Paul L. Caron
Dean




Saturday, December 15, 2018

The Tax Code Shift That’s Changing Liberal Activism

AtlanticDavid Pozen (Columbia), The Tax-Code Shift That’s Changing Liberal Activism:

The “resistance” to President Donald Trump has shaken up American politics on a highly public stage. Across the nation, impassioned protesters have held hundreds of marches; record numbers of progressive women are heading to the House; a Democrat even won a Senate seat in Alabama. But resistance groups have also been transforming American politics behind the curtains, through the choices they are making about their place within the tax code. This seemingly dry legal development could turn out to be one of the movement’s most significant legacies, as it presages a new model of liberal activism for the age of Trump and beyond. Nonprofit groups that used to focus their energies on litigation and education are increasingly structuring themselves to be political players.

The late 20th-century model of liberal activism revolved around two institutions: labor unions and “public charities.” Labor unions not only bargained with employers on behalf of their employees but also supplied extensive support to Democratic electoral campaigns. Public charities, organized under section 501(c)(3) of the Internal Revenue Code, undertook a wide range of civic activities and brought a constant stream of lawsuits in the public interest.

Many groups gravitated to section 501(c)(3) because public charities enjoy unique tax benefits—most notably, they can receive deductible donations—and tend to be favored by wealthy foundation funders. But these perks come at a price. Public charities are required by law to keep their legislative lobbying to a minimum and to forgo politicking altogether. Taking a stand for or against a candidate for elective office is strictly prohibited. The 501(c)(3) form fit snugly into the postwar theory of legal liberalism, in which the federal courts were seen as the key agents of social reform and professionally managed nonprofits as their partners in that effort. ...

As the legal architecture of campaigns for racial, social, and economic justice continues to evolve, public charities will remain core pillars. Their numbers alone assure this. Even so, the shift toward 501(c)(4)s, pacs, and hybrid legal structures represents more than just a temporary adaptation to Trumpism. It signals the possible emergence of a distinct brand of legal liberalism for the 21st century—one less oriented around lawsuits and tax-subsidized donations and more closely connected to partisan politics and grassroots organizing. Well before the Kavanaugh-confirmation fight, liberal activism’s center of gravity was already tacking away from the courts.

This new model raises new challenges for government officials and nonprofit leaders alike. Most fundamentally, it is putting ever more pressure on the already unstable boundary between the nonprofit sector and the political arena. This in turn will put more pressure on Congress and the IRS to police the existing legal buffers and to develop additional rules to limit the flow of “dark money” between secret donors and politically active nonprofits (as lower courts have just begun to do). It remains to be seen whether regulators will be able to meet these challenges. It is likewise unclear whether professionally managed, cause-driven nonprofits such as the ACLU will be able to generate and sustain forms of “people power” that translate into policy victories.

Amid all this uncertainty and change, one point seems clear enough. For the foreseeable future, the nation’s political welfare will increasingly be bound up with social-welfare organizations.

https://taxprof.typepad.com/taxprof_blog/2018/12/the-tax-code-shift-thats-changing-liberal-activism.html

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