The legal-historical amnesia of using tax exemptions to punish political beliefs

A tool for viewpoint discrimination has an anti-LGBT history, too

|The Volokh Conspiracy |

In a televised Democratic presidential forum on LGBT issues last night in Los Angeles, CNN's Don Lemmon asked Beto O'Rourke, "Do you think religious institutions like colleges, churches, charities – should they lose their tax-exempt status if they oppose same-sex marriage?"

"Yes," O'Rourke responded. "There can be no reward, no benefit, no tax break for anyone, or any institution, any organization in America that denies the full human rights and the full civil rights of every single one of us."

Eugene explained well in this 2016 post why the IRS cannot deny tax exemptions solely on the basis of viewpoint, even if you conceive of a tax exemption as a form of subsidy (a "reward") that the government does not have not to give anyone at all, and even if you think the group propounds a hateful or deeply immoral message. The IRS

can't deny exemptions to groups that engage in "hate speech" against blacks, gays, evangelical Christians or Donald Trump supporters, while allowing exemptions to groups that praise blacks, gays, evangelical Christians or Donald Trump supporters. Indeed, the Supreme Court has made this clear: The government may not discriminate against groups based on the viewpoint of their speech. See Rosenberger v. Rector (1994) (discussing Regan v. Taxation With Representation (1983)). As the D.C. Circuit put it in Z Street v. Koskinen (2015) (itself a 501(c)(3) tax exemption case), "in administering the tax code, the IRS may not discriminate on the basis of viewpoint."

Walter Olson expands on why O'Rourke's answer was so objectionable, calling it "illiberal, anti-pluralist, and inflammatory." Scott Shackford piles on, noting the political damage that could be done: "If you care about LGBT rights, you should be glad O'Rourke doesn't have a shot: The backlash against him as a nominee would be massive."

All of these points are well taken. Perhaps most striking to me about the exchange between Lemmon and O'Rourke was not that a candidate would tell an audience what he thought they wanted to hear, but that the audience was so wildly enthusiastic about it.  The reaction was explicable on one level because organized religion has been an extraordinary source of pain to LGBT people. (And of course, it has also been a source of extraordinary comfort to many LGBT people. It giveth and taketh away.)

But on another level, it's an act of forgetfulness. As William Eskridge has written, "the modern regulatory state cut its teeth on gay people." First Amendment rights, especially the cardinal directive that government may not discriminate on the basis of viewpoint, has served both individual LGBT people and the organized LGBT-rights movement very well.  When the government, including the administrative state and courts, failed to live up to those principles, the whole movement was imperiled.

One of the innumerable ways in which the state attempted to discourage gay-rights advocacy in its infancy was through the device of denying corporate charters, school recognition, and all other manner of what O'Rourke might call a "reward, benefit, or tax break . . for anyone, or any institution, or any organization" that violated right and good state-sanctioned principles.

Among these devices was specifically the selective denial of charitable tax exemptions for gay organizations in the 1970s. As Eskridge summarized some of the cases in a 1997 Yale Law Journal article:

Educational and charitable organizations are entitled to exemption from federal income tax, and their contributors are entitled to tax deductions. The IRS had granted tax-exempt status to organizations not having "gay" in their names, most prominently the University Fellowship of Metropolitan Community Churches, and had been willing to give "gay" groups exemptions if they stipulated that they did not "promote" homosexuality or if they accepted homosexuality as a "diseased pathology." Accordingly, the IRS denied tax exempt status to the Gay Community Services Center of Los Angeles in January 1973. In an important turnabout and after a series of meetings with gay representatives, the IRS reversed itself in August of that year, giving exempt status for the first time to an organization with "gay" in its name. Lambda Legal Defense got surprisingly quick approval the next year.

In other words, the IRS made a speech restriction (no "gay") or even compelled speech (accepting homosexuality as a mental illness) a condition of receiving a tax benefit.

The IRS also initially denied exempt status to the Pride Foundation, a pro-gay educational and legal organization.

The IRS found that the Pride Foundation's "efforts 'toward the elimination of unjustified and improper discrimination or treatment, or toward violations of the privacy of adult individuals, are insignificant when compared to the possible detriment to society,"' specifically, "'advancing the unqualified and unrestricted promotion of the alleged normalcy of homosexuality"' which the IRS feared would have the effect "'in the general prevalence of what is still generally regarded as deviant sexual behavior."' As legal authority for its position, the agency cited the Supreme Court's disapproval of "perverted" sexuality in its obscenity opinions and state sodomy laws against homosexual conduct.

Here the federal government doled out exempt status purely on the basis of the viewpoint of the gay-advocacy group: it could not "promote" the idea that homosexuality was normal. Doing so might have socially harmful (and indeed illegal) behavioral consequences. Eskridge recounts how gay-rights attorneys were able to turn the IRS around:

Once such a justification was out in the open, gaylegal representatives were able to ply the IRS with arguments and information undermining its premises. Lawyers for the Fund for Human Dignity in New York worked with the IRS for two years and persuaded the agency to grant exempt status to gay educational groups, without any disclaimer, in a September 1977 ruling.

O'Rourke's rationale for denying exempt status to churches and other groups that oppose same-sex marriage is identical in form to the rationale for denying exempt status to the Pride Foundation in the 1970s. A federal benefit (exempt status) can be denied selectively on the basis of a viewpoint ("promoting" homosexuality then, opposing same-sex marriage now) in the interest of avoiding social harm ("sexual deviancy" then, denial of "full human and civil rights" now).

There's a lot of forgotten or unrecognized history in the LGBT-rights movement.  The movement has been trying rather self-consciously to unearth that history. It's also worth recalling that the government, with its long and ready list of good causes, has not always been a friend.

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  1. “First Amendment rights, especially the cardinal directive that government may not discriminate on the basis of viewpoint, has served both individual LGBT people and the organized LGBT-rights movement very well.”

    Sure, in the *past.* Now the First Amendment is in the position of the previously-loyal henchman whose continued existence the bad guy considers a threat to his agenda.

  2. I don’t understand why liberals hate so many people.

    1. Modern Americans — especially younger, educated, reasoning Americans residing in our modern, successful communities — tend to dislike intolerance and disrespect ignorance.

      This bothers plenty of conservatives.

      1. An excellent example of JtD’s point. That sort of intolerance has no place in intelligent conversation, yet you see it at the highest levels of the Democratic Party. “Elections have consequences” exemplifies the attitude which kept President Obama from making any real progress while he had the congressional majority back in 2009 and 2010.

      2. And with that comment, RAK again demonstrates that he’s the most intolerant and ignorant commentor in these comment threads.

        1. Ready to be replaced, Rossami?

  3. In a democracy, the government is never a “friend” to minority rights. Sometimes the majority agrees to protect minority rights, more often in history it doesn’t, and public opinion tends to swing on a pendulum.

  4. Like so much of the Conspiracy, this piece has a sad, Kerensky-like quality. You would think people could learn, but they mostly don’t.

  5. It’s too bad the IRS and SCOTUS got bullied. Look at all the harm being caused to society and children especially these days.

  6. O’Rourke says Planned Parenthood should lose its tax exemption?

  7. That aside, I agree with Professor Carpenter’s view that tax exempt status should be neutral with respect to political positions on social debates, and he right to point out that in 1970s cases on tax exempt status, public university recognition, and similar matters, the First Amendment defended organizations like Lamda against views similar to O’Rourke’s on the other side.

  8. Professor Carpenter

    I think the obvious opinion to point out is Judge Barrett’s dissent in National Gay Task Force vs. Board of Education of Oklahoma City, 729 F 2nd 1270.

    Judge Barrett argued that while the government of the United States is a human-made institution and its overthrow a mere man-made prohibition, a malum in quod, sodomy, the abominable and detestable crime against nature, is a malum in se, inherently evil, and its advocacy does not get any First Amendment protection. Because sodomy is a malum in se, not a mere malum in quod, case law holding that the first amendment protects advocating the violent overthrow of the United States does not apply.

    One suspects O’Rourke’s reasoning is probably going to be remarkably similar to Judge Barrett’s.

    https://law.resource.org/pub/us/case/reporter/F2/729/729.F2d.1270.82-1912.html

  9. Of course, one other problem with with weaponization of the religion exemption is that it exists at all. Structurally, it’s hard to argue that the blanket tax deduction isn’t “respecting the establishment of religion” in contradiction to the 1st Amendment. Yet, it’s been a part of American tradition since our country’s founding. Philosophically, that’s a problem to those religionists who argue that religion faces some kind of disadvantage in American society

    I’ll predict, however, that over the next 50-100 years, religion’s special exemption from taxation will gradually disappear, and organized entities of religion will fall under the same regulatory framework as other non-profits. This will allow them to retain many of their current tax advantages, while removing the troublesome problem of that blanket exemption from laws that apply to all other entities.

    This follows the same logic as recent court decisions that the principles of neutral community noise ordinances do apply to both general civil nuisance issues (muffler laws, late-night parties in residential areas, etc.), and to specifically religious issues such as the bell-ringing of Christian Churches and the Adhān (the Muslim call to prayer). Noting that some decidedly non-neutral noise ordinances have been appropriately overturned on grounds of religious rights, one could expect the same approach when addressing both religious and nonreligious non-profits.

    I am generally an optimist (less by nature than by policy) and I think there’s evidence that over the centuries, over millennia, human society slowly but demonstrably evolves, matures, improves, and ultimately, progresses. Such progress is not smooth; it happens in fits and starts with considerable backsliding (during the Middle Ages, some of that backsliding lasted centuries).

    The gradual worldwide disentanglement of religion from government over the last 200+ years—despite some backsliding in some places—is evidence of that long slow societal progress.

    1. I was under the impression that the distinction was not between religious and secular nonprofits, but between churches/mosques/temples/Gurdwaras/etc, on the one hand, and other nonprofits on the other hand. Churches, etc. are exempt from certain reporting requirements, and an IRS investigation of them is bound by rules which a non-church isn’t protected by.

      But all nonprofits, including churches, are still bound by rules about how they can conduct themselves, eg, not endorsing candidates, not “excessively” lobbying, and not using their organization to launder undue amounts of money to the leaders.

      As for the latter restriction, churches have been known to be a tad lavish in their compensation, but then, so have non-church nonprofits of various stripes.

      I don’t know what the answer is, but I know what the answer *isn’t* – you won’t stop the waste of the money by having the taxman grab it and throwing it into the bottomless abyss of the federal treasury.

      1. I’d agree here. Churches are a classic non-profit enterprise.

    2. “disentanglement of religion from government”

      I question the premise.

      It’s not that the government has been disentangling from religion in general, it’s been disentangling from some of the more traditional religions – the traditionalist forms of Christianity, to take the biggest example.

      At the same time, the government is more than willing to take sides in religious issues, and even work together with religious groups – it’s just not the same old groups.

      There’s a coalition of believers in various religions or nonreligions – certain atheists, but also certain Protestants, certain Catholics, certain Jews, and so on through the list – who have tweaked their religious beliefs to accommodate a highly trusting and overly-reverential view of the government, sometimes verging on outright idolatry.

      I recall a Congressman justifying high federal taxes by quoting Jesus that to whom much is given much will be expected. So apparently the feds are stand-ins for God, who was the original source of the demands Jesus spoke of. Is this disentanglement?

      1. “What the Bible Teaches Us on Climate Migration”

        “As climate migration increases, the Church has the opportunity to exercise this virtue of charity and to become Christ-like in caring for border-crossers seeking refuge. In contrast, the Bible chastises the arrogant wicked who disregard the needs of others as they “take up possession of the land” for themselves and “drink up waters in abundance” (Psalm 73).”

        https://sojo.net/articles/what-bible-teaches-us-climate-migration

      2. From Unbound: An Interactive Journal of Christian Social Justice

        “What does it really mean to value family? Specifically, what should it mean to Christians?

        “Jesus’ family in life does not fit a “traditional” narrative—with a dad who we’re told wasn’t his biological father, no wife or children mentioned in the Scriptures, and a chosen family of twelve other guys (and often-unnamed women) wandering around and relying on the generosity of strangers to get by….

        “The Bible doesn’t shy away from the diversity of family structures, nor from their challenges….

        “That said, there is a lot of unexplored terrain when it comes to Christianity fully lifting up and supporting the real families of the 21st Century. These families may wrestle with whether or not to birth and/or raise children. They may involve friends that are emotionally and spiritually closer than biological relatives. They include folks in infinite combinations of gender, racial, and religious identity. And their children have different physical and psychological needs and strengths.”

        http://justiceunbound.org/carousel/valuing-family-in-all-its-varied-forms/

      3. “Louisville Catholic church slams Trump as it declares ‘sanctuary’ status…

        “”When immigrants, black and brown persons, Muslims, LGBTQ persons and other communities are under attack, Christians cannot remain silent,” the public statement said. “We therefore affirm our commitment to sanctuary, understood not simply as offering space in churches, but as an active praxis of solidarity.

        “”We commit ourselves to resist this administration’s horrendous policies and rhetoric toward immigrants, and to offer ongoing and active support to immigrant-led movements for justice. We raise our voices to cry out, in the name of God, for sanctuary for all.””

        https://www.courier-journal.com/story/news/local/2019/10/08/archbishop-supports-louisville-catholic-church-st-william-sanctuary-status/3900907002/

  10. Concluding sentence from the linked Walter Olson post: “The position on taxation of religious institutions to which O’Rourke assented Thursday evening is extremist and oppressive.” So is the rest of the Left’s agenda.

  11. The left has abandoned the idea of opposing tyranny. The new plan is to embrace tyranny and deny to their opponents the office of tyrant.

    This strategy does not have a good track record through history.

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