The Volokh Conspiracy
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J Street and other progressive groups are campaigning to get the Treasury Department to pull the tax-exempt status of U.S. charities that provide support to Israeli communities in the West Bank and Golan Heights, i.e., settlements. In an article in Tablet, I discuss the constitutional problems with such action. Here is an excerpt:
While J Street claims that its demand is justified on the grounds that private Americans' support for settlements contravenes "established public policy," J Street is calling for the administration to do something unprecedented and clearly unconstitutional. To put it simply, J Street et al are asking that some non-profits be denied tax exemptions because they disagree with the President on diplomatic matters. That's what going against "public policy" means here-not violating any statutes, but pursuing goals at odds with the foreign policy of the President.
J Street hides its effort behind language in Treasury regulations restricting the tax-exempt status of groups that act "contrary to clearly defined and established public policy." But what J Street fails to mention is that groups only act "contrary to clearly defined and established public policy" when they contravene a policy established by law and the Constitution. According to the IRS itself, the public policy exception applies only to one context: racial discrimination. The public policy exception provides no basis for the idea that the IRS can revoke tax exemptions for groups that favor policies disfavored by the White House or State Department.
Unlike presidential disdain for Israeli settlements, the legal background of combating racial discrimination is enshrined in several Constitutional Amendments, numerous statutes, and countless Supreme Court precedents. The legal pedigree of combating racial discrimination is vital to the legal validity of applying IRS exception, as the Supreme Court stressed in narrowly upholding the racial discrimination exception several years ago. J Street makes a mockery of the law and the nation's long struggle for equality when it attempts to assimilate the "crime" of donating ambulances to communities living in Shilo or the Jewish quarter of Jerusalem's Old City into what the Supreme Court justly called the unique "stress and anguish" of racial discrimination in the nation's law and history.
To get an idea how shocking J Street's suggestion is, consider its potential scope. During the Bush Administration, it was the firm policy of the U.S.-repeatedly endorsed by Congress and the President-to fight a global war on terror and detain suspected terrorists in Guantanamo. Under J Street's rule, anti-war groups or civil rights groups protesting Gitmo could have their tax exempt status revoked. After all, protest groups are often explicitly at odds with government policy.
Indeed, in Bob Jones, the "public policy" standard required that all three branches take a consistent strong position to create a policy. Here, at most there is what even critics of Israel call "schizophrenic" Executive Branch treatment of settlements. Given the action J Street and numerous prominent progressive intellectuals are proposing would violate the First Amendment while raising serious separation of powers and due process problems, it is surprising that the American Civil Liberties Union and other civil rights groups have not come out against these ideas.
Of course, if Congress passed a law defining support for Israeli settlements as inimical to U.S. interest and eliminating the tax status of groups that support them or authorizing the president to do so, it would be a different question. It is the difference between the Neutrality Proclamation and the Neutrality Act, between law and presidential caprice. Interestingly, J Street is not addressing its request to Congress.