[EL] High Court Ruling Spells Trouble for 501(c)(3) Restrictions

[John Pomeranz]

I find myself in the unusual position of disagreeing with the knowledgeable and astute Ezra Reese:  I don't think the Court's opinion in AID vs. Alliance for Open Society Int'l is likely to lead to the end of the ban on 501(c)(3) electioneering anytime soon.

The problem is that government subsidy pervades the 501(c)(3) form.  Donors are generally permitted to deduct the amount of their 501(c)(3) contributions from their taxable income and are not subject to gift tax on large gifts.  Private foundations likewise have tax incentives to fund 501(c)(3) charities.  In a sense, all 501(c)(3) funds are government subsidized.

This is really the basis for the Court's earlier ruling in Regan v. Taxation with Representation, which the Court yesterday, you'll note, seemed to endorse in citing the decision.  The Court believed (and apparently still believes) that it's permissible to force the supporters of a 501(c)(3) to create an affiliated 501(c)(4) (or 501(c)(4) plus political committee) to keep excess lobbying and any electioneering out of the tax-subsidized 501(c)(3).

FCC v. LWV is properly distinguished in that there was only one broadcasting license, so the Regan safety valve wasn't available.  And AID v. Alliance for Open Society itself is distinguishable in that what was challenged was an attempt by government to enforce a preferred policy viewpoint, not a neutral restriction on lobbying or electioneering of any type.

A bigger problem for the ban on 501(c)(3) electioneering is probably MCFL (and its progeny Citizens United, Speech Now, etc.) where the Court found that making a 501(c)(4) create a PAC to engage in electioneering was too burdensome to survive constitutional scrutiny, a sharp contrast to its willingness to force 501(c)(3)s create 501(c)(4)s in Regan.  However, the Court has yet to apply that line of reasoning to strike down the restrictions on 501(c)(3) activities, perhaps finding the 501(c)(3) subsidy to be great enough to justify a greater burden (i.e. creating another entity) on 501(c)(3) advocacy efforts.



John Pomeranz
Harmon, Curran, Spielberg & Eisenberg, LLP
1726 M Street, NW, Suite 600
Washington, DC  20036
office: 202.328.3500
mobile: 703.597.7663
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e: jpomeranz at harmoncurran.com




"High Court Ruling Spells Trouble for 501(c)(3) Restrictions"<http://electionlawblog.org/?p=51924>
Posted on June 21, 2013 8:54 am<http://electionlawblog.org/?p=51924> by Rick Hasen<http://electionlawblog.org/?author=3>

Ezra Reese<http://www.lawandpoliticsupdate.com/2013/06/high-court-ruling-spells-trouble-for-501c3-restrictions/> (In the Arena): "Yesterday, the Supreme Court released its opinion in Agency for International Development v. Alliance for Open Society International, Inc<http://www.supremecourt.gov/opinions/12pdf/12-10_21p3.pdf>.  The Court's opinion in AID v. Alliance spells trouble for the Internal Revenue Service's longstanding position that a section 501(c)(3) organization is not merely barred from using tax-deductible funds to engage in campaign intervention, but must not lend its imprimatur to political activity at all."

I flagged<http://electionlawblog.org/?p=51876> the interesting language on 501c(3)s in AID v. OSI yesterday. This will get interesting.


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