More on SAFE SPACE v. Commissioner

Yesterday, I blogged about SAFE SPACE’s declaratory judgment suit, in which they are seeking recognition of tax-exempt status despite the fact that they plan to endorse candidates on their website. I mentioned that I had been planning (with Sam Brunson) to create a 501(c)(3) organization that would endorse a candidate on an affiliate 501(c)(4) organization’s website. And I said that the difference between our approach and theirs “may seem like a difference without a distinction” but that it is “probably quite significant.” So, why is it significant?

First, important to both approaches are two ideas: (1) the Constitution protects charities’ right to endorse candidates, while also (2) the government has a legitimate interest in preventing charities from using their government-provided subsidies to pay for such endorsements. As I mentioned yesterday, the tension between these two ideas – and the solution to vindicating them both – comes from the Supreme Court’s Taxation With Representation case and the DC Circuit’s Branch Ministries case, both of which affirmed both ideas. The solution described in those cases is the one Sam and I planned to adopt in our “test case” organization: have the 501(c)(3) charity use a 501(c)(4) affiliate to pay the costs of publicizing the endorsement. This structure has sometimes been called the “Alternate Channel Doctrine,” because the use of a 501(c)(4) affiliate was described in Taxation With Representation as an “alternate means” for the charity to communicate its views. If all the expenses are paid for by the 501(c)(4) affiliate, then the case is strongest that the charity is not using its subsidized funds to intervene in a campaign. It permits the government to fulfil its legitimate purpose of “nonsubvention.”

SAFE SPACE has chosen not to use this “alternate means” to communicate its endorsements, but instead to publicize them on the charity’s own website. It concedes that the website will “be developed and hosted for a low, flat fee” and that there will be no “additional expense for developing and hosting additional pages or materials on its website.” (emphasis added). It then claims that, “[t]he cost to SAFE SPACE of endorsing candidates and publishing its endorsements will be zero.” Well, which is it? A “low, flat fee” or “zero”? These two apparently inconsistent statements can be made consistent by adopting a specific theory of what it means for the cost of an endorsement to be zero. In my 2009 article, I called that theory a “marginal cost” paradigm, explaining that proponents of that paradigm argue that speech or action has no cost if it can be accomplished without making any additional expenditures beyond those already being made for other purposes. If the organization is already developing and hosting a website for its educational purposes, and no additional cost is required to post an endorsement, then the cost of endorsing candidates is zero.

As I mentioned yesterday, SAFE SPACE argued that it couldn’t use the affiliate-organization structure because that would impose “insurmountable” administrative burdens on the fledgling charity. SAFE SPACE therefore is taking the position that (1) the affiliate organization structure is unnecessary because a government subsidy has only been used when there is a marginal cost to the organization, and (2) forcing an organization to create an affiliate is such a substantial administrative obstacle that it constitutes an undue burden on the charity’s speech rights.

If SAFE SPACE could persuade the Tax Court to adopt its marginal cost theory of campaign expenditures, that could be very important for 501(c)(3) organizations going forward. Over a decade ago, at the request of Senator Charles Grassley, the Commission on Accountability and Policy for Religious Organizations (CAPRO) proposed legislative reform to permit 501(c)(3) organizations to engage in low-cost electoral speech, like the endorsement SAFE SPACE proposes. Republicans in Congress have repeatedly proposed the Free Speech Fairness Act, modeled on CAPRO’s recommendations, but it has never been adopted. But scholars like Ellen Aprill have pointed out that in an “age of cheap speech,” permitting all low or no-cost political speech under a marginal cost paradigm would open the floodgates to extensive use of charitable funds (and therefore government subsidy) in electoral speech. Under this theory, as long as the organization was promoting its charitable message, it could include its electoral message so long as that message had no marginal cost. In addition to the website that SAFE SPACE plans to operate, charities could use newsletters, email blasts, paid social media posts, television advertisements, and paid door-to-door educators to promote their views. Scholars like Sam Brunson, Roger Colinvaux, Edward Zelinsky, Nina Crimm, and Laurence Winer have all attempted to address the same problem. There’s no easy answer, but I think the use of an affiliated 501(c)(4) organization does a better job of balancing speech rights with our collective interest in nonsubvention, and that the administrative burden that imposes on a small charity like SAFE SPACE is therefore warranted.

I think that’s what’s at stake in this tiny organization’s declaratory judgment case.

-Benjamin Leff