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A~ /" - --'\~ ,..,"~ f :~ ~ / < = " j < ~ ~'f " ~ ~ V ~0, "' ',_ ~ ;~ " , _"; " AXATION OF __ XEMPT ORGANIZATIONS l\'ovt'mber I Deeember 1998 Vol 10 I So 3

Gays and Conservatives Both Have Exemption Battles With the IRS

JEFFERY L. YABLON

Warren, Gorham& Lamont

mrGROUP Gays and Conservatives Both Have Exemption Battles With the IRS

- -· The evidence of alleged IRS bias is really evidence that the law must be changed.

JEFFERY L. YABLON

ilitary personnel some­ dangerous to extrapolate from to include all women, regardless of times say of bad events the two recently reported con­ sexual orientation. !very-Rivers M that the first time is an troversies involving Kathy's Group then sent a follow-up fax to Garvin, accident, the second time is an un­ and The Gay and Lesbian Ado­ stating that the purpose of Kathy's fortunate coincidence, but the lescentSupport System (GLASS). Group should be to "provide third time is enemy action. A sim­ Nonetheless, it is worth noting supportive resources for lesbians, ilar logic has recently led both gay that, in both situations, the con­ their families (whether blood or organizations and_ conservative troversies arose on the initial sub­ affinity) and any women who have organizations to_ conclude that mission to the IRS of the been diagnosed with cancer." the IRS is biased against them. It application for recognition of In response, Kathy's Group is not cle?r, however, how these tax-exempt status. It is also worth obtained the legal services of a Sec­ claims should be analyzed, in­ noting that, in both situations, tion 501(c)(3) organization, the vestigated, or evaluated. What is other parties became involved­ Lambda Legal Defense and Edu­ clear is that the IRS should not be specifically, a friendly tax-ex­ cation Fund, Inc. ("Lambda"), trying to enforce innately vague empt organization that supplied which is the oldest and largest legal and subjective rules about whether legal help and a friendly legisla­ organization serving the gay com­ organizations qualify for tax ex­ tor who applied political pressure. munity.3 On 4/14/98, Lambda emption. staff attorney David S. Buckel Kathy's Group. Kathy's Group was wrote to the IRS asking it to drop incorporated in May 1996.2 An its demand that Kathy's Group ALLEGED ANTI·GAY BIAS application for exemption was filed alter its mission statement and to Encounters between taxpayers in January 1997, stating that the issue a favorable determination let­ and the IRS are normally private organization's purpose is to ter immediately. The letter noted affairs. Indeed, there are laws provide information and support to that there is no authority allow­ lesbians with cancer. In February ing "the IRS [to] force applicants that are expressly designed to 1998, an IRS official, Brenda I very­ -to change their missions based 'on achieve this result. 1 It is therefore Rivers, called the president of the viewpoints of the IRS agent." Kathy's Group, Lorraine Garvin, to Buckel's letter also urged the IRS say that exemption would be grant­ "to ensure that other charitable or JEFFERY L. YABLON is a partner in the Washington, D. C. firm of Shaw Pittman ed if and only if the organization educational organizations that Potts & Trowbridge. He has represented two would change its mission to better serve gay people do n~t face sim­ of the tax-exempt entities discussed herein, serve the "public good." Speci­ ilar difficulties in gaining tax­ The Big Mama Rag and The Progress & fically, the organization's mission exempt status." Freedom Foundation. statement would have to be altered At about the same time, the IRS

November 1 December 1998 Vol10 I No 3 EXEMPTION AND BIAS 109 was contacted by Rep. Barney that counselors and participants do tion 78 as tax-exempt under Sec­ Frank (D-Mass.), an openly gay not encourage or facilitate homo­ tion 501(c)(3). member of the House of Repre­ sexual practices or encourage the de­ sentatives. In a letter dated velopment of homosexual attitudes Big Mama Rag and its aftermath. Big 4/23/98, he called the Service's po­ and propensities by minor individuals Mama Rag, Inc., to which sition "outrageous, and one that attending your programs." GLASS's attorney made reference, I am impelled to fight." He noted GLASS did nothing in response is the best known case involving to this letter for several months, tax-exempt status for homosex­ reportedly because its president ually-oriented organizations. It in­ he IRS should not be trying to was "too intimidated" by the volved an organization that pub­ Tenforce innately vague and "homophobic" tone of the letter. lished a feminist and lesbian-orien­ subjective rules about Ultimately, however, the matter ted newspaper. Officially, the Na­ exemption. was turned over to Lambda's at­ tional Office and the IRS district torney, Buckel. In what would director concluded that tax-ex­ prove to foreshadow the Kathy's empt status should be denied on that a similar problem had arisen Group dispute, Buckel wrote to three separate grounds: " (1) the in the fall of 1997 with respect to the IRS on 7/1/97 to ask that its commercial nature of the newspaper; GLASS, and that he had con­ letter be withdrawn. He stated (2) the political and legislative tacted the IRS at that time on be­ that: commentary found throughout; and half of the organization, expressing (3) the articles, lectures, editorials, the discriminatory language in his concern and requesting that the the September 10, 1996letter etc. promoting lesbianism." Un­ IRS take steps to prevent future echoes inappropriate language officially-and before the litigation manifestations of anti-gay bias by that has surfaced in past IRS began-the organization was told IRS personnel. The 1998 letter considerations of gay-related by IRS officials that a favorable concluded: "I urge you to grant im­ organizations and thus we are concerned that it remains boil­ determination letter would be mediately Kathy's Group appli­ erplate language for IRS issued if it would stop saying that cation for tax-exempt status and agents. See, e.g., Big Mama homosexuality was a mere pref­ I renew my demand that the IRS Rag, Inc., [631 F.2d 1030,46 erence, should be regarded as nor­ AFTR2d 80-5723 (CA-D.C., take necessary action to prevent mal, and was the "equal" of heter­ this problem from recurring. " 4 1980)]. (IRS officials earlier advised appellants counsel osexuality. A week later, the IRS issued a that an exemption could be ap­ The district court agreed with favorable determination letter to proved only if the organization the Service's conclusion, though Kathy's Group. agree(d) to abstain from ad­ not precisely with its reasoning. vocating that homosexuality The court held that tax-exempt sta­ GLASS. GLASS, the entity Rep. is a mere preference, orienta­ tion, or propensity on par tus should be denied because the Frank referred to in his letter, with heterosexuality and described itself in its application which should otterwise be for Section 501(c)(3) status as regarded as normal.)5 helping "young gay men, lesbians 1 See, e.g., Section 6103. and bisexuals" between the ages of Buckel also noted that the Service's 2 Stokeld, "Lesbian Group Gets Exempt 15 and 21 in dealing with their own "methodology test" requires Status After Flap With IRS," 20 Exempt sexuality and resulting harassment, the IRS to examine the method Org. Tax Rev. 390 (June 1998). prejudice, isolation, and low self­ used by an organization to com­ 3 See press release reprinted in 3 Paul esteem. In response, IRS National municate its viewpoint rather Streckfus' EO Tax Journal (hereinafter Office tax law specialist John than the viewpoint itself. "EO Tax Journal") 33 (August 1998). Roman Faron wrote on 9/10/96 On 7/9/97, Edward K. Karcher 4 "Barney Frank Says IRS's Approach that the group could be viewed as of the IRS wrote to withdraw the to Granting Exemption to Lesbian Group is Outrageous," 3 EO Tax Journal152 "tending to encourage or facilitate earlier letter and agree with (June 1998). homosexual practice and propen­ Buckel's analysis of the method­ 5 "Information Letter to Gay Group sities by the young and impression­ ology test. "In order to take a fresh Criticized as 'Antagonistic Treatment' by able." Among a variety of other look at your application, it will be IRS," 2 EO Tax Journal, 8 (8/1197). requests, the letter asked GLASS to reassigned to a different Tax Law 6 Stokeld, "IRS Letter to Youth Group "describe in detail the procedures Specialist ... ,"6 Karcher added. Raises Concerns in Gay Community," 17 and safeguards in place to assure GLASS is today listed in Publica- Exempt Org Tax Rev. 243 (August 1997).

110 JOURNAL OF TAXATION OF EXEMPT ORGANIZATIONS November 1 December 1998 Vol 101 No 3 content of the publication failed quality of an applicant's views lished as Rev. Proc. 86-43, 1986- to meet the "full-and-fair expo­ and goals and therefore to 2 CB 729. Since then, the IRS has discriminate against those en­ acted as if the problem has· dis­ sition" standard of Reg. 1.501(c) gaged in protected First (3 )-1 (d)(3 )(I), which states that an Amendment activities. appeared, but that may not be true. exempt educational organization In the words of one treatise;·'' the ·is permitted to advocate a par­ As for the "unfortunate" com­ [National Alliance appellate] court ticular position orviewpoint "so ments about "promoting les­ long as it presents a sufficiently full bianism" and the language that 'Look, this is a political case and fair exposition of the pertinent Buckel was to quote 17 years facts as to permit an individual or later, the court declared: and the decision is going to the public to form an independent be made at the national opinion or condu.siori. On the The history of appellant's ap­ level.' other hand, an organization is not plication for tax-exempt sta-.. educational if its principal func­ tus attests to the vagueness of the "full-and~fair exposition" did not determine whether the tion is the mere presentation of un­ test and evidences the evils that · supported opinion." the vagueness doctrine is de­ methodology test, whether Among other claims, lawyers signed to avoid. The district _· adopted as 'a matter of practice for the Big Mama Rag asserted that court's decision was based on · or piJder ari amendment to th~creg- .. the value-laden 2onclusion · ulation,' wouldcorrect the Reg­ this standard could not withstand that [the organization] was too ulation's vagueness." 8 .._. ·. constitutional scrutiny. Under the doctrinaire .... Whether or not void-for-vagueness doctrine, a .[the anti-gay comments of the - . ' . statute or regulation is unconsti­ IRS officials] represented of­ IRS institutional responses. On tutionally vague if either ( 1) "men ficial IRS policy is irrelevant. 6/8/98, after Kathis Group ob­ It simply highlights the in­ of common intelligence must nec­ tained exemption from the IRS, herent ·susceptibility to dis­ Buckel wrote to IRS Commissioner essarily guess atits meaning" or criminatory enforcement of (2) it allows governmental per­ vague statutory language.· Charles 0. Rossetti asking that the sonnel such as IRS employees to IRS take steps to prevent discrim­ confer or withhold benefits or After Big Mama Rag, how­ inatory treatment by the agency detriments in an arbitrary and dis­ ever, the edges of the law in this against gay organizations. In re­ criminatory manner.? The dis­ area became fuzzy and remain so sponse, on 7/23/98, Marcus S. trict court, however, found the to this day, National Alliance, Owens, Director of the Exempt "full-and-fair exposition test" 710 F.2d 868, 52 AFTR2d 83-5609 Organization Division, wrote to Buckel, stating that, to ensure that not to be unconstitutionally vague. (CA-D.C., 1983), rev'g48 AFTR2d the tax laws are applied in a "fair The comments by IRS officials that 81-5138 (DC D.C., 1981), in­ and nondiscriminatory manner," tax-exempt status was being de­ volved an organization that pro­ he and other National Office offi­ nied because the organization mulgated racist and anti-Semitic cials would travel to the IRS's field was "promoting lesbianism" were views, coupled with calls to vio­ offices to talk "about the need for termed merely "unfortunate" and lence. It sought to rely on the' hold­ professionalism, impartiality, and the claims of the IRS that it itself ing of Big Mama Rag, bu(the IRS fairness in ... dealings with all tax­ did not adopt such a position unveiled the "methodology" test, payers" and would use examples were accepted. which focuses not on what is said that "specifically address the issue The District of Columbia Cir­ but how and whether the conclu­ sions advanced follow from the of bias against groups that are cuit reversed, declaring in language supportive of gay men and les- of broad applicability that the reg­ premises. While the lower court ulation was unconstitutionally found the methodology test itself vague: to be unconstitutionally vague, the D.C. Circuit decided, in a some­

Applications for tax exemption what opaque opinion, that the pub­ 7 must be evaluated ... on the lications of the National Alliance See Amsterdam, "The Void-For­ basis of criteria-capable of neu­ were simply not "educational" Vagueness Doctrine in the Supreme Court," 109 U. Pa. L. Rev. 67(1960). tral application. The stan­ under "any reasonable interpre­ dards may not be so imprecise 8 that they afford latitude to in­ tation of the statutory term." . Hill and Krisch ten, Federal and State dividual IRS officials to pass The methodology test was sub­ Taxation o(Exeinpt Organizations (WGL, judgment on the content and sequently reiterated and pub- 1994), p 2-30.

November I December 1998 Vol i 0 I No 3 EXEMPTION AND BIAS 111 bians." 9 Moreover, he said that tions are ongoing as this ar­ Gingrich-related organizations. In Buckel's letter would be forwarded ticle goes to press and are 1993, a year before the Republican to the IRS official responsible for likely to remain ongoing for takeover of the House of Rep­ IRS policy and training with some time. resentatives that made him Speak­ respect to discrimination. er, Rep. Newt Gingrich (R-Ga.) Amel'ican Campaign Academy. developed and began to teach a American Campaign Academy, 92 course entitled "Renewing ALLEGED ANTI-CONSERVATIVE TC 1053 (1989), involved the American Civilization." A former BIAS charitable status of an organization professor and the holder of a At least five sometimes interrelated that trained people who became doctorate in history, Rep. Gingrich elements make the publicly re­ Republican political operatives. initially taught the course at ported IRS controversies involv­ All of its funding came from the Kennesaw State College, part of ing conservative organizations National Republican Congres­ the Georgia State U ni versi ty different from that of gay orga­ sional Trust. The curriculum was System. The Kennesaw State nizations. focused on the Republican Party, College Foundation aided in the with study topics such as the production of the course, which "Growth of the NRCC [National was televised and offered for sale ew exempt organizations of any Republican Congressional on tape. The course was later Fpolitical stripe could afford the Committee] and "Why are people moved to Reinhart College, a legal fees incurred by Empower Republicans?" Enrollment was private college exempt under America. effectively limited to "applicants Section 501(c)(3). The Progress & who are likely to subsequently Freedom Foundation, a private work in Republican organizations Section 501(c)(3) "think tank," and campaigns" and, indeed, this helped Rep. Gingrich with research 1. Many more conservative or­ is what the graduates actually did. and logistics. The central theme of ganizations than gay organi­ All agreed that the organization's the course was that the U.S. should zations have been reported activities were educational and did replace its current "welfare state" in the media to have IRS not constitute participation in with an "opportunity society." problems. This was also the central theme of 2. These problems have arisen elections. Nonetheless, the IRS declined to recognize the tax­ both Rep. Gingrich's re-election both on initial application campaign and GOPAC, a Repub­ for recognition of tax-ex­ exempt status of the organization under Section 501(c)(3). The Tax lican political action committee empt status and on audit. with which he was closely 3. Because "liberal" and "con­ Court agreed because the entity served the non-exempt private associated. servative" are opposing A Democratic member of the purposes of benefiting the terms in a way that "hetero­ House charged that Rep. Gin­ Republican Party. The court sexual" and "homosexual" grich's involvement with the course repeatedly stressed, however, that are not, conservative organi­ constituted a violation of both the the holding should be limited to its zations complain of a large tax laws and the ethical stan­ facts and should not be read set of mirror-image tax-ex­ dards of the House. The House broadly: empt ideological opponents Ethics Committee investigated that do not seem to be hav­ Rep. Gingrich, but ultimately ing tax problems. A showing that petitioner's reached no conclusion with respect 4. While third parties have be­ graduates served in ... cam­ paigns of candidates from to the tax laws. The investigation come involved in the IRS in­ both major political parties was ended rather than resolved vestigations of both gay and would have significantly aided when Rep. Gingrich admitted that conservative organizations, petitioner's contention [that it certain untrue statements had most of the third parties that was charitable] .... Had the have become involved in the record established the Acad­ tax matters of conservative emy's activities were nonpar­ tisan in nature and that its organizations have been un­ 9 "IRS Will Train Agents to Be Fair and graduates were not intended to friendly. primarily benefit Republican Impartial to Gay Groups," 80 Tax Notes 5. A number of disputes involv­ candidates, we would have a 768 (8/17/98). ing conservative organiza- different case. 10 10 92 TC at 1072 and 1079.

112 JOURNAL OF TAXATION OF EXEMPT ORGANIZATIONS November 1 December .1998 Vol10 1 No 3 been submitted to the Committee began to hear rumors that the IRS ing of their applications for recog­ on his behalf and agreed to certain was targeting the Center; 12 nition of exemption, and a num;. sanctions. In 1996, the IRS began an audit her of other parties who are That did not end the matter for of the Center's 19 9 5 tax year. Ac­ alleged to have been targeted for the tax-exempt entities, however. cording to the Center's accountant, audit because of their political Questions had been raised about when the audit began to focus on views and activities. the exempt status of the two the Center's political views and schools and the two foundations choices of stories, the IRS agent that helped with the course, as well twice stated, "Look, this is a po­ he problem is that the tax as GOPAC and certain other tax­ litical case and the decision is going Tlaws on exempt status are exempt entities that had been in­ to be made at the national level. " 13 so vague as to allow volved in one way or another On 10/22/96, while the audit was individual IRS agents to with Rep. Gingrich. These ques­ progressing, Farah published an indulge their biases under tions were soon reported and article in the Wall Street] ournal color of law. elaborated on in the media. It describing the audit as "retalia·­ therefore came as no surprise tory" and listed other conserva­ when most or all of these entities tive organizations that he identified were reported to be under IRS in~ as having been subject to: similar The "Kemp Commission." In 1995, vestigation. After all, the IRS can treatment, including the Heritage Rep. Gingrich and then Senate be presumedtoread the newspa­ Foundation and the National Rifle Majority Leader Bob Dole (R­ pers. Moreover, some of the com­ Association.14 The article and its Kan.) established the National plaining parties sit in the House claims received much media cov­ Commission for the Study of of Representatives. erage;· Economic Growth and Tax In December 1996, the IRS ex­ Reform to. study and recommend Western Journalism Center. Rec­ panded the scope of the Center's basic reform of the federal tax ognized by the IRS as tax-exempt audit to include the 1994 tax laws. Sen, Dole and Rep. Gingrich under Section 501(c)(3), The year. The audit was completed in appointed all of the members of the Western Journalism Center (the May 1997 and the IRS issued a Commission, including its "Center") engages in investigative written determination declaring chairman, former Rep. Jack Kemp journalism. Conservative in out­ that the Center was in full com­ (R-N.Y.). Rep. Kemp thereafter look, the Center investigated al­ pliance with Section 501(c)(3). No created The Fund for the Study of leged illegalities of the Clinton Ad­ taxes, interest, or penalties were Economic Growth and Tax ministration, including, for ex­ assessed. Reform (the "F\lnd"), which col­ ample, the circumstances sur­ A year later the Center filed a lected money to finance the Com­ rounding the death of White House $20 million lawsuit against former mission's work. The Fund was Deputy Counsel Vincent Foster. and current IRS employees, in­ organized as a trust, and its docu­ After the Center ran nationwide cluding former Commissioner mentation contained all of the legal full-page newspaper ads raising Margaret Milner Richardson and provisions that educational questions about the case, a White unidentified other parties, claim­ organizations normally have in House lawyer reportedly wrote a ing that a variety of its constitu­ order to qualify under Section memorandum-later obtained by tional rights. had been _violated 501(c)(3), e.g., prohibitions congressional investigators­ under color of law and that it had naming the Center and one of its suffered substantial damages. 15 reporters as hostile to the Clinton The complaint lists 13 other con­ 11 Farah, "Criticizing Clinton Got Me Administration.U A year later, in servative tax-exempt entities that Audited," Wall St.]., 5/18/98, page A22. 1995, the White House and. the are alleged to have been sub­ 12 Western Journalism Center Press Re­ Democratic National Committee jected to similar politically moti­ lease, reprinted in 3 EO Tax journal 95 issued a report that identified the vated audits, four conservative (June 1998). 13 Center as one of a number of entities that are alleged to have " Farah, supra note 11; Western Jour­ conduits of stories critical of the been in effect threatened with nalism Center Press Release, supra note 12. Clinton Administration. The politically motivated audits, three 14 Farah, supra note 11. Center's founder and executive conservative entities that are al­ 15 "Group Sues IRS, White House Of­ director, Joseph Farah, has leged to have suffered politically ficials in Dispute Over Audit," 79 Tax publicly stated that thereafter he motivated delays in the process- Notes 816 (5/18/98).

November I December 1998 Vol 10 I No 3 EXEMPTION AND BIAS 113 against inurement, influencing zation, the Court found that both sued a lengthy denial letter in legislation, and political activity ,16 of the two characteristics of such which the organization was char­ The Fund began operations organizations were present, i.e., acterized as too partisan for Sec­ and applied to the IRS for recog­ (1) a primary objective (the flat tion 501(c)(4) status because its nition of tax-exempt status under tax) that can be obtained only "activities are designed to promote Section 501(c)(3). The operations through legislation and (2) advo­ the electoral interests of the Re­ consisted almost exclusively of cacy for that primary objective "as publican Party and politicians af­ studying the concept of a "flat tax" distinguished from engaging in filiated with the Republican and presenting reasons why the nonpartisan analysis, study, or re­ Party." In support of this con­ search and making the results clusion the IRS noted that all of thereof a vail able to the public." 18 the people involved were Repub­ eporting political enemies to The case is on appeal as this arti­ licans, and all of the policies ad­ Rthe IRS is attractive because it cle goes to press. 19 vanced were associated with the forces the subject to spend Republican Party. resources. Empower America. Empower On 4/21/97, counsel for Em­ America was incorporated on power America submitted a 1/8/93 "to advance a conservative lengthy written rebuttal, empha­ reform agenda." The five initial sizing the large number of De­ current federal income tax system members of its board of directors mocrats-including President should be abolished. Both ideas are were all prominent Republicans­ Clinton-who publicly agreed commonly associated with the Jack Kemp, former Secretary of with the various positions es­ Republican Party, and media re­ Education William Bennett, former poused by the organization with ports consistently identified the Representative Vin Weber (R­ respect to such issues as the North Commission and the Fund as "Re­ Minn.), former U.N. Ambassador American Free Trade Agreement, publican" or the "Kemp Com­ Jeanne Kirkpatrick, and financier anti-crime legislation, welfare re­ mission." Rep. Kemp later resigned Ted Forstmann. On 2/9/93, the form, spending curbs, drug policy, and soon after became the 1996 organization filed an application education reform, school reform, Republican Vice-Presidential can­ for recognition of tax-exempt and several other topics. The let­ didate, with Sen. Dole heading the status under Section 501(c)(4) as a ter also noted that at least one new ticket. social welfare organization. This board member was a Democrat After over a year of consider­ began an almost five-year, slow-· and that there were new "strong ation, meetings and supplemental motion repetitive two-step dance procedural safeguards" to ensure submissions, the IRS denied the of information, request, and that the organization would never Fund's application on two response. In a letter dated 5/16/94, become partisan. A conference was grounds-it was operated for a the IRS gave the following held on 9/12/97 and more infor­ substantial non-exempt purpose explanation for requesting more mation was submitted the fol­ and it was an "action organiza­ information: lowing month. tion" within the meaning of Reg. On 11/21/97, the IRS recog­ [W]e are concerned that your 1.501 (c)(3 )-1 (c) (3 )(iv). nized Empower America as exempt The Fund took the matter to dis­ organization may be involved in activities that are appro­ under Section 501(c)(4). An Em­ trict court, which ruled for the priately categorized as polit­ power America spokesman said IRSP In holding that the Fund had ical campaign intervention. a substantial non-exempt pur­ In particular, we are con­ pose, the court noted that the out­ cerned that you are "testing the 16 come of the nominally academic waters" for a future run by Mr. The Fund For the Study of Economic Growth and Tax Reform, 997 F. Supp. 15, exercise was foreordained to be a Jack Kemp for national office by keeping his name before the 81 AFTR2d 98-947 (DC D.C., 1998). flat tax, that the timing and life public and helping to develop 17 Id. span of the Fund coincided with positions and public support 18 Reg. 1.501(c)(3)-1(c)(3). the 1996 Presidential election (in for his platform. 20 which tax reform was an issue), 19 "Kemp Commission Case Moves to Circuit Court." 3 EO Tax ]ourna/44 (Sep­ and that the Commission never de­ As time passed and more in­ tember 1998). formation was requested, the or­ nied the media characterization of 20 "Special Report: Empower Amer­ "Republican." In holding that ganization complained of unfair ica-Its Long March to Exemption," 2 EO the Fund was an action organi- treatment. On 2/21/97, the IRS is- Tax ]ourna/24 (12/22/97).

114 JOURNAL OF TAXATION OF EXEMPT ORGANIZATIONS November 1 December 1998 Vol 10 I No 3 that the IRS had been given "a plication for recogmtwn of tax­ It has also become relatively copy of everything we've done. " 21 exempt status of the Christian common for conservative orga­ Coalition.24 nizations to be reported to the IRS Branch Ministries (The Church at by their ideological adversaries for Pierce Creek). Four days before Other conservative organizations. the 1992 presidential election, An exhaustive list of the con­ Branch Ministries, a religious or­ servative organizations that have ard-boss interest-group ganization doing business as The been reported in the media to be Wpolitics should not be a Church at Pierce Creek, published involved in discussions with the part of our tax system. two open letters to the Christian IRS concerning their own tax­ community in national news­ exempt status is beyond the scope papers. The letters stated that the of this article. A few random items positions taken by then-candidate are worth noting, however: allegedviolations of the rules ap- · Bill Clinton regarding abortion, plicableto tax-exempt organiza~ homosexuality, and teenage ab­ • In 1997, the conservative tions.28 stinence were contrary to Christian Heritage Foundation was de­ biblical views. The IRS viewed this scribed in media reports as Congressional action. The Congres·s as prohibited political involvement being subject to an IRS audit has to date taken two steps in 25 and subsequently revoked the that it found to be onerous. response to the many complaints Section 501(c)(3) status of Branch • Both the National Rifle As­ and media reports concerning the Ministries. Aided by the conser­ sociation and Citizens IRS treatment of conservative vative Landmark Legal Founda­ Against Government Waste organizations. tion, the church has filed a lawsuit were widely reported in First, in early 1997, the Joint contesting the revocation, claiming 1997 to be undergoing IRS Committee on Taxation was or­ 26 a violation of its constitutional audits. dered by House Ways and Means rights to free speech, religion, and • Landmark Legal Founda­ Committee Chair Bill Archer due process, as well as selective tion, the tax-exempt organi­ and Senate Finance Committee enforcement of the tax laws.22 The zation that is currently Chair William Roth (R-Del.) to selective enforcement claim may be representing Branch Min­ investigate whether. conserva~· the most interesting aspect of this istries, was itself reported in tive organizations have been sys­ case, if only because many other early 1997 to be under IRS tematically mistreated or targeted churches holding more liberal auditY for audit by the IRS and to issue views are widely reported to en­ dorse candidates and allow poli­ ticians routinely to campaign and even collect funds before, during, 21 "Exempt Organizations: IRS Re­ 28 See, e.g., "Pastor May Have Engaged and after church services. versal on Tax Exemption for Politically in Partisan Politics, Watchdog Group Active Advocacy Group Surprises On­ Says,'' 75 Tax Notes 1318 (6/9/97); "Fal­ lookers," BNA Daily Report for Execu­ well May Have Violated Ban on Church The Christian Coalition and related tives (12/8/97). entities. The IRS has been in­ Politicking, Watchdog Group Alleges," 76 22 "Curre~t Litigation Status Report," vestigating a number of organi­ Tax Notes 187 (7/14/97); "Americans 20 Exempt Org. Tax Rev. 534 (June 1998). United Letter to Chailes Rossotti," 3 zations associated with evangelist 23 "Christian Broadcasting Network, EO Tax]ourna/159 (June 1998); "Com­ politician Pat Robertson, including IRS Reach Settlement;" 78 Tax Notes 1598 peting (c)(3) Participating in Lobbying, Pol­ The Christian Coalition, The (3/30/98). itics, Labor Organization Charges,'' 20 Christian Broadcasting Network, 24 "Archer Brings Up Tax-Exempt Exempt Org. Tax Rev; 515 (:June 1998); The Freedom Council, the Status For Christian Group in Meeting on ABA Transcript, 16 ExemptOrg. Tax Rev. National Perspectives Institute, IRS,'' Wall St.]., 5/21/98, page A18. 435 (March 1997); "'Salon': Lavish and the N a tiona! Freedom 25 ''Heritage Foundation Audit," 2 EO Spending at Tax-Exempt Magazine," X Institute.23 According to published Tax JournalS (8/1/97). The Chronicle of Philanthropy 46 26 (6/18/98). Sometimes it is impossible to reports, on 5/19/98, House Ways "Congress to Look I~ to IRS Audits of Exempt Organizations,'' 74 Tax Notes determine whether the dispute is ideo­ arid Means Committee Chair Bill 1623 (3/31/97). logical ornot. See, e.g., "Greater Birm­ Archer (R-Tex.) spoke with IRS 27 "IRS Said To Be Auditing Conser­ ingham Ministries Urges IRS to Revoke Commissioner Charles 0. Rossotti vative Groups, 74 Tax Notes 773 Exemption of Joint Venturer,'' 3 EO Tax on behalf of the pending ap- (2/10/97). ]ourna/153 (June 1998).

November I December 1998 Vol10 I No 3 EXEMPTION AND BIAS 115 a written report of its findings. A under color of law. While Group and GLASS were for­ specific area for investigation is the immediate results of the tunate enough to have the whether analogous liberal orga­ two situations may in many support of Lambda, but nizations are being treated more ways seem to be the same to there may have been other favorably, a claim that has ap­ the victim, the fact remains similar entities that were not peared in several media reports. 29 that, as Justice Oliver Wen­ that lucky. Similarly, despite As this article goes to press, the dell Holmes, Jr., once noted, the public image of conserv­ report is due to be released in the "even a dog distinguishes be­ atives being rich, the truth is fall of 1998.30 tween being stumbled over that few tax-exempt organi­ 3 and being kicked. " 1 zations of any political • Not every biased action is stripe could afford the legal he law as currently written, necessarily motivated by evil fees and other costs incurred Tinterpreted, and administered intent. In the case of Kathy's by Empower America in its has produced an intolerable Group, for example, the IRS long administrative battle. mess agent who sought to predi­ Moreover, as is too often the cate tax-exempt status on a case throughout modern change in mission could be American society, the result viewed as wanting to im­ obtained can depend to an prove the organization by extraordinarily great extent Second, the 199 8 IRS Restruc­ expanding the charitable on the quality of the legal turing Act added Section 721 7 to class from lesbian women counsel used, wholly apart the Code, designed (according to only to all women without from the cost. its title) as a "Prohibition on Ex­ regard to sexual orientation. • In view of how many gay ecutive Branch Influence Over Of course, if this were to be­ and lesbian organizations Taxpayer Audits and Other In­ come standard IRS operating had previously received vestigations." procedure, the world of tax­ recognition of tax-exempt exempt organizations would status before GLASS and be dramatically different be­ Kathy's Group, it seems un­ OBSERVATIONS cause each IRS agent could likely that the IRS has an in­ The discussion above suggests impose his or her own val­ stitutional bias against some observations: ues. An IRS agent might con­ homosexuals. • Thinking people must clude that the Red Cross • It seems unlikely that the strongly resist the "pox-on­ would accomplish more IRS has an institutional bias both-their-houses" response good if it spent less effort on against conservatives. Al­ that is sometimes heard: "If teaching children to swim though the outcome of the the IRS is attacking both the and more effort on teaching Western Journalism Center's gays and the conservatives, children to read. Perhaps an lawsuit may prove differ­ it must be doing a good IRS agent would find that ently, it also seems unlikely job." Similarly, the issue the local museum, opera, or that the White House or­ should not be viewed as pos­ symphony orchestra focuses dered the IRS to withdraw ing a choice between believ­ too much on activities of in­ or deny the exemption of the ing or disbelieving terest to rich elitists who do Center or any other conserv- conspiracy theories involv­ not need the hidden tax sub­ ing the White House, IRS sidy anyway. Indeed, an IRS political appointees, or the agent might conclude that 29 See, e.g., "IRS Plans to Beef Up In­ IRS as an institution. some religions would be im­ vestigation of Exempts' Political Activities," • There is a fundamental dif­ proved by the elimination of 74 Tax Notes 845 (2/17/97); Dellinger, ference between a govern­ certain exclusionary aspects "Politically Motivated Audits Need Not of their doctrinal beliefs. Have Corne From the Top," 80 Tax Notes mental agency having an 861 (8/17/98). institutional bias and a gov­ • The public will never know 30 "JCT Report on IRS Audits of Con­ ernmental agency having in­ how many gay or conserva­ servative EOs Needs More Time," 80 dividual employees whose tive organizations quietly Tax Notes 752 (8/17/98). positions allow them to act collapsed in the face of in­ 31 Holmes, The Common Law (1881 ), on their personal biases tense IRS scrutiny. Kathy's page 3.

118 JOURNAL OF TAXATION OF EXEMPT ORGANIZATIONS November 1 December 1998 Vol 10 I No 3 ative organization. It would Section 501(c)(3) organiza­ PROPOSAL not be surprising, however, tions to engage in "nonparti­ The law as c·urrently written, in­ to find that individuals who san" voter registration terpreted, and administered has . dislike conservative organi­ drives in poor neighbor­ produced an intolerable mess of zations presented the IRS hoods,33 even though it is inconsistent results, partisan mud with what they regarded as clear to all that the motive, wrestling, and hypocritical cross­ evidence of abuse. Nor purpose, and intent (as well attacks, Worse, it has undermined would it be surprising to as the result) is to increase find that some of the indi­ the number of voters who vidualswere politicians, po­ support the Democratic n 'express advocacy' litical appointees, or Party. Astandard should be adopted. employees of political orga­ • Regardless of the ultimate nizations. result, reporting political en­ • With approximately emies to the IRS is attractive public confidence in the IRS and 102,000 people on the pay­ because, without any cost to the tax laws generally. Dramatic roll, it is a mathematical cer- the reporter, it forces the changes must be made so that the . tairity that the IRS has some victim of the report to spend IRS and its personnel will no employees who dislike ho­ resources. Any adverse pub­ longer be called on to interpret and mosexuals and soine employ­ licity is an added bonus, par­ administer a set of vague and ees who dislike conservatives. ticularly if it scares away subjective rules that are not sub­ The problem, however, is not potential donors, To date, ject to neutral application. that some IRS agents have so­ this tactic seems to be used What does this mean, exactly? cial and political views that mostly by liberals against It means that, to the maximum ex­ may be called biases. The conservatives; but the con­ tent possible, the subjective tests problem is that the tax laws servatives may soon begin to of the current system should be pertaining to tax-exempt sta­ return the favor. 34 There is purged and replaced with "bright tus are so vague and amor­ no shortage of liberal orga­ line" tests that are less subject to phous as to allow individual nizations with activities that abuse. It is not possible in this ar­ IRS agents to indulge their are functionally ahd concep­ ticle to delineate all of the changes biases under color of law, tually indistinguishable from that this would entail, but the fol­ perhaps sometimes without those of some of the conser­ lowing three points should be even realizing it. vative organizations that sufficient to outline the approach: • As has been argued else­ have been subjected to "re-· 1. The "methodology" test of where, it makes little sense porting" by private citizens National Alliance and Rev. to test tax-exempt organiza­ or groups. More of this ac­ Proc. 86-43 should be dis­ tions for impermissible mo­ tivity will not be good news carded, along with whatever 32 tive, purpose, or intent. for the IRS, which can nei­ remains of the "full and fair People start and join tax-ex­ ther enjoy nor avoid its role, exposition" standard of Reg. empt organizations for an particularly if a member of 1.501(c)(3)-l(d)(3)(I). The · unanalyzable mixture of Congress is involved. lower court in National Al­ pure and impure motives • There is something wrong liance was surely correct in that change over time and with the spectacle of a gay finding the methodology test cannot possibly be measured congressman contacting the to be unconstitutionally by the IRS or anyone else. IRS on behalf of a gay orga­ Although some have lately nization and a conservative argued in favor of the IRS congressman contacting the predicating tax-exempt sta­ IRS on behalf of a conserva­ 32 See Yablon and Coleman, "Intent Is tus on a complete absence of tive organization. Even when Not Relevant in Distinguishing Between Education and Politics," 9 JTEO 156 political intent, liberals radically updated and dis­ (Jan/Feb 1998). would probably be as hurt as guised almost beyond recog­ 33 TAM 9117001. conservatives if the IRS nition, ward-boss 34 would adopt such a view and interest-group politics Indeed, this has already started on a small scale. See Lehrfeld v. Richardson enforce it uniformly. For ex­ should not be a part of our et al., 132 F.3d 1463, 81 AFTR2d 98-529 ample, the IRS now allows tax system. (CA-D.C., 1998).

November I December 1998 VoJ10 I No 3 EXEMPTION AND BIAS 117 vague. Not only must "men the bright line of express ad- CONCLUSION of common intelligence vocacy? Definitely so, but There is no hint of a cease-fire guess at its meaning" but it that would not be very much being called anytime soon in the allows-indeed, sometimes different or very much worse cultural wars that are currently almost requires-IRS per- than what we already have, being fought on the American sonnel to apply their own and the level of gamesman- political landscape. Some of the prejudices and biases under ship, hypocrisy, and IRS in- rules of this warfare are con- color of law. Moreover, the volvement would decrease tained in an innately vague and methodology test is con- dramatically. To the extent subjective set of tax rules that the ducive to a cynicism that this will allow easy manipu- IRS has been called on to admin- corrupts the tax system. lation and avoidance of the ister. Not surprisingly, some of the 2. In the area of political activ- election finance laws, the ' combatants believe strongly and ,1•• 1 ity, an "express advocacy" election finance laws should complain bitterly that the IRS 36 standard should be be changed. It is poor pol- has become a partisan for the other 35 adopted. Among other icy to perpetuate bad tax side. The only solution is to remove things, this means charitable laws in order to backstop the IRS from the battlefield. The organizations and their rep- weak election finance laws. current vague and subjective rules resentatives would be pro- 3. There should be a prohibi- must be replaced with a set of hibited from expressly tion on the IRS seeking to "bright line" tests that require lit- advocating the election or "improve" organizations, ei- tie factual analysis and legal in- defeat of any political party ther in mission or in corpo- terpretation. The war will go on, or candidate, but the IRS rate structure. This means, of course, but there will be less would not get involved un- for example, that the IRS chance of respect for the tax laws less the advocacy rises to the should not be able to force express level of "Vote for Kathy's Group to serve non- becoming a casualty. • Candidate X" or funds for gay women. It also means Candidate X are expressly that the IRS should not be 35 The IRS has considered and re- solicited or collected on the able to force Empower jected the "express advocacy" standard. premises. Motive, purpose, America to put a Democrat See, e.g., TAM 9609007. and intent should be irrele- on its board. This sort of 36 This is a valid concern. See, e.g., Carr, vant. Will this mean that governmental interference is "Tax-Exempt Groups Scrutinized As Fundraising Clout Grows," 55 Congres- some tax-exempt organiza- ugly even when it is well~in- sional Quarterly 4 71 (2/22/97); Carney, tions will become blatantly tentioned and intolerable "Stealth Bombers," 29 National journal political, stopping only at when it is not. 1640 (8/16/97).

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