Already at this point it should be apparent that [section] 501(c)(3) does not simply confine "nonprofits." This anodyne label may suffice for calculating taxes, but not for evaluating the constitutional questions. More to the point constitutionally, [section] 501(c)(3) targets idealistic organizations for restrictions on their freedom of speech and petitioning. Nonprofits--especially religious, educational, and charitable organizations--are devoted to pursuing ideals, in contrast to profit or other selfish interests. Section 501(c)(3) thus generally targets idealistic organizations, in contrast to business, labor, and other organizations representing types of self-interest.
The idealistic organizations that matter here are religious. In singling out religious organizations for restrictions on their petitioning and political speech, [section] 501(c)(3) limits the ability of many religious Americans to bring their religious concerns into politics. The section excludes churches from the political process and it thereby also excludes Americans who rely on their churches to protect their religious interests in the political realm. (95)
Of course, notwithstanding [section] 501(c)(3), many churches and other idealistic organizations do their best to participate in politics. In a 2004 IRS study of one hundred and ten [section] 501(c)(3) organizations, it became apparent that 68% had engaged in prohibited campaign activities. (96) Most violations, however, were innocent. For example, many violations were based on misunderstandings of IRS interpretations or were anomalous or were promptly corrected after they were pointed out. (97) In other words, where the IRS interpretations were clear to the organizations, they usually complied. (98) The study thus actually confirms the degree to which churches and other idealistic organizations are constrained by [section] 501(c)(3). To the extent the law is clear, it largely keeps them from campaigning or substantially petitioning. Both in law and in reality, [section] 501(c)(3) substantially excludes such organizations from central modes of political participation.
Of course, there are considerations that may seem to justify [section] 501(c)(3)'s restrictions. These considerations are familiar from the constitutional debate over the section, and they cannot excuse the section's violations of the First Amendment. (99) Yet even if they were persuasive on the constitutional question, they cannot explain away the exclusion.
Merely Conditions on Spending. A standard constitutional justification for [section] 501(c)(3)'s constraints is that they are merely conditions on spending. The conditions argument, however, does not show the constitutionality of the speech and petitioning restrictions, and more to the point here, it does not justify the exclusion.
As will be shown in detail elsewhere, [section] 501(c)(3)'s limits are grossly unconstitutional. (100) They sweepingly restrict speech and petitioning by religious and other idealistic organizations, regardless of the amount of the supposed subsidy, and even when there is no subsidy. They therefore are grossly disproportionate and nongermane and thus are precisely the sort of conditions that Supreme Court doctrine treats as unconstitutional. (101) Accordingly, notwithstanding that the Supreme Court has upheld [section] 501(c)(3)'s restriction on petitioning, it is difficult to understand how its petitioning and speech restrictions are really constitutional. (102)
Imagine that the government actually offered money to churches and other idealistic organizations on account of their public service, but required in exchange that they silence themselves in campaigns and substantially in petitioning. This clearly would be unconstitutional, but it at least would leave churches free to speak without a direct penalty. Section 501(c)(3), in contrast, is much worse, for it gives churches and other idealistic organizations a choice between silence or paying a tax--indeed, a choice between silence or paying a tax to which they otherwise have never been subject. (103) It thus is a tax or direct penalty on petitioning and campaign speech by religious and other idealistic organizations.
If this is the offer of a contract, it is at best an extortionate offer--the sort one cannot refuse. Put simply, when the law tells religious and other idealistic organizations, "shut up or pay a tax," it cannot be constitutional. Section 501(c)(3)'s restrictions on speech and petitioning are forcefully unconstitutional--one of the most sweeping violations of the First Amendment in American history.
The complaint here, however, is not that [section] 501(c) (3) is unconstitutional, but rather that it excludes. It severely limits petitioning and political speech by churches and thereby also religious individuals. The result predictably is to limit their effectiveness in politics, with sobering consequences for their ability to protect themselves from equal but religiously burdensome laws. Even if (improbably) [section] 501(c)(3) were constitutional, it hollows out religious equality, leaving in place the formal equality guaranteed by the Free Exercise Clause, but depriving many religious Americans of their political ability to secure their religious interests under equal laws.
This remains true, moreover, even if [section] 501(c)(3) merely imposes conditions--indeed, even if it imposes entirely constitutional conditions. The government increasingly controls Americans through conditions on its largess. Although Charles Reich may have overstated the due process restrictions on the government's distribution of benefits, he aptly noted the degree to which the government uses its grants to control Americans. (104) Whereas government traditionally ruled through law, it now governs at least as much through spending. And this is a reminder that, even if [section] 501(c)(3) merely places conditions on spending, such conditions can be powerful mechanisms for limiting the freedom of Americans--in this instance, by excluding religious organizations, and thereby many religious Americans, from key aspects of the political process.
Alternative Routes for Speech. Of course, idealistic organizations still can campaign and petition through adjunct [section] 501(c)(4) organizations. (105) But even these organizations apparently are subject to limits on campaigning and petitioning. (106) Thus, to enjoy free speech in politics, a church must form a [section] 501(c)(4) organization and then this organization then must form a [section] 527 political action committee, which in turn is finally is allowed to speak freely in politics. (107) The result is a series of Russian dolls: The largest is muted, the smaller is slightly less muted, and only the tiniest is allowed freely to squeak out a political message.
Idealistic organizations are thus restricted in their attempts to speak in their own voice. Churches, for example, have a right--a freedom derived from God and protected by the Constitution--to speak as churches. (108) Yet rather than speak in their voice, they are forced to speak like ventriloquists; they must keep their mouths closed and can, at best project a muffled sound through a wooden dummy--a lifeless substitute for a living religious community. Churches therefore cannot speak in the same voice, even in the same body, about both personal morality and political morality. When speaking to God or the people about moral questions, a church can speak in its own voice, but when speaking to the people about elections, or to Congress about legislation, it must speak through a contraption manufactured by the Internal Revenue Service.
In another version of the alternate-route-for-speech justification, it is said that churches and other idealistic organizations can speak through their members. Thus, although a church cannot campaign or substantially petition, it can do so through its members. (109) But this is to view church members as theological automatons, who are subservient to the church's directives. And in depriving a church of its freedom of political engagement, this approach also deprives the members of their freedom to speak in unison and thereby enjoy the strength of a united voice. The voices of individual members are thus no substitute for their united voice through their organization.
A further variant of these justifications is that churches and other idealistic organizations can speak through political parties. Indeed, some religious groups can ally themselves with political parties. But what of the groups that are too small, too orthodox in their attachment to church authority, or too distant from politically popular views? They often cannot work to protect their beliefs through political parties and therefore need to work through their own churches. The alternative avenues for speech thus are no cure for the exclusion of churches from the political process.
Avoiding a Conduit for Tax Deductible Political Contributions. There is a serious danger that [section] 501(c)(3)'s tax exemption could create a conduit for tax-deductible political contributions. Taxpayers contributing money to [section] 501(c)(3) organizations can deduct the amount of their contributions from their income, as permitted by Internal Revenue Code [section] 170(c)(2). (110) Section 501(c)(3)'s restrictions have therefore been justified as a necessary barrier to the political use of deductible contributions. (111)
Certainly, there is a risk that tax-exempt churches and other idealistic organizations, as listed in [section] 501(c)(3), will become conduits for tax-deductible political contributions. But can worries about the abuse of tax deductions really justify shutting churches (and other idealistic organizations) out of central political arenas? The government created the deduction problem and it thus is mere bootstrapping for it to claim that this problem justifies it in...