received 1,603,499 returns from tax-exempt organizations that year.  The same Data Book, however, reports that only 2,816 returns of the same types included in the number filed were examined. While there are certainly concerns with the comparability of the two sets of numbers, 2,816 returns examined reflects a very small percentage of the universe of organizations filing returns, particularly when some unidentified number are Form 990-N filings made by very small organizations. The small number of actual examinations of tax-exempt organizations undoubtedly reflects resource allocation decisions within the IRS that ensure that the core mission of the IRS, tax collection to fund the government, continues, with those functions not generating significant tax revenue, as is the case with tax-exempt organizations, receiving reduced resources. The reduced resources have resulted in the consolidation of operational units and various technical functions, with a risk of dilution of institutional knowledge and a reduced flow of information about the tax-exempt sector to senior managers and policy makers in Washington, DC.

Professor Volokh's testimony followed the doctrine we are all primarily taught in law school.  That is, that the majority can never be trusted to be a referee of speech, not even speech universally considered beyond the boundaries of civilized debate, because a wrongly indoctrinated or intoxicated majority will inevitably narrow those boundaries until only the speech of an empowered minority will be considered within acceptable boundaries.  

But giving the government the power to discriminate against some such viewpoints necessarily means the government will also have the power to discriminate against others.  Would we feel comfortable giving this power to the Trump Administration? If we would, would we feel comfortable giving it to a possible Sanders Administration? I doubt there are many people who would trust both those Administrations; and this distrust of government power is one reason the First Amendment exists.  Many campaigns for democracy, liberty, and equality have been greatly helped by the First Amendment, and by courts’ willingness to enforce the First Amendment. But the Court has recognized that this protection against governmental suppression of speech must apply to foes of these principles as well as friends. As Justice Brennan wrote in NAACP v. Button (1963)—an important win for the NAACP—the NAACP’s civil rights mission was “constitutionally irrelevant” to the Court’s First Amendment analysis. “The course of our decisions in the First Amendment area makes plain that its protections would apply as fully to those who would arouse our society against the objectives of the [NAACP].  For the Constitution protects expression and association without regard to the race, creed, or political or religious affiliation of the members of the group which invokes its shield, or to the truth, popularity, or social utility of the ideas and beliefs which are offered.”

Pollyannish though it may be, I have a little more faith in a world matured by having lived through slavery, the holocaust, Wounded Knee, Vietnam, Rowanda, the Bosnian War, xenophobia, and even the nativism that some feel is fueling "reactionary" election results around the world.  We even know that online bullying, which can only be viewed as speech, is actionable and we've taken legal steps against it.  But the wholesale spread of hate so close to violence, well . . . we fall back on old dusty doctrine because we don't want to do the hard work necessary to preserve free speech and human life simultaneously.  I no longer believe that we have to tolerate racial supremacists because if we don't, we will inevitably allow condemnation of those who talk about loving neighbors no matter their race, gender, or sexual orientation.  I am not a First Amendment Scholar, but it seems fairly apparent that traditional First Amendment doctrine -- protect even the most despicable speech inevitably to lead to violence so that we never squash universal ideas underlying our spirituality and humanity -- is outdated and hardly applied in recognition of the speed and frequency with which hate speech can be repeated and used as tools of indoctrination.  Yes, it is and will continue to be difficult to distinguish between "civilized," speech that advances the plight of humankind (even if debatable on the fringes -- like global warming), and speech of those in or out of power labeled, in an exercise in of understatement,  "contemptuous" even by Professor Volokh in his testimony.  But I am in favor of a sentiment expressed by one of the Republican members of the subcommittee.  That the law should preclude tax exempt status for those who advocate violence (explicitly or by implication sufficient that even Stevie Wonder could see it) -- how possibly could that be considered "charitable?" --  even if it takes a constitutional amendment to implement such a rule; Volokh would extend deny only groups that actually engage in violence and that position is consistent with traditional First Amendment doctrine.   But it is as outdated as the notion that a stalking victim must await actual violence before expecting protection from the law.  Anyway, this is a blog post not a law review article.  Simply put, it is not an inevitable requirement that we subsidize hate speech in order to protect real charity.

Darryll K. Jones