*1 WITH TAXATION REPRESENTATION WASHINGTON, Appellant,

OF REGAN, Secretary Donald T. Treasury, et al.

No. 79-1464. Appeals, United States Court District of Columbia Circuit. Argued En Banc Oct.

Decided March *2 Cary

John with whom Alan B. Mor- Sims Field, D. Washington, F. rison Thomas C., appellant. were on the brief for Cihlar, Atty., Dept, Frank P. of Justice Murray, Acting with whom John F. Asst. Gen., Ruff, Atty. Atty. F. Charles C. U. S. filed, at the time the were Michael L. briefs Farber, Paup Attys., Dept, and Richard Justice, C., Washington, D. were on Brown, appellees. brief for Ernest J. Leon- Brennan, Henzke, Philip ard J. Jr. and I. C., Justice, Dept, Washington, Attys., D. appellees. appearances also entered ROBINSON, Judge, and Before Chief TAMM, MacKINNON, ROBB, WRIGHT, WALD, MIKVA, EDWARDS, WILKEY, GINSBURG, Judges. Circuit

MIKVA, Judge: Circuit Representation

Washington (Taxation) challenges the lob or nonprofit bying restrictions certain 501(c)(3) of ganizations required Code, the Internal Revenue U.S.C. 501(c)(3), a violation of its First Because this equal protection rights. complex, may Amendment case is path to set out in advance the useful argument whole of Taxation’s well ex- reasoning opinion begins our follows. The parts. ceeds the sum of its Taxation’s case explanation with an of the internal revenue solely is weak if it is viewed as a First provisions (cited issue as l.R.C. or claim, Amendment because the Constitution Section) and the discrimination established require Congress does not to subsidize First *3 by provisions. part those In the second activity. Amendment Taxation also has a opinion, explain why we the statute’s weak solely equal protec- case in terms of given judicial classifications must be close tion; Congress has vast leeway under the scrutiny. The third section then identifies classify recipients Constitution to of its substantiality gov- and assesses the of the benefits and to favor some over ernmental interests justify said to the dis- But others. a First Amendment concern crimination, and concludes that the statute equal protection analysis must inform the is unconstitutional. The final section of the this spe- case. Courts must scrutinize with opinion appropriate discusses the remedy by Congress cial care act facili- for this violation and the for need a remand speech speaker tates the of one over anoth- to the district court. er, legislation even when enacted dry, classification-ridden context of the In- I. BACKGROUND ternal By subsidizing Revenue Code. nonprofit Taxation is a charitable and lobbying activities of organization educational that was formed failing tions while to subsidize the represent general public on tax issues of Taxation and other groups, courts, Congress, before and the execu- equal protection has violated the incorporation tive branch.1 After its guarantees of the Constitution. The dis- applied June Taxation Internal erroneously rejected trict court Taxation’s (IRS) Revenue Service for a declaration challenge, constitutional accordingly and we organization was an described in reverse. 501(c)(3).2 Although Section Taxation oth- merg e.g., Taxation was created as the result of a those we decide here. See, Christian Ech organizations, er between two other Taxation oes National Inc. v. United Ministry, States, (TWRF), group with Fund Representation de (10th 1972), 470 F.2d 849 cert. denied, Cir. voted to courtroom and Taxation advocacy, U.S. L.Ed.2d 84 41, 38 (TWR), group with Representation devoted to (religious organization challenged loss ex legislative TWR had been activity. incorporat legislative as result of ac emption substantial organization ed in 1970 as a social welfare clause); as violation tivity of free exercise Has from federal exempt income taxes under Sec (Ct.Cl. well v. United States, 500 F.2d 1133 501(c)(4), 501(c)(4) tion 26 U.S.C. § [herein 1974), cert. denied, after cited as but l.R.C.], liable for unemploy (1975) (taxpayer 42 L.Ed.2d 803 sued for refund ineligible ment taxes and for tax deductible that his contributions theory contributions l.R.C. § engaged should extensive have TWR was denied classification contributions); been deductible as charitable 501(c)(3) organization, unsuc appealed Tax & Analysts Shultz, Advocates v. in Taxation cessfully Representation (D.D.C.1974), F.Supp. dismissed mem. app. (4th 1978), United States, 585 F.2d 1219 Cir. sub nom. Tax v. Simon, & Advocates Analysts cert. denied, 441 U.S. 905, (D.C.Cir.1975) (suit 512 F.2d 992 for declarato judgment legislative restrictions ry activity Taxation absorbed the functions apparently of Section were unconstitutional dis of TWR after TWR lost its see Brief for appeal, missed because action barred l.R.C. (IRS Brief) United Appellee States 7421(a), barring enjoin § suits to restrain or Taxation makes the same claims here that were taxes). collection of Taxation with Representa rejected the Fourth Circuit. this Despite tion was also a suit, to the latter party close between issues and relationship parties, prejudice. was complaint dismissed without however, has not or pleaded See 35 A.F.T.R.2d 1352. argued that Taxation should be precluded judicata litigating res case, and we 2. Section to: applies decline to reach the sua sponte. litigants Several chest, this and Corporations, any community other courts have organized also raised unsuccessfully fund, foundation, issues related and operated Code, qualified tax-exempt

erwise status un- linchpin I.R.C. 501 “is the section, der that require- statutory system.” it did not meet the of the benefit Simon Kentucky Rights Organi Eastern Welfare part” ment that “no substantial of its activ- zation, n.1, “attempting leg- ities consist of to influence n.1, This sec specifically islation.” The found IRS organi describes several dozen kinds of purposes Taxation’s “stated include at- exempt zations that are from federal taxa tempting legislation, legis- to influence tion on the income receive. lative advocacy may constitute a substantial part your important components activities.” Notification of There are other Ruling, February provided by Adverse tax benefits Joint Section 501 in conjunction provisions with other (J.A.) result, of the Appendix 48. As a Code, however. The chief source of income ineligible pro- was for several tax benefits many nonprofit organizations 501(c)(3), particularly vided private described in the statute is contribu- eligibility to receive tax-deductible contri- *4 encourage giving, tions. In order to such butions from donors.3 frequently provided has that con- Taxation exhausted its administrative 501(c) tributors to organiza- various Section remedies, sought May and then 1978 to may tions take a deduction based on the overturn the by bringing IRS decision amount of the contribution. Because the declaratory judgment action under I.R.C. imposes general Code three taxes on indi- Upon 7428.4 § consideration of cross-mo- income, gifts, viduals —on and estates —the tions for summary judgment, the district provisions allowing contributors to take court ruled for the defendants. Memoran- appear these deductions separate in three Opinion, dum January 1979, J.A. 56-64. portions of the Code. See I.R.C. §§ appealed the district court’s deci- 2055, 2522. complexity, Aside from this sion, and a three-judge panel of this court however, general simple. scheme is 14,1981, April decided on uphold the trial Congress has organizations accorded certain 11, 1981, court. On June majority of the exemption double benefit: from taxes on full appeals court of voted to vacate the income, their own eligibility to receive panel opinion and rehear the case en banc. gifts contributions and that are deductible from the Throughout donors’ taxes as well. A. The Statutory Scheme opinion, tax exemption refers to the benefit, first tax-deductibility considering Before presented the issues second. case, by this it is necessary first to examine the classifications that are under review. Every organization described in Section Congress has excluded types various of or- enjoys exemption, some form of tax ganizations from taxing provisions of only eligible some are to receive tax-deduct- exclusively religious, charitable, for (emphasis added). organizations scientif- Such are ex- ic, testing public safety, literary, empt for or educa- from taxation under the income tax subti- purposes, tional exemption or to tle foster national or inter- unless is denied under sports competition (but national amateur §§ I.R.C. and 504. only part if no of its activities involve the 170(c). 3. See § I.R.C. Other benefits accru- provision equipment), of athletic facilities or ing 501(c)(3) organization to a § include ex- prevention or for the cruelty to children or emption security from federal social taxes animals, part earnings no of the net of which (FICA), 3121(a), exemption § I.R.C. any inures to private the benefit of share- unemployment (FUTA), federal taxes I.R.C. individual, holder or part no substantial 3306. § carrying propa- activities of which is

ganda, attempting, or otherwise to influence 4. I.R.C. § authorizes certain courts to is- legislation (except provided as otherwise declaratory judgments appropriate sue cases (h)), subsection partici- and which does not relating to the status and classification of or- in, pate (including publish- or intervene in ganizations 501(c)(3). Congress under I.R.C. § distributing or statements), any politi- part enacted this section of the Code as campaign cal on behalf of for candidate 94-455, Tax Reform Act of Pub.L. No. public office. Stat. 1520. 501(c)(3) any par- ible contributions. The status of —some course, organization, simply organiza can called “charitable” ticular times examining portions examples of the former. A do ascertained the other tions —are organization may his provide deductions to nor to such an deduct of the Code by virtue of the relevant complica- A further contributions to it organization’s donors. provisions I.R.C. in the that the differenti- Code. tion lies fact Code deductions); 170(c)(2) (income tax eligible to I.R.C. among § those ates 2055(a)(2), 2106(a) (estate tax deduc §§ receive tax-deductible contributions 2522(a) tions); (gift tax deduct of the uses to which I.R.C. § terms ions).5 limits the put. purposes The Code amount of may tion’s income For the case, by the promoted may of this the crucial distinction be conducted Sec however, organization, wheth Section 501 is between tion related to its may not receive tax-deductible contri- er or not they lobby substantially, exempt purpose.6 butions if and or- See Slee v. Commission er, (2d 1930). ganizations receive such contribu- 42 F.2d 184 Cir. hand, organizations, tions even if do. on the other 170(a) “general aganda, attempt states the rule” that or otherwise to influence § I.R.C. “any legislation.” 4945(a) (d)(1). deductions shall be allowed for I.R.C. (c). contribution” defined in subsection Sec- 170(c) e.g., Rev.Ruling 1967-2 Cum. defines “charitable contribution” as gift (nonprofit organization operates a contribution or Bull. 185 to or for the use facility protection stray corporation, trust, animals community does A or chest, fund, qualify exemption part if a of its substantial foundation— *5 (A) organized attempts activities to influence state created or in the United consists of thereof, any possession legislation States or or under and local to of ani- related welfare State, States, any mals); Commissioner, Kuper the law of the United 332 F.2d Columbia, any possession (3d District of 1964) (upholding or Cir. of disallowance States; United chapter deduction for of contributions to local (B) organized exclusively operated and for League gen- of Women Voters because of “the charitable, scientific, religious, literary, or ed- legislative program League”); eral purposes, ucational or to foster national or League States, of Women Voters v. United sports competition international amateur F.Supp. (Ct.Cl.1960) (forum discus- (but only part if no of its activities involve formulating position sions members to be provision equip- of athletic facilities or questions public taken on interest held to ment), prevention cruelty or for the “preparation influencing constitute for the animals; children or legislation” legislative and were therefore ac- (C) part earnings no of the net of which tivities). practice, “In effect of terrorem any private inures to the benefit of share- vague statutory many proscription causes individual; holder or and charities to avoid indirect most direct or efforts (D) disqualified which is not for tax ex- support oppose legislation, or even when the emption 501(c)(3) by under section reason of legislation directly related to the charitable attempting legislation, to infíuence and which purposes op- they organized for which are and in, participate (in- does not or intervene in Timbie, Caplin Legislative erated.” Activi- & cluding publishing distributing or Charities, Contemp.P. ties of Public 39 L. & statements), any political campaign on behalf (Autumn 1975). This effect flowed public candidate for office. ambiguity from the inherent of the statute. (emphasis added). language permits Similar States, F.Supp. See Krohn v. United analogous donors to make with re- deductions (D.Colo.1965) (meaning 347—48 of “substan- tax, spect gift 2522(a)(2) (citizens or § I.R.C. may vary organiza- types tial” with different residents) (b)(2) (nonresident aliens), and and tions, may organiza- and turn on extent of the tax, 2055(a)(3) (citizens estate §§ I.R.C. or resi- tion’s other noncharitable activities as well as dents) 2106(a)(2)(A)(ii) (nonresident and activities). the extent of its charitable aliens). Gift and estate tax deductions will Congress sought problem however, ease this some- significance, soon become of less what in the Tax Reform Pub.L.No. light changes Act of made Recov- the Economic 94-455, ery 90 Stat. which allows certain Tax Act of Pub.L. No. Stat. governed by point, may charities to be new Code 172. As a final foundations 501(h) contributing organization sections the or- deterred from 4911. These allow to an lacking 501(c)(3) ganization percentage to devote a its re- § status because foundations managers subject lobbying, provide explicit and their sources to are to tax if the and thus pays any carry prop- ceilings requir- foundation amount “to dollar rather than requirements, meet they certain other for exempt from income taxes even if are lobbying. engage in or- substantial These example, exempt are under Section ganizations eligible to receive tax- are 501(c)(8).10 Although contributions contributions, however.7 deductible only societies are tax-deductible if con- contrast, 501(c) organiza- group’s Section to be for tributions are used tions receive tax-deductible contribu- exempt purposes, imposes the statute no regard any lobbying tions without limita- gift or tax restriction income cemetery tion. Contributions to certain purposes, purposes. does for tax estate companies, exempt burial which are Compare 2055(a)(3) (explicit limita- I.R.C. § 501(c)(13),are deductible under Sec- purposes) tion for tax with I.R.C. estate 170(c)(5) statutory explicit without lim- 2522(a)(3) (no gift pur- restriction for tax § concerning lobbying itations activities.8 170(c)(4) (no poses) I.R.C. restriction § same is true of contributions Regu- purposes). Treasury for income tax governments exclusively federal or state appear gap, lations to fill however. public purposes. 170(c)(1). La- regulations provide that a leagues exempt unions bor and business are operated by beneficiary fund a fraternal 501(cX6) re- under Sections society qualify will not for tax-deductible spectively, primary even if is their provisions if contributions under these purpose. Contributions to such society organization,” is an “action tions, dues, usually generally form of engage in includes sub- are deductible to the extent lobbying. Reg. stantial Treas. expenses.” “business 1.501(c)(3)-l(c)(3). e.g., id. 25.- § § Analysis 501(c) of where other Section 2522(a)-l(a)(4) (gift deductions); tax id. compli- fall this scheme is 1(h)(5) (income deductions); tax § regulations may cated the fact that IRS 1.170A— (estate 2055(a) deductions). id. De- impose lobbying limitations even when the spite given the impression itself the statute beneficiary Code is silent. Fraternal operate through lodges alone, then, societies that local beneficiary fraternal societies taxpayer. to adhere to cer- the less est If Section “substantiality” 501(c)(3). (6) organizations lobbying, tain test of Section use dues for *6 charities, however, All continue to have their dues are deductible contributors lobbying restricted or requirements 162(e) under one standard extent that the of Section made, other. “Taxation has not and does not are satisfied. plan make, election to covered provisions.” new Taxation Brief n.9. (10) provide 10. Section and for ex- accordingly The new standard is not before us emption and is of little relevance to the be- discussion (8) orders, beneficiary societies, Fraternal low. But see note 40 infra. or associations— 7. Section 501(c)(4) applies (A) operating lodge system to: under or leagues organizations Civic organized or for the exclusive of a not benefit members profit operated fraternity exclusively operating lodge for for the itself under promotion welfare, system, of social or local associa- employees, tions of membership (B) life, sick, providing payment of which for the employees designated is limited accident, of a other or benefits to the members of person persons municipali- particular or in society, order, or association or their ty, earnings and the net which are devoted dependents. exclusively charitable, educational, or rec- purposes. reational orders, societies, Domestic fraternal associations, operating lodge or under companies 8. Such must barred system— charters, however, engaging from (A) earnings of The net which are devoted 170(c)(5). activities. § I.R.C. charitable, scientific, exclusively religious, 9. These sections thus track I.R.C. 162(e), de- literary, educational, § purposes, and fraternal pp. detail 731-732 infra. scribed in more 162(e) by Congress Section was enacted (B) provide payment do not for the 1962 to allow businesses to deduct the costs of life, sick, accident, or other benefits. lobbying directly legislation related to of inter- 501(c)(3)organizations Consequences B. resemble be- Section Suffered by regulation are from cause barred scheme, statutory The effect of the with using tax-deductible contributions to en- regulations engrafted, is that different ex- gage lobbying. substantial empt disparate organizations receive tax organizations, Veterans’ which are ex- treatment, depending on their ac- 501(c)(19),require even empt Section 501(c) gamut tivities. Section runs the beneficiary analysis closer than fraternal organizations may lobby but re- 501(c)(3)organiza- societies. Unlike Section contributions, ceive e.g., no tax-deductible tions, veterans’ are not sub- 501(c)(4); organizations may Section jected prereq- to a limitation as a receive tax-deductible contributions but receiving for uisite tax-deductible contribu- 501(c)(3); may lobby, e.g., not See, e.g., 170(c)(3)(income tions. I.R.C. § both, practice may that in do deductions); (estate 2055(a)(4) tax I.R.C. § i.e., veterans’ under Section deductions); 2522(a)(4) (gift tax I.R.C. § 501(c)(19). organization An such as Taxa- deductions). however, Again, Treasury tax not receive tax-deductible contri- Regulations exemption condition from in- engages butions lobby- if “substantial” groups come taxes on whether such devote ing, qualifying but a veterans’ “exclusively” themselves to certain veter- may continue to receive tax-deductible con- ans’ Reg. functions. Treas. tributions even if as much it lobbies and on Moreover, 1.501(c)(19)-l. Treasury § many issues as it chooses. Regulations require seem to that veterans’ Perhaps as a of this result uneven treat- groups obey lobbying limitation order ment, such as Ameri- to enable their contributors to deduct dona- can Legion Foreign and the Veterans purposes, tions income tax id. 170A- large Wars active on a before 1(h)(5), gift pur- if estate number of different issues. The American however, poses. practice, veterans’ or- Legion historically and its affiliates “have ganizations enjoy very different tax treat- among been active most or- ment. Counsel for the candid- ganizations Troyer, on the national scene.” ly during argument admitted oral that the Charities, Law-Making, and the Constitu- regulation governing deductibility of contri- tion: Validity Restrictions on butions for purposes income tax is not en- Inst, Inñueneing Legislation, 31 N.Y.U. regard forced with groups, to veterans Fed. Tax. Veterans’ or- challenge the IRS has stated will that it ganizations sought legis- have to influence income tax regard deductions taken involving lation of the Panama groups. donations made to ratification these IRS Pub- treaties, parks, No. Canal Organi- lication List Alaska national na- Cumulative issues, 170(c) zations security Described in tional elimination of *7 (1980). Internal delivery.11 Revenue Code of 1954 Saturday 501(c)(3) mail But a § See, e.g., Service, Cong., Inclusion of Alaska Hear- Post 11. Lands: Office and 1st Civil 95th O’Neil, ings (1977) (statement Before the Subcommittee on General Sess. 103 of James F. Oversight publisher, Legion magazine); and Alaska of Lands the House Com- American id. Affairs, Schwab, (statement mittee on Interior and Insular 95th of H. director Donald Cong., (1977) (statement service, legislative VFW); Department 1st Sess. 100 of Del- national Shull, VFW); Six-Day Delivery: Appropriations Hearings mar L. Mail of Defense for 1977: Hearings Before the House Committee on the Before a of Subcommittee the House Commit- Service, Cong., Sess., Cong., pt. Post Appropriations, Office and Civil 95th 1st tee on 95th 2d & (statement Security (1977-1978) Spike (1978) (National 2d Sess. 197 of 685-710 Resolution Brooker, Commander, adopted by Post American Le- the 59th National Convention of the gion); (statement alia, Copen- id. Legion supporting, at 216 of Robert American opment inter devel- barger, Paso); bomber, missile, VFW Post of El Postal Service of the B-l M-X cruise Hearings missiles, Act of 1977: Joint Before the Sub- selective and reestablishment of ser- Operations system). committee on Postal and Services vice Veterans’ have presumably Subcommittee on Postal Personnel and even on lobbied matters that have special Modernization on House Committee interest as such Taxa- disadvantages, notably tial organization, charitable as one formed exclusion from care, promote may engage health not the IRS List” of “Cumulative legisla- substantial even when the to receive entitled tax-deductible donations purpose, directly exempt grants.12 “[Ajppearance to its relates and foundation on say prerequisite a hos- a bill for the construction of more List is Cumulative pitals. raising successful fund most organizations. Many simply contributors preliminary arguments, Two organization will make an not donations to standing, could be said to concern should be appear that does on Cumulative turning addressed is before to the central Simon, University Bob List.” Jones First, sues of this government case. 725, 729-30, 2038, 2042-43, notes that organization because charitable therefore L.Ed.2d It is irrele- may exempt payment from income might lobby vant to Taxation’s case that 501(c)(4) taxes if it under Section even en substantially exempt pay- and still be from gages lobbying, in substantial Section ment income under taxes Section 501(c)(3) way gov in no constitutes a direct 501(c)(4).13 ernmental interference with lob Taxation’s argument preliminary suggest- A second bying. Supplemental Appellee Brief for ed is related to the first. (IRS Supp. Brief) United 14. States implication Because chief effect Taxation’s re- is that Taxation has suffered no comply “no injury 501(c)(3) from fusal to with the substantial denial Section sta 501(cX3) provisions lobbying” tus clause of is because the of the “nei Section Code ther may restrict Taxation’s its contributors lobbying activities make deducti- deny contributions, nor Taxation tax ble exempt government implies status be cause of planned As proper activities.” Id. that Taxation is party not the description shows, statutory bring Supp. scheme this case. Brief at IRS 19. however, disparate depend tax benefits on “The attenuated effect on of de- specific statutory provision nying under which potential a deduction to its contribu- organization exempt determined to be tors” said “significant not to constitute from federal income tax. lack infringement” Taxation’s encroachment” or “serious 501(c)(3) Section id., status right causes it substan- lobby, Taxation’s and “does not 12. IRS Publication No. the Internal Revenue Code of 1954 tion in [the Cumulative odically updated). ganization listing, regardless of their actual tax status.” may rely An crucial tions,” is “tantamount Caplin Timbie, that, Hearings received a stating 729, Bob Jones Organizations sight Means, Cum.BuII. tion. 1978) (statement organization’s beneficiaries practical 94 S.Ct. of the Code.” Rev.Proc. of the House Committee on E.g., & that contributions 95th right Before narrowly are deductible as Tax University ruling 2038, 2042, Cong., point to receive Described in Section Simplification Proposals: Cumulative List for “The of of James supra loss of “The limited his of 1st & 2d Sess. 234 determination Subcommittee v. Service has announced view, *8 largesse note to a death sentence.” 40 listing Simon, List] deductible Lund, VFW). exceptions, Cumulative provided 6, charities are not donors status, signifies at 195. of an maintain 416 (1980) (peri- so Ways letter in section U.S. 170(c) contribu- a donor long (1974). the or- 1972-2 List of (1977- “From it has Over- Field their “the 725, ... 13. 2, enacted 501(c)(3) charitable endowment out of tax-favored cial welfare amounts of feits its fare 445 — 46 could qualify U.S.Code very duct contributions exempt Note in the Law of Limitation on es.... 94th It is a Section much concerned about organization seek as a social welfare Cong., far 501(c)(4). charities in It exemption by lobbying may organization Cong. status. is, tax-exempt organization.” S.Rep.No.938, pt. however, fund to Political Activities: Discordant provision 2d & clear, Sess. deductible Ad.News made to Charities, order that after denial as a section 1976, Congress provided vital from however, I.R.C. status 83, reprinted and organization support them.” prevent 4030, “build[ing] up contributions as then 46 Va.L.Rev. as a donors their own tax they qualify that Taxation A 4107-08. us[ing] social wel- substantial Clark, not then that for- Section ^[1976] so- de as

723 legislation legislation even infringe Amendment when the Taxation’s First di- id. at 26. This argument rights,” rectly objects, too affects their difference, course, standing has There of easily dismissed. Taxation is a between behalf showing First Amendment claims on that a has a discriminatory to raise statute unconstitutional, application and it is it is supporters,14 of members and its clearly will be But Taxation has met the threshold re- evident that Taxation quirement demonstrating injury of giving if its contributors cease from harmed statute,15 unequal application of a and it money. Regardless of the merits case, undoubtedly constitutionality of appropri- Taxation is an is to the that statute we bring this action. now turn. party ate short, complained has II. APPROPRIATE THE STANDARD 501(c) exposes vari- OF REVIEW discriminatory tax-exempt

ous thereby starting point tax- treatment violates Taxa- for our review The protec- equal tion’s First Amendment and appropriate must be determination rights. statutory provision apply appellant’s The effec- reviewing standard to McRae, Harris v. organi- constitutional claims. See tively ability limits the of charitable 297, 322, 2671, 2691, present legislators zations to views 448 U.S. 100 S.Ct. 65 See, Alabama, 449, Florida, 184, e.g., 191, McLaughlin v. U.S. NAACP 357 v. 379 U.S. 85 458, 1163, 1169, 283, 287, (1964). 78 S.Ct. 2 L.Ed.2d 1488 13 222 See L.Ed.2d (an assert, organization may Williamson, on behalf of its Skinner v. ex Oklahoma rel. members, 1113, certain of their First Amendment L.Ed. Rock, rights); n.9, (1942); v. Yeager, Bates Little 361 U.S. Rinaldi v. n.9, 1497, 1499-1500, 80 S.Ct. 4 L.Ed.2d 480 86 S.Ct. 16 L.Ed.2d Buckley Valeo, 1, 12, In 612, 631, (1976), 46 L.Ed.2d 659 held the Court suggests has limit- dissent appellants standing challenge had political ed the activities of the $1,000 limitation of on individual contributions. prominent groups by nation’s more veterans’ “precludes The limitation most associations incorporating them with federal charters that effectively amplifying from the voice of their “uniformly provisions barring contain them simultaneously adherents” “is an interfer- engaging partisan political from activi- ence the freedom adherents.” [their] ty. Dissent .. at 760-761. .” This raises Sweezy (quoting Id. at 96 S.Ct. at 636 questions several of fact not addressed Hampshire, New court, including district which of the nation’s 1203, 1211, (1957) (plurality 22,000 organizations veterans’ have such char- opinion)). (cid:127) actually ters and whether are these charters Wars, Foreign enforced. The example, Veterans astounding 15. The makes also does not seem to have charter limita- argument political shown “discrimination” is not activities, tions on its See 36 U.S.C. simply “disparities because of seq. (1976). Indeed, the treatment § et the VFW en- similarly taxpay- presidential accorded somewhat situated dorsed a candidate in the 1980 particularly organizations exempt Detroit; Republicans election. “The ers— Code,” provisions tax under different Group Reagan,” Veterans’ Endorses Wash- pertaining Post, Moreover, and that “the federal lobbying ington July tax laws at All. exempt organizations activities of tax some fact that veterans’ are no less ‘neutral’ now” than were in federally distinguish chartered does them 162(e). before enacted Section 501(c)(3) organizations, from section may Supp. Supreme IRS Brief at 24. The has Court e.g., also have federal charters. soundly repudiated the contention that the de- (1976) (American U.S.C. 1§ National Red equal protection mands of are met when the Cross); (Boy America); 21§id. Scouts of id. applies equally statutory law within to all (Future America); § Farmers of id. § class: (United Committee); Olympic States id. § 461 (National Council); Safety (Big application among id. 881 Broth- § the members of the class Indeed, America). juxtaposition inquiry ers of defined . Judicial .. does end showing equal legislation. with a and section ques- throughout courts must reach this title illustrates and determine the corpo- similarity “private tion whether the classifications drawn in a essential these light purpose. statute are rations law.” reasonable in of its established under Federal Id. *9 724 2343, 2350, (1980). a 65 (1980). high We find that L.Ed.2d 341 Were

L.Ed.2d 784 scrutiny required government sought in which is because the this a case the level lobbying lobbying suppress con- the activities of Taxa- restriction directly, appropriate tion scruti- protected the level of a limitation on First stitutes See, ny e.g., would obvious. N.A.A.C.P. activity, and because Taxa- Amendment Button, 438-39, 415, v. 371 U.S. argument 83 S.Ct. equal protection therefore tion’s 328, 340-41, (1963); 9 L.Ed.2d 405 Bates v. clearly is involves what fundamental Rock, 524, 516, 412, Little 361 80 U.S. S.Ct. analyzing right.16 In the differential treat- 417, (1960). 4 L.Ed.2d 480 here, challenged question the then ment governmen- must be whether substantial rights First Amendment are not supports tal interest the classification and however, abridged, merely because the narrowly is whether classification refuses to subsidize those drawn to serve that interest. States, rights. In Cammarano v. United 524, 498, 358 79 S.Ct. 3 462 U.S. L.Ed.2d Implications A. First Amendment (1959), Supreme upheld Treasury Court prohibited regulations There no whatsoever that business deduc lobbying protection expenses ground comes within the tions of on the See, e.g., of the First governmental Amendment. Califor refusal underwrite Transport Trucking nia Motor v. Co. Unlim costs not violate First does ited, 508, 510-11, McRae, 609, 404 92 v. U.S. S.Ct. Amendment. See Harris 448 (1972); 318, (whether 30 L.Ed.2d 642 New York at 100 S.Ct. at 2689 U.S. Sullivan, 254, 270, Times Co. v. 376 84 U.S. should subsidize exercise of a 710, 720, (1964); 11 S.Ct. East fundamental freedom is “not constitutional entitlement”).17 ern R.R. Presidents v. Noerr Conference of constitutional matter Inc., Freight, 127, 137-38, reasons, Motor 365 U.S. 81 For same in “Americans Unit 523, 529-30, Walters, 1169, S.Ct. 5 L.Ed.2d 464 It ed” Inc. v. 477 F.2d 1182 beyond dispute (D.C. 1973), also grounds First Amend rev’d on sub Cir. other rights ment freedoms are fundamental v. nom. Alexander “Americans United” See, society. e.g., Borough Inc., 2053, our v. Schad 416 U.S. 94 40 L.Ed.2d Ephraim, 61, 67, Mount 452 101 (1974), S.Ct. 518 this court followed Cammarano 2176, 2182, (1981); 671 68 L.Ed.2d Central dismissing appellants’ claim that Sec Hudson Corp. 501(c)(3)’s Gas & Electric Public v. Ser restriction violated Comm’n, 557, 565, vice 447 U.S. 100 S.Ct. the First Amendment on face.18 its challenged opinion: Because the 16. classification is cre- the theme later in the “It cannot statutes, equal protection ated federal government may prohibit that because guarantees Fifth rather Amendment than contraceptives prevent parents use of ... or apply. e.g., the Fourteenth Amendment sending ., private their child to a school . . Valeo, Buckley 670, 1, 93, v. 424 U.S. 96 S.Ct. government, therefore, con- has an affirmative (1976); Weinberger 46 L.Ed.2d 659 v. obligation persons stitutional ensure all Wiesenfeld, 1225, n.2, 420 U.S. 95 S.Ct. have the financial resources obtain contra- n.2, (1975); L.Ed.2d Johnson ceptives private or send their children to Robison, n.4, 94 S.Ct. schools.” Id. 448 U.S. at 100 S.Ct. at 2689. n.4, (1974); Bolling Sharpe, 497, 499, 74 S.Ct. reversing, Supreme simply Court held L.Ed. 884 request injunctive that Americans United’s requiring tax-exempt relief of its reinstatement 17. This statement was made in the context of Anti-Injunction status was barred Act’s argu- the first of several constitutional prohibition against rejected McRae, purpose suits “for congressional ments restraining availability restriction assessment or collection of certain medical- ly necessary (quoting tax.” 416 at abortions under U.S. at Medicaid im- pinged liberty 7421(a)). protected by on the I.R.C. did discuss interests Court case, recognized appellants’ Due Process clause the ing merits not- Roe v. than Wade, consequences present 93 S.Ct. “[t]he L.Ed.2d (1973), progeny. regime See 448 U.S. at for § can be n.14, Court elaborated harsh indeed.. . Id. at 763

725 501(c)(3), provided efits” of Section makes a valiant at it did Taxation holdings claiming tempt a lobbying. avoid these not exceed “substantial” level of 501(c)(3) expressly restriction of Section Because Section condi- 501(c)(3) receipt charity’s constitutes “unconstitutional tions of these benefits on a greater First a willingness condition” on the exercise of its to refrain from level contends, rights. Perry expression, Amendment v. Sinder Taxation an uncon- mann, 593, 597, 2694, 2697, placed 408 92 condition U.S. S.Ct. stitutional has been on the (1972), Supreme furnishing 33 Court L.Ed.2d 570 these tax benefits. “The explained though person obligation a has Government has no that “even whatever to charities, grant ‘right’ advantages tax but governmental no bene if it a valuable so, do though government may receipt fit and even decides to cannot condition advantages on a surrender of First deny him the number of benefit rights.” reasons,” Appellant Amendment Brief for government “may deny a (Taxation Brief) person infringes benefit on a basis that protected his constitutionally interests —es argument strength, has This some but we pecially, speech.” his in freedom of interest reject premise. It is true that under Accord, 618, 626, Paty, v. McDaniel 435 U.S. conditions, granted certain the indirect aid 1327, 1322, (1978); 98 55 L.Ed.2d S.Ct. 593 through exemptions tax and deductions is Educ., 563, Pickering v. 391 Board U.S. equivalent of a functional direct 568, 1731, 1734, 88 S.Ct. 20 L.Ed.2d 811 government payment.19 See Committee for (1968); Tucker, 479, v. Shelton 364 U.S. Religious Liberty Public Education and v. 485-86, 247, 250-51, 81 S.Ct. 5 L.Ed.2d 231 790-91, 756, 2955, Nyquist, 413 93 (1960); Tygrett Barry, v. 627 1279 F.2d (1973) (declaring (D.C. Randall, 1980). Speiser Cir. Cf. v. 357 system tax benefit invalid under Estab- 513, 1332, 518, 1338, 78 S.Ct. 2 L.Ed.2d Clause); Connally, lishment Green v. 330 (1958) (“conditions imposed 1460 upon the 1150, (D.D.C.), F.Supp. 1156-57 aff’d mem. granting privileges gratuities or must be Green, 997, sub v. nom. Coit 404 U.S. ”). Supreme ‘reasonable’ deci Court’s (§ (1971) L.Ed.2d 550 prohibited sions “have conditions on racially not be used to benefit discrimi- dampen benefits . . . which the exercise natory private schools). deny “To an ex- generally rights, of First Amendment how engage emption to claimants who in certain ever slight the inducement to the individual speech penalize forms is in them effect to Burns, rights.” forsake those Elrod speech. for such Its deterrent effect is the n.11, 427 U.S. same as if the State were to fine them for n.11, (1976) opin Randall, (plurality Speiser speech.” this 357 U.S. ion). enjoy “public argu- Taxation could ben- 78 S.Ct. at 1338. Taxation’s 2059 n.14. See id at S.Ct. at violate the Establishment of the First Clause (Blackmun, J., dissenting) (implying opinion Amendment, being “genuine no there no nexus underlying controversy, agree- on merits of exemption between tax and establishment of appeals presented Shultz, with court of that case religion.” In Marker v. F.2d 1003 question). substantial constitutional (D.C.Cir.1973), exemp- this court held that tax tions for unions under did McDaniel, e.g., Surrey & Ex- The Tax prohibited constitute state involvement penditure Concept Budget and the Act Reform support political for union “A activities. tax 17 B.C.Indust. & Comm.L.Rev. 679 exemption is consistent with a ‘benevolent neu- (1979); Dodyk, cf. The Tax Act of 1969 Reform trality’ noninvolvement with Poor, and the 71 Colum.L.Rev. 758 exempted organization.” Id. at 1006. See government accepts analogy between tax Irvis, Lodge Moose No. 107 v. exemptions governmental and direct subsidies 92 S.Ct. L.Ed.2d case, purposes cautioning for they while (state provision necessary services such as Supp. have different characteristics. IRS police protection, everyone given and fire See, e.g., Brief at 11 n.12. Walz Com- v. Tax approval, without connotation of does not con- mission, L.Ed.2d fostering encouragement of racial stitute crimination). dis- (1970), property 697 exemption which held that a religious does not then, outset, As we observed at the Taxa- be troublesome if it would therefore

ment *11 compelling solely claim on tion has no based government condi- the case that the were reject We “the the Amendment.22 First provision of tax on a its benefits tioned rights notion that First Amendment are of First organization’s waiver fully they not are somehow realized unless rights.20 Amendment Cammarano v. subsidized the State.” however, mechanistic, sug- to overly It is States, 515, United 79 S.Ct. at 501(cX3) lobbying re- gest the Section J., (Douglas, concurring). also re- We on the re- actually striction a condition ject Taxation’s condition” “unconstitutional group A ceipt of tax benefits charities. argument, because charitable governed by itself are than easily such as Taxation can structure no conditions other in Cammarano. Taxation has upheld those lines, along dual both Sections 501(c)(3)’s lobbying not shown that Section Code, 501(c)(3) 501(c)(4) using abridges First restriction Amendment organization only latter the rights. 501(c)(4) Because Section or- purposes.21 ganizations losing may lobby freely without Equal Implications Protection B. they qualify, for which the tax benefits Our of Taxation’s First discussion use of both a charitable subsections accords ap- claims not Amendment does resolve than organization full tax benefits review, propriate standard this is because ability lobby con- tax-deductible government not a in situation is entirely tributions —and this distinction to subsidize all impartially refuses permissible under Cammarano. Charitable Although activities. need simply required are not not subsidize the exercise of First Amend- rights waive their First Amendment in or- rights, ap- ment remains they simply der obtain propriate govern- benefits — standard of review when may lobby with tax-deductible contribu- ment subsidizes exercise First tions —and Taxation’s “unconstitutional rights discriminatory fash- Amendment in a argument condition” must therefore fail. ion.23 case,

20. If this were the we be forced to it for lob- would non-deductible contributions made to bying purposes. decide whether the restrictions on charities 501(c)(3) that received benefits under Section necessary important were both that attained. challenge proscription assure 22. Taxation does not objects program against vagueness, benefit were lobbying” grounds “substantial on Valeo, Buckley e.g., v. however, question is and that 1, n.65, n.65, 96 S.Ct. 46 L.Ed.2d Borod, opinion. Lobby considered this See (1976) (Congress, may condition candi- Interest, for the Public 42 N.Y.U.L.Rev. receipt agreement financing dates’ of federal on' (1967); Clark, supra 1106-10 note abide campaign limitations on overall 451-54; Troyer, Charities, Law-Making, and expenditures); CivilService Comm’n Nation- Validity the Constitution: The of Restrictions Carriers, al Ass'n of Letter Inñuencing Legislation, on N.Y.U.Inst. (1973) (upholding Fed.Tax. 1456-62 political activity restriction of federal em- ployees). strong argument Taxation makes a may misleading 23. It to treat First Amend- activities are not inconsistent equal protection questions though ment and see, purposes, e.g., with charitable 2 Restate- entirely separate, were In cases however. (Second) (1959); ment Scott, of Trusts § 374 IV R. W. this, interplay such as there is a distinct be- (3d 1967), The Law of Trusts ed. § 374 principles. tween these two constitutional disposition our but First Taxation’s Amend- Emerson, The the First Affirmative Side of unnecessary ment claim makes it to consider Amendment, Ga.L.Rev. argument. (1981) (discussing equal protection “an element guarantee” in the first in the con- amendment above, supra, 21. As noted see note 1 governmental speech). text of subsidies for originally in fact tional structure. followed this dual peculiar identity equal protection “The Although a Section analyses first amendment access organization differential converting be barred from logically explicit cases follows consti- from organization, a Section see note 13 designation speech supra, tutional nothing as fundamental keeps such an forming and from the fact the first using amendment’s a new arm at time opinion Randall, 518, Harlan’s for the Speiser Court Cammara- (1958), carefully distinguished L.Ed.2d no the earlier deci- discriminatory Supreme Court held that sion: exemptions engaging tax denial of Speiser has relevance to the cases be- no infringe First speech impermissibly can being fore us. are not Petitioners denied Speiser rights. Amendment concerned they engage tax deduction because property California statute that conditioned activities, protected constitutionally taking exemptions loyalty of a simply being required pay for those though oath. The Court held even entirely pock- out their own activities *12 merely discriminatory statute involved the ets, everyone engaging else in similar as direct exemptions, denial of tax and not the required pro- is to under the activities do suppression scru- speech, of a strict level of of the visions Internal Revenue Code. tiny appropriate. was “When we deal Nondiscriminatory of denial deduction complex the of strands in the web of free- gross from expended income to sums opera- up speech, doms which make free the promote or legislation plainly defeat “ the tion and effect of method suppression danger- the ‘aimed at of ” sought be be speech restrained must U.S., S.Ct., ous 519 ideas.’ 357 at at [78 subjected analysis judg- to close and critical Rather, appears express it us to 1338]. light particular in the ment of circum- by Congress a determination that since 520, is applied.” stances to which it Id. at purchased publicity can influence fate conducting 78 S.Ct. at 1338. After this affect, directly legislation of which will or analysis, close concluded Cal- Court indirectly, community, everyone all in “clearly compelling ifornia has no such in- community in should stand opera- justify terest at stake” as would looting regards purchase same as so 529, of tion the statute. Id. at 78 at S.Ct. the Treasury far as of the United States 1343.24 is concerned. Speiser

Although year 513, was decided a ear- (emphasis at 79 at U.S. Cammarano, than nothing added). lier in emphasis the later The Court’s on “nondis- repudiates Indeed, ruling. case this criminatory” clearly Justice of denial benefits dis- proscription against censorship simply XX, 19, is itself forcé Article of the California Consti- specialized equal protection guarantee.” tution, a Per- exemptions which denied tax ry Hohlt, Local Educators’ Ass’n v. F.2d “person which advocates 1286, (7th 1981). Karst, Equality Cir. overthrow of the Government the United Amendment, Principle as a Central in the First violence,” States or the State force or see Supreme 43 U.Chi.L.Rev. 20 The Court 516, at 357 U.S. 78 S.Ct. at 1336. The Court recognized interplay many has this times. explicitly refused to reach the e.g., Brown, Carey 455, 460-61, v. 447 U.S. may deny exemptions whether “California tax 466-71, 2286, 2293-96, 100 S.Ct. persons engage proscribed who in thé (1980); Tinker v. Des Moines Inde- speech they might impris- for which be fined or pendent District, Community School 520, Instead, oned.” Id. at 78 S.Ct. at 1338. 503, 510-11, 733, 738-39, 89 S.Ct. 21 L.Ed.2d applied scrutiny “proce- the Court strict (1969) (although classrooms are not safeguards” proof’ dural estab- “burden forums, prohibiting wearing rule students from statute, lished id. at 78 S.Ct. at protest armbands of the Vietnam War struck 1339, and found that “this allocation part prohibit down in because did school proof, concerning burden of on an issue free- wearing symbols political signifi- of other speech, requirements dom of falls short of the cance). process.” of due Id. at at 1340. Although suggested Speiser it could be Although may underlying be correct that an striking should be understood down stat- hostility actually to the California sedition law “frankly suppression ute aimed at the dan- explains Speiser, Nelson, Pennsylvania see gerous ideas,” at (1956), 76 S.Ct. L.Ed. 640 here, inapposite interpreta- and therefore the Court itself was to decide the case careful approach tion conflicts with the taken light scrutiny of the strict must Speiser Court. was decided in soon after applied discriminatory tax treatment States, the decision in Dennis v. United implicates any rights. First Amendment 95 L.Ed. 1137 attempt The California statute was an to en- where distinctions are this case. noncontent-based tinguishes from Cammarano Speiser therefore con- Cammarano affecting statute First drawn a strict standard requiring sistent rights, Supreme Court Amendment govern- in which the review situations interest has held that First grants exemptions affecting ment served must “substantial” rights discriminatory ba- Amendment on a statutory “narrowly classification tai- sis. lored” to serve that interest if the statute previous explicitly This court’s decisions equal scrutiny. protection is withstand adopt relationship reading be- 1122; id. at 1111. Id. see Speiser and In “Amer- tween Cammarano. arguably case us before differs Walters, icans United” Inc. F.2d Community Speiser and even appellants’ held claim Sec- Service we that the 501(c)(3)’slobbying gov- un- unequal restriction was sense that it involves levels of discriminatory raised sub- constitutionally subsidy of ernmental First Amendment question: stantial constitutional rights, govern- rather than a more intrusive Cammarano, disposing appel- while rights. mental restriction those *13 rights that lants’ claim first amendment question apparently open remains whether statute, questioned violated may adopt courts a different level of scruti- attempt possible not to with does deal sort, in ny cases of this one that is some- discriminatory . . . conduct. Americans searching ap- the scrutiny what less than United, hand, alleges just on the other government plied directly when the bans discriminatory lacking that conduct found expression. Perry First Amendment See in Cammarano.... Hohlt, Local Educators’ Ass'n v. 652 F.2d If discrimination here it exists relates 1286, (7th 1981) (suggesting 1296-97 Cir. of exercise the most fundamental sliding “may vary existence of scale that rights, protected by of those first particular right question”). It with in . amendment. . . This is neither a frivo- whether, not to view necessary decide in which, challenge lous nor one as of the nature of inhibition Taxation’s writing opinion, of this has been foreclos- rights, appropriate First Amendment Supreme ed Court. stringent is the level review most courts at Big Rag, Id. 1182-83.25 See Mama Inc. employ. certainly inadequate simply It is States, 1030, v. United 631 & F.2d 1034 n.7 to ask at in whether classifications issue (D.C. States, 1980); Cir. Haswell v. United relationship this case to “bear some rational 1133, (Ct.C1.1974), 500 F.2d 1147-48 cert. legitimate v. state end.” McDonald denied, 779, 1107, 95 42 S.Ct. Commissioners, Board Election U.S. 394 (1975). Similarly, in Communi 802, 809, 1408, 1404, 89 22 739 S.Ct. L.Ed.2d ty-Service Mid-America, Broadcasting of (1969). Plainly, this case not like Cam- FCC, (D.C. v. 1978) Inc. 593 F.2d 1102 Cir. marano, in which the indirect burdens on (en banc), court require invalidated a expression fell on equally First Amendment ment that noncommercial sta educational Only heightened tions record copies scrutiny fully and maintain all. test of broad public casts on importance issues because with In- accords decisions in other cases.26 system alreadybeing noted, however, appellant mail used It board’sinternal should be union, dropped another are instructive: “Americans United" First appeal. Amendment claims on at 477 F.2d Despite sweeping language De of [Police (“at argument Reply 1181 oral in its Brief it partment Mosley 92, U.S. ] [408 focus, wisely has narrowed its we 2286, believe above, quoted 33 L.Ed.2d 212] so, ‘discriminatory’ aspects Supreme it is Court cases demonstrate that 501(c)(3)”). may invariably government true that the constitutionally among never discriminate protected speech Judge Perry Wisdom’s comments Hohlt, Local on the basis its content (7th speaker, Educators’ Ass’n v. or on 652 F.2d 1286 the basis of the nor even 1981), analogous Cir. always which concerned an all such scru discrimination must equal-access equal claim a union use a school tinized with a ma- strictness. Because

729 deed, previous gu- number of cast guided by ballots in the analysis our must be Buck election). Valeo, 96 46 These “direct bur- ley v. S.Ct. bernatorial U.S. (1976), Supreme much more than in which the dens” were restrictive dis- L.Ed.2d financing funding criminatory presidential challenges heard candi- Court dates, said, thereby campaigns implying provisions presidential Court appropri- greater support “exacting scrutiny” less than was provided far financial determining significant highly major-party candidates. ate. Id. But it is appropriate analyze review the Court went on discrimi- the standard of Amendment, heightened natory funding provisions the Fifth Court started event, Congress holding scrutiny that direct “re terms. “In precedents process strictions on access to the electoral enacted H furtherance of suffi- Subtitle interests,” exacting scrutiny.” ciently must Id. at important governmental survive Panish, id., e.g., at 670. Lubin v. at S.Ct. U.S. S.Ct. because 1315, 1321, 39 “public financing of eliminating as means may (indigent improper large private L.Ed.2d candidates influence con- required pay filing govern- not be a significant fees absent tributions furthers access); alternative means of ballot Wil mental interest.” Id. at Rhodes, added). liams (emphasis standard of review (1968) (appearance of mi we select in this case must no lower than parties nor on applied Buckley, though ballot be conditioned even nei- on petitions whether can obtain voter ther situation involves a burden” “direct signatures percent totaling expression.27 of the First Amendment Cf. Citi- us, jority agree case now before even Court were unable ac- *14 any cases, one in knowledges process rationale some of these it is as a democratic “[t]he always easy appropriate not to jeopardized determine the government whole is where the interpreting of standard review. Even any provides support undue to one way in cases most favorable to the de- faction, including organi- the class of charitable fendants, however, they require rigorous zations.” IRS at Brief 29. scrutiny applied [Sjpeech to be here.... keyed identity restrictions speaker to the directly of Buckley analogous is 27. to this case always strictly: scrutinized approved greater public because had invariably almost spect are not neutral with re- funding of First Amendment activities for some viewpoints they tend to disfavor. opposed Buckley candidates as to others. is Fund, Id. at 1294-95. National Black United however, distinguishable, also in the sense that Devine, (D.C.Cir., 1981), Inc. v. 667 173 F.2d it involved less restrictive discriminations than rejected a claim that refusal to allow at those issue here. The Court noted that cor- participation in the Combined Federal Cam- major-party relative on restrictions candidates paign ap- nonqualifying charity abridged a helped given financing of offset lack full to pellant’s rights, First Amendment is not to the parties: any major-party minor since can- “But contrary. opinion The observed that the mere accepting public financing campaign didate of a “possibility” that the of voices some charities voluntarily spending ceiling, a assents to other might amplified expense at the of others did spend will to in candidates be able more rela- “compel scrutiny every strict of Commis- major-party tion to the candidates.” 424 U.S. decision,” 179, regulations sion at because the 99, offsetting at advantages 96 S.Ct. at 673. No at issue were “intended to serve interests unre- groups in Section 501 for charitable suppression speech” lated to the of and were suggested have been here. The Court also ob- subject thus to evaluation under a different Buckley in “risk harm served minority to By contrast, standard. Id. at 179. the Section speculative” interests is because the 501(c) lobbying clearly restriction was intended force, 101, yet go statute had into id. at regulate speech. substantially “A rule that 674, at S.Ct. and cautioned “we of course impairs ability convey of certain concluding possibility do not out rule in message audience, ato desired on the case, upon appropriate some future an factual hand, effectively ‘abridges speech’ if even demonstration, financing sys- public public it is not intended to curtail debate.... invidiously against nonmajor tem discriminates Government must bear a far heavier burden n.131, parties.” Id. 424 at 97 96 S.Ct. at U.S.

justification for such a rule. Its content-neu- contrast, Again, 672 n.131. 501(c)(3) in ‘compelling’ tral interests must be and it must lobbying by restriction demonstrate the absence ‘less drastic since has been effect achieving purpose.” for means’ Id. In the given by ment of activities Rent Control/Coalition Against zens - -, Berkeley, tax-exempt groups. It Housing 501(c) v. to different Fair 436, -, 434, L.Ed.2d 492 taxation, more may S.Ct. “in even be true that (1981) of First Amendment (“regulation fields, legislatures possess the than in other exacting judicial subject rights always is classification,” greatest freedom in Madden review.”). 83, 88, 406, Kentucky, v. 60 S.Ct. 309 U.S. 408, (1940), power is 84 L.Ed. 590 but short, apply heightened we must Supreme discriminatory not unlimited.28 As Court scrutiny treat- level of judgment). applying government argues Court, The an Supreme that no 28, Supreme stringent but not its most standard Court cases have held that classifications elevated ever gender-based classifi review, measured has found certain federal tax statutes are to be Act unconstitu standard, more IRS cations the Social Supp. Security than a rational basis Weinberger v. 420 U.S. Wiesenfeld, knows no tional. See 30, Supreme Brief at and that (1975); holding inval- 43 L.Ed.2d 514 Cali Court cases a federal tax statute 95 S.Ct. generally grounds, Goldfarb, id at 31. See fano v. Van id. supra. equal protection Right-Privilege Dis San v. Rodri- The Demise of the Alstyne, Antonio School Dist. Independent guez, 411 81 Harv.L.Rev. 1278, 1301, Law, tinction Constitutional (1968) (“A (quoting Ken- minimum demand L.Ed.2d Madden v. management tucky); rules in the Lenhausen v. Auto Parts reasonable uniformly Lake Shore largesse Co., 410 U.S. 356, 360, 1001, 1004, surely unexceptional 93 S.Ct. (1973) (tax government”). of constitutional requirement statute must “palpa- suggests that Moritz or “invidious” to violate bly arbitrary” equal light guarantees). of Kahn do not case “of protection questionable vitality” These cases involve v. 94 S.Ct. claims, however, Shevin, 351, 355, First Amendment 416 U.S. (1974), the Su- which must be in which measured under a more search- Randall, standard. 357 U.S. at Court held that Florida could preme provide Speiser 518, 78 S.Ct. at widows but not for property exemption violating widowers without equal protection overturned, Federal tax statutes have been guarantees. IRS Brief at 31 n.25. The Supp. well as Court Supreme however — lower distinguishable, however, two cases are clearly E.g., federal courts. Life Ins. National and even in after Kahn the statute was upheld Co. v. United States, 508, 520, 48 S.Ct. showing a level of review the differential (1928) (“The suggestion 591, 593, 72 L.Ed. 968 treatment had “a fair and substantial relation grant that as deduc may object legislation.” Id. at gross tions income it can pleasure, (quoting Reed, Reed give to one and deny another is specious, (1971)) unsound”); (Bran 254, 30 L.Ed.2d id. at at 598 ago, It is true that almost (“The three decades dissenting) déis, J., has, course, Court *15 upholding court a rational applied basis test to declare that power of taxation system of the Activities Control unconstitutional”); provisions Subversive established Act that denied tax or (10th deductibility exemptions Moritz v. F.2d 466 Commissioner, 469 communist-action or- 1972), contributions to Cir. 906, cert. 412 U.S. 93 S.Ct. denied, ganization, regardless of its status under I.R.C. (1973) (dependent 2291, 36 L.Ed.2d 971 care 170 and §§ deduction dis provision Code impermissibly with reference to tax The sanctions tinguished exemp- between unmarried male and un are in Section 11 deductions, tions and taxpayers); married female cf. Golden Rule Act, of the forbid income tax deductions (“Al Church Ass’n, 41 719, T.C. 729 registered though contributions to a legisla tax benefits matters may grace income tax to such deny exemptions tive . . . nevertheless, a denial of such organizations. granted These and denials benefits allowances others of essentially congressional grace fall within so same class the field of well rise an to the level of long discrimination”). as a This is reasonable basis appears. unconstitutional Moreover, state We tax too well established citation. classifications have been struck down require think valid. these incompatibility provisions clearly equal protection princi E.g., Iowa-Des Bank States v. Sub ples. Moines National v. Communist the United Party Bennett, 531, 284 U.S. 223 F.2d 133, Board, 52 S.Ct. 76 L.Ed. versive Activities Control (1931); Legatos, (D.C.Cir.1954), grounds, 265 cf. In re 351 Estate of Cal. rev’d on other (1969) (equal U.S. 76 S.Ct. 100 L.Ed. 1003 App.3d Cal.Rptr. pro classifications). tection But in view of authority this case is of doubtful proscribes arbitrary v. four addition, Social which was decided Speiser Randall, despite popular conceptions, Seasongood v. Commis is more akin to a tax than an insur later. Security years Compare 1955) (6th (con ance sioner, See 227 F.2d Cir. payment. Goldfarb, Califano v. coloring struing “propaganda” U.S. to reach 1021, 1032-33, 97 S.Ct. (1977) (Stevens, concurring motive, L.Ed.2d ulterior J., distortion of facts with an Dep’t Mosley, held in Police another. If 2286, 2292, 33 L.Ed.2d 212 501(c)(3) organizations lobby Section en- (1972), profound there is a constitutional matters, tirely distinct has en- regulating picketing distinction between all greater sured that attention will devoted picket- doing selectively. so “Because to some causes than others. Either out- ing plainly expressive involves conduct come is unconstitutional unless evalua- protection within the of the First Amend- tion of the differential treatment in terms ment, pickets . among . . discriminations heightened of the scrutiny appro- level of gov- must be tailored serve a substantial priate here demonstrates that there is an Brown, Carey ernmental interest.” important governmental justifying interest 455, 471, 2286, 2296, 65 the First preference. Amendment We turn (1980) (reaffirming Mosley); to that now. LaRue, 109, 138, California v. (1972) (Mar- A. State Interests Furthered the Clas- shall, J., dissenting). The in this issue case sification therefore becomes whether the discrimina- Before the court can determine whether a tory 501(e) framework of Section serves governmental substantial supports interest governmental substantial interest review, differential classification under narrowly whether the statute is tailored to it must first determine what interests are serve that end. justify said to the classifications. Once identified, these interests it can then be III. CONSTITUTIONALITY OF DIF- asked whether are substantial. The FERENTIAL TAX TREATMENT pertinent classifications made in the Code OF LOBBYING are as follows. When Cammarano v. United States was decided its foundation was the con- lobbying 1. Business gressional “neutrality” toward rehearing, dropped existed at the time of the On has decision. Taxation equal protection See 358 challenge 533.29 right S.Ct. at Since time, Congress departed businesses to expenses, has substan- deduct tially from policy Supp. n.3, Brief at 18 and it has explain should not any lobbying. necessary subsidize not hitherto been Taxa- these Nevertheless, provisions claims that refusal subsidize Code. lobbying by 501(c)(3) organizations tax treatment of business is wor- thy the same lobbying by extent some attention because the reasons 501(c) organizations behind that exemplify subsidized treatment the sorts governmental equal protection. constitutes a violation interests that we seek to identify in this opinion. section of the facts, On these agree. we In the starkest terms, Congress Code, has perhaps 162(e) used permits I.R.C. the deduction of *16 inadvertently, things. do one two “ordinary necessary If all and expenses” in- organizations organizations veterans’ and business, curred carrying any in trade or such lobby as Taxation on different sides of including lobbying costs incurred “direct questions, Congress the same chosen has “legislation proposed connection” with lobbyist favor one on particular a legislation issue over taxpay- direct interest holding existing League prohibition against that a Good Government was uniform subven- disqualified receiving Garrett, deductible con- tion.” Federal Tax Limitations on Po- tributions because a different construction litical Activities of Public Interest and Educa- might Amendment). violate First Organizations, tional 59 Geo.L.J. 583 & (1971) (citing Respondents n.38 Brief for Indeed, argued the IRS in Cammarano States, Cammarano v. United against a business deduction for ex- (1959)). penses ground upset on the that it “would equilibrium which existed due to the then gov- identifying have little relevance in significant is a be- There difference er.”30 profitmaking nonprofitmaking tween and interest furthered a differen- ernmental entities, probable it seems that each and statutory tial classification. ence; business

legislative tion to the attention of legislation eral tion of U.S.Code ness’ tions: 2d net more accurate measurement of a business’ deduction of and the type lobbies with different behind the distinction. But the Haswell v. United The Senate Sess. expenses income. policy is a Report viewpoint itself executive people fact that a difference exists 22-23 cost of Cong. branch; considerations, anomaly to a business’ continued mentions three demonstrate the state interest incurred lobbying expenses permits a Sen.Rep.No.1881, Report explaining the addi- 162(e) desirability (1962), reprinted to administrative & Ad.News branch but doing States, 500 F.2d at 1150. bring in 1962 mentions sev- allowing importance presenting business, relevant informa- however. Congress. motives. excluding encouraging 87th 3304, 3325. deductions explana- agencies and the of some Lobby- a Cong., ^[1962] exist- busi- does Id. furthered our effort risks groups, forces. to allow veterans’ tions is ble fits without risk of vice more legislative activity by veterans’ pursuits,” assist by legislatures, it is reasonable for ans’ benefits from subversion civilian their service to “compensate organizations. interests tial tax treatment stantial benefits and rewards in return The contributions.” Id. Second, identifying however, necessary life,” “Since that are said to attractive.” IRS activities to them for the tax treatment of these First, these benefits are government suggests that becoming it must in the help country. losing their tax deducti- governmental offers order to veterans deserve sub- lobbying by disruption “make preserve “readjustment justify preferen- Supp. cautioned that These benefits protect post military of civilian two state organiza- veterans’ interests provided Brief at hoc at- engage hostile veter- bene- ser- tempt inexplica- 2. Veterans’ to rationalize otherwise govern- ble distinction in the Code. It is far more difficult to identi attempt ment made no in the district court fy governmental pro interest present evidentiary affidavits or other giving moted by materials. Our identification of the rele- lobbying advantage over other Section depend vant state interests must on the 501(c) organizations. Just as there are dif legislative history of the statute —but that ferences between business and nonbusiness history sparse Despite ap- indeed.31 course, groups, groups may veterans parently unambiguous distinction drawn in distinguished 501(c) from other Section or statute, there is no indication in the ganizations. above, however, As noted legislative history of sections that these mere fact that differences exist between grant any tax-exempt intended to any two distinct entities does not demon organization lobbying advantage over strate a substantial state interest that can fact, justify legislative history discrimination in the exercise others. In the scant of con rights. stitutional Descriptive suggests terms alone contrary, that exists is to the supra. 162(e) underlying per- 30. See note 9 ment is unclear as to the rationale also scope prohibition”); Troyer, supra mits businesses deduct indirect ex- penditures paid that are as dues to an (legislative history note of the 1934 member, taxpayer tion of which the is a Note, sparse unclear”); amendment “is Regulating as a trade association. Activity *17 the Political of Founda- tions, (1970) (“nei- 83 Harv.L.Rev. See, e.g., Support Memorandum of Cross- proscription ther the extent of the nor its ra- Summary Judgment, Motion Defendants for clearly ever enunciated tionale has Congress”). been n October history (legislative at 5 “surprisingly Garrett, sparse”); supra note (“The statutory history at 564 of this amend- 214(a)(10), Congress Section meant treat Revenue Act ch. 501(c) organizations time, equally. however, of all By 43 Stat. 253. § considerably the statute had become more charitable, exemptions religious, Tax for detailed, Congress created a new sub- the cor- educational —and section groups. for veterans’ Contribu- provisions permitting taxpayers relative gifts given tions or were if deductible groups— deduct contributions to such (A) States, are much older than similar treatment of State, The any United Terri- organizations. veterans’ Not until after tory, any political thereof, or subdivision World War explicitly One did ex- Columbia, or the District of for exclusive- tend these benefits to named veterans’ ly public purposes; (B) any corporation, group. 214(a) Section of the Revenue Act chest, fund, community foundation, or or ch. 42 Stat. accorded ex- organized operated exclusively for empt posts status to of the American Le- charitable, scientific, religious, literary, or gion, greatly suggestive and it is that Con- purposes, educational or preven- for the gress in 1921 Legion viewed American animals, cruelty tion of to children or no differently any no than other charitable part earnings of the net of which inures group. Lodge, proposed Senator who private of any to the benefit shareholder Senate, extension considered one individual; (C) special or fund for “to possible which I think there can no vocational rehabilitation authorized objection,” (1921), Cong.Rec. 7 of section the Vocational Rehabilitation the lack debate bears him out. As enact- Act; (D) posts or of war ed, predecessor section to I.R.C. veterans, or auxiliary units or societies of simply Legion added American to other any posts organizations, or if such organizations, by allowing deductions for units, posts, organizations, or societies are gifts or Contributions made within the organized in the any United States or year (A) taxable to or for the use of: possessions, part and if no of their net States, State, Territory, United or earnings any pri- inures to the benefit of any political thereof, subdivision or the individual; (E) vate shareholder or or Columbia, District of exclusively pub- order, association, society, fraternal or op- purposes; (B) lic any corporation, or com- lodge erating system, under the fund, foundation, chest, or munity organ- gifts if such or contributions are to be ized operated exclusively for reli- exclusively religious, charitable, used gious, charitable, scientific, literary, or scientific, literary, pur- or educational purposes, educational including posts poses, prevention cruelty or for the Legion American or the women’s children or animals. auxiliary thereof, preven- units or for the 214(a)(10), Again, 43 Stat. 271. cruelty animals, or children no however, legislative history creates no part earnings of the net of which Inures Congress sought inference that to treat any private the benefit of stockholder groups differently these than or- individual; or (C) special fund for ganizations. change approved was vocational rehabilitation authorized without comment on the floor in either section of the Vocational Rehabilitation house, Cong.Rec. 2860, (1924), see Act. and received almost no mention in the re- 214(a)(ll), (emphasis 42 Stat. 241 ports accompanying the revenue act. See added). beginning, then, 398,. S.Rep.No. Cong., 68th 1st Sess. only expected that veterans’ (1924); H.R.Rep.No. Cong., 68th 1st tions groups and charitable would be treat- It is noteworthy Sess. also equally, ed but it included both in Congress enacted the same con- restrictions the same subsection of the tax laws. cerning earnings that inured to benefit

Congress extended this tax private types treatment to of individuals for both or- generally ganizations. in 1924. *18 organizations concerned, limitation on charitable or- are if lobbying ganizations was not enacted until all excluded from immunity and all it is true only inserted it my judgment treated alike. It is that we dealing the subsection of the statute get away never shall from mistakes of organizations. 23(o)(2), charitable administration and from decisions which Revenue Act of 48 Stat. 690. This may seem like favoritism until all contri- may simply drafting oversight, have been a organizations butions to of this kind are Indeed, Harrison, however. Senator subject made to the income tax. committee, reporting sug- chairman of the (Senator Reed) Id. at 5959. See id. at 5861 gested that carefully more drafted (stating disagreement” “no with Senator apply amendment would to “war remarks). Harrison’s The amendment was tions” as well: eventually agreed to with the under- amendment, considering In as I standing undergo redrafting it would recall, the sentiment of the committee by the conference Cong. committee. provision was that apply should (Senator Couzens) (amendment Rec. 5959 any organization receiving that is contri- conference, “go should butions, and we proceeds can of which are to be change propaganda purposes language used for if it try or to is found to do legislation. influence inequity”); (Senator Reed) (“if id. agreed I called the amendment shall experts attention of the to we will have the fact that it proviso seemed to me the from now until the study conference to at the end of the paragraph second subject prepare better phraseology”). [the lobbying provision] apply should to all explanation There is no legislative in the paragraphs. course, four Of that would history language for the fact that the of the affect organizations, some war per- enacted version was identical to that of the sonally I see no difference between one proposed.32 amendment as might be on one side of Congress has not indicated since 1934 getting fence propa- contributions to specifically impose wishes to gandize legislation and influence and be- lobbying restriction less uniformly, than ing permitted proceed without inter- other than enacting a Code that articu- ference, while at the prevent- same time lobbying lates provisions limitations some might one that have a different view- and not others. No stated intent to dis- point receiving making use of among criminate activities of contributions purpose. for the same tax-exempt various organizations is shown Cong.Rec. (emphasis added). 501(c)(19), the 1972 addition of Section LaFollette, Senator another member of the which created a new subsection for veter- Committee, agreed Senate Finance organizations ans’ in Section 501 to corre- desirability uniformity: spond with separate veterans’ subsec- I recognize . .. there are certain tion in legislative history Section 170. The types to which suggests that this addition was tech- and the executive branch of the Govern- nical, nonsubstantive designed amendment might ment desire to encourage contribu- to correct the tax treatment of in- tions. ... certain my opinion, it will not make penny’s difference, worth of come inadvert- so far as the contributions to ently these various changed by the Tax Reform Act of legislative provides sup- purposes. scheme further tax See Revenue Act of Pub.L. port reading scope 101(6), 23(o)(2), for this broad of the of the No. §§ 700, 690, 755, (current restriction. When the limitation Stat. version at enacted, por- was 501(c)(3), 170(c)(2)(D), 2055(a)(2), it was added to all relevant §§ I.R.C. tions of exemption establishing 2522(a)(2)). the Code—the section There was no intent —and no con- apply and the ceivable reason —to restric- provisions permitting some, all, three primary deduction of chari- tion to but not income, estate, gift table exempt organizations. contributions for benefits accorded *19 emphasizes, Congress, There is no indication Con- 1969.33 gress organiza- meant veterans’ impinge benefit impermissibly when it does not tions vis-a-vis tions in explaining the effect does lobbying (1972), reprinted tion.” tax difficult part lack of attention & Ad. News organizations Senate preferences S.Rep.No. any respect.34 purposes intend Report resist 3141, reflect no other for for 1082, and the IRS. to come under this the conclusion that noted: 3145.35 ^[1972] lobbying by tax any expenditures 92d Most consistency the new policy, exempt organiza- U.S. Code Cong., “The committee importantly, It but 2d Sess. therefore veterans’ provision on excep- simple Cong. for ry problems to a later date.” at 42. serious problems permits Congress L.Ed.2d 285 Brief at 40 problem upon demonstrates 96 S.Ct. at fundamental abuses, ‘one (quoting Buckley (1972)). step legislate respecting 675; while at rights, “may If the compelling Katzenbach v. single Jefferson v. leaving “[T]he time.’ Valeo, legislative out the IRS 1724, ” Constitution less serious Supp. reason IRS address Hackney, the most 1731, Morgan, greatest histo- Supp. Brief for at a particularity spe- on focus with organiza- charitable Section problems lobbying cial charitable created tions dollars, might with tax-deductible this suf- searching for govern- addition justify fice to the differential treatment promoted by preferential mental interests in the indicated Code sections before us. organi- of lobbying treatment veterans’ Initially, it does seem far to discern zations, easier we govern- must also examine the governmental promoted by interests mental interests behind restrictive treat- organiza- ment restriction charitable 501(c)(3) organizations. other As than extending tions those advanced exactly posi- 33. Until were veterans’ ans’ same exempt themselves as beneficiary from taxation so- either tion as fraternal now associations cial welfare enjoy”). 501(c)(4) or as clubs social under Section 501(c)(7). 1969, organizations exempt Until government argues language 35. The this categories subject under these were not modifies received insurance income unrelated business income tax. The Tax Re- purposes activities and set aside for charitable form Act 1969 extended the unrelated busi- 512(a). Supp. under Section IRS Brief categories, ness income tax to these however. correct, great reading Even if n.33. law created therefore a new subsec- weight given should still restriction. organizations, tion for veterans’ Sec- and added new rule excluded from the busi- unrelated 512(a)(4) so that the income that a veter- receipts ness income tax used or all insurance insuring ans’ received from set for for reli- aside insurance benefits “or subject dependents members was not charitable, scientific, gious, literary, education- to the unrelated business income tax. See etc., al, purposes” that were then identified S.Rep. (1972); Cong., No. 92d 2d Sess. 170(c)(4).” purposes specified “the in sec. H.R.Rep. Cong., No. 92d 2d Sess. S.Rep.No.1082, Cong. & Admin. U.S.Code 34. The busi- 1969 extension unrelated 1972, p. purposes, News the Re- 3145. These tax, example, ness prompted by income had been for said, port unequal treat- desire “to avoid programs involving to include American- are organi- types tax-exempt ment of the various ism, youth activities, activities, community H.R.Rep. pt. 1, Cong., zations.” No. 91st programs and information and educational Cong. 1st Sess. U.S.Code Admin. & security foreign relative to af- national 1969, pp. (amending News I.R.C. purposes provision. fairs of this 511(a)(2)(A)). The 1972 revision was based “purposes specified If Id. these in sec. Cong.Rec. a similar concern. See 118 170(c)(4)” do not include when in- (1972) (Rep. Mills) (“the source, come is one hard derived from it is tions should not be taxed on this insurance lobbying simply see how can include be- exempt organizations since income permitted cause income different is derived from a to insure be- their members without source. activity”); taxed on the income from this (Rep. Matsunaga) (bill place id. “would veter- if it bution is a selfish one made to ad- groups. to veterans’ Feder- this restriction charitable, exemptions religious, personal giver al tax interests of the vance the organizations'are money. as old as .. . and educational 1894,36 there the Income Tax Act of *20 suggest Id. at 5861. These statements statutory lobby- on the were no limitations regarded to curb what it acted exempt organizations for activities of by abuses above, forty years. the next As described eligible then to use -tax-deductible contribu- Congress amended the tax laws in 1934 to lobbying partly tions for Based activities. make clear that what are now Section comments, on these the district court below 501(c)(3) organizations engage were not to “legitimate governmental articulated three lobbying in substantial activities. Unlike purposes” by lobbying served restric- legislation concerning organi- governmental tion: “assurance of neutrali- zations, lobbying restriction was enact- ty respect to the activities of explanatory ed re- after number organizations; prevention charitable Congress, marks members of and this lobbying by private abuse of charitable in- relatively easy identify makes it seem terests; preservation of a balance be- governmental promoted interests tween the activities of charitable measure. organizations and those of non-charitable discussing In the amendment on the floor organizations and individuals.” Memoran- Senate, example, Order, of the for Harri- Senator J.A. 62. dum explained: son grossly simplistic It would read too the attention of the Senate committee comments, Leg- these much into however. was called to the fact there are vacuum, passed never islation is in a certain receiving which are any genuine understanding purpose of its legisla- contributions in order to influence must take some account of what conditions carry tion and propaganda. The com- were before it was enacted. There is an thought ought mittee there early history political of restrictions on ac- that, stop amendment which would so tivity by pre- well why put that is we have this amendment 1919, statutory change. ceding 1934 in the bill. example, Treasury provided reg- Cong.Rec. Reed, 5959 Senator ulation “associations formed to dissem- who was also a member the reporting partisan propaganda inate controversial or committee, addressed meaning not educational within the trying 45,

what we Reg. were to do the statute.” Treas. art. (1919), 2831, amendment. There no reason in the in T.D. 21 Treas.Decs.Int.Rev. why world a contribution made to the principle successfully was Economy League applied National should be de- in several cases before the Board of 1920s,37 ductible as if it were a charitable contri- Appeals Tax in the and was central August 349, 36. Act of ch. 28 Stat. 509 and International Reform Bureau were formed (held unconstitutional propaganda); Pollock v. Farmers’ to disseminate controversial So- Co., 912, Loan Coxe, & Trust phia (1926) (League G. 5 B.T.A. 261 (1895)). exemption provi- L.Ed. 1108 A similar exclusively charitable). Enforce Peace not sion was included in the Income Tax Act of generally (14 Phillips, Jackson v. 96 Mass. Al- subsequent ch. 38 Stat. reve- len) (1867) (trust promote “women’s provision permitting nue acts. The correlative rights” charitable); Attorney Bowditch v. taxpayers to deduct contributions from their General, 241 Mass. N.E. income taxes was enacted in 1917. War Reve- (trust promotion temperance held chari- Act, (now nue ch. 40 Stat. I.R.C. Commissioner, table). The later case of Slee v. 170). (2d 1930), widely 42 F.2d 184 Cir. was followed. Forstall, E.g., James J. 29 B.T.A. Fales, e.g., Herbert E. 9 B.T.A. 828 (1933); Commissioner, Leubuscher v. 54 F.2d (1927) (evidence indicated that Scientific Tem- (2d 1932); Weyl Cir. v. Commission- perance Federation, Massachusetts Anti-Saloon er, (2d 1931). 48 F.2d Cir. League, Anti-Cigarette League, Massachusetts Judge opinion political all Learned Hand’s activity by Slee charitable or- Commissioner, (2d 1930): ganizations 42 F.2d 184 Cir. inherently was improper. The breadth of restriction agitation has Political as such is outside the therefore statute, primarily been attributed aim, however innocent inability “ap- to draft a more though nothing “propa- adds dub it propriate” test.39 theory support This finds polemical ganda,” a decry word used to Reed, in the debates. who Senator was also publicity side. Contro- a member of the Senate Finance Commit- versies of that sort must be conducted tee, subvention; without observed on the floor that “we Treasury found great difficulty phrasing stands aside from them. amendment. I reproach do not the draftsmen. I think Obviously, Id. because of the close *21 task; gave impossible we them an but this connection in the statute between veterans’ goes amendment much further than the organizations groups, and other charitable go.” committee intended Cong.Rec. to 78 regulations judicial pronounce- (1934). presumably applied ments to veterans’ or- ganizations too. strength views, Whatever of these they strongly suggest

These that the 1934 political activity by restrictions on amend- organizations applying ment only charitable to prior to 1934 charitable make automatically it interpret congressional presumed difficult to tions cannot to Congress intent show that behind the 1934 amendment with addressed “the phase problem total confidence. “In existing view of the which most seem[ed] subject, law legislative case on the it is acute to the not clear what mind.” Williamson proponents legislation Co., 483, sought Optical 489, of the v. Lee to Clark, accomplish.” 461, The Limitation on Po- S.Ct. If L.Ed. the 1934 litical Activities: A Discordant Note in the amendment was to intended liberalize the Charities, 439, law, Law 46 Va.L.Rev. applied only case the fact that (1960). The may addition to the statute charitable suggest would have been simply codify preexist- meant lobbying by meant to treat ing regulation organizations. of charitable stringently less activity than similar extent, great however, To a by legislative commentators groups.40 other The history hold the view that the 1934 provides enactment was positive no prop- assurance for this osition, reform course, measure intended to liberalize the utterly but it also fails case law.38 It appears that proponents demonstrate that restricted the selfishly wanted to politi- restrict motivated of charitable be- agitation, cal personal meant to secure special some problems arising cause in that donor, interests of the providing without area alone. Commissioner, e.g., Seasongood (1970) (restriction is “obscure in (6th 1955) (courts origin, F.2d application, perhaps Cir. “have also uncertain in applied principle, harmfully outmoded”). being the section liberally construed”); Clark, remedial must be 447; Borod, supra supra Garrett, Clark, note (1934 supra 564; at note at note see supra amendments “were intended to note at 447. liberalize, restrict, some extent to than rather the administration of the revenue laws re- support argument 40. Some additional for this gard organizations”); Caplin 501(h) charitable & lie in the enactment of Section Timbie, supra (“A persuasive note supra, see note 6 which liberalized “Congress can governing by case organi- made” that intended a rules proscription reading more by limited freeing than literal zations application them from the uncertain suggest”). the statute “substantiality” would The restriction of the test. See widely Note, E.g., Hearings has been Legislative Activity by excoriated. Certain Tax Lobbying Types Exempt Code’s Organizations Differential Treatment Before the Comm, 501(c)(3), Means, Under Ways Cong., 66 Va.L.Rev. House 92d Note, (1980); Activity (1972); Geske, Lobbying Political Tax 2d Sess. 1 Direct Ac- Exempt Organizations Charities, Lawyer Before and Añer tivities of Public 26 Tax Tax Reform Act of 38 Geo.Wash.L.Rev. 501(c)(3) organizations is both relevant Interests Substantiality of the State

B. narrowly tailored to serve interest in- governmental If are there it.41 disparate tax treat- terests furthered tax-exempt activities ment 162(e) has The addition of Section groups, have and other assessing strength import history legislative been identified case, however, government’s analysis in this case. The parties in this lobbying is not because it demonstrates any of these interests now becomes whether concerning inherently improper activity justify the sufficiently are substantial neutrality Congress seeks as much treatment, and if so wheth- differential 162(e) possible. unquestionably to meet narrowly er tailored the statute by Congress to de demonstrates a decision them. posture neutrality toward part from the clearly preceding discussion Camm lobbying that once was affirmed justi governmental interests that identified any sug arano.42 It therefore undercuts fy allowing the cost of businesses to deduct to influence gestion that efforts because govern lobbying. Because the business “well-recognized dangers present legislation income, taxes on net business ment assesses Government,” Haswell v. representative necessary in order to such deductions *22 States, United at such ef F.2d permit accurate measurement of cost of through never be subsidized forts should contrast, producing goods and services. The first of the three deductions.43 tax-exempt organizations compara have no governmental given by interests the district ble need for a realistic reflection of income. lobbying by court the restriction governmental distinguishing The interest preservation charitable between these two kinds of is —the one, governmental neutrality concerning substantial and the Code’s differenti lob ation between businesses bying disappears. Section —therefore 41. The same gressional fense of the uniformly reversing amendment ings Before the House ment over encing Legislation gress strictions validity. lation to a business’ existence relevant ity some of the penses” under Section 162. See note 9 supra. 170(c)(2) organizations in the ^[1962] Section leagues ity ble As It See, suppress noted subsidizing only of contributions to section offers a clear and substantial others. reports encouraging U.S.Code e.g., under Sections 162(e) information to the extent above, Neither be noted in applied position applied, policy Garrett, governmental issues constitutional reasoning Supreme accompanying 162(e) are of doubtful lobbying such contributions Cong. difficult since regarding to section on subvention, makes de- supra S.Rep.No.1881 business and raises importance to the attention to unions indicates a Public Charities: Hear- operate discriminatorily Court, supports passing, Comm, & Ad.News by particular concerns note freedoms”); are “business the enactment nor the 1962 amend- whether people the deductibil- however, of some constitutional and business changed serious justification is no are deducti- at articulated Ways at 501(c)(6). desirabil- to at 3325. of Con- the re- groups 22-23, longer Influ- bring legis- (“By con- first that ex- U.S 490, 516, 101 S.Ct. 2882, 2897, 69 L.Ed.2d lems that governmental whether tion are of use permit partures strength one of ough suggest statement): [1962] U.S.Code Means, the former of the business charitable come a [N]ow United (1981) (“exceptions legislative reports e.g., live entertainment at of Mount respect live entertainment Supreme encouraging that federal 2185 n.14 94th undermines that direct business from uniform States, justify Metromedia, deductible great organizations. accompanying Cong., purpose “neutral to process. purpose city’s Ephraim, supra) Court lobbying" significance Cong. (“The Borough’s interests policy exclusion”). 2d Sess. 68 business interest”); activity is posture has Inc. v. San has been pursuit to poses & Ad.News raise S.Rep.No.1881 Borough’s genuinely 452 U.S. at as a is not recognized (see section as lobbying general under participation opposed nonconforming inherent doubts of an asserted Cammarano neutral, upset Schad v. Bor- assessing the tax law decision Diego, 453 162(e) contention important. at that de- prohibi- in favor has be- 162(e), at but is (ABA prob- 3325. also to interest, Bellotti, 785-86, prevention

The second such 98 S.Ct. lobbying by private 1420-21, abuse of charitable in- (1978); id. see at terests, pass also fails mus- constitutional 790-91, concept 1423-24. “[T]he scrutiny ter close test. There is no government speech may restrict the lobbying evidence whatsoever that society some elements of order our by private is subject veterans less to abuse enhance the relative voice of is others whol 501(c) than interests that of Section ly foreign to the First Buck Amendment.” Thus, groups. although this interest is Valeo, ley 96 S.Ct. at valid, suggested doubtless it cannot be governmental purposes 648-649. The said 501(c) has been tailored meet it. require special lobbying restrictions on government’s We decline invitation to 501(c)(3)organizations there apply infer that because did insubstantial, illegitimate, fore either in lobbying exemption exempt to all or- promoted adequately by a statute is ganizations, problem it saw according no narrowly tailored to serve them. special tax benefits to veterans’ Moreover, the Code’s discriminato despite tions activities. The ry of lobbying treatment veterans’ or legislative provides history discussed above ganizations satisfy does not even the test of no support for such an inference. rationality, heightened much less the level require special The final interest said to scrutiny appropriate legisla here. The organi- treatment of lobbying history exemptions tive of the tax accorded “preservation of a balance be- zations — gov no absolutely veterans demonstrates tween the activities of charitable ernmental interest whatsoever organizations” groups— and those of other by allowing served to conduct also heightened fails meet the standard substantial with tax-deductible applicable absolutely here. There no evi- post sug contributions. The hoc rationales Congress sought dence that to achieve this gested by the are constitution *23 objective lobbying when it enacted re- ally illegitimate. Allowing to veterans lob in striction 1934. Even if charities before by freely protect in order to their benefit that time could with lobby deductible con- programs explain does why other tributions, there is that no indication chari- groups may equally dependent upon that powerful ties had become so that they Congress support for should have less access threatened drown out the of voices those legislature. tax-exempt Other similarly whose was subsi- universities, groups, as equally such are be Moreover, dized.44 had this been intent set hostile forces but are nevertheless of Congress, courts would consider limited in the amount purpose constitutionally illegitimate. of lobbying they may do to “[Wjhere, here, as maintain or legislature’s suppres- congressional increase speech sion of their level of fund suggests attempt an give ing. Finally, emphatically one of it public side not fol debatable does an advantage in low expressing special its views to the because veterans deserve people, the First plainly recognition Amendment benefits of of- in their service to fended.” First National Bank of Boston v. the country, they greater are entitled to J., suggested (Leventhal, (“Courts concurring) engaged Members of this court have cases, judges legislation scrutiny First Amendment should con- the careful of are not .. . governmental purposes conjecture important governmental sider the actual free to challenged legislation possi- congres behind rather than interest when one has not surfaced in hypothetical e.g., deliberations.”). ble or ones. Communi- sional farb, Cf. Califano Gold ty-Service Mid-America, Broadcasting 212-17, of Inc. v. 1029- U.S. FCC, (Robinson, J., concurring (1977) (plurality opinion) F.2d at L.Ed.2d (“courts part) rely upon legislative history challenged (examining cannot aims that apparently leg- purpose” never crossed the minds of the statute to determine “actual dis islators, particularly crimination, refusing objectives accept when confronted and possibility danger by appellants to a inter- fundamental advanced given had because est") (footnote omitted); them). id. at 1146 & n.51 no attention to so, rights and is Amendment than other citizens. unconstitutional. Even this re-

First proscribes govern- First Amendment mains a troublesome case. has speaker efforts to favor one over mental recipi- leeway classifying enormous See, e.g., Brown, Carey v. another. funds, favor- ents of its benefits and and in 2291-92; at 100 S.Ct. at First U.S. groups If Con- certain over others.45 Bellotti, National Bank of Boston v. 435 gress provided space government office 1420; 784-85, 98 at S.Ct. at Police surplus organizations, furniture veterans’ 96, 92 Dep’t Mosley, example, Congress clearly has au- rights may 2290. “First Amendment not be do, thority indirectly it facilitate would type ‘currency’ as a to reward those used freeing groups by up of such who have service rendered nation or funds such as Tax- who otherwise determined be wor- spend ation would have to for rent and thy.” Supp. Brief at Moreover, Congress occasionally supplies. appropriates grants certain groups short, the Code’s classification understanding according money lobbying by tax benefits to some education, tax-exempt litigation, but used for groups not others does not scrutiny. Similarly, withstand lobbying.46 constitutional No iden other contexts governmental justify tifiable interests such as Televi- National Public Radio and differential by sion, treatment of government directly First funds necessity or activity ex- Amendment ganizations. The distinctions and interests speakers cludes some and favors others. suggested by the are either Emerson, The Affirmative Side completely any unrelated to substantial Amendment, First 15 Ga.L.Rev. 823-28 purpose, only illegitimate govern or reflect Note, (1981); Freeing Broadcasting Public goals. mental open has been to courts “[I]t Restraints, from Unconstitutional 89 Yale since the enactment the Fourteenth (1980) (arguing L.J. 719 state direct determine, particu Amendment to if on the subsidy Broadcasting of the Public Service must, lar facts that a discrimination Amendment). violates the First no policy, simply arbitrary reflects capricious Carr, action.” Baker v. suggest nothing concerning We grants constitutionality these (1962) (emphasis by Court). programs, course are not be Nevertheless, may fore us. be observed C. The Unconstitutionality of These Clas- many principles distinguish that certain do *24 sifications pref programs of these from First, justifies given Because erence it is purpose no substantial now to veterans. disparate although government well that lobbying by treatment of established Sec- 501(c) subjected may directly speech tion of one when that statute facilitate is another, person scrutiny, discriminatory government careful treat- over that of of ment rightful participant Taxation’s First Amendment activ- too is a in the “market protection, Examples ities denial equal place constitutes a of of ideas.”47 such as I, prepare 45. Article 8 of em- Constitution Prevention authorized to studies and powers Congress lay and collect taxes and recommendations and disseminate information public expend general individuals, agencies, funds for the welfare. con- powers prevention juve- Its under this clause are broad. See cerned with nile and treatment of Davis, 548, delinquency). Steward Co. v. Machine 301 U.S. 57 883, (1937). 81 L.Ed. 1279 828, e.g., Spock, 47. Greer 424 838 v. U.S. See, e.g., n.10, 2996f(a)(5) (1980) (Le- 1211, n.10, 42 § U.S.C. 96 S.Ct. 1217 47 L.Ed.2d 505 gal Corporation prohibited (1976); Gayer Services to use Toward a Bicentennial Commit- passage Foundation, funds to influence or of defeat federal tee v. Rhode Island Bicentennial legislation except 632, or stances); F.Supp. (D.R.I.1976) state in delineated 417 circum- 638-39 & n.9 (1980) (National (state inquire applicants proposed 42 U.S.C. 5653 can whether Delinquency public speci- Institute for comports Juvenile Justice and use of area with theme

741 press analysis programs constitutional of offices of of certain Voice America agencies might although well demonstrate departments executive illus- government program discriminatorily does government’s authority to commu- trate the speakers, subsidize certain state interest people with nicate its citizens and is sufficiently compelling discrimi- conditions, possible world. Under some nation is unconstitutional. Until other government could also subsidize programs arguably subsidize First private groups speakers in an effort rights discriminatory Amendment fash- message get Compare its own across. Com- us, however, ion come before it would be Broadcasting of munity-Service Mid-Ameri- injudicious to con- undertake elaborate ca, n.17, FCC, v. 593 at 1110 with Inc. F.2d analysis might now stitutional what Shiffrin, Speech, Government 27 U.C.L.A. analogous seem situations. Second, very 565 nature L.Rev. may government dictate that it alone can . crucially important, does What remain provide certain forums for First Amend- however, jus- possible is that none of these expression, parks ment with rostrums uphold discriminatory can tifications system. to a national First television of lobbying treatment different kinds of principles apply Amendment to these fo- 501(c) organizations. There is a rums, course, require that ac- brightline legisla- distinction between direct nondiscriminatory48 cess be than promotion rather tive speech, indirectly fa- government speech not create the facilities at cilitating by providing Finally, possible thorough all. it is that a with other of support. kinds It cannot by government). 569, Hampshire, fied also Cox v. New 312 U.S. 61 S.Ct. possesses powers 762, (1941) (parades). editorial when it acts as the 85 L.Ed. 1049 proprietor entity press rights. of an with See situations, govern- In certain the fact that Rutgers, Jersey, Avins v. State Univ. of New permit ment has created the forum seems to 1967), denied, (3d 385 F.2d 151 Cir. cert. 390 speakers among some discrimination 920, 855, (1968) U.S. 88 S.Ct. 19 L.Ed.2d 982 directed toward content but neutral with re- (state university pre law review had editorial gard viewpoint. See, e.g., FCC v. Pacifica rogative rejecting article). It be diffi Foundation, 726, 3026, 438 U.S. 98 S.Ct. cult, course, distinguish govern between (FCC (1978) regulate L.Ed.2d 1073 can use ment-sponsored speech private speech City airwaves); certain words on v. Lehman Compare Bonner-Lyons close cases. v. School 2714, Heights, 298, Shaker 418 U.S. 94 S.Ct. Committee, (1st 1973) 480 F.2d 442 Cir. with opinion) (plurality (munici- L.Ed.2d Prentice, (6th 1978). Buckel v. F.2d Cir. pal system permit bus can commercial but not generally Perry See Hohlt, Local Educators’ Ass’n v. political Compare advertising). Southeastern 1286, (7th 1981); 652 F.2d 1292-96 Cir. Promotions, 546, Conrad, Ltd. v. 420 U.S. Emerson, 831, 837; Shiffrin, supra note (1975) (granting 43 L.Ed.2d 448 Speech, Government 27 U.C.L.A.L.Rev. pro- municipal claim for access theatre (1980); Yudof, 577-88 When Governments production) Young moter of controversial Speak: Theory Toward a Ex Government Inc., Theatres, v. American Mini pression Amendment, and the First 57 Tex.L. (1976) (plurality S.Ct. opinion) 49 L.Ed.2d 310 Rev. 908-12 (upholding zoning ordi- restrictive See, e.g., Department Mosley, Police sexually exhibiting explicit nance for theatres (1972); films). Karst, generally Enterprise Public Healy James, Forum, and the Public Ohio St.L.J. (1972); Louisiana, Cox v. (1976); Comment, Access *25 to State-Owned (1965); Hague 85 S.Ct. 13 L.Ed.2d 471 Communications Media—the Public Forum CIO, 307 U.S. 59 83 L.Ed. Doctrine, Note, (1979); 26 U.C.L.A.L.Rev. 1410 principles govern 1423 Similar the Access, Equal The Public Forum: Minimum time, place, may and manner be restraints Amendment, Access, and the First Stan.L. applied expression to First Amendment with- ap- Rev. 117 Other standards violating e.g., out the Constitution. propriate public at where the “forum” is not Grayned Rockford, City of all. United States Postal Service v. Coun- Ass'ns, Greenburgh cil of Civic (*‘The question crucial is whether the manner (1981) (uphold- expression basically incompatible of the unstamped prohibiting deposit of statute activity particular place partic- normal of approved officially matter mail- “mailable” time”); Cooper, ular Kovacs v. boxes). (1949) (loudspeakers); 93 L.Ed. 513 requires regulating terest conceivably lobbying the amount of argued dem- preference organizations for veterans’ flowing dollars tax-deductible to Section attempt get government’s onstrates 501(c)(3)organizations that may be used for public, message across to be- its own lobbying purposes. Extending provides open-ended the Code subsidi- cause given organiza- treatment now to veterans’ groups any position of zation these might tions to all Section espouse positions even if those choose open a Pandora’s Box of woes and abuse. directly challenge policy govern- of notes, government example, The passing Without on the judgment ment.49 319,- during year, 1980 fiscal there were attempts constitutionality congressional organizations exempt listed as message itself advance 501(c)(3), 22,247 only Section veterans’ funding groups, speech particular 1978, contributions, groups.50 grants, clear write fa- it is cannot gifts 501(c)(3) organizations to Section organizations payable a blank check vored billion, nearly more than aggregated $21.9 First on the Amendment. veter- given 1500 times the million $16.7 permitted If we organizations.51 ans’ Sec- IV. THE REMEDY CONSTITUTIONAL 501(c)(3) groups lobby freely as 501(c)’sdisparate treatment Section organizations, be a veterans’ there would lobbying by particular tax-exempt by private abuse clear risk of interests groups leads to an viola unconstitutional in the amount con- increase of “selfish” equal protection tion of The fi principles. personal tributions “made to advance the appropriate nal before us is the giver money.” interests of remedy striking The relief. most obvious — (Senator Reed). when Cong.Rec. Even 501(c)(3) lobbying down limita vio- they attempt remedy constitutional governs poses tion that now Taxation — lations, ordering must resist relief courts problems. legislative obvious most his expecta- clearly legitimate exceeds the tory clearly of that limitation a con shows gressional Congress.52 in- determination that the tions of earlier, Jones, supra, (statement Phelps noted 49. As see veter- director note Col. security affairs, VFW). foreign ans’ have their lob- not restricted national bying particular importance to issues of to vet- erans, (citing Exempt Supp. programs. Brief at 40 50. IRS IRS such as veterans’ benefit A File, Ann.Rep. Organizations particularly Master 1980 IRS example notable is the 76). many cautions that this does organizations against pro- represent not 501(c)(3) organizations, however, a true universe of Section posed See, e.g., Panama Canal treaties. Pana- cer- because Hearings Canal ma Treaties: the Senate Before Comm, tain apply such as churches need Foreign Relations, Cong., 95th 1st recognition a rul- unless desire (1977) (statement Sess. 566 Smith, Robert Charles ing, ruling and because the letter covers not Commander, National American Le- applying organization of its but all gion); (statement Ruggie- id. at 578 D. of Frank subordinate units. ro, Commander, Amvets); National id. at 582 (statement Roberts, Maj. Gen. J. Milnor U. S. (based percent Id. on 90 of all information Army Reserve, director, executive Reserve Offi- returns for the filed Ass’n.); (statement cers id. at 595 of Col. year). taxable Phelps Jones, USA-Ret., national se- director curity affairs, VFW); foreign Proposed implies also the existence of con- Treaties, Hearings Panama Canal Before the siderably remedy. narrower It claims that Comm, Relations, House on International 95th repugnant most feature of the current Cong., (state- (1977-1978) 1st & 2d Sess. 155 is that limitation in Wasylik, ment of Dr. John Command- National engage lobbying” lose tions that “substantial Chief, VFW); (statement er in id. at right to contri- receive tax-deductible Rogers, past William J. commander, immediate national just used butions and not those contributions Legion); American id. at 171 lobbying. concurring specifically for In his (statement Ruggiero, of Frank D. *26 National States, opinion Cammarano v. United in Commander, Amvets); (statement id. at 175 example, Douglas suggested that Justice Foster, foreign Dr. Robert P. chairman national question in- would have been found statute commission, Legion); relations American id. at organi- it denied to an valid had all deductions

743 sion, nullification, possible proper rather than is remedy A second is also Westcott, Supreme recog course,” this case. As the Court has Califano v. 443 U.S. nized, may in certain situations benefits be 2655, 2663, 99 61 S.Ct. L.Ed.2d 382 away preferred group in taken from a order (1979), choosing between these alter- “[i]n unconstitutionally unequal to cure treat natives, attempt a court should to accom- ment, group even if that before the fully possible policies modate as States, e.g., Welsh v. United court. judgments expressed statutory in the 333, 361-65, 1792, 1807-09, 90 U.S. S.Ct. Id. scheme as a whole.” 99 S.Ct. at J., (1970) (Harlan, concur J., (Powell, dissenting). It seems evi- ex rel. ring result); Skinner Oklahoma dent legislative judgments that ex- Williamson, 535, 543, U.S. 501(c) pressed will be Section less dis- right 86 L.Ed. “The in by striking preferential turbed down the treatment; equal voked is that and such treatment now accorded the treatment will be attained if either by extending than competitors’ taxes are increased or their 501(c)(3) organi- treatment to Section Iowa-Des Moines National own reduced.” legislative history, suggesting zations. The Bennett, Bank v. 239, 247, may the current treatment of veterans Kirk v. Cf. 76 L.Ed. 265 demonstrating have been inadvertent but Commissioner, (D.C.Cir.), 425 F.2d congressional prevent clear concern denied, cert. lobbying by private abuse of charitable in- (1970) (refusing to reach consti terests, fully this view. confirms tutionality of income exclusion for minis remedy appears logical This the most ters because even if the violated the statute judgments most in accordance with the ex- Clause, Establishment “it would not affect pressed by Congress. But the veterans’ or- liability the tax in this case. Rather minis ganizations directly ters of that would be gospel longer would then no affected be exclusion.”). by preferential entitled to the benefits of the nullification of treatment Although 501(c) involving equal par- number of cases have not heretofore been protection challenges litigation. always to underinclusive fed ties to this must Courts suggest eral benefit dealing statutes that “exten- be cautious when with the interests zation that spent money the extent the amounts promote oppose actually spent denying 501(c)(3) organization. initiative, rather than deduc- simply a Section tion of the in that effort. money spent argument merit, Taxation’s is not without at 515, 79 at 534. therefore grant we decline to the alternative remedy suggests analogous that an in this case remedy the same reason discussed above. Each of the would be to in an deny tax-deductibility several hundred thousand Section or- amount to the amount of proportionate lobby- ganizations now monitored the IRS may ing 501(c)(3) organization in which a Section have hundreds of thousands con- separate engaged. Cf. Harris v. McRae, organization, tributors. For each IRS 317 n.19, 100 S.Ct. n.19, L.Ed.2d would have to ascertain the of lob- proportion (1980), which held that a “broad disqualifi- bying organi- activities expenses cation from benefits” receipt percentage through trace zation, and then unconstitutional even when a more limited ex- to the individual contributions in order to limit clusion is In that permissible. case, the Court the amount of their to the same deductibility although Congress might held that decline to logi- world, a less this proportion. complex subsidize certain abor- medically necessary might although cal scheme tions, appropriate, “substantial constitutional would arise if had would not cure the violation to with- attempted equal protection hold all Medicaid benefits from an otherwise found here. But this could over- easily remedy eligible candidate because that candi- simply load and IRS for monitor- destroy any capacity date had exercised her constitutionally protect- these and become an admin- pregnancy ed freedom to terminate her nightmare subject istrative dis- widespread argues abortion.” Id. Taxation that precisely regard Although mandating such a or abuse. the same disproportionate penalty imposed Congress, is within the remedy authority when an ex- new work- court should not a massive impose rights urges ercises First Amendment fully, load on the to so a cure IRS leads partial the Constitution at the least requires very of the discrimination shown here. its contributors’ deductions be limited only *27 not a matter initially not had an that should be decided opportunity of those who have court, present arguments appellate especially defens- their own this when all es, judicial parties are not partly legitimacy directly stems affected before us. because large hearing measure from the views CONCLUSION directly those who involved. See all Fiss, Court, Supreme The 1978 Term —Fore- occupies The First Amendment a Justice, preferred place word: The Forms 93 Harv.L. govern in our scheme significant, Collins, Rev. 44-46 It is less ment. Thomas v. though noteworthy, also still that Taxation 89 L.Ed. This mean, however, opposes application this to the does solution unconstitution- 501(c).53 always We ality legal dispute simple. therefore de- in a is The Section Congress seem remedy time. lines will clearer when adopt cline to this this di group rectly prohibits particular a Accordingly, case is remanded place, speaking particular in a and more it district court with instruction that Congress confused when subsidizes First constitutionally operation cure the invalid expression unevenly through Amendment 501(c) after inviting of Section veterans’ intricacies the Internal Revenue participate framing the Nevertheless, principle Code. remains interim, course, relief. In the the IRS the same. Because the Code differentiates may seek other remedies. may It decide protected its treatment of First Amend regulations lobby- that additional governing activity by tax-exempt organ ment various ing by veterans’ more —and izations, constitutionality of its classifi diligent lobbying regu- enforcement of the must judged heightened cations be govern already lations that those scrutiny. level of tions —are in fact in accordance with the congressional purpose behind light, When viewed in there 501(c).54 groups The IRS suggested can be no dis might Congress also clearer seek from preferred between tinctions purposes, any, determination of the if tax-exempt organizations are constitution legis- had in mind when it enacted meaningless. ally Discrimination giving preferential lation tax treatment to government subsidization of First Amend veterans, lobbying by or passage of more rights narrowly ment must be tailored to legislation narrow that could show that vet- purpose, substantial meet a state and the groups actually speak erans’ for proffered distinctions between favored advocating specific pro- kinds of veterans’ groups 501(e)(3) organizations and Section grams and benefits. On the before record any governmental are either unrelated to us, however, it is even clear that Sec- illegitimate whatsoever interest or are bas 501(e)’s unequal application reflects Indeed, governmental es for classification. any congressional intent whatsoever. although necessary it has not been to reach support provided broad tax to veterans’ or- question, possible these dis ganizations any side upheld criminations could not even they choose, issue companion and the re- asking “rationally test whether were striction on lobbying by legitimate to a governmental pur related organizations, pose,” discrimination have been creates an unconstitutional Ex- disparity. more nothing than an accidental or inadver actly problem how this legislative drafting. should be cured tent result Supp. seeking 53. Taxation Brief at 20 n.4. In Iowa-Des burden of an increase of the sume the Bennett, paid.” Moines Bank v. U.S. at taxes which the others should have S.Ct. at the Court ordered a of “the refund appellants excess of taxes exacted” from be- analogous presumably IRS came con- taxpayer cause “it is well settled that a who concerning clusions by the treatment subjected discriminatory has been societies, taxation beneficiary despite fraternal through favoring of others in violation of question. apparent on that silence of the Code law, required federal cannot himself as- supra. Seepp. 720-721 *28 nonprofit against lobbying a charitable and educational or- Tax discrimination the organi- similar tax-exempt purpose represent of Taxation and is ganization whose to fails to meet constitu- zations therefore the public general the on tax issues before Con- appropriate We re- tional standard here. courts, gress, executive and the branch. this case with instruc- verse and remand incorporation After its in June Taxa- cured, unequal tions that the treatment be to the Revenue applied Internal Ser- restricting ac- by either the tax benefits (IRS) for vice a declaration that it was an by ex- corded or organization 501(c)(3) described in of the § 501(c)(3) tending to those benefits (Code), Internal Revenue Code 26 U.S.C. organizations. in the intrica- Even arcane 501(e)(3). Although may Taxation other- § code, government cies of cannot the tax qualified 501(c)(3) wise have for section sta- give special special any nor to voice lend ear tus,1 IRS determined that Taxation in- person group worthy no or matter how part to tended devote a substantial its exact- ideas or their credentials. The “attemptfs] legisla- to influence activities ing the First do standards of Amendment by lobbying Congress tion” on matters in- provide pre- not allow volving system. the federal tax The effect place parties ferred for certain least —at determination, of that the correctness of pur- not without a more substantial state contest, which Taxation does not was to pose than shown has been here. advantages, it of deprive several tax includ- remanded. Reversed and exemption from taxes on certain eligibility own and the to receive activities MacKINNON, Judge (dissenting). Circuit (These tax contributions.3 deductible ad- Appellant Representation vantages collectively are referred herein Taxation Washington (Taxation) incorporated accruing as “tax as the benefits” (FUTA) 1. Section to: 330 l’s federal taxes applies § unemployment 3306(b), (c)(8). virtue of § Corporations, chest, any community organized fund, or foundation, and operated religious, charitable, scientif- for the deduction § for I.R.C. exclusively provides testing ic, or for educa- from income tax: safety, literary, contributions public tional ... no net earn- of the purposes part (a) Allowance of deduction.— ings of which inures to the of any benefit (1) General rule. —There shall be allowed shareholder or substan- private individual, no as a deduction any contribution carrying tial of the activities of part which is (as (c)) defined in subsection payment propaganda, attempting, or otherwise which is made within the taxable . . . year. legislation (except influence otherwise (c) Charitable contribution defined. —For (h)), provided subsection and which does of this term section, “charitable purposes (including or in, intervene participate gift contribution” means a contribution or statements), publishing distributing or use of— n or for campaign any can- political behalf of didate for office. (2) A or trust, corporation, community added). (emphasis Such are ex- chest, fund, or foundation— from taxation under tax empt the income subti- (A) organized created or in the United tle unless under exemption denied or thereof, States or under any possession I.R.C. §§ 502, 503, or which 504, sections with States, the law of the United any State, we are not concerned in this Wholly appeal. of Columbia, District or of the any possession from apart the issues raised States; United restriction, it could be seriously questioned (B) organized and exclusively operated how an avowed purpose religious, scientific, charitable, or ed- literary, which is the has a ‘reli- foster national ucational or to purposes, gious, testing charitable, scientific, for public international amateur competition sports safety, or educational literary purpose’ (but if no activities involve of its part brings it within instance. § the first of athletic facilities or provision equip- ment), accruing 501(c)(3) organi- or for prevention cruelty Tax benefits to a § children or animals; zation include: tax from income exemption 501(a); 3111(a)’s (C) earnings virtue of no § from net which exemption § part (FICA) federal social virtue of inures share- security any private taxes benefit of 3121(a), (b)(8)(B); or individual; holder exemption June 501(c)(3).) court voted to hear the qualifying under section tions banc, case en our qualify exemp- rules vacates still opinions. panel The court’s stat order its own income as a social welfare tion on ed hearing en banc would focus 501(c)(4).4 organization under I.R.C. section upon two issues: standard of review subsection, however, placing That while no *29 applicable challenged statutory organization’s lobbying on restrictions an scheme, and the ultimate constitutionali activities, being result does not in donors ty of the distinction between frater Code’s permitted to deduct from contributions organizations nal and veterans’ on one the income, gift their own and estate taxes.5 501(c)(3) exempt organiza hand and section exhausting its After administrative reme tions on the other.7 dies, brought declaratory judg Taxation a against ment action the Commissioner of I.

Internal Revenue under 26 § U.S.C. seeking (1976),6 a declaration section raising presented A case the same issue 501(c)(3)’s restriction of substantial at against here was decided one of Taxation’s legislation tempts influence is unconsti predecessor organizations8 by the Fourth granted tutional. The district court the Representation v. Circuit in Taxation with summary judg Commissioner’s motion States, (4th 1978), United 585 F.2d 1219 Cir. ment, Representation Taxation with of denied, cert. Washington Blumenthal, 43 A.F.T.R.2d The district L.Ed.2d court (P-H) (1979), appeal, 79-419 and on a disposing H this case followed that decision in panel divided of this court affirmed. Taxa contentions. 43 A.F.T.R.2d Taxation’s Blumenthal, Representation tion with (P H) at 79-681. For the reasons 179-419 — (D.C. 14, 1981). April No. margin, present 79-1464 Cir. On set forth I find the (D) disqualified product merger Which for tax is not ex- of a Taxation is between emption 501(c)(3) organizations, (Taxation Repre- under section reason of two one with attempting legislation, Fund) 501(c)(3) group to influence and which sentation § devoted in, participate (in- does not cluding or advocacy, (Taxation intervene courtroom publishing distributing or Representation) 501(c)(4) group de- § statements), any political campaign on behalf legislative advocacy. voted to See at 16. J.A. any [Empha- candidate for office. qualify sis added.] 5. Taxation could also seek to under language permits 501(h), Similar permits donors to make anal- I.R.C. which some § tax, ogous respect gift 501(c)(3) organizations deductions with specified § to devote (citizens residents) 2522(a)(2) § I.R.C. or quantities exempt purpose expendi- & of their (b)(2) (nonresident aliens), tax, estate and the lobbying, tures to rather than adhere to the less (citizens residents) 2055(a)(3) §§ I.R.C. or & “substantiality” 501(c)(3). certain In § test aliens). 2106(a)(2)(A)(ii) (nonresident however, court, expressly Taxation district addition, foundations be deterred any disavowed intention to make an election contributing that fails 501(h). J.A. at § 15-16. discussion lobbying 501(c)(3) test section status infra. at 755-756 because untaxed foundations otherwise managers subject to tax if the founda- 6. Section 7428 certain to is- authorizes courts pays any carry propaganda, tion amount “to on declaratory judgments sue in certain re- cases attempt, legisla- or otherwise to to influence lating organi- to the status and classification of 4945(a), (d)(1). tion.” I.R.C. § 501(c)(3). zations under 26 U.S.C. § 501(c)(4) applies 4. Section to: originally challenged also validi- 7. Taxation leagues organized Civic or not ty permitting lob- businesses deduct their profit exclusively operated for promotion but for the “ordinary necessary” bying expenses as & welfare, of social or local associa- expenses. 162(e). That business See I.R.C. employees, membership tions of of which pursued en contention was not before the court employees designated is limited to the of a banc, and we its merits here. do reach person persons particular municipali- or in a ty, earnings and the net are devoted which supra. 8. See note exclusively charitable, educational, or rec- purposes. reational premise judi- from the doctrine of res restric- suit barred cata, invalid, the merits.9 regardless therefore address of the uniformity tion application, protected burden on challenges Tax Code’s deni- Taxation speech. Second, Br. at 15. See Taxation qualified of tax otherwise al benefits Code, argues by placing engage in substantial restrictions on the activities of sec- indepen- as two what it views 501(c)(3) placing while no First, grounds. dent it asserts section similar those of veterans’ restrictions of or- 501(c)(3), conditioning tax benefits on ganizations in section defined organization’s rights the non-exercise of an fraternal orders defined sections speech, press, petition, violates the (10), equal protection denies it the rely attack does not first amendment. This guaranteed by the fifth by laws amend- distinctions drawn Code among organizations, proceeds process rather ment’s due clause.10 *30 the 9. Taxation’s district court made The rationale for sua action on sponte papers ques- relitigation clear it absorbed the functions of the tax- that tions of is should be preclusion lost in Taxation with payer not to serve defendant’s inter- precluded simply judi- avoiding litigation, at 16-18. The record Representation. See J.A. but est in also to avoid judicial before the also district court establishes cial reliance waste and to foster on Taxation has the chief executive as had same United States, decisions. Wilson v. 166 supra, Taxation with the generally Representation, appellant F.2d at Montana v. 528-29; see Unit- the Fourth Circuit id. at 14 with case, compare 147, 153-54, ed 99 States, 970, 440 U.S. S.Ct. id. at 16, and same (1979) the com- employs attorney, 973-74, 59 and authorities id. at 6 F.2d pare with 585 at 1220. relitigation Despite cited. The consent to defendant’s this close issues and between par- relationship decisive, cannot there is an inde- always argued ties, the has not Government pleaded preventing “in the mis- pendent interest that Taxation should as a precluded, matter judicial resources and allocation second judicata of res or collateral from liti- estoppel, judges guessing Ill of Art. when prior panels gating the issues Fourth the Circuit decided litigated the issue in a fully fairly has been against Taxation with Representation. proceeding.” United States v. Sioux Na- prior Although judicata tion, 100 at 433, 448 U.S. S.Ct. 2749 supra, collateral and res estoppel (Rehnquist, dissenting). J., waivable defenses under Fed.R. affirmative 8(c), Civ.P. We are some courts have addressed thus determine whether tempted litigate preclusion issue sua where Taxation information should be sponte estopped within their notice relieved same effectively has issues on which Taxation with Represen- defendant burden of his usual on the tation lost proof However, the 4th Circuit. E.g., issue. 617 Kurtz, Boone v. F.2d 436 Government’s failure to plead preclusion (5th 1980) (“[Ejven though stage litigation Cir. Fed.R.Civ.P. of this Taxation of an deprived 8(c) judicata denominates as an argue res affirmative that such defense should opportunity defense[,j the court [dismissal sua sponte not clear that Taxation has apply, it is not judicata grounds on res ... is arguable objection permissible no to such We application. judicial the interest where both remanding hearing economy thus have a for a choice of brought court”); actions were before the same Blonder-Tongue e.g., on that issue, Labora- see, Housing Gullo v. Veterans Ass’n, 269 Coop. tories, Inc. of Illinois Foundation, v. University (D.C.Cir.1959) (trial F.2d 517, 517 court may 402 U.S. 313, 91 28 L.Ed.2d 788 S.Ct. judicata taking res apply notice of (1971) upon (remanding par defendant permit plead case); ties’ previous Wilson v. United States, challenge collateral plaintiff estoppel (8th 1948) 166 (appellate F.2d 527, 528-29 Cir. plea), disposing or of of Taxation’s case on the court on own motion determine action is ju- original merits. The determined that panel judicata); barred res Holmes v. United taking dicial be best would served by economy (N.D.Ga.1964), States, 231 972-73 F.Supp. so to the sub- course, latter proceeded (5th 1965) (court, aff'd, 353 F.2d 785 Cir. appar have determined to do issues, stantive as we judicial ently own took motion, notice of here. proceedings judicata prior res applies judgment). defendants’ motion for would be invalid under summary “[l]f classification Accord, cases cited in United States v. Sioux Clause of the Fourteenth Protection Equal Nation, 448 371, 432, U.S. 100 inconsistent with 2716, 2749, Amendment, it is also the due (Rehnquist, 65 L.Ed.2d 844 Fifth J., dissent Amendment.” process requirement ing). See also P. R.R. v. n.4, Southern United Johnson v. 415 U.S. 364 94 Robison, (1974). States, 168 55-61, U.S. 1, 18 S.Ct. 39 L.Ed.2d n.4, (former judgment L.Ed. 355 1, 93, held conclusive 424 U.S. 96 S.Ct. Valeo, v. Buckley though pleaded). (1976). even not 612, 670, 46 L.Ed.2d estoppel specially upon whether or it

II. exercises its first right lobby. amendment Taxation’s first claim is based on the statutory denial of tax contention that placed upon The condition engage in benefits to plainly upon speech, has its direct effect not places an substantial “unconstitu- upon fundraising. not, This fact does upon enjoyment tional condition” however, protections render the first those benefits.11 The cornerstone of this inapplicable, amendment is well es Randall, argument Speiser v. 357 U.S. protection “the tablished that Constitution’s (1958), 2 L.Ed.2d 1460 limited to direct interference with opinion which the Harlan for the of Justice James, rights.” Healy v. fundamental Court established proposition 169, 183, 2338, 2347, 92 S.Ct. 33 L.Ed.2d enjoyment government-conferred aof bene- challenged reg “Even where upon compli- fit cannot be made contingent expression only ulation restricts freedom of ance a condition that violates first incidentally,” the first amendment demands rights amendment of one who would other- heightened judicial sensitivity. Schad v. qualify wise for the benefit.12 Taxation Borough Ephraim, of Mount urges restriction in sec- n.7, n.7, 101 S.Ct. 68 L.Ed.2d 671 501(c)(3) imposes precisely such a con- Valeo, Buckley See also contention, majority dition. This as the 1, 21, 612, 635, recognizes, is without merit. Rock, (1976); City Bates Little Taxation does not claim that the chal- 412, 416, *31 L.Ed.2d provisions lenged “chill” speech by its im- (1960). question whether the con a posing penalty direct or upon restriction placed upon exempt dition status section Nor, moreover, its lobbying activities. does 501(e)(3) right guaranteed violates Tax it claim that pre- effectiveness of its by the ation first amendment therefore de sumed “charitable and educational” activi- thorough serves examination. fact, lobbying ties —in of di-—is agree gener- I lobbying activity that is an fact, more, minished the bare without ally protected by the first amendment. I non-exempt its status. Taxation’s claim is agree for purposes also of this case that confined to the assertion that because it possesses general Taxation qualify does not an the same exempt organization rights speech petition guaranteed 501(c)(3), under signif- section it is rendered persons. icantly less See First National Bank v. support able to raise funds in Bellotti, government its if activity.13 Even has no

obligation view, support my activities either L.Ed.2d But in its directly structure, case, through specific or the tax Taxa- circumstances of this Con- argues, tion provide or gress constitutionally decision to with- could condition the hold support permissibly availability agree- cannot turn upon of tax benefits primarily applicants’ speech rights. 11. We consider of tax ex- denial of their exercise income, emption bring for Taxation’s own but note “The man who knows that he must forth question there is no serious persuade as to Taxa- proof and another of lawfulness standing challenge upon tion’s conditions necessarily of his conduct must steer far wider deductibility of donors’ contributions to it. It is if the unlawful zone than the state must bear so, understanding doing our that in is Taxation these burdens.” 357 U.S. at 78 S.Ct. at asserting rights, rights own its and not the potential party third donors not before the court. noted, many Supreme 13. As the has con- Court “simply tributors will donations to an not make Speiser requirement per- a invalidated organization appear” on that does not seeking qualify sons for a state constitution- exempt organizations pub- Cumulative List property exemption al sign for veterans University lished the IRS. Jones loyalty Bob require- oath. The Court held that the Simon, 725, 729-30, improperly presumption ment loyalty created of dis- part applicants on the the burden overcoming impermissibly chilled the engage below, lobbying. ment not to in substantial 'For the reasons set forth I view instance, In this the reach of Taxation’s 501(c)(3) restriction in section right lobby can be determined in the protected as one unrelated to the content of right context which that is asserted.14 speech. difficulty finding I have no By holding out as or itself a charitable governmental expressed by interest laying educational claim one, restriction is a substantial and that the to the tax benefits accorded such means protect has chosen to tions, Taxation has assumed a status which sufficiently interest are satisfy narrow to Congress may regard constitutionally as in- the Constitution. Consequently, my compatible carry- to some extent with the opinion argument Taxation’s the lob- activities, political on of substantial bying restriction in section is an subject which may therefore be made upon “unconstitutional condition” the en- upon enjoyment conditions that would joyment of the tax benefits Taxation seeks impermissible. otherwise be to finance its substantial should be cases, In first amendment the threshold rejected. scrutiny applicable of the level of challenged provision upon turns A. alleged whether the restriction is one based upon the “content” of the communication argues re- sought protected. speech to be Where type speech striction is one “based on the restricted because of its content rather than subject protected expres- or the matter” of govern because of its incidental effects on sion, scrutiny. and therefore merits strict mental interests the Constitution demands However, argu- Taxation Br. at 15. judicial scrutiny. strict of that Satisfaction plainly compares ment fails when one sec- requires standard to dem types with the of statutes regulation onstrate “that its necessary Supreme invalidated Court as “con- serve compelling interest and that it is speech. tent-based” restrictions on narrowly drawn to achieve that end.” Wid 501(c)(3) is not a restriction based on con- Vincent, -, mar -, -U.S. tent. It “message” is not aimed at the *32 269, 274, (1981). S.Ct. 70 L.Ed.2d 440 impact” “communicative of Taxation’s ac- contrast, restriction, where though a tivities, confining tax-sup- but rather at trenching on speech, is directed not at the ported organizations to those activities Con- speech, content of the but at the “non- gress worthy encouraging by pub- deems speech” elements of the activity, restricted support through lic system. the tax The government considerably lighter bears the restriction is directed neither toward con- showing burden of that the restriction fur trolling hear, what may Taxation’s audience “important thers an govern or substantial controlling nor message toward Taxation’s mental greater interest” and is “no than is viewpoint subject because of its or matter. essential to the furtherance of that inter simply regulates It the activities of an enti- O’Brien, est.” United States v. 391 U.S. be, alia, ty happens speak- 367, 377, inter a 1673, 1679, 88 S.Ct. 20 L.Ed.2d 672 er, imposed (1968). wholly and is for reasons unre- See Consolidated Edison v.Co. Pub Commission, lic 530, message Service lated to the Taxation seeks to con- 447 540 U.S. n.9, 2326, n.9, 100 vey.15 S.Ct. 2335 The fact that 65 L.Ed.2d 319 statute in terms (1980). specifically restricts activities a “substantial Mid-America, FCC, Broadcasting As Taxation conceded in its brief before the vice Inc. v. original panel case, 1102, establishing (D.C.Cir.1978) (en banc); in this “in a 593 F.2d Note, 1129 program, Conditions, may benefit the Government include 73 Unconstitutional Harv.L. requirements 1595, necessary (1960). that are to assure that Rev. 1600 objects program are attained.” Tax- Buckley ation Br. Redish, filed 8/1/79 at 14 n.5. See v. generally The Content Distinc- Valeo, 1, n.65, 612, 424 U.S. 57 96 Analysis, S.Ct. 653 tion in First Amendment Stan.L. n.65, (1976); Community-Ser- 113, Rev. 114-18 part” ted “carrying propaganda, expression of which is on commercial prohibiting while legis- or attempting otherwise to influence expression noncommercial in identical cir- support lation” cumstances); cannot inference that Central Hudson Gas & Elec- provision any particular Commission, is one aimed at tric Co. v. Public Service subjects viewpoints. U.S. 100 S.Ct. 65 L.Ed.2d 341 (1980) regulation (invalidating prohib- Supreme Court’s decisions invalidat utility promoting ited from use of electrici- ing speech content-based on restrictions ty); Corporation Consolidated Edison v. demonstrate that strict first amendment Commission, Public Service scrutiny is reserved for those instances in (1980) (invali- L.Ed.2d sought specifi which the has dating regulation prohibited utility subjects cally about which “dictat[e] expressing views on “controversial is- persons may speak speakers who public Brown, policy”); Carey sues of v. may public address issue.” First National U.S. 100 S.Ct. 65 L.Ed.2d 263 Bellotti, 765, 785, Bank v. (1980) (invalidating permit- ordinance that ap L.Ed.2d picketing ted prohibiting labor while plication high appropri of this standard is picketing); Department Mosley, Police ate “[ejspecially where . . . legislature’s 33 L.Ed.2d 212 suppression speech of free suggests an at (1972) (same).16 tempt give public one side of a debatable question advantage an expressing among Where neither discrimination views. ...” Id. Even where the viewpoints among subjects motive nor of discussion enacting involved, restriction bear prompting the concerns strict speech has been claimed scrutiny non- absent. The restric- content, neutral respect imposed see United section does not O’Brien, supra, States v. the Court subjects has re persons about which “dictat[e] apply fused to strict scrutiny. may It has con speak [given who address a ] application fined issue,” of that public certainly test to cases in “sug- does not government’s which the gest[] asserted interest attempt give an one side directly related to the content of the re advantage debatable stricted e.g., communication. expressing Widmar its views ...” First National Vincent, supra, -U.S.-, Bellotti, 102 S.Ct. Bank v. supra, 435 (invalidating, (emphasis added). at 1420 The statute speech grounds, free university state rules merely Congress’ reflects determination generally permitted campus use of fa claiming exemption from the cilities but religious denied use for pur obligations imposed normal by the tax laws poses); Metromedia, Diego, Inc. v. San 453 must thereby gained devote the resources *33 490, 2882, U.S. 101 S.Ct. purposes 69 L.Ed.2d 800 the Congress granted (1981) (invalidating permit- ordinance that exemption place.17 in the first relating corporations business,’ may We focus on cases to content re- to ‘stick to also upon subject strictions based they matter because corporations religious, limit other — reading involve the Court’s broadest respective or civic —to their ‘business’ when involving term “content.” In cases the invali- addressing public.”). The statute struck particular dation of restrictions based on corporate speech down in that case limited viewpoint speaker given subject, aof aon referendum issues to instances in which the distinction between restrictions corporation’s presumed (by interests were 501(c)(3) plainer. e.g., § is even First itself) 501(c)(3) statute to be affected. Section Bellotti, 765, Nat’l Bank v. S.Ct. operate any way does not to restrict 1407, (1978) (invalidating 55 L.Ed.2d 707 stat- subjects upon may lawfully which Taxation corporate ute speech protec- which limited speak, receipt nor does it condition Taxation’s corporations’ interests). tion of business upon subjects of tax benefits it addresses. lobbying entirely The restriction is neutral type legislative 17. This is not the directive to respect subject legislation matter of the “stick to business” invalidated in First National sought 501(c)(3) Bellotti, supra, 785, to be inñuenced. Bank v. 435 U.S. at 98 S.Ct. (“If merely requires legislature may charitable and educational or- direct business imposed by 501(c)(3) est” whose “incidental alleged restriction restriction on merely because it re- rendered invalid greater First Amendment freedoms is no quires organizations enjoying exempt status than is essential to the furtherance of that largely non-politi- to confine themselves to interest.” Id. at 88 S.Ct. at 1679. It is cal activities. The ordinance invalidated in my 501(c)(3) conclusion that section satisfies Village Schaumburg v. Citizens for a both concerns. Environment, Better 444 U.S. 100 S.Ct. (1980), 63 L.Ed.2d 73 somewhat similar- 1. Governmental Interest ly restricted the activities of charitable argues there is no clear groups by requiring they spend at least statement legislative history in the of sec- percent receipts directly of their tion purpose Congress purposes.” principal “charitable A differ- sought to imposing achieve in ence between that restriction one restriction enjoyment as a condition on the Schaumburg involved here is that the ordi- benefits, of tax and claims that the statute (solicitation activity nance burdened an supported only is therefore by “post hoc and door-to-door) “characteristically funds in- speculative arguments of Government coun- speech. tertwined” with signifi- A second sel, which constitutionally are insufficient.” difference, however, cant is that the restric- Taxation Br. disagree. at 16. I The inter- tion in Schaumburg was primarily defended Congress sought clear, ests to further are sought as one that prevent upon fraud clearly justify suffice to the statute. donors.18 Section has an entirely Here, different purpose. legislative Where intent is manifest has conferred tax benefits on the the words or obvious effect of a statute seeking taxpayer support in order to itself, the absence of comment thereon in encourage particular kinds activity in the hearings, reports, or floor debates of public interest, imposed and has lobby- Congress is not to be taken as evidence that ing restriction as a means to insure that the statute is devoid of purpose. rational that benefit is directly issued to further the Markets, Boys Inc. v. Retail Clerks Un- purposes Congress sought encourage in ion, 235, 241, Local granting the benefit.19 1583, 1587, So-called “post arguments permissible hoc”

B. interpret support congressional enact- foregoing establishes that this case Congress ments. is not an administrative does not concern a agency required content-based restriction grounds that is to state the speech. acts, It upon remains to decide whether which it and courts do not inter- restriction powers satisfies the lower fere with the when standard of first amendment review exercising judicial power im- interpret posed by O’Brien, United supra, States v. federal statutes. Cf. Securities and Ex- 391 U.S. change Chenery Corporation, Commission v. (1968).20 is, above, That standard 194, 196, stated whether the law in serves an “im- (1947); id., L.Ed. 1995 portant governmental or substantial inter- 87 L.Ed. 626 It is not ganizations governmental the fruits of their spend 19. The special nature of the interest ex- status finds to be ways pressed restriction is more fully *34 consistent with the for which that purposes discussed at 752-753 status was created, i.e., to further and educational See discussion at purposes. 20. The the Court reaffirmed Supreme recently 752-753 infra. the O’Brien standard in appropriateness involving cases not content-based restrictions. governmental 18. The other asserted interest Consolidated Edison v. Public Service Co. was protection of residents’ Comm’n, from the 447 privacy n.9, U.S. 540 100 S.Ct. intrusions of door-to-door solicitors. n.9, 65 L.Ed.2d 319 -39, 100 S.Ct. at 837-38. proper ensuring for means of necessary legislative record Con- that the benefits in its every organizations produce gress explain every provision to these will be received every the intended beneficiaries. argument that statute and foresee support against be in of or its asserted Although unnecessary, it is in the absence is true in the first enactments. This indicating intention, contrary evidence a is amendment context as it elsewhere. justification to legisla- seek further the 1, 106, Valeo, e.g., Buckley v. restriction, tive history lobbying it the 46 L.Ed.2d 659 Al- noting contrary merits to that Taxation’s though claims, forgotten, strong is often statutes the fact there is a indication of Con- gress’ interpreted by imposing regulation. often to intent can be reference The floor debate amendments the plain to ex- to terms without reference Revenue Act of in which section is traneous sources. This such a statute. 501(c)(3) (section 23(o) Act) of the 1934 has plain purpose Read in the of the context origin, its signifi- contains discussion the groups per- section 501—to benefit certain cance cannot be obscured forming various services that brevity. being public views as in the interest21 clearly (c)(3) —subsection indicates a con- colloquy a between Senator Reed gressional encourage intent to certain activ- Harrison, Pennsylvania and Senator ities viewed as charitable and educational. language concern was re- raised stricting propaganda attempts to influ- restriction, since it cannot legislation precise ence language —the successfully ground be attacked today found in statute have —would it among organizations discriminates based denying exempt effect of organi- status to upon the speech, only content of their can Society zations such as “the for the Preven- sensibly attempt be as an read to confine Children, Cruelty Society tion of or the purposes directly that are Animals, of Cruelty the Prevention Judge charitable or philanthropic. As Wil- worthy of the institutions that we do stated, key has restriction slightest in the mean to effect.” assuring section “is aimed some Cong. (1934) (remark Rec. 5861 of Sen. purity purpose.”22 Similarly, in that Reed). Although specifically he noted and committee report interpreting provision part on the of Congress endorsed desire shortly original after its enactment stated: protect philanthrop- the activities of such exemption upon ... is based groups, ic position Senator Reed voiced the theory compen- the Government is of the Finance Senate Committee sated for loss of revenue its relief “[tjhere why is no in the world reason from financial burden which would other- contribution . . . be if should deductible as wise have appropriations met it were a charitable contribution if it is a from other . . . funds selfish personal one made to advance the H.R.Rep.No.1860, Cong., 75th 3d Sess. 19 giver money. interests of the That (1938). Congress could reasonably conclude what trying the committee was to reach limiting activities of edu- added)23 ...” (emphasis Despite Id. cational and charitable personally was a fact that Senator Reed favored survey n.8, exemptions n.8, 21. A various stated 94 S.Ct. 2044 & L.Ed.2d 501(c) general types J., dissenting); (Blackmun, § will reveal the of inter- Haswell v. Congress sought protect. States, (Ct.Cl.1974). ests See I.R.C. United 500 F.2d 501(c)(l)-(22). majority suggests 23. The that “it would be United,” Walters, 22. "Americans Inc. v. grossly simplistic” signifi- to attribute much (D.C.Cir.1973) (concurring F.2d opinion), exchange. Majority op. cance to this at 736. jurisdictional grounds rev'd on sub I take Since the view that this evidence Inc., nom. Alexander v. “Americans United” obvious from the face of confirms intent statute, proper extended discussion (1974) (emphasis original). also Bob weight unnecessary. accorded University Simon, Jones &

753 restriction, argument Congress, having be- Taxation’s upon narrower is based the all tax emanating fact that benefits interpretation leading fore it the above 501(e)(3) any to section are denied charged member of the with re- committee part tion a “substantial the of activities of matters, sponsibility adopted the for tax This, lobbying. which” is alleges, language presently found in section the renders restriction broader than neces- 501(c)(3). statutory language Even if the sary Congress’ achieve purpose, to in that if thought were leave doubt substantial Congress sought deny only to tax benefits sought about purpose to be achieved engaged in “selfish” activi- restriction, revealing the lobbying his- ty, deny deductibility and so to to their tory question resolves intent about the contributors, the achievement of that end of Congress adopting it. requires only that portion of contribu- actually prohibited tions used for the interpreted, beyond question Thus is “self- ish” purposes nonexempt be treated as restriction an “im- serves non-deductible. The remainder of portant and of the substantial” interest funds, purposes for expressly used for- encouragement United The of States. bidden, qualify would continue ex- education, charity, objectives and similar emption deductibility. through system, the tax like that achieved government accuracy with which by direct congressional appropriations for categories pur defines of citizens purposes, legiti- is interest whose poses regulation particular is a matter macy seriously cannot The in- doubted. importance when first amendment interests organ- terests served the activities of the are at stake. Central Hudson Gas & Elec 501(e)(3) izations enumerated section Commission, v. Corp. tric Public 447 Service power well within both 557, U.S. 100 65 S.Ct. serve the and the traditional interest (1980). Courts in such circumstances are scope of power. the exercise of that relieved, however, duty to re spect superior competence and concomi Scope 2. The Restriction authority tant legislature devising regulation. means of As was held in Buck argument against Taxation’s section final Valeo, ley v. 424 96 U.S. S.Ct. that, conceding govern- even (1976), “Congress’ fail ment to important have an and substantial engage ure tuning in such fine does not restriction, interest that is served legislation, invalidate” where leg even restriction is invalid because it is broader islation in burdens first amend “than is essential furtherance speech ment freedoms of and association. O’Brien, supra, interest.” States v. United 75.24 83, 103, also id. at 96 at 6 391 88 S.Ct. at 1679. Even long recognized It has been that this defer where speech a restriction on is not directed legislative competence particular ence to content, imposes the first amendment ly appropriate regulation where the in requirement adopt system volved is of taxation. Anto San achieving means of purpose is least Independent nio District v. School Rodri restrictive of first amendment interests. 1, 41, guez, 1278, 1301, Village Schaumburg for a Citizens (1973); Kentucky, L.Ed.2d Madden Environment, Better 83, 88, 406, 408, 84 L.Ed. L.Ed.2d Judges frequently Court, Supreme and commentators have 1979 Term —Foreword: dangers judicial attempts Expression Burger Court, noted the inherent Freedom in the schemes, regulatory (1980) (questioning refine even un- where Harv.L.Rev. compliance judicial analysis dertaken in policy order to enforce “close alternatives See, e.g., ], the first put upon amendment. Hudson Central Central Hudson with the burden [in Comm’n, Corp. Gas & Electric v. Public negate Service all the state foresee and the alterna- supra, ”). U.S. at imagine S.Ct. at 2368- tives Court can . . . J., Cox, (Rehnquist, dissenting); *36 Taxation, remedy majori- proceed the Taxation’s is to I reach the same conclusion as (h) subsection rather and the as whole as a under than under ty view Code If, hand, (c)(3).27 on the other section regulation sufficiently scheme of is 501(h) equally is an or more restrictive satisfy con- narrow to first amendment confining proper to means charities their my opinion, In the enactment cerns. recent purposes, extremely one should be reluctant 501(h) provides of section of the Code an Congress produce to hold that can and must insight Congress’ into choice of means in competing a still better resolution of the regulating compels charities the con- 501(h) interest than it has in either 501(c)(3) clusion that section is valid.25 501(c)(3). Bearing in the Con- mind effort Before a discussion of the proceeding to gress has made to resolve these interests 501(h) terms of section and their relation- precisely, authority and this court’s limited ship important 501(c)(3), to section is to determination, pro- second-guess to I significance relationship. note the of that purpose ceed to an and examination of the 501(h) an product is the exten- 501(h). effect section precise by Congress sive effort to establish 501(h) part as was enacted of the political activity limits on the Tax Reform Act Pub.L.No.94-455 of. effect, organizations.26 In 501(h) section (1976). permits It § Stat. congressionally-engineered constitutes described in section “less restrictive alternative’’ to the opt regulation out under “substan- 501(c)(3). Rarely restriction in section part” (cX3) tial standard of and come under position presented courts in our with such a precise quantitative limitations on ready-made, legislatively-created solution to they may spend leg- influencing amount on problem the sort of first amendment raised expenditures”) (“lobbying islators and recognize here. We should therefore public (“grass expenditures”). roots I.R.C. this Congress great action is entitled 501(h)(2)(A), (C). Generally speaking, § weight. 501(c)(3) organization section prudential aspect addition to this a church so elect. I.R.C. relationship between the two subsec- 501(h)(5). By electing un- treated § tions, is an important logical there connec- 501(h), per- der section hand, 501(h) mitted, tion. On the one if section subject to certain require- disclosure truly ments, offers less restrictive expend alternative on lobbying “grass than political activity up section like roots” 25% parties significance ultimately 501(h), 25. The did on § not focus became “further decisions 501(h) arguments markup before § were made in committee sessions ability willingness court. Taxation’s Throughout Treasury . 1974 . . De- coverage 501(h), elect see discussion partment, many of the charitable considered, infra, proposals, 755-756 not be representa- need interested these rely simply however for we on that section not major religious organizations joined tives of all affording as less alterna- Taxation a restrictive agreements ...” staff members reach fact, guidance tive in also as source of Id. evaluating scope 501(c)(3). existing §of (Although 501(h) pro- section related passed part were as visions Tax Reform early 26. At as least held 94-455, writing hearings problems posed Act of Pub.L.No. the tax on originally (c)(3)’s Legisla- committees con- of both houses § 501 restriction. See bill, Activity by separate Types Exempt tive ganizations: sidered the H.R. measure as a Certain Or- 94-1210, Hearings H.R.Rep.No. Before House 13500. See U.S.Code Comm, Means, Ways Cong., 6640; Cong. p. S.Rep.No. 92d 2d & Admin.News 94-938, Sess. 94-1236, Cong. Several bills S.Rep.No. were introduced & U.S.Code subject prior earlier sessions on the to the ulti- p. 2897, (conference report) Admin.News adoption 501(h) mate of section the 94th (all (1976)). Cong., 94th 2d Sess. 94-455, in Pub.L.No. 90 Stat. 1520 94-1345, H.R.Rep.No. U.S. Code 27. Taxation has declined to so. We discuss do Cong. 1976, p. Cong. & Admin.News significance of this decision at (June 8, 1976). According Rec. 16886 to Con- infra. gressman Ullman, sponsor of the bill that It exempt purposes speci- remains to whether spends amount it considered *37 501(h) the availability of section 501(c)(3).28 Expenditures alternative fied in in section is, is it relevant here. I believe that not- ceiling excess of this amount result in the withstanding the fact that Taxation has imposition a the of 25% tax on excess. elected not to come under that section’s 4911(a)(1). I.R.C. § coverage. clarify history attempts of and signifi- As chief previously, noted the quantify political activity limits on the the 501(h) purposes cance of for the section of exempt organizations which culminated represents the this case lies in fact that it 501(h) in adoption the of section in 1976is a to meet congressional recent enactment congressional activity fine example problems raises. The that Taxation now response to first amendment concerns. (1) Congress that statute indicates finds 501(h) features of section and related activity might legislative lobbying that provision, satisfy section combine to compatible purposes to a with charitable any objection valid that Taxation have extent, any limited charitable First, lobbying they rep- to the restriction. organization wishing legisla- engage resent of Congress’ clear statement should, activity judgment tive in the understanding relationship between subject Congress, regula- to well-defined purposes political activity. tory lobbying limits on activities. Any ambiguity purpose to un- claimed organization an Whether or not chooses to derlie 501(c)(3) lobbying the section restric- coverage 501(h), elect under these section tion, 16; majority op. see Taxation Br. at congressional must determinations be re- 501(h)’s resolved treat- section spected. Second, subject.29 ment of the Taxation’s Although from all indications in Taxation objection that section denies all qualify record would for treatment un- tax an benefits to does 501(h), der section it before testified (i.e., some a more than an insubstantial District Court it elected not to be so of) lobbying, amount is addressed section treated: 4911’s expendi- 25% tax excess has not does made and [Taxation] 4911(a). tures. I.R.C. The loss of tax § make, plan to an election under sections is, system, directly benefits under this pro- 501(h) and 4911 of the Code. Such an portional organization’s to the extent of the might require accept election us to re- lobbying activity, eliminating alleged justified strictions are which or au- “massive overkill” effect section thorized under First Amendment of 501(c)(3). 17. Finally, See Br. at Constitution, right on our to commu- legislative history and structure of sec- nicate with our contributors and members 501(h) illustrates the weakness of the regarding of legislative matters interest. claim, see Taxation Br. at 501(h) Sections also fail is seeking regulate speech because of its any specificity define with narrow impact.30 communicative “legislative terms as and “tax- activities” 4911(c) 28. I.R.C. sets forth the formulae for created § test, which part” possibility determining the maximum expenditures per- two different size spend mitted. amount same dollar would be treated because that amount bears a differently facing legislative different to the total relationship expenditures could have activity by exempt Cong.Rec. organizations. chosen to restriction. This repeal 1976); (daily S16884 ed. see June also suggesting do, declined to doubts about United,” Walters, “Americans Inc. v. of that section as in 1934 purpose adopted jurisdiction- (D.C.Cir.1973), 1169, 1173 rev’d on largely are misconceived. grounds al nom. v. “Americans sub Alexander “sliding 4911’s noteworthy § Particularly United” Inc., 752, 94 scale” definition level of permitted politi- cal This was included expenditures. provision as an alternative “substantial event, reason, expenditures”. For this those restrictions serve able 501(h) might under section re- election clearly valid interest are drawn quire impose us to on the prior restraints comport precision with sufficient weekly publication of Articles our requirements of the first amendment. news-magazine, Tax Notes. An election require 501(h) might section us also III. accept legislative limitations on our activities which we believe are unconsti- Next to be considered is Taxation’s *38 imposed tutional not claim imposing second that the similarly exempt organiza- situated tax restriction on the activities of section as, tions, such example, associa- trade organizations, 501(c)(3) placing while no tions, societies, unions, fraternal labor upon similar restriction fraternal organizations, veterans practice, and in exempted by tions sections addition, churches. In the of an income (10) or exempted by veterans’ sec- organization Rep- such as Taxation with 501(c)(19), against tion discriminates Taxa- Washington normally of resentation fluc- impermissible in a constitutionally tion widely year year. tuates from to There- similarly rejected. manner. This claim is practical matter, percentage fore as legislative attempts Recent to deal with 501(h) test —such as in that section —to complex relationship money, politics, of the permissible spend- determine the level of guarantees provid- have and constitutional ing legislative activities is unworkable. Supreme opportu- with several ed the Court (J.A. 15-16). Field Aff. 2-3 applicable to set forth the standards nities Except complaints for the same dis- support here. Those the standards conclu- criminatory treatment that it raises this Congress consistently sion that has acted case, alleged Taxation’s reasons for choos- requirements with of the first amend- remain to section ment. objections (1) to conclusory amount evaluating claim of unlawful dis- specificity statutory terms in sections crimination, whether under the constitu- 501(h) “workability” first, tional strictures and four- quantitative fifth expenditure limitation. or questions regarding 501(h) These teenth amendments under some other section obviously provision law, it not suited for resolution must be remembered However, do “[sjometimes grossest here.31 we not believe that that discrimina- precludes this recognizing us from ex- treating things can lie tion that are dif- or congressional istence of statute exactly though they ferent as were alike represents. it determinations that Al- Valeo, 1, 97-98, Buckley ...” v. 424 U.S. though compelled Taxation cannot be 612, 672-673, (1976), S.Ct. L.Ed.2d coverage 501(h), elect under section Fortson, quoting Jenness v. 403 U.S. present mean does not that its must be case 1970, 1975-76, L.Ed.2d statutory evaluated as if that alternative (1971). presumed simply It cannot be did not exist. complains parties, two one of who treatment different from that received From the foregoing, is submitted that other, similarly are situated so that the Congress legitimately has distinc- drawn a rises the level difference of “discrimina- between charitable Obviously, tion.” differential treatment of engage in substantial and those persons members of do not. The different classes restrictions to which subject depend upon equated is the ex- cannot differential treat- tent right lobby, of its exercise persons identically ment situated. Con- Taxation, adverting specif- paid It noted is while able deference should also be vagueness quantitive alleged its affidavit to the of terms ic set forth in the statute. standards 501(h) Valeo, 1, 30, 83, Buckley used §§ similar raised no vagueness objections 612, 640, 501(c)(3). §to Consider- establish, speech. however, What scrutiny alleged of an it does stitutional “discrimi- short, nation,” presupposes es- that when determines that two complaining sential characteristics significantly serve different party indistinguishable are in the main purposes, present significantly different from the characteristics of those who are regulatory problems, the Constitution does alleged favorably. treated more require it to afford them identical treat- Equal protection does require ment. “things which are different in fact ... be majority opinion The fatal defect in the though they treated in law as were the recognize its failure to different regula- Texas, Tigner same.” tory presented by considerations veterans’ L.Ed. 1124 501(c)(3) organizations. groups36 beyond dispute We take it that were adopts assumption that, majority the tacit preserve existing benefit restriction, but for Taxation is provisions favoring veterans’ purposes legally for all relevant indistin- wholly eliminating while those afforded guishable groups. The ma- organizations, other charitable jority therefore draws the conclusion that *39 would be without colorable of dis- claim permitted by the difference in treatment crimination the first or fifth amend- that touching restriction discrimination Generally ments.32 speaking, Congress is right speech. on the fundamental of free I free, subject to the minimal constraint of disagree strongly assumption with the that to “rationality,”33 determine that veterans’ groups Taxation and veterans’ are identical- groups worthy are of those benefits while ly respect purposes situated with to of groups with charitable or educational Congress benefits, in conferring these tax purposes are The not. fact that veterans’ consequently accept and cannot the conclu- organizations permitted engage would to majority sion the draws from it. lobbying among in their other activities34 would not be for to com- cause majority appears view to veterans’ plain congressional discrimination favor- organizations 501(c)(3) simply organiza- as speech veterans’ over its Govern- own. happen which purely tions for technical rea- ment is free to choose the which interests to subsection, occupy separate sons to Code structure, support offers via the tax even 501(c)(19). ignores That both view Con- if as a groups result some are to exer- able gress’ understanding own Tax Code’s speech rights cise their at a lower effective character, provisions unique and the status cost than are others.35 groups and function of veterans’ under the Insofar laws of United as these States. The foregoing would not establish important reveal between differences veter- constitutionality of a measure that condi- groups tioned ans’ and receipt of a benefit educational group one general, over particular polit- groups nothing another on the basis of in the first or interests, ical views or Congress nor that of one fifth amendments forecloses from imposed a direct protected legislating burden on on the those basis of differences See, maj.op. contrary upon govern- 32. place Part IIA. 35. A rule would obligation providing equal ment re- publish Dukes, to sources all who would their views on 33. See New Orleans any subject. obligation That no such exists is obvious, Maj.op. (per majority curiam). as the notes. 726. congression- Assuming 34. the absence of other majority appears agree upon activity. 36. al Because limits this Limits of sort Treasury conjunction presently respect the statute read in with fact exist with to veterans’ regulations Congress. does fact restrict chartered Act of See, e.g., (1976) (DAV activities of fraternal a fashion sim- § 90f shall be societies U.S.C. nonpolitical 501(c)(3), any support ilar to this discussion confined to candi- regarding groups. office). date claims veterans’ for Taxation’s There are discussed at 760- 761 infra. 501(c)(3) groups subject being from essen- as it has done here. Far re- charities, vet- It viewed tially Taxation and striction.38 fungible as into a falling groups tions class fundamentally groups erans’ different tax-exempt entitled to enjoy status without operations, their purposes, in their their political restriction activities. responsibilities law. Those dif- under the that Taxa- ferences lead the conclusion Second, legislative evolution subjected to tion has not been unconstitu- income, specific provisions gift and es- tional discrimination. tate deductions contributions shows Congress, having originally extended groups The fact that veterans’ are treat- exempt the benefits of status deducti- (501(c)(19)) ed statutory provision in a dis- types to all bility charitable and educa- general exemption tinct from the chari- groups, subsequently tional determined to table educational sec- 501(c)(3) withdraw it from section or- suggest itself tends to ganizations engaged in substantial at- essentially viewed these tempts legislation.39 to influence The basis types organizations. different ma- for that decision need not be set forth ex- jority separate attributes this treatment plicitly for it be entitled court’s reasons, purely technical namely, the need respect, but previously quoted debate on insulate veterans’ cogni- action was shows tax imposed on unrelated business income drawing. zant the distinction it was op. Reform Maj. Tax Act present This evolution section S.Rep.No.92-1082, Cong., 92d 2d extending the benefits of —first (1972); H.R.Rep.No.92-851, Cong., Sess. 92d exemption deductibility, paring later 2d attempted explana- Sess. That precisely response them back —is the sort of tion is not sufficient. *40 experience experi- legislative to social First, appears it that at the it enact- time Supreme ment that the Court has held most 501(c)(19), ed Congress section viewed vet- worthy judicial Contrary of deference. to erans’ falling as the outside majority opinion, the the rule that “reform scope 501(c)(3). of section In stating step time, may take one at a addressing understanding existing law, of the the com- phase to of problem itself the the which reports 501(c)(19) mittee on section stated legislative seems most acute to the mind”40 groups that qualified veterans’ “so- as fully applicable is to this case notwithstand- cial 501(c)(7) clubs” under “so- section or as presence of first amendment con- organizations” cial welfare under section meaning That is cerns. the unmistakable 501(c)(4).37 At Congress the time enacted Supreme holding Buckley Court’s 501(c)(19), then, Valeo, it believed that veterans’ supra, 424 U.S. 96 46 S.Ct. groups were not classified with (1976). Cong., 92d Sess. 2 condition 92-851, 2d H.R.Rep.No. placed upon exempt status (1972); Cong., 92-1082, 92d S.Rep.No. 2d Sess. now in § was appears adopted (1972), Cong. 2 U.S.Code & Admin.News in order denial deduc- complement p. 3142. groups tions for contributions lobby 170(c)(2)(D). is § now S.Rep.No. 38. Given this recent Con- interpretation Cong., (explaining 73d 2d Sess. gress, legislative the pre-1934 cited history change in rules under the 1939 Code exemption majority, maj. is little op. 732-733, (prior 101(6) change § reference in de- might value. Whatever one make of the “pre- 23(b)). This fact fur- ductibility prior history” restriction, since 1934 ther the view that intent supports principal Congress has without view deviation taken the Congress imposing restric- veterans’ section self-serving was to curtail “donations” in- 501(c)(3) organizations different essentially with compatible the charitable Con- purposes in character. sought gress to further. 39. The initial focus of the decision to deny these benefits 483, 489, lobbied 40. Williamson v. Lee Optical, was organizations’ upon the status, 99 L.Ed. 461, 465, exempt upon them. deductibility contributions ment, Buckley, presented explicit was the Court made holding the Court its challenge to various features of the Fed- understanding Congress’ that this power Campaign

eral Election Act of fully applicable was in first amendment seq. Among 431 et U.S.C. § precisely cases of the character presented issues there was claim that present here. See id. U.S. at 105 n. provision providing of the Act for feder- n. S.Ct. funding primary campaigns, al election Buckley statute at issue in was an no which allowed funds to candidates for attempt by Congress regulate the effects elections, primary office who did not run in private upon massed wealth federal elec- unconstitutionally against discriminated such, presented tions. As it lying concerns those candidates in violation of the first and very at the political heart of the freedom rejected fifth amendments. The Court this protected by the first amendment. The challenge, holding different treat- regulation imposed by section can justified Congress’ ment was in view of hardly pose be said to equally or still power to structure the conduct of federal more serious threat to those values. elections. The stated: Court specific When the actions of deciding propriety the constitutional [I]n relative groups, to the status of veterans’ of the limitations such a reform meas- including regulation political of their guided by princi- ure we are the familiar activities, closely are examined more than ples that a ‘statute is not invalid under do, majority apparently willing might the Constitution because have Congress’ conclusion is even more evident. did,’ gone farther than it Roschen v. decision in 1934 to limit the re- Ward, [49 501(c)(3) organizations striction to take—to 722], legislature L.Ed. that a need not step amply supported “one at a time” —is time,’ ‘strike at all evils at the same Sem- contemporary continuing “fact Examiners, ler v. Dental regarding unique of American life”42 1086], 79 L.Ed. and that [55 status of in our soci- time, ‘reform may step take one at a fact, ety. In view of this familiar social addressing phase prob- itself to the clearly justified focusing was lem which legis- seems most acute to the perceived its attention on what it to be the mind,’ lative Optical Williamson v. Lee tax-exempt most serious abuse of the or- Co., [75 *41 statutes, ganization namely, the activities 99 L.Ed. 563]. generally-described organizations quoting U.S. at at 501(cX3)43 presently defined in section 641, 647, Morgan, Katzenbach v. 384 U.S. 1717, 1721, 16 (1966) (foot unparalleled veterans have War made In omitted).41 note a footnote to this state- preserva- contributions to the creation and Campaign quiring legisla- 41. The Court cited different remedies. Or so the Buckley Act’s character as a “reform” measure, id. 424 ture think.” Williamson v. Lee may Optical, U.S. at 96 S.Ct. at 676. The 461, 465, 99 L.Ed. long recognized, courts have as the already (1955) (emphasis added). legislative cited clear, itself makes history section is a similar sort of remedial 42. Valeo, U.S. at 96 S.Ct. at Buckley e.g., Seasongood measure. See, v. Commis- (6th 1955); sioner, 227 F.2d Cir. “Americans United," Walters, Inc. v. 477 F.2d fact that the reform implemented (D.C.Cir.1973) (Wilkey, 1169, 1183 J„ concur- lobbying restriction was first in 1934 adopted ring), jurisdictional grounds rev’d on sub nom. does not undermine its status as a “first proper Alexander v. “Americans United” Inc., changes The various step.” statutory adopted S.Ct. 2038, 40 L.Ed.2d 496 since time —the enactment of sections Congress status of an Act of as a “reform” 501(h) (discussed supra) 753-755 and measure is a to be determined committees) (regulating action political Congress reference to —il- the intent evidenced continuing lustrate attention Con- adopting paid by it, and not to the of a predilections gress intervening reviewing to this area in the years. court. “Evils in the same field may be of different and re- dimensions proportions, contingent upon organizations past tion of this nation. Their success of a candi- country begin- in this from the have existed primary case, That date in elections.45 ning. organizations sought have These one, much more so than this tested a stat- veterans, aid disabled their widows assist ute political which made success—and provide and and to orphans, mutual therefore, consequent the content popu- and support among those who and assistance larity political of one’s ideas —a condition on country served their in time war. See receipt aof benefit. The Court never- Glasson, Military generally Leg- W. Pension upheld provision theless as one enacted islation Some of these sufficiently important “in furtherance continuing in the adminis- play a vital role governmental practical interests” little benefitting veterans, tration of laws as rights parties impact on disad- recognized specifically has vantaged thereby. 424 See, provided 3402(a) e.g., for. 38 U.S.C. § Finding S.Ct. at evident 971—72. (1976) (permitting veterans’ there, here, as “there are obvious differ- represent presenting veterans in claims ences in between veterans’ organi- kind”46 to Veterans’ Administration and the fur- 501(c)(3) organizations, zations and section nishing space them). of office The close my judgment decision restrict the coordination between veterans’ 501(cX3) activities of section or- unique. tions and the Con- ganizations by placing upon a condition gress acknowledge has continued to the im- benefits, receipt plac- their without portance organizations by of veterans’ in- upon an identical condition veterans’ corporating them with federal charters in organizations, power was within the of Con- permit carry order to them out gress. philanthropic purposes. e.g., Pub.L. No.97-83, (Nov. 1981) Finally, 95 Stat. 1094 that Congress it must be stressed (chartering United States Vet- has in Submarine fact acted limit the II).44 erans of War Because World political activities of nation’s important unique public played role prominent more groups, including veterans’ groups, Congress properly could Legion the American and AMVETS. The regard as a entity them different kind of governing organi- statutes these and other deserving different tax treatment from by Congress zations of veterans chartered generally that accorded the more described provisions uniformly barring contain them subject to section engaging partisan political activity 501(c)(3). limiting political otherwise involve- pursue. incorporating ments this, demonstrates, It Buckley could do Veterans, American Disabled for exam- perceived even though effect the dif- ple, provided “shall that it be non- might ferent treatment creation of political nonsectarian, organi- and as an groups’ indirect burden on other first Buckley promote candidacy zation shall not presented amendment interests. *42 regulatory provision receipt any person seeking which made the public office.” of a financial benefit (campaign funding) added)47 (emphasis U.S.C. 90f In- § organizations similarly 44. Other veterans’ are 46. Id. incorporated. See note 47 infra. (1976) (American 47. See also U.S.C. 46§ adopted by Under standards the House and and, Legion nonpolitical organi- “shall as an Judiciary Committees, Senate federal charters zation, promote candidacy any shall of granted only “unique of person seeking public office”); (“No id. § 67d character,” “organized oper- and which are part of the activities of Veterans [American of charitable, solely literary, educational, ated carrying World War shall II] consist scientific, patriotic improvement pur- or civic propaganda” any political supporting par- or of poses nonpartisan nonprofit organi- ... as ty candidate); (Blind or id. Veterans § S.Rep.No. Cong., ...” 97th zation^] nonpolitical World War 1 “shall be and shall 1st Sess. 2 partisan not be used for the dissemination Valeo, Buckley 45. principles”); (Paralyzed 96 S.Ct. at id. § Veterans of America). Amendment, deed, component imposed Fifth we recently Congress has most restrictions, to the restric- charter identical would have find that because 501(c)(3), upon tions of section United provision Act burdens First of World War States Veterans Submarine rights subject persons Amendment War II American Veterans and the Italian 441a(a)(l)(C) greater to a than § extent of the Their charters were United States. rights corpora- it same burdens’ the subject granted by Congress in 1981 to the unions, tions that such differen- restriction that “shall not contribute justified. tial is not We treatment need to, support participate any or otherwise not consider this second —wheth- political activity any attempt or in manner alleged by appel- er the discrimination legislation.” to influence justified lants is we find no —because To the extent that such direct limitations such Appellants’ discrimination. claim of on the activities veterans’ unfair ignores plain fact treatment exist it even necessary is not consider the imposes the statute as a whole far extent to which the different treatment fewer restrictions on individuals and un- 501(c)(3) organi- accorded them section incorporated associations than it does on provisions zations of the within Tax corporations and unions. justified by government’s Code is inter- (first added). Id. emphasis at 2724 extent, est in veterans’ affairs. For to that imposed political The restrictions on the groups operate veterans’ under constraints activity of most veterans’ essentially identical49 similar even consistently show that has re- imposed by upon those section sponded any perceived ‘impurity’ in the Taxation, groups like and hence no true organiza- philanthropic purposes of those “discrimination” their favor occurs.50 As tions.51 The that it fact has chosen do so Supreme recently Court stated in Cali- by means other than amendment fornia Medical Association v. Federal Elec- Commission, respect tion Tax lessen the we Code does not (1981), owe upholding judgment. Congress free not 320(a)(1)(C) section only step solving Federal Election to take at a “one time” in Act, Campaign perceived problem, but also to choose dif- problems. already We have ferent forms of solutions to such concluded 441a(a)(l)(C) impli- “That does not first amendment interests are § violate First In begin, inquiry.” Amendment. order to cated should not end our conclude it protection equal Against City nonetheless violates the Citizens Rent Control v. 8(c), (Nov. presidential 97-82 dorsed a § Pub.L.No. 95 Stat. 1092 candidate in 20, 1981); 8(c), Maj. op. Pub.L.No. 97-83 95 Stat. election.” actuality, § at 723 n.15. (Nov. 1981) (emphasis added). appears it cited news source was a Political Action Committee formed 49. See id. organization members of a that made veteran’s (Wash.Post, 17, 1980). the endorsement. Jan. clearly 50. This is most in the case instance Times, (“To Aug. See N.Y. at 6 avoid sought of contributions to be deducted from the status, tax-exempt risking its the V.F.W. last 2055(a)(4). estate tax under section That sec- year political separate created a action commit- makes contributions to veterans’ added)). (emphasis tions if tee to back deductible the contribution is “to candidates.” imposed or for the use of incorporated by In view of various restrictions Any committees, upon Act of ...” both Federal under the placed upon political Act, conditions activities of Campaign e.g., 2 Election U.S.C. charters, then, corporate these in their 441a(a)(l)(C) (1976) and Tax under the Code *43 explicitly incorporated provision are into the itself, majority’s the com- see U.S.C. contributions, governing deductibility the Indeed, ment restrictions is of no moment. the and the effect is as if 2055 itself im- section go imposed upon political further committees posed political the restriction on involvement. given close demonstrate the attention these by Congress. concerns I see fail to the relevance to the scrutiny majority’s restriction here under the one assertion that veteran’s “en- - -, larly distinguishable -, like Berkeley, (White, J., 70 L.Ed.2d avowedly incorporated are dissenting). in As the Court stated Califor- operated chiefly exclusively and for the Association, within nia Medical even purpose lobbying Congress on matters of regulations touching protected area of event, public Congress, finance. in was speech, Congress may “that determine these distinction, clearly justified drawing differing pur- have structures and entities treating perceived and in what it to be poses, may require and that therefore they abuses of tax laws it has here. Sec- regulation in different forms of order to 501(c)(3)accomplishes objective tion protect integrity proc- of the electoral wholly way, is there- content-neutral added). (emphasis ess.” 101 S.Ct. fore consistent with constraints of the first amendment.

IV. system majority While attributes agreement There is that the unanimous regulation challenged simple lobbying restriction in section here con- does impose upon “inadvertence,” op. maj. unconstitutional burden gressional the exercise of Taxation’s first amendment respect I would afford it the dictated rights. holds, however, The majority that Buckley by long sorry and counseled imposing upon judicial history forays legislative into tions an identical restriction—the threat of Here, Congress province. has treated vet- losing benefits under the Internal groups differently erans’ from the vast un- Congress unconstitutionally Revenue Code— mass of claim- differentiated against discriminated Taxation. purposes. educational and charitable It opinion, my holding fails accord recognized has that veterans’ are Congress due, respect it is even areas unique having “differing entities structures regulation may place where an indirect bur differing purposes, and that there- interests, den on first amendment when require regula- fore different forms legislating insure interest Association, tion ...” California Medical ignores best served. To the extent it supra, Nothing at 2724. fact that has used means besides opinion persuasive majority either of the system regulate the tax the otherwise of that conclusion or of incorrectness Con- fully protected political activity of veterans’ authority gress’ legislate lack groups, majority leaps peremptorily basis of it. past the threshold of whether sec respectfully I therefore dissent. groups are in fact discriminat against ed at all. Medical Asso California FEC, supra. ciation v. To the extent that it WILKEY, JJ., join ROBB herein.

fails cognizance to take gradual de velopment of governing political the law

activity exempt organizations which be gan with the passage re

striction in 1934 and which continues into present52 explicit solicitude for —with

the first amendment interest at stake—the majority fails to afford the re

spect due in this field of endeavor. Buck Valeo,

ley v. supra. Veterans’ essentially are different character from other charitable groups. They particu- educational supra. 52. See 760-761