By: Philip Hackney, Oct. 31, 2016
Last week the Yale Daily News a college newspaper run by students associated with Yale University endorsed Hillary Clinton for president. While a newspaper endorsing a candidate for president is usually the ordinary course of business, when that newspaper is a section 501(c)(3) organization, its an issue. A charitable organization is absolutely prohibited from intervening in a political campaign.
On Friday October 28, I joined my tax prof friends and many surly bloggers Ben Leff, Sam Brunson, David Herzig and Andy Grewal to discuss in a Sparemin Podcast whether YDN put its exemption at risk or not. We had had a dispute on twitter and decided that a podcast discussion might enhance our understanding of one another’s views. It certainly helped me. Give it a listen yourself. Let us know what you think.
My take: Endorsing a candidate for president is an intervention in a political campaign under section 501(c)(3) period. Additionally, the newspaper is *the* activity of this organization that is incorporated separately from the university it is associated with. The editorial board of that newspaper would appear to be the authoritative voice through which this organization would speak. I would, therefore advise such separately incorporated college newspapers to not endorse candidates because it will put their tax exempt status at risk. However, based on IRS guidance and section 501(c)(3) generally, I argue that there is a defense for YDN, and maybe there is even reason to allow a standalone 501(c)(3) college newspaper to make such endorsements.
The Yale Daily News is a section 501(c)(3) organization that is separately incorporated from the university. While some college newspapers are simply activities of the 501(c)(3) universities that they support, others are separately incorporated. Why are they separately incorporated? My primary guess is that they separately incorporate for liability protection, although it could also be to establish a certain level of journalistic independence for the student newspaper.
How might a standalone newspaper make the case that an endorsement for president does not violate the ban on political campaign intervention? They would do so based on Rev. Rul. 72-513. There the IRS examined a college newspaper that was simply an activity of a much larger university. The question the IRS focused upon was whether editorials and endorsements by the student run newspaper might put the universities tax status at risk. Based on a couple of factors the IRS found that it did not.
The IRS noted that the college paper was serving an educational function for the students. The students were supervised by faculty, but the students decided who or what to endorse or support. Furthermore, the paper was narrowly distributed primarily to the student body. Finally, the activity of endorsing candidates seemed to be something in the ordinary course of the type of things a newspaper might do, meaning that doing endorsements served a legitimate educational function. Now the IRS ultimately seems to conclude that this is not an intervention because we cannot reasonably attribute the act of the endorsement to the university. I think this is a reasonable conclusion under the facts and circumstances test that reigns in this area.
So, our debate focused primarily on whether it was reasonable to extend this reasoning to the standalone college newspaper. I think there are good reasons to allow a similar analysis. The standalone paper likely looks almost exactly like the activity of the university. It certainly looks that way to students and those who read the paper. Presumably, professors still assist and oversee the operations. Presumably the university provides funds for the operation of the standalone organization. Utilizing some of the same reasoning as the IRS, given that college newspapers have long been engaging in these educational efforts it is hard to see why we would treat the two forms differently.
However, it is difficult to apply the reasoning of the standalone version because there is almost no other activity of this organization. Nevertheless, because of the significant educational function of the newspaper and its significant integral connections to the university system, I believe it is possible to view this as not speaking for the organization itself. I would argue that if the president of the organization were to endorse a candidate or maybe tell the students who they should endorse for president, this could be clearly attributed to the organization. However, where the students are carrying out simply an educational activity that is clearly associated with their work with the university that they are affiliated, we should wind up with the same result as we found in the revenue ruling. Their endorsement does not speak for the organization and thus there is no intervention in a campaign.
This is a tough case to make and it leaves us with something that looks like an exception to a rule that is supposed to be absolute. That makes me a bit uncomfortable. Once you admit of exceptions to such a rule, you open up possibilities for abusing the rule. Can it be reasonably limited? I think so. I think it can be limited to the school newspaper situation where students are legitimately making the call of who to endorse, the paper primarily has a scope within the school community, and there is a substantial educational component connected to the associated school.
Still, were I a standalone college newspaper, I would not endorse a candidate without the IRS providing an updated revenue ruling creating an exception for this situation. I am not confident, the case I make here would win the day. I only think it is a reasonable conclusion under all the circumstances.
Andy Grewal has up an excellent post calling my argument into question. You should check that out here. Very much enjoyed the back and forth on twitter and then in a podcast and then in blogposts.
At the end of the day, I believe it unlikely the IRS would go after Yale Daily News. In any case they would have a discussion with the organization and if they found they violated the Code will encourage them strongly to no longer do such endorsements. They might also work out some arrangement under which YDN could continue to endorse candidates without violating the prohibition on campaign intervention.