Paul L. Caron

Monday, May 25, 2009

Liberty University as Bob Jones University -- Can the IRS Strip Tax-Exempt Status for Revoking Recognition of Democratic Club?

Following up on my earlier post, Liberty University Revokes Recognition of Democratic Club (May 22, 2009):  could the IRS strip Liberty of its § 501(c)(3) tax-exempt status under the authority of Bob Jones University v. United States, 461 U.S. 574 (1983):

[T]o warrant exemption under § 501(c)(3), an institution must fall within a category specified in that section and must demonstrably serve and be in harmony with the public interest. The institution's purpose must not be so at odds with the common community conscience as to undermine any public benefit that might otherwise be conferred. ... [A] declaration that a given institution is not "charitable" should be made only where there can be no doubt that the activity involved is contrary to a fundamental public policy. ...

Petitioners contend that, even if the Commissioner's policy is valid as to nonreligious private schools, that policy cannot constitutionally be applied to schools that engage in racial discrimination on the basis of sincerely held religious beliefs. As to such schools, it is argued that the IRS construction of § 170 and § 501(c)(3) violates their free exercise rights under the Religion Clauses of the First Amendment. ... The governmental interest at stake here is compelling. ...   That governmental interest substantially outweighs whatever burden denial of tax benefits places on petitioners' exercise of their religious beliefs. The interests asserted by petitioners cannot be accommodated with that compelling governmental interest; ... and no "less restrictive means" ... are available to achieve the governmental interest.

Jonathan Singer notes the potential applicability of American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989), in which the Tax Court stripped the tax-exempt status of an educational organization for acting in an excessively partisan fashion:

In that case, an academy was created to teach individuals the skills necessary to work in political campaigns. All of the graduates of the academy went on to work for Republican candidates, and the academy itself stemmed from a similar training program previously administered by the National Republican Congressional Committee.

It's worth noting that the facts of the Liberty University situation do not exactly comport with those in American Campaign Academy. Although the late Jerry Falwell played an important role in the Republican coalition and Liberty University itself has been used by Republicans for important addresses, the nexus between the institution and the GOP is considerably more attenuated than the connection between the American Campaign Academy and the NRCC.

That said, it appears that Liberty University is endorsing a Republican Party organization while barring a Democratic Party organization. Whether this action rises to the level of the type of excessively partisan action the Tax Court has already ruled to run afoul of laws regulating non-profit organizations remains to be seen.

For more on American Campaign Academy, see Darryll Jones (Stetson) of our sister Nonprofit Law Prof Blog.

For more on Liberty University's actions, see:

Here is Rachel Maddow's take:

Jerry Falwell, Jr., Chancellor and President of Liberty University, yesterday issued this press release explaining Liberty's actions:

The University has not banned Democrats from campus. Nor has the Democrat club been banned from meeting. And, never has the University or its' officials said that a person cannot be a Christian and a Democrat. Sorry for those who want to run with these titillating soundbites, but these are the facts.

The students who formed the Democrat club last October are good students. They are pro-life and believe in traditional marriage. They can continue to meet on campus. The only thing that has changed came about as part of a University-wide review of all student organizations for official recognition status. Official recognition carries with it the benefit of using the University name and funds. While this group will not be an officially recognized club, it may still meet on campus. ...

Parents and students support the University because they believe in its' distinctly Christian identity and mission. Liberty University is pro-life and believes that marriage between one man and one woman provides the best environment for children. Liberty University will not lend its' name or financial support to any student group that advances causes contrary to its mission.

While the students in the college Democrat club are pro-life and support traditional marriage, the constitution of the club pledged support to advance the Democratic platform and candidates. The 2008 Democratic platform has taken an extreme turn to the left on social issues. For the first time it supports federal funding of abortion and repeal of the federal Defense of Marriage Act, a law passed overwhelmingly by a bi-partisan Congress and signed by President Bill Clinton. Liberty University will not lend its' name or financial support to undermine marriage or to promote abortion.

While students are free to meet on campus, debate and discuss politics of every stripe, the University will remain true to its' core principles and not lend its' name or fund groups that work to undermine the principles that make Liberty attractive to so many people. Liberty brings many diverse speakers to campus.

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Jos, actually the NEA has a political action committee which does the endorsement of candidates. Political endorsement also is a very different situation because the NEA endorses candidates across the aisle. What happened at Liberty is blatant politicizing on campus by only allowing one view at the university.

Posted by: C. Williamson | May 26, 2009 7:45:45 PM

It has been more than obvious for about 20 years now that the Christian right operates more as a tax dodging political machine than as a religion, to the extent that those are different things.

Posted by: C.Markov | May 26, 2009 11:33:25 AM

the NEA should probably lose their tax exempt status too. They endorse candidates all the time...

Posted by: Jos | May 26, 2009 10:52:33 AM

Tax exempt status should not be allowed to any institution of higher learning that is led by a president and/or chancellor who thinks that the possessive of the word "it" is formed by adding the letter S followed by an apostrophe.

Posted by: Peter G | May 25, 2009 9:26:02 AM

I doubt this is an issue the left would want to get into to. For example there are numerous cases of Christian student organizations being given trouble because (say) they did not want to accept homosexuals or otherwise did not conform to accepted views. The cases are obviously not exactly the same, and I don't personally defend the Liberty decision which seems rather foolish on my part. But it would be difficult indeed to argue that it is primarily liberals who have freedom of speech problems on campus these days. The whole thing sounds like very selective outrage to me, part of a campaign to delegimatize/stigmatize anyone outside of the Obama Consensus, I don't think it has anything much to do with free speech.

Posted by: mike livingston | May 25, 2009 7:51:10 AM