Paul L. Caron
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Friday, May 17, 2024

Volokh: Nonprofits That Help Organize Protests That Break The Law Can Lose Their Tax Exemptions

Eugene Volokh (UCLA; Google Scholar), Can Nonprofits That Help Organize Protests Lose Their Tax Exemptions?:

Senate Republicans have called on the IRS to investigate various nonprofits that have helped organize university protests, and see if they should be stripped of their tax exemptions. Would that be permissible?

[1.] The government can't strip groups of nonprofit status based on their ideological viewpoints. This was first made clear in Justice Brennan's opinion in Speiser v. Randall (1958), which struck down a denial of a property tax exemption to people and organizations that "advocate[] the overthrow of the Government of the United States … by … violence … or who advocate[] the support of a foreign government against the United States in the event of hostilities" ...

[2.] But nonprofits' right to express viewpoints doesn't extend to a right to violate valid laws (such as content-neutral time, place, and manner restrictions). IRS Revenue Ruling 75-384 deals specifically with that. ...

Nothing in Rev. Rul. 75-384, of course, suggested there was anything wrong with advocating for world peace and disarmament as such. But trying to serve any cause, good or bad, through deliberately violating the law—including by "deliberately block[ing] vehicular or pedestrian traffic" and thus "disrupt[ing] the work of government, and prevent[ing] the movement of supplies"—can justify denying a tax exemption. ...

Indeed, such denial of tax exemptions can extend even to groups that operate merely "contrary to public policy," which includes engaging in race discrimination in education (Bob Jones Univ. v. U.S. (1983)). And that principle is at least equally true as to groups that systematically engage in violating criminal laws. ...

[3.] Again, speech remains protected regardless of its viewpoint. That would include speech that is viewed as disparaging based on race (see Matal v. Tam (2017), affirming In re Tam (Fed. Cir. 2015) ("Bob Jones University is a case about racially discriminatory conduct, not speech")); advocacy of "the overthrow of the Government of the United States … by … violence … or who advocate[] the support of a foreign government against the United States in the event of hostilities" (see Speiser); advocacy of terrorist attacks by Hamas; and more. But pervasive illegal conduct planned by the group can lead not just to criminal punishment for members of the group, but to the loss of tax exemption for the group itself.

https://taxprof.typepad.com/taxprof_blog/2024/05/volokh-nonprofits-that-help-organize-protests-that-break-the-law-can-lose-their-tax-exemptions.html

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