Tax Law and Election Law are now unlikely bedfellows. Political campaigning is often conducted through tax-exempt entities, and the tax code has become an important mechanism for regulating political campaign entities. Ellen Aprill, in her recent article entitled Regulating the Political Speech of Noncharitable Exempt Organizations After Citizens United, explores the constitutionality of regulating tax-exempt organizations post the Supreme Court’s recent decision in Citizens United, which overturned existing rules prohibiting corporations from making contributions to political campaigns. Aprill points out that dicta in Citizens United could provide justification for overturning some of the provisions regulating tax-exempt entities and their involvement in political campaigns. In this piece, Aprill concludes that those provisions are constitutional, and suggests some further regulation that would strengthen some existing weakness in the current regulatory scheme.
Aprill starts with a discussion of the current regulatory framework that applies to tax-exempt organizations. In short, the Code provides certain limitations on the campaign and lobbying activities of tax-exempt organizations. Courts and scholars have generally justified these regulations based on the notion that an entity was not entitled to tax-exempt status and that Congress therefore had the power to define the contours of the tax-exemption. Thus, 501(c)(3) organizations (mainly charities and educational institutions) can be prohibited from intervening in a political campaign, 501(c)(4) social welfare organizations must have social welfare as their tax-exempt purpose, and 527 political organizations can be required to disclose contributions and expenditures. While some scholars have questioned these regulations, I, and others, and in my view the Supreme Court, have upheld these types of regulations. Language in Citizens United indicating that the Congress cannot condition corporate status on a prohibition on campaign contributions by corporations calls into question the constitutionality of the restrictions on tax-exempt organizations. If Congress cannot condition corporate status on a corporation’s agreement not to make political contributions, then can Congress place restrictions on the political activities of tax-exempt organizations as a condition of their qualifying for exempt status. Continue reading "The Constitutionality of Campaign Restrictions on Non-Profit Organizations after Citizens United"