Tuesday, May 31, 2022

On Twitter and Charitable Exemption

On Friday, David Herzig (EY) proposed a thought experiment about what Elon Musk could do in his acquisition of Twitter:

His proposal led to some interesting discussion--could Twitter qualify as a 501(c)(3)? After all, newspapers and other journalistic organizations have been doing it for the last couple decades. Most recently, the Chicago Sun-Times converted from a for-profit newspaper into a nonprofit, tax-exempt one.

As I've thought about it, I see two major impediments to the idea of Twitter itself become a tax-exempt organization.

The first is the question of whose speech counts as Twitter's speech. One thing that tax-exempt newspapers have to do is forswear endorsing candidates for office. But people on Twitter endorse and oppose candidates for office all the time. (It's one of the fun things about Twitter.) As Ellen Aprill points out, even the best algorithm would have trouble blocking all of the endorsement. So if users' tweets are treated as Twitter's speech, that probably blows its potential exemption.

Which leads to another problem: if Twitter's users aren't speaking on behalf of Twitter, who is? Most newspapers are exempt as educational and charitable organizations. (Here, for instance, is the Salt Lake Tribune's exemption application.) But Twitter qua Twitter doesn't really say anything. To the extent it is engaged in furthering educational purposes, it has to be the users' tweets that are furthering education.

But--and this is a significant problem for Twitter--to qualify as an educational organization, Twitter would have to meet the IRS's "methodology test." The test lists four criteria that indicate that an organization is not educational:

  1. a substantial part of the organization’s communications are viewpoints not supported by facts;
  2. the facts used to support the conclusion are distorted;
  3. presentations use inflammatory and disparaging terms and base conclusions on feelings; or
  4. the organization’s approach does not aim to develop an understanding by its audience because it does not take into account the background or training of the audience in the subject matter.  

And, um, as much as I love Twitter, that's a pretty decent description of what Twitter is. So if only Twitter speaks for Twitter, Twitter doesn't really speak or education. But if users speak for Twitter, either it's going to get knocked out on political endorsements or through the methodology test. Which, I suspect, makes Twitter enough unlike newspapers to disqualify it from being exempt.

I'd be curious what you think, though: can Twitter qualify as an exempt organization? Should it be able to?

Samuel D. Brunson 

https://lawprofessors.typepad.com/nonprofit/2022/05/on-twitter-and-charitable-exemption.html

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