Regulating the Political Speech of Noncharitable Exempt Organizations after Citizens United

Abstract

The Supreme Court decreed in Citizens United that “[n]o sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.” Yet the Internal Revenue Code imposes a variety of limits on different categories of tax exempt nonprofits, including tax exempt section 501(c)(4) entities such as Citizens United itself. Supreme Court cases predating Citizens United have justified these tax limits on the grounds that government has no duty to subsidize political speech. The key “no duty to subsidize” authority, Regan v. Taxation with Representation of Washington (TWR), proclaimed, “Both tax exemptions and tax-deductibility are a form of subsidy that is administered through the tax system.” Justice Blackmun concurred. He conceded the point, however, only because such a section 501(c)(3) organization could form a tax-exempt affiliate not subject to lobbying limits (but also not eligible for tax-deductible contributions) under section 501(c)(4). Citizens United, however, rejected the notion that requiring a corporation to establish a corporate affiliate—even an affiliate that is no more than a separate bank account—in order to engage in political speech satisfies the First Amendment, at least for purposes of campaign finance law. This piece will explore both the tax rules that are, and some that might be, applicable to the political speech of noncharitable tax exempt organizations in light of Citizens United. Part I will review TWR, its ancestors and its progeny as well as Citizens United. Part II will describe the current tax rules regarding lobbying and politicking applicable to noncharitable tax exempt organizations. Part III examines the possible impact of Citizens United on the tax law's current approach to political speech. It concludes that Citizens United has not sub silentio overturned TWR. Part IV proposes a number of possible requirements, particularly disclosure requirements, for noncharitable exempt organizations engaged in lobbying and politicking.