Editors’ Note: Philip Hamburger introduces some central arguments of his recently published book, Liberal Suppression: Section 501(c)(3) and the Taxation of Speech. Ellen Aprill will follow later this week with a review of the book.
Last spring I published a book on a revenue subsection—not something that would ordinarily stir the passions of readers. The subsection in question, however, is section 501(c)(3) of the Internal Revenue Code. Many Americans will therefore already recognize that much is at stake.
The section exempts religious, educational, and charitable organizations from federal income tax. At the same time, it denies them this exemption if they engage in campaign speech or if they devote a substantial part of their activities to propaganda or other attempts to influence legislation. Churches, charities, and non-profit schools thus must choose between paying a tax and exercising their full freedom of political speech and petitioning.
Of course, there is a dispute about the character of the exemption. Is it a tax subsidy, or is it merely a measure of the tax code’s baseline—a recognition that nonprofits are not the sort of organizations that are subject to income tax? Either way, the exemption creates a powerful tax incentive for churches, charities, and non-profit schools to limit much of their political speech and petitioning.
This Hobson’s choice is especially troubling when one considers the idealistic character of these organizations. It is usually said that section 501(c)(3) exempts “nonprofits,” and this anodyne technical label may suffice for calculating taxes. But it fails to capture section 501(c)(3)’s broader import, for by including religious, educational, and otherwise charitable organizations, it takes aim at the central categories of idealistic associations.
No less astonishing is the sort of political speech limited by section 501(c)(3). Idealistic organizations are entirely free to speak politically outside political contests but not in politics. For example, a church can advocate universal health care coverage at a theological conference, but not substantially to members of Congress, and not at all to support or oppose a candidate in an election.
The result is a conundrum. On the one hand, the First Amendment centrally protects political speech. On the other, section 501(c)(3)’s broad suppression of political speech is widely considered normal and constitutional. Although not the most sharply focused or harsh abridgment of political speech in the nation’s history, it is among the most sweeping attacks on such speech, and it is therefore a puzzle.
My new book attempts to understand this oddity. Most concretely, it reconsiders the constitutionality of section 501(c)(3)’s speech restrictions. Along the way, it more broadly documents the role of theological liberalism in demands for the suppression of speech, and this is why the book is called Liberal Suppression: Section 501(c)(3) and the Taxation of Speech.
Theological Liberal Anxieties. Put simply, what underlay section 501(c)(3)’s speech restrictions (and many other contemporary speech limits) have been long-standing liberal anxieties about authoritative group speech. Such fears became popular in the nineteenth century, and in the twentieth they bore fruit in law.
Nineteenth-century churches and other idealistic associations participated freely in American politics, but it took an aristocratic foreigner, Alexis de Tocqueville, to recognize the significance of their role. In an egalitarian society, he observed, individuals are apt to be psychologically isolated and politically weak, and thus vulnerable to government. But they can overcome these difficulties by joining together in associations, through which they can exert themselves far beyond their own meager power. They can thereby acquire confidence and strength in relation to government, including the power to shape public opinion and, at the very least, to prevent government from controlling the public opinion by which government should be controlled.
Idealistic and especially religious organizations—groups that are neither businesses nor political organizations—are especially important for such purposes. Their commitments rise above the everyday give-and-take of political and financial bartering and therefore often collide with the workaday assumptions of government and business. With such ideals, such organizations enable individuals and indeed large swaths of the public to pursue lines of thought and action more or less independent of both government and the market. This is why idealistic organizations often seem worrisome to government and business. But it is also why a vibrant society needs such organizations.
Nonetheless, the speech of the idealistic associations so valued by Tocqueville increasingly became the object of theologically liberal anxieties. For example, in 1830, in opposition to the authoritative speech of more-or-less Calvinist churches, William Ellery Channing preached:
“There are countless ways by which men in a free country may encroach on their neighbors’ rights. In religion the instrument is ready made and always at hand. I refer to Opinion, combined and organized in sects, and swayed by the clergy. We say we have no Inquisition. But a sect, skillfully organized, trained to utter one cry, combined to cover with reproach whoever may differ from themselves, to drown the free expression of opinion by denunciations of heresy, and strike terror into the multitude by joint and perpetual menace,—such a sect is as perilous and palsying to the intellect as the Inquisition.”
Fearing that individuals would “lose themselves in masses” and “identify themselves with parties and sects,” Channing urged an “inward” or mental freedom from “the bondage of habit,” from the slavery of “precise rules,” and from anything through which the “mind” might be “merged in others.”
Such fears were later given eloquent expression by John Stuart Mill, but he was expounding already familiar sentiments, which had long flourished in America as anxieties about the speech and other influence exerted by churches—as well as charities and business corporations. These theologically liberal fears of group opinion and speech transformed American religion, culture, and politics in many ways—some valuable, some not. Such concerns were particularly a mixed blessing in laying a foundation for suppression. They suggested that authoritative speech, or at least the speech of a group claiming authority, could be oppressive to individuals—a conclusion that eventually would be understood to justify government intervention.
Adding to the danger from theologically liberal fears, nativists adopted such a stance against the Catholic Church. Theological liberalism flourished in early nineteenth-century America in opposition to Calvinism and other Protestant claims of “orthodoxy,” but it was soon applied by nativists more forcefully against the Catholic Church. Not merely concerned about how ecclesiastical authority threatened the mental independence and thus the faith and salvation of individuals, nativists complained that Catholic clergy were instructing Catholics how to vote, thus undermining their independence as citizens and threatening democracy.
These developments—both theologically liberal and the nativist variant—became intertwined with broader and more political versions of liberalism. Liberalism acquired a theological bent against authoritative group speech, and a nativist twist that made such speech seem a threat not only to individuals but also to the state and its democracy. It was a majoritarian combination of hyper-individualistic and democratic anxieties that boded ill for the expression of minority beliefs.
These liberal anxieties so permeated American life that they often transcended narrow religious and political affiliations. Many Catholics and many Republicans, for example, were theologically, culturally, and even loosely politically liberal, and it should therefore be no surprise that support for section 501(c)(3)’s speech restrictions cut across conventional divisions. Liberalism, perhaps especially its theological elements, was a profoundly appealing mode of thinking, which for both good and ill, extended to different degrees through much of the nation.
Section 501(c)(3). The theological and, increasingly, broader liberal assault on supposedly antidemocratic speech became a reality in twentieth-century tax law. Section 501(c)(3)’s speech restrictions (and the identical Section 170 restrictions on deductibility) are usually understood as a mode of political suppression, for they were proposed by Senator David Reed in 1934 and Senator Lyndon Johnson in 1954 in response to their political opponents. And this is bad enough. But the speech restrictions were not merely political, for underlying them were liberal anxieties—indeed, prejudices—about the speech of churches and churchy organizations.
Tellingly, the first person who is known to have prominently proposed a combination of both of the speech restrictions was Hiram Evans—the Imperial Wizard of the Ku Klux Klan. In 1930 he asked whether a church can “be allowed to organize political machinery on a religious basis,” and whether it may “use its spiritual authority to coerce voters or members who are in public office?” In thus seeking limits on ecclesiastical persuasion of voters and legislators, he laid out the dual speech restrictions that would soon find expression in section 501(c)(3).
Although his main motivation was anti-Catholic—to “hit political Catholicism”—his vision was more generally theologically liberal. For example, he said that “we must make Catholics know the American meaning of freedom, equality and Liberalism.” And he demanded restrictions not merely on Catholic speech, but more generally on the speech of all churches—seeking “limits of their right to political activity either directly or through religious power over their followers.”
The point is not that Evans’s proposals were necessarily read by Senators Reed or Johnson, but rather that such ideas were in the air. The suppression of speech embodied in section 501(c)(3) did not appear ex nihilo.
How much did section 501(c)(3) arise out of nativist and other theologically liberal demands? Consider the so-called “lobbying” restriction. It unabashedly echoes nativist language.
Although often euphemistically recast in terms of “lobbying,” this restriction, in fact, does not mention lobbying. Instead, it says that an exempt organization is one “no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation.” This strange locution was not an accident.
In their theologically liberal assault on the Catholic Church, nativists repeatedly complained about Catholic “propaganda” and its “influence” on “legislation.” For example, a 1927 Fellowship Forum book called Proof of Rome’s Political Meddling in America complained about the Church’s “propaganda agency” in Washington and about the “spread of their propaganda” and “their efforts to mold or control legislation” and to “influence members of Congress.” These nativist protests against Catholic propaganda to influence legislation became an insistent drumbeat in the first half of the twentieth century.
And the nativist complaints were merely part of broader and more pervasive liberal concerns about the speech of all ecclesiastical and other idealistic organizations. To understand the reach of such anxieties, not least in Congress, one might consider that in the late 1920s two-thirds of the Senate (including Reed) and 70 percent of the House of Representatives were Masons of one sort or another. Although many Masons (including Reed) opposed crude attacks on Catholics, many also thought—as Reed put it—that Americans of the “old stock” had reason to worry about Catholicism. Masons of this sort could be somewhat nativist in their anxieties about Catholicism, but also more broadly liberal in generally fearing the authoritative speech of all churches and idealistic organizations.
There were thus layers of anxieties—nativist fears of Catholic propaganda to influence legislation, reinforced by more broadly liberal concerns about church and churchy speech. It is therefore no surprise that when Senator Reed faced opposition to some of his legislation, he introduced his 1934 speech restriction in terms of “propaganda” to “influence legislation.” Nor is it a surprise that Congress adopted this speech limitation.
This is not the place to recite the full range of evidence. Suffice it to say that theological anxieties underlay section 501(c)(3)’s speech restrictions—even to the point that nativist code words, about “propaganda” to “influence” “legislation”—became part of the law.
Unconstitutionality. The constitutional questions about section 501(c)(3) are usually given short shrift. The section’s restrictions are widely assumed to be a technical tax matter, of little broader import, and even when the constitutional questions are reached, they tend to be brushed aside on the ground that the restrictions are merely conditions on spending. By now, however, it should be obvious that this seemingly technical tax provision was born of liberal “democratic” anxieties that reek of prejudice.
Does this matter? Well, in Regan v. Taxation with Representation (1983), the Court upheld the restriction limiting propaganda to influence legislation. But it added: “The case would be different if Congress were to discriminate invidiously in its subsidies in such a way as to ai[m] at the suppression of dangerous ideas.” Well, that is exactly what Congress did. The very Supreme Court precedent that allegedly justifies the speech restrictions thus points to their unconstitutionality.
More broadly, the history of prejudice matters because it can open the minds of readers and induce them to consider the question afresh. The prejudices that underlay the adoption of the speech restrictions have not entirely dissipated; indeed, they remain powerful in tempered forms and even (as shown by my book) find expression in the political theory and Supreme Court doctrine that justifies the speech restrictions. Accordingly, it is important to recognize the underlying prejudices, if only to give readers pause, so that they can find the mental space to reconsider the questions about legitimacy and constitutionality.
Rather than detail the constitutional arguments here, I just want to mention their broad outline. The speech restrictions violate a host of constitutional provisions—most basically, those on speech, petitioning, free exercise of religion, and the establishment of religion. To this, one must also add the due process of law and jury rights.
The violations of these freedoms cannot be justified by any compelling government interest—for example, because the speech restrictions are not narrowly tailored (let alone least restrictive). To be sure, there is a real danger that deductions will become an avenue for government-subsidized political contributions. But this would only justify restrictions on the deductions taken by donors where their gifts were used for political speech; it would not justify sweeping restrictions on the political speech of the recipient exempt organizations.
An immediate objection may be that section 501(c)(3) exemption is merely a tax expenditure and that the speech restrictions are therefore merely conditions on spending. But the speech conditions do not pass muster under the Supreme Court’s doctrine on unconstitutional conditions, which requires conditions to be germane and proportionate.
And even more basically, it is doubtful whether the exemption is really a tax expenditure. Most commentators on section 501(c)(3) simply assume that it offers a tax expenditure, but this has no foundation in tax expenditure theory. As recognized by Stanley Surrey and the Joint Committee on Taxation, although section 170 deductions are tax expenditures, section 501(c)(3)’s exemptions are not. In the Committee’s words, “tax-exempt status is not classified as a tax expenditure.”
One might find it reassuring that nonprofits can find alternative avenues for speech in section 501(c)(4) organizations and section 527 PACs. As a practical matter, however, the alternative pathways cannot fully compensate for the loss. And even if by some mundane metric they could, they still could not solve the constitutional problem, which is that idealistic organizations have been denied their freedom to speak—that is, their freedom to speak in their own voices.
Consider the fate of churches. For religious reasons, many churches must pray, witness, confess, profess belief, petition, and plead in their own voice. Only when speaking in its own voice, or in the united voices of its members, can such a church speak with religious authority and authenticity—let alone with passion and moral force. It is therefore a profound affront to the freedom of speech, not to mention the freedom of religion, to suggest that churches can find adequate substitutes for their own voices in 501(c)(4) organizations or 527 PACs.
Last but not least, note that the sensibilities of First Amendment lawyers are very different from those of tax lawyers. Speech constraints that seem “minor” in tax law are not viewed with such complacency in First Amendment doctrine.
In fact, section 501(c)(3) has thus far survived constitutional scrutiny only because of the repeated bending of constitutional doctrines. The Justices of the Supreme Court have not been immune to the theological and cultural predispositions that animated the legislators who adopted section 501(c)(3)’s restrictions. The Justices have therefore had difficulty seeing the constitutional problems and have unselfconsciously bent constitutional doctrine in the same direction as the restrictions. The prejudices that produced the suppression have also gone far in upholding it.
Conclusion.This essay, being only a summary, cannot address all of the issues raised by section 501(c)(3). Nor can it delve into my book’s other themes—such as the nativist ideas underlying John Rawl’s liberal democratic theory, the importance of equality in securing public support for rights, and the theo-political foundations of many contemporary speech restrictions.
But I hope this essay can at least persuade readers to reconsider their assumptions about section 501(c)(3). Too often, the constitutional concerns about the section are brushed aside on the theory that its speech restrictions are merely technical tax provisions, that they are conditions on tax expenditures, that they leave open other avenues for speech, that any constitutional questions have been put to rest by Supreme Court precedent, and so forth. These are distractions, and mistaken ones at that.
The sad reality is that the speech restrictions give effect to popular anxieties—really prejudices—that have become part of the fabric of American life. It should therefore be no surprise that the restrictions are unconstitutional and that this has not been adequately understood.
Philip Hamburger is the Maurice and Hilda Friedman Professor of Law at Columbia Law School and recently became President of the New Civil Liberties Alliance. Before coming to Columbia, he was the John P. Wilson Professor at the University of Chicago Law School, and in his youth he practiced in business law and corporate tax. He has written extensively on religious liberty and freedom of speech, and his books include: Separation of Church and State (Harvard 2002), Law and Judicial Duty (Harvard 2008), and Is Administrative Law Unlawful? (Chicago 2014). He has twice received the Sutherland Prize for the most significant contribution to English legal history, and has been awarded the Henry Paolucci – Walter Bagehot Book Award, the Hayek Book Prize, and the Bradley Prize.