By Ellen P. Aprill
Several commentators have called attention to the statement of the IRS in Revenue Procedure 2018-5, just reiterated in Rev. Proc. 2019-1, that it will not issue a determination letter recognizing exemption from income tax for “an organization whose purpose is directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law regardless of its legality under the law of the state in which such activity is conducted.”
These commentators suggest that this position could constitute impermissible viewpoint discrimination in violation of the First Amendment. I do not view the IRS announcement in this way. Instead, I see it as an application of the long-standing principle denying exemption to entities with an illegal purpose or engage primarily in illegal activities.
The illegality doctrine has long prevented exemption under section 501(c)(3), the category that encompasses what we generally call charities. In the words of Section 101(c) of the ALI Draft Restatement of the Law of Charitable Nonprofit Organizations, “[a] purpose is not charitable if it is not lawful, its performance requires the commission of criminal or tortious activity, or it is otherwise contrary to fundamental public policy.” Continue reading “The IRS Did Not Violate the First Amendment in Declining to Exempt Organizations to Help Marijuana Dealers” →
By Sam Brunson
Yesterday at the National Prayer Breakfast, Donald Trump promised to “get rid of and totally destroy the Johnson Amendment.”
In case you’re unfamiliar with the name “Johnson Amendment” (and I kind of hope you are—it’s a stupid name), that refers to the phrase in section 501(c)(3) that prohibits tax-exempt organizations from endorsing or opposing candidates for office. It was proposed by Senator Lyndon Johnson in 1954, and inserted into the tax code with little fanfare and no legislative history.
There’s a lot that can (and, in fact, has) been said about Trump’s proposal, which follows up on a campaign promise he made, apparently repeatedly. I wouldn’t doubt if we return to it a few times here at Surly. But I just wanted to point out one potential consequence: Continue reading “Newspapers and the Total Destruction of the Johnson Amendment” →
By Sam Brunson
Pity the IRS.[fn1] It is, right now, stuck in the middle of a battle over religion. See, churches, like other public charities, are exempt from tax under section 501(c)(3). But the exemption comes with certain limitations, including an absolute prohibition on supporting or opposing candidates for office.
This prohibition has become something of a culture wars battleground, at least with respect to churches. Some churches argue that they have a moral and religious obligation to support candidates whose actions are in line with their beliefs, or, alternatively, to oppose candidates whose actions violate their beliefs. As such, they claim this prohibition violates their Free Exercise rights, and is unconstitutional, at least as applied to churches.
The funny thing is that, as best I can tell, only one church has ever lost its tax exemption for violating this campaigning prohibition. Continue reading “Stuck in the Middle With . . . the IRS?!?” →