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Is hate speech constitutionally protected? Do groups that express hate in their words and deeds deserve tax-exempt status? Is the IRS equipped to judge what is hate and what is merely odious? Does it even matter?
The House Ways & Means Oversight Subcommittee held a hearing on this fraught subject last week. And the answers, it turns out, are very complicated.
Members heard dramatic and painful testimony from victims of hate. But they also heard important, if less passionate, testimony from the former head of the IRS’s tax-exempt organizations division about how the IRS addresses requests for tax-exempt status and from a law professor who cautioned that the Constitution requires “viewpoint-neutral” administration of requests for tax exemption.
Marcus Owens, the former IRS head of tax-exempt organizations, described the IRS process for permitting tax deductions for contributions to educational, charitable, or religious organizations. He acknowledged that the IRS faces multiple challenges when determining whether an organization meets the tests required for being eligible to receive tax-deductible contributions, for example, by being an educational entity.
Ideally, the IRS would examine a group’s written application, activities, organizing documents, operational plans, and public statements. Under IRS rules, if the group advocates a particular viewpoint, it may qualify as educational as long as it presents “a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion;” but it would not qualify if its principle function is “the mere presentation of unsupported opinion.”
Though speech alone is not determinative, courts have ruled that tax-exempt status can be denied for organizations that frequently use inflammatory statements, including ethnic, racial and religious slurs in their communications, coupled with distorted statements presented as fact.
But supervising tax-exempt groups is tangential to the IRS’s core mission of collecting revenue and, faced with reduced resources, the IRS has progressively required or reviewed less information, denied fewer applications for tax-exempt status, and “systematically dismantled” its enforcement structure, Owens testified.
In fiscal year 2018, the IRS examined only 2,816 of the 1.6 million returns filed by tax-exempt organizations. And of the nearly 92,000 new applications it received, the IRS rejected only 71, less than five percent of the number rejected in 2007. This reduced level of activities likely reflects both fewer resources and Congressional criticism of prior policies and procedures.
UCLA law professor Eugene Volokh carefully outlined constitutional limitations the IRS operates under. Hate speech is protected by the Constitution unless it involves imminent threats. While nonprofits have no constitutional right to a tax exemption, they do have a right to be free from discrimination. “The Tax Code indeed subsidizes hate,” he said, “just as it subsidizes Socialism, Satanism, and a wide variety of dangerous and offensive ideas. Under the First Amendment, tax exemptions have to be distributed without discrimination based on viewpoint; that means that evil views have to be treated the same way as good views.”
Approval of requests for tax exempt status, he testified, must be based on actions, not advocacy, with very narrow exceptions such as “true threats of criminal attack, or incitement intended to and likely to cause imminent criminal conduct.” But “hate speech writ large” is insufficient. As courts have recognized, the government must shun being the arbiter of “truth.”
Volokh questioned whether the IRS’s tests—even if aimed at the method of presentation rather than the ideas presented—are, or can be, sufficiently clear, objective, and workable to pass constitutional muster. The area, he said, is “rife with opportunities for [IRS] abuse.” Expanding information requirements, he cautioned, would increase reporting burdens for the 99+ percent of groups not involved with hate.
A 2016 Chronicle of Philanthropy analysis found the IRS had granted tax-exempt status to 55 charities that were among 900 "hate groups" identified by the Southern Poverty Law Center (SPLC), including anti-immigrant and anti-gay-rights organizations, white nationalists, and Holocaust deniers. Many of these groups reject the “hate” label and some of their supporters have criticized SPLC’s own methods.
So can the IRS end tax exemptions for organizations that spew hate without running afoul of the Constitution? At best, imperfectly and with great difficulty.
Agency personnel are poorly qualified to grapple with what Owens called “complex, near-philosophical issues,” especially in minefields of political controversy or protected speech. For evidence, look no further than the events of 2010-2012 when the agency set off a political firestorm by selecting for extra scrutiny “social welfare” groups suspected of political spending based on their names -- “Tea Party” or “patriot” on the right and “occupy” or “progressive” on the left. At the same time, the IRS was criticized for insufficient enforcement against more ambiguously named nonprofits illegally spending a majority of their funds on political activity while concealing donors and evading gift taxes.
To help avoid such controversies, the IRS must define clear criteria that are “viewpoint-neutral,” focused on an applicant’s actions, not beliefs, recognizing that some hate groups may survive scrutiny and earn tax exemption. And, if the process is to have a chance to work effectively, Congress must give the IRS more funding so it can add staff, require enough information to meaningfully review groups seeking tax exemption, and strengthen impartial enforcement.
As Justice Holmes wrote 90 years ago, “if there is any principle of the Constitution that more imperatively calls for attachment than any other, it is the principle of free thought -- not free thought for those who agree with us, but freedom for the thought that we hate.”
Subcommittee Chairman John Lewis (D-GA), himself a victim of violent hate, pledged to hold an additional hearing and to introduce legislation addressing tax-exemption for “hate groups.” Stay tuned for the next chapter.
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