APPLYING THE FIRST AMENDMENT TO THE INTERNAL REVENUE CODE: MINNESOTA VOTERS ALLIANCE AND THE TAX LAW'S REGULATION OF NONPROFIT ORGANIZATIONS' POLITICAL SPEECH.

• Author: Zelinsky, Edward A.

INTRODUCTION

In Minnesota Voters Alliance v. Mansky, (1) the U.S. Supreme Court struck on First Amendment grounds Minnesota's "political apparel ban." (2) This law prohibits individuals from wearing "political badges, political buttons, or other political insignia... at or about [any] polling place." (3) The Minnesota statute, the Court held, unreasonably restricts constitutionally protected expression at the polls. (4) The statute's "expansive" (5) term political is "unmoored," (6) proscribing in "indeterminate" (7) fashion not just buttons and clothing mentioning the candidates, parties, and ballot questions being voted upon, but also forbidding apparel referring to issues and groups extrinsic to the election. (8) As it lacks "objective, workable standards," (9) the Court held, the Minnesota law banning "political" apparel in polling places violates the First Amendment in light of "the potential for erratic application." (10)

Minnesota Voters Alliance thus confirmed the ability of voters to wear political clothes and buttons to the polls as long as such clothes and buttons do not mention candidates, political parties, or ballot questions at issue in the current election. (11)

On its face, Minnesota Voters Alliance is about which t-shirts, hats, and buttons voters can wear at the polls. However, the Court's First Amendment analysis in Minnesota Voters Alliance extends beyond apparel at polling places. That decision impacts the ongoing debate about the Johnson Amendment, (12) the now controversial provision of the Internal Revenue Code ("Code") that forbids organizations listed in section 501(c)(3) (13) from intervening in political campaigns. Minnesota Voters Alliance also affects the proper construction of section 501(c)(3)'s ban on lobbying by tax-exempt entities (14) as well as other provisions of the tax law taxing and precluding campaign intervention by tax-exempt organizations. (15)

Minnesota Voters Alliance requires that these provisions of the tax law (16) be construed to comply with the First Amendment mandate that restrictions on speech be reasonable, objective, workable and determinate. After Minnesota Voters Alliance, the Johnson Amendment should be interpreted as only proscribing 501(c)(3) entities from expressly endorsing or opposing particular candidates, political parties, or ballot questions or from engaging in the "functional equivalent" of such express advocacy. (17) Under this test, tax-exempt entities would not be precluded from engaging in more general issue advocacy.

The other provisions of the tax law preventing tax-exempt entities from participating in political campaigns and taxing such participation should be construed in the same way. These other features of the tax law should be understood as precluding and taxing only express advocacy of, or opposition to, particular candidates, parties, or ballot questions, or as prohibiting and taxing the functional equivalent of such explicit expression.

In light of Minnesota Voters Alliance, the 501(c)(3) lobbying ban should be interpreted similarly, as only prohibiting tax-exempt entities from explicitly supporting or opposing pending legislative proposals or from undertaking the functional equivalent of such explicit advocacy about pending legislation. The 501(c)(3) lobbying ban should not prevent tax-exempt entities from discussing public policy questions more generally, even though such questions can be formulated as legislative proposals. Section 4911 of the Code already propounds for certain electing exempt organizations such a First Amendment-compliant standard. (18)

As currently understood by the IRS and the Treasury, the Code's restrictions on the political expression of tax-exempt entities sweep too broadly and too vaguely to satisfy these constitutional standards. According to the IRS's current administrative interpretation of the Johnson Amendment, that provision of the Code proscribes "issue advocacy that functions as political campaign intervention." (19) This expansive test is, like the Minnesota apparel statute struck in Minnesota Voters Alliance, unmoored and indeterminate and is, thus, unreasonable for First Amendment purposes. To establish objective, workable standards in light of Minnesota Voters Alliance, the IRS's construction of the Johnson Amendment should prohibit only explicit endorsements of, or opposition to, candidates, parties, and ballot issues involved in the current election and the functional equivalent of such express endorsement or opposition. Under this more carefully tailored construction of the Johnson Amendment, nonprofit organizations, churches in particular, would no longer risk the loss of tax-exempt status by engaging in issue advocacy that falls short of overt support for, or opposition to, specific candidates, political parties, or ballot questions.

Similarly, Minnesota Voters Alliance requires the reformation of the Treasury regulation that interprets the statutory ban preventing 501(c)(3) organizations from "[a]dvocat[ing] the adoption or rejection of legislation." (20) Virtually any issue of public concern can result in legislation. (21) Under Minnesota Voters Alliance, this expansive test should also, as a constitutional matter, be limited to the championing of, or opposition to, particular proposals currently pending before legislative bodies or slated for a popular vote. Under this more precise construction of the Code's general prohibition on lobbying by nonprofit organizations, (22) such organizations, including churches, would not risk the forfeiture of tax-exempt status through their statements on public policy as long as such statements do not endorse or object to particular legislation that has been introduced in a lawmaking body or that is subject to an impending vote by the electorate.

Part I of this Article explores the Court's decision in Minnesota Voters Alliance, which establishes that, under the banner of reasonability, the First Amendment requires "objective, workable standards" when political expression is regulated by the government. (23) Restrictions on voter apparel that mentions candidates, parties, and ballot questions satisfy this standard of reasonability; broader restrictions on "political" clothing do not. (24)

Parts II, III, and IV explore, in light of Minnesota Voters Alliance, the provisions of the Code that regulate the political expression of tax-exempt institutions. Part II examines Revenue Ruling 2007-41 in which the IRS contends that, depending upon the "facts and circumstances" of particular instances, "issue advocacy" can constitute forbidden campaign intervention for purposes of section 501(c)(3). (25) The Court's analysis in Minnesota Voters Alliance implies that Revenue Ruling 2007-41, like the Minnesota apparel statute, sweeps too broadly and too imprecisely. (26) Indeed, Revenue Ruling 2007-41 unconstitutionally condemns as forbidden campaigning an ill-defined set of statements that address issues of public policy even if no candidate, party, or ballot question is explicitly endorsed or opposed.

Part III discusses the tax imposed by section 527(f) (27) on civic organizations, labor unions, business associations, and other tax-exempt institutions when they attempt to "influence" elections. (28) This Part also discusses the Treasury regulation that holds that organizations tax-exempt under section 501(c)(4) (29) cannot intervene in political campaigns. (30) Minnesota Voters Alliance indicates that these provisions, as currently understood, are overly broad, often nebulous restrictions on political expression, too indeterminate to pass First Amendment scrutiny. (31)

Part IV confronts the Code's ban on lobbying by 501(c)(3) organizations. Minnesota Voters Alliance indicates that this ban must also be construed more carefully to prohibit only express support for, or opposition to, particular bills pending before legislative bodies or scheduled for a popular vote. An organization's tax-exempt status should not be forfeited by statements about public policies that could be implemented by legislation since virtually any position on any public policy can be implemented by state, local or federal legislation. Section IV.B highlights the Code's disparate treatment of tax-exempt organizations which can and do elect the lobbying safe harbor provided by sections 501(h) and 4911 and the treatment of tax-exempt entities which cannot or do not make that election. The former, by virtue of the safe harbor election, are subject to restrictions that are more consonant with the First Amendment standards of Minnesota Voters Alliance than are the latter.

Having established that these provisions of the tax law are today understood too capaciously to pass First Amendment scrutiny, Part V of this Article addresses the administrative understanding of these provisions which would satisfy the test of Minnesota Voters Alliance that restrictions on political expression be reasonable, objective, and determinant. The particular implementation of that principle in Minnesota Voters Alliance does not work well in these other settings, that is, the Johnson Amendment, the section 527(f) tax on political participation, the Treasury regulation forbidding campaign intervention by civic leagues, and section 501(c)(3)'s general lobbying ban. Under Minnesota Voters Alliance, states can forbid individuals from wearing to the polls buttons or clothes that mention candidates, parties, or ballot issues involved in the current election. (32) This "no mention" test works well for voting place apparel because voting is a discrete activity which occurs briefly at a particular point in time. (33) In this setting, forbidding the names of candidates, parties, or ballot issues is a targeted rule easily administrable at a specific point in time, to wit, an election day presence at the polls.

But this "no mention" test does not work well in other settings that extend over long periods. The...