In the Wall Street Journal last Friday, David B. Rivkin, Jr. and Lee A. Casey, attorneys who have served in the administrations of Ronald Reagan and George H.W. Bush, announced their recent discovery that an important section of the Internal Revenue Code violates the First Amendment. If they are right, corporations will have even greater power to strengthen the corpocracy that now substitutes for a democracy.
Section 501 (C) (4) of the IRC has long been interpreted to provide that social welfare organizations are tax exempt so long as partisan electoral activities as opposed to lobbying or non-political activities do not form their primary purpose. This section contrasts with section 501(c)(3) in that the (c)(3) organizations cannot engage in any partisan electoral activity though they can engage in some lobbying activity.
You probably are aware that 501 (c)(4) organizations have been much in the news. Unleashed by Citizens United, corporations have flocked to funnel funds through them for partisan electoral activity. Why 501 (c)(4) organizations rather than organizations that are primarily or exclusively devoted to electioneering? Because the 501 (c)(4) organizations are not subject to federal contribution disclosure requirements and the fully political organizations are subject to those requirements, not to mention less favorable tax treatment. The rise in 501 (c) (4) organizations famously aroused the suspicions of the IRS with the entirely proper worry that many of these new 501(c)(4) organizations were political organizations in disguise. The recent scandal is that the IRS allegedly selected conservative, but not liberal organizations for investigation.
Enter Rivkin and Casey. They maintain that permitting 501 (c)(4) organizations to engage in lobbying activities, but restricting their election activities to keep this tax status is impermissible content discrimination. Indeed, they insist that if it is permissible to have social welfare organizations that promote botany without permitting political organizations to have 501 (c)(4) status, that is also impermissible content discrimination. In other words, if 501 (c)(4) organizations are to be maintained, the Constitution requires that the organizations be able to spend all of their funds for election purposes. Fortunately, the content discrimination Rivkin and Casey woodenly deplore has long been upheld. For example, the Court has held that it is permissible to distinguish between substantial political lobbying and insubstantial lobbying to distinguish 501 (c)(3) and (4) organizations and affording different tax treatment (such as whether contributions are tax deductible) on the basis of those speech activities. Does this require content discrimination? Of course. But the Court recognizes that there is a difference between censoring political speech and determining whether to subsidize that speech through the tax code. Rivkin and Casey’s column is significant not only because it illustrates how the content discrimination doctrine can be carried to a tortured extreme, but also because it exhibits Wall Street Journal chutzpah. Not only are we to provide corporations a tax deduction for their political expenditures (as an ordinary and necessary political expense) and allow them secretly to funnel political funds into organizations that can spend almost half of their contributions for political election purposes, we are required to let those organizations spend all of their money for political election purposes. Even worse, Rivkin and Casey ask us to believe that their proposal is designed to help “ordinary people” as opposed to “wealthy players.” If you believe that, let me know. I have a bridge to sell you.