Is Section 501(c)(3) a Form of Censorship?

Columbia Law School Professor Philip Hamburger is a prodigious and iconoclastic legal scholar, having previously authored provocative, deeply-researched books on religious freedom, judicial review, and administrative law—Separation of Church and State (2002), Law and Judicial Duty (2008), and Is Administrative Law Lawful? (2014), respectively—and many articles. His approach customarily combines legal history and a refreshingly-original perspective on familiar subjects, sometimes producing controversial results at odds with conventional thinking.

Hamburger’s latest subject, in Liberal Suppression (2018), is an inquiry into the legitimacy of restrictions on the political speech of non-profit organizations. [1] Section 501(c)(3) exempts religious, educational, and charitable organizations from federal income tax but denies them this exemption if they engage in campaign speech for or against any candidate for public office or devote a substantial part of their activities to propaganda or other attempts to influence legislation. Section 170(c) makes contributions to qualifying non-profits tax-deductible to the donor. According to Hamburger, these exemptions and deductions amount to “many billions of dollars annually.”

Most people’s knee-jerk reaction is that section 501(c)(3)’s restrictions are justified by the tax-exempt status such non-profit organizations applied for and received. Rejecting such preconceptions in his trademark fashion, Hamburger strongly disagrees. Although non-profits are free to express a wide range of opinions—even political opinions—outside of political contests, Hamburger views section 501(c)(3) as “an extraordinary abridgement of an essential freedom,” which ought to be considered unconstitutional. Inasmuch as the Supreme Court has unanimously upheld the lobbying restrictions in section 501(c)(3) [2], Liberal Suppression is nothing if not ambitious, but is it persuasive? Realizing that his arguments may appear to be an “uphill struggle,” early on Hamburger asks readers to “hold their skepticism in abeyance.”

After reading the book, my skepticism remains stubbornly intact.

Hamburger reminds the reader that from colonial times until the amendment of section 501(c)(3) in 1934 [3] (and further tightening in 1954, and again in 1987), which imposed the restrictions he finds objectionable, American clergy actively participated in politics from the pulpit. The timing of the 1934 and 1954 restrictions, he points out, coincides with a period of “liberal” [4] anti-Catholic sentiment in America. The principal culprits in Hamburger’s tale are nativists such as Ku Klux Klan imperial wizard Hiram Evans and then-Senator Lyndon B. Johnson, who faced a Catholic opponent in the 1954 senatorial primary.  Hamburger portrays them as the instigators of section 501(c)(3)’s “oppressive” political restrictions.

Hamburger suggests that the “sordid” restrictions were added to section 501(c)(3) in order to reduce the influence of the Catholic Church, but fails to prove that the motives of particular individuals were shared by Congress as a whole. He also concedes that the “theological liberals” who feared an “ecclesiastical threat to mental independence” saw a similar danger from traditional Protestant churches. Indeed, to some secular factions, “the threat to individuals came from all religious organizations and even all distinct religions.” The anti-Papist conspiracy was broad indeed.

Hamburger warns darkly that the restriction on religious speech has caused profound harm to churches and the polity, and suggests that the Tocquevillian benefits of private associations have been reduced by the “suppression” of speech from what Hamburger refers to as “idealistic organizations.” At the same time, Hamburger acknowledges that “there are limited empirical data on the effects of section 501(c)(3)’s speech restrictions—partly because the effects are difficult to measure, and partly because it is difficult to find a suitable control group.” He makes this point to argue that “any reassuring conclusion that the loss of messaging is minimal cannot be much more than speculation,” but the converse is equally true. Claims of harm are likewise speculative—and, to my mind, far-fetched. And, confusingly, Hamburger simultaneously argues that section 501(c)(3) constitutes an unconstitutional establishment of religion.

Non-profit organizations have substantial leeway to engage in speech short of political advocacy, and those feeling hamstrung by the restrictions of section 501(c)(3) can form section 501(c)(4) affiliates and section 527 political action committees, or simply forgo tax exempt status (and the concomitant tax deductibility of contributions under section 170(c)).  The success of political organizations such as Jerry Falwell’s Moral Majority, the Christian Coalition, and Concerned Women for America (to name just a few) demonstrate that politically-active believers are not silenced by section 501(c)(3). The right-to-life movement, which is largely driven by Christian activists, is very formidable. The LDS (Mormon) church led two successful ballot measures in California to protect traditional marriage, in 2000 and 2008. Given the vibrancy of talk radio, social media, and grassroots political movements (such as Tea Party activists and Trump supporters), it is questionable to state, as Hamburger does, that “many Americans have come to feel that they are politically impotent.” Populism is alive and well.

Hamburger asserts that “[c]hurches, schools, and charities…must pay a tax for exercising two of their First Amendment rights,” on the assumption that these entities were never properly subject to federal taxation and thus needed no exemption. (The subtitle of the book is Section 501(c)(3) and the Taxation of Speech.) The contrary view is that—absent an exemption—all organizations are subject to tax. Tax exemptions are a subsidy. The First Amendment doesn’t confer a right to engage in political activities using pre-tax dollars. Conceding that the restrictions of 501(c)(3) are not “distinctively severe,” Hamburger insists nonetheless that they are “grossly unconstitutional.” His reasoning rests in large part on arguing that, contra Regan, section 501(c)(3) reflects invidious discrimination designed to suppress disfavored ideas.  This “seemingly technical tax provision,” Hamburger avers, “was borne of dark ‘democratic’ anxieties that reek of prejudice.”

Hamburger vigorously challenges the assumption underlying much of the scholarship supporting section 501(c)(3)—that the section’s exemptions are merely “subsidies” or “tax expenditures,” which can be conditioned on compliance with the section’s restrictions. “The basic difficulty,” Hamburger argues, is that “if refraining from taxing amounted to spending, then all Americans would always be recipients of government largess.” Under this logic, Hamburger avers, the government’s decision to forgo a higher tax rate “could extend section 501(c)(3)’s restrictions to all Americans.” Hamburger properly objects to the concept that “the government is spending wherever it does not impose a higher tax rate.” Such an open-ended application of “tax expenditure theory” could justify sweeping restrictions on speech. However, section 501(c)(3) is a narrow  provision, not a broad rule. If one assumes that the Sixteenth Amendment authorizes the taxation of all corporate entities—even churches, schools, and charities—exempting those operating as non-profits does confer a privilege. Conditioning this privilege—a “subsidy” of sorts—on limited speech restrictions is not equivalent to authorizing blanket suppression of the constitutional rights of “all Americans.” Hamburger accuses proponents of tax expenditure theory of “proving too much,” but his contention that section 501(c)(3) leads ineluctably to the widespread suppression of constitutional rights is subject to the same criticism.

Hamburger, alas, comes up short.

Liberal Suppression imputes to the American populace during the 19th and 20th centuries all manner of “anxieties,” “fears,” and “prejudices.” Hamburger contends that section 501(c)(3)’s broad restrictions on political speech were motivated by “fervid and often nativist anxieties about religion and politics,” but the existence of anti-Catholic sentiment in certain pockets of America doesn’t explain the adoption of even-handed restrictions on all ecclesiastical speech—and, for that matter, on all tax-exempt organizations. History is complicated. “Anxieties” over many different subjects have abounded since the Founding. The 20th century in particular presented many things for Americans reasonably to be “anxious” about.  No matter how fervent the effort, not all dots can be persuasively connected.

Nor does Hamburger explain convincingly why “idealistic organizations” such as churches, schools, and charities should have the right to operate on a tax-exempt basis and engage in unrestricted expression, even purely political advocacy. Section 501(c)(3) doesn’t limit the speech or activities of all organizations, only those that have chosen to organize as a tax-exempt entity. Reprising a pet theory he has articulated in previous articles, Hamburger contends that conditions (such as restrictions on certain types of political advocacy) cannot be placed on eligibility for legal privileges (such as tax exemptions) without violating the First Amendment, arguing that “private consent cannot enlarge the government’s constitutional authority.”

This absolutist position is untenable because the same objection would apply to restrictions on the political activities and speech of government employees (such as the Hatch Act), active-duty military personnel, classroom teachers, FCC licensees, and other recipients of legal privileges. If no restrictions on the speech or activities of non-profits are constitutionally permissible, as Hamburger contends, doesn’t that force taxpayers to subsidize such advocacy (and also the donors to such groups, whose contributions are tax-deductible)? Justice William Rehnquist so argued in Regan, pointing out that

Congress has merely refused to pay for the lobbying out of public moneys. This Court has never held that Congress must grant a benefit such as [the non-profit] claims here to a person who wishes to exercise a constitutional right. This aspect of these cases is controlled by Cammarano v. United States, 358 U.S. 498 (1959), in which we upheld a Treasury Regulation that denied business expense deductions for lobbying activities. We held that Congress is not required by the First Amendment to subsidize lobbying.” [5]

We consent to many things beyond the government’s constitutional reach in order to receive privileges to which we have no inherent entitlement: we agree to searches (via metal detectors) to enter airports and certain public buildings, drug-testing and background checks for certain government jobs, breathalyzers-on-demand for drivers licenses, and so forth. Welfare benefits are sometimes conditioned on drug-testing and other intrusions. Hamburger’s position, if adopted, would ban all these things.

Does section 501(c)(3) “threaten the core of most First Amendment freedoms,” as Hamburger claims? Liberal Suppression, despite its undeniable erudition and interesting digressions into American political (and theological) thought and historical asides, falls short of making a compelling case. Hamburger is likewise unconvincing in his attempt to make a connection between the restrictions in section 501(c)(3) and contemporary forms of censorship such as campus speech codes. While Hamburger’s theoretical arguments seem to miss their mark, they are always engaging and sometimes contains gems like this:

American religion has increasingly been aligned with popular liberal and progressive opinion—even to the point of looking for salvation not in another world but in this one, and not so much from God as from democratic government.

[1] For ease of reference, I use the term “non-profit” as synonymous with an organization that has been granted tax-exempt status under section 501(c)(3).

[2] Regan v. Taxation with Representation of Washington, 461 U.S. 540 (1983).

[3] The predecessor to the IRS imposed some restrictions on political speech by regulation in 1919.

[4] Hamburger’s frequent use of the terms “liberal, “suppression,” “nativism,” and “prejudice,” which he parses in great detail, is—sometimes confusingly–considerably more nuanced than their ordinary meaning.

[5] 461 U.S. at 545-46. Hamburger criticizes the reasoning of Regan for, inter alia, treating exemptions and deductions interchangeably, but maintains that neither justifies political restrictions in any event. Hamburger suggests that Rehnquist and his colleagues were—at least “unselfconsciously”—blinded by theologically liberal prejudice.