[EL] The IRS Proposes to Ban Books (Was: #We Will Not Be Silenced)

[BZall at aol.com]

Since you're highlighting one of the many sessions being given about the  
Treasury/IRS Notice of Proposed Rulemaking on defining CRAPA ("cand
idate-related  political activity"), I thought you might like to see the Overview and 
Summary  from the comments I submitted. You'll notice that I, too, add a 
breathless  phrase (which is amply supported by the proposed regulations, but 
no one seems  to have noticed): THE IRS PROPOSES TO BAN BOOKS.
 
The full 34-page comment, which IRS has not yet approved to be shown  on 
regulations.gov, can be found at: 
http://www.campaignfreedom.org/wp-content/uploads/2013/12/Comment-on-IRS-REG-134417-13.pdf
 
 
These comments are directed to the proposed regulations circulated by the  
Department of the Treasury and the Internal Revenue Service in a Notice of  
Proposed Rulemaking issued November 29, 2013 defining political activities 
that  are not permissible as “social welfare” for  organizations exempt from 
tax under  Internal Revenue Code § 501(c)(4). These comments are directed 
solely to the  question of “litigation risk” generated by the proposed 
regulations.   
OVERVIEW: 
It is not difficult to estimate the litigation risk in these proposed  
regulations, and that risk is extraordinarily high. To use just one simple and  
stark example: THE IRS PROPOSES TO BAN  BOOKS. (See P. 27, infra.) 
And not just ban books by political candidates, but any written or  
recorded material by anyone proposed for appointment to any federal, state or  
local public office. The proposed regulations forbid “Distribution of any  
material prepared by … a candidate …, including, without limitation, written  
materials, and audio and video recordings.” 78 Fed. Reg. 71541, Prop. Reg. §  
1.501(c)(4)-1(a)(2)(iii)(A)(6). But  the expanded definition of “candidate” 
sweeps in “an individual who … is  proposed by another, for … nomination …
 or appointment to any federal, state, or  local public office.” Id., Prop. 
Reg.  § 1.501(c)(4)-1(a)(2)(iii)(B)(1). A §  501(c)(4) organization, for 
example, could not distribute any written or  recorded information by a person 
who is proposed for appointment as dog-catcher  in a small town, including 
blog posts or books.  
This is most ironic since recent disclosures of internal IRS and Treasury  
emails reveal that the proposed regulations were first considered as a 
reaction  to the Supreme Court’s then-recent decision in Citizens United v. Fed. 
Election Comm.,  558 U.S. 310 (2010) (“Citizens  United”). (See, P. 33, 
infra.) It is widely believed that the  government lost the Citizens United  
case at its first oral argument when Malcolm Stewart, a Deputy Solicitor  
General, told the Court that the government could ban books. (See, P. 27, 
infra.) When the case was re-argued,  then-Solicitor General Elena Kagan was asked 
about book banning; she replied:  “The government’s position has changed.” 
Yet here the IRS is proposing to ban  books by persons who might be 
proposed for appointment to public office.   
The first question in any constitutional analysis is whether the agency  
has the power to promulgate the rule. The proposed regulations are a direct  
challenge to two different but complementary lines of Supreme Court cases; 
one  on the power of the IRS to limit speech that is not paid for by 
tax-deductible  contributions, and the other on the power of the government to define 
political  activity as anything more than “express advocacy” and its 
functional equivalent.  The proposed regulations are likely to be litigated 
immediately upon  promulgation, and, given both the current state of the law and 
the IRS’s recent  actions, are likely to be found unconstitutional under one 
or both of those  lines of Supreme Court cases.  
SUMMARY OF DETAILED  COMMENTS: 
1) The IRS must  respect the First Amendment even in tax classification. 
(See P. 6.)  
Although courts usually defer to the IRS’s expertise in tax regulation,  
regulations must be based on a reasonable interpretation of congressional  
intent. Congress has never said that § 501(c)(4) organizations cannot engage in 
 political activity, as it has for § 501(c)(3) charities. Instead Congress 
has  not only recognized that § 501(c)(4) organizations can and do engage in 
 political activity, it has chosen to tax their political activities. 
Courts,  including the Supreme Court, have also recognized that § 501(c)(4) 
organizations  can engage in political activity.  
It is no defense of the proposed regulations to say that they are only a  “
tax classification,” and not a regulation of speech. The current regulations 
 governing § 501(c)(4) organizations’ political activities were enacted 
soon  after the Supreme Court’s 1958 decision in Speiser v. Randall. “The 
appellees are  plainly mistaken in their argument that, because a tax exemption 
is a  ‘privilege’ or ‘bounty,’ its denial may not infringe speech.” 
Speiser v. Randall, 357 U.S. 513, 518  (1958). Regan v. Taxation With  
Representation of Washington, 461 U.S. 540 (1983), is often misquoted as  empowering 
the IRS to ignore speech infringements in tax classifications, but Regan did 
not reverse Speiser; the decision simply says that  the IRS has such power 
only in cases where the speech uses direct or indirect  government funding. 
Because there is no government “subsidy” of speech by §  501(c)(4) 
organizations – which is both funded by non-deductible contributions  and taxed under 
Internal Revenue Code § 527 – Regan does not provide authority to the  IRS 
to block § 501(c)(4) speech. Agency  for Int’l Development v. Alliance for 
Open Society Int’l, Inc., __ U.S. __,  133 S.Ct. 2321, 2328-30 (June 20, 2013) 
(“Open Society”) (distinction between  government funding to a “project” 
or to a “grantee”).   
2) The Supreme  Court Has Become Much More Protective of Political Speech 
By Tax-Exempt  Organizations. (See, P.  19.) 
The NPRM does not write on a blank slate. In recent years, the Supreme  
Court has issued several decisions with clear and explicit direction on what  
speech can be limited and how. The most likely judicial conclusion is that 
the  proposed regulations are unconstitutional under the Supreme Court’s 
rulings on  exempt organizations’ ability to engage in express advocacy political 
campaign  intervention, such as Fed. Election  Comm’n v. Wisconsin Right To 
Life, Inc., 551 U.S. 449 (2007) (“WRTL”). The Supreme Court has already  
defined a sufficient interest to permit the government – including the IRS – 
to  suppress political speech, and these regulations go far beyond that 
interest:  “Discussion of issues cannot be suppressed simply because the issues 
may also be  pertinent in an election.” WRTL, 551  U.S. at 474.  
The WRTL test has only two  parts: 1) is the speech of the tax-exempt 
organization either “express advocacy”  or the “functional equivalent” of “
express advocacy?” In other words, can the  speech only be understood as an  
appeal to vote for or against a specific political candidate? And 2) if there 
is  any ambiguity or question about whether the speech is express advocacy or 
its  functional equivalent, the decision must be resolved in favor of 
permitting the  speech. “Where the First Amendment is implicated, the tie goes to 
the speaker,  not the censor.” WRTL, 551 U.S. at  474. The proposed 
regulations challenge both parts of the WRTL test, by including substantial  areas 
of speech that are neither express advocacy nor its functional equivalent,  
and by resolving ambiguities in favor of prohibiting the speech.   
3) The IRS’s  Litigation Risk Is Substantially Increased By Procedural and 
Substantive Defects  in the NPRM and Recent IRS Actions. (See,  P. 24.)  
The proposed regulations make significant changes in prior regulation and  
practice. In addition to activities that have traditionally been recognized 
as  “political,” the proposed regulations expressly “sweep in” many 
non-political  activities, simply to reduce the “fact-intensive determinations” 
made by trained  IRS personnel. Yet “the desire for a  bright-line rule ... 
hardly constitutes the compelling state interest  necessary to justify any 
infringement on First Amendment freedom.” FEC v. Massachusetts Citizens for 
Life,  479 U.S. 238, 263 (1986) (“MCFL”). More importantly,  “[t]his Court 
has never recognized a compelling interest in regulating ads, like  WRTL’s, 
that are neither express advocacy nor its functional equivalent.” WRTL, 551 
U.S. at 476.  
In addition, the IRS’s actions prior to issuing the NPRM greatly weaken  
its rationale. The NPRM proposing new definitions of permissible political  
activity by § 501(c)(4) organizations was viewed as a reaction to the ongoing  
IRS “scandal” over targeting organizations by name or ideology, but it 
does not  address the actual concerns raised in the investigation of the “
scandal.” In  addition, the new regulations were not actually triggered by the “
scandal” in  application processing; recently revealed internal documents 
show that they had  been in process for several years and were actually 
sparked by concern over the  Supreme Court’s decision in Citizens  United. Making 
a  major change in law that affects speech is a choice for Congress, not the 
IRS,  and the IRS’s record behind this NPRM further endangers its 
litigation chances.  
The proposed regulations present the Supreme Court with a clear question:  
will the Court’s traditional deference to IRS regulatory determinations  
overwhelm its recent and traditional decisions finding that the IRS could not  
substantially restrict speech by § 501(c)(4) organizations without  
unconstitutionally offending the First Amendment rights of speech, association,  
assembly and petition.  By proposing  regulations that expressly “sweep in” 
non-political speech – in other words, by  including both speech that the 
Court has recognized as regulable “express  advocacy” and speech that the Court 
has recognized as far outside compelling  governmental interests – the IRS 
has asked the Supreme Court to make yet another  decision on whether it has 
the power to limit core protected speech. The  litigation risk is high. 
The IRS and Treasury have lost the public trust necessary to merely amend  
or “tweak” these proposed regulations. The secret drafting and incomplete 
NPRM  violate the Administrative Procedures Act and other procedural 
protections. The  substance of the regulation is ultra  vires, since there is no 
evidence that Congress intended to delegate the  legislative power to block 
speech that was already taxed. And the substance of  the proposed regulations 
has drawn almost universal criticism, even from those  who have asked the IRS 
to do something about political activities by § 501(c)(4)  organizations.  
The IRS should withdraw the proposed regulations. Instead, the IRS should  
issue what it planned to do all along: guidance clarifying existing rules,  
applying the rules laid down by the Supreme Court in WRTL and other cases.  


Barnaby Zall 
Of Counsel 
Weinberg, Jacobs & Tolani,  LLP 
10411 Motor City Drive, Suite 500
Bethesda, MD 20817
301-231-6943  (direct dial) 
bzall at aol.com  
_____________________________________________________________ 
U.S.  Treasury Circular 230 Notice 

Any U.S. federal tax advice included in  this communication (including 
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