How far can non profits go when helping to organize protests?
Image by Ted Eytan
Do non profits put their tax-exempt status at risk when they help organize university protests? Or protests outside of SJ City Hall? Eugene Volokh at Reason says: "not for the viewpoints they express." {Full disclosure: Opp Now is a 501(c)(3) non profit.}
[1.] The government can't strip groups of nonprofit status based on their ideological viewpoints. This was first made clear in Justice Brennan's opinion in Speiser v. Randall (1958), which struck down a denial of a property tax exemption to people and organizations that "advocate[] the overthrow of the Government of the United States … by … violence … or who advocate[] the support of a foreign government against the United States in the event of hostilities":
"[A] discriminatory denial of a tax exemption for engaging in speech is a limitation on free speech. It is settled that speech can be effectively limited by the exercise of the taxing power. To deny an exemption to claimants who engage in certain forms of speech is in effect to penalize them for such speech. Its deterrent effect is the same as if the State were to fine them for this speech…. [T]he denial of a tax exemption for engaging in certain speech necessarily will have the effect of coercing the claimants to refrain from the proscribed speech. The denial is "frankly aimed at the suppression of dangerous ideas."
The Supreme Court reaffirmed this in Regan v. Taxation with Representation of Wash. (1983) and Rosenberger v. Rector (1995): Though "the Government is not required to subsidize" speakers, once it chooses to provide such a subsidy—including through "tax deductions for contributions"—it must abide by "the requirement of viewpoint neutrality in the Government's provision of financial benefits."
And the U.S. Court of Appeals for the D.C. Circuit has specifically applied this (in Z Street v. Koskinen (D.C. Cir. 2015)) to denials of a 501(c)(3) tax exemption, holding that "in administering the tax code, the IRS may not discriminate on the basis of viewpoint"—there, as it happens, against pro-Israel speech that departed from the Administration's foreign policy. There have been some viewpoint-based denials in the past (see Dale Carpenter's post for some examples), but these precedents pretty categorically forbid such denials.
[2.] But nonprofits' right to express viewpoints doesn't extend to a right to violate valid laws (such as content-neutral time, place, and manner restrictions). IRS Revenue Ruling 75-384 deals specifically with that:
"Advice has been requested whether a nonprofit organization formed to promote world peace and disarmament by nonviolent direct action including acts of civil disobedience qualifies for exemption from Federal income tax under section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1954."
"The purposes of the organization are to educate and inform the public on the principles of pacificism and nonviolent action including civil disobedience. Its primary activity is the sponsoring of protest demonstrations and nonviolent action projects in opposition to war and preparations for war."
"Protest demonstrations are conducted at military establishments, Federal agencies, and industrial companies involved with military and defense operations. Other activities consist of peace marches and protests against the use of tax monies for war purposes. The protest demonstrations constitute the primary activity of the organization. They are designed to draw public attention to the views of the organization and to exert pressure on governmental authorities. To derive the maximum publicity of an event, demonstrators are urged to commit acts of civil disobedience. Participants deliberately block vehicular or pedestrian traffic, disrupt the work of government, and prevent the movement of supplies. These activities are violations of local ordinances and breaches of public order. Incidental to demonstrations, leaflets are dispersed presenting the views of the organization…."
"[A]ll charitable trusts (and by implication all charitable organizations, regardless of their form) are subject to the requirement that their purposes may not be illegal or contrary to public policy. In this case the organization induces or encourages the commission of criminal acts by planning and sponsoring such events. The intentional nature of this encouragement precludes the possibility that the organization might unfairly fail to qualify for exemption due to an isolated or inadvertent violation of a regulatory statute. Its activities demonstrate an illegal purpose which is inconsistent with charitable ends…."
"Illegal activities, which violate the minimum standards of acceptable conduct necessary to the preservation of an orderly society, are contrary to the common good and the general welfare of the people in a community and thus are not permissible means of promoting the social welfare for purposes of section 501(c)(4) of the Code. Accordingly, the organization in this case is not operated exclusively for the promotion of social welfare and does not qualify for exemption from Federal income tax under section 501(c)(4)."
Read the whole thing here.
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