Regan v. Taxation with Representation of Wash.
461 U.S. 540 (1983)
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Rule of Law:
The government does not violate the First Amendment by refusing to subsidize lobbying activities through tax exemptions, nor does it violate the Fifth Amendment's equal protection component by selectively subsidizing the lobbying of certain groups, like veterans' organizations, so long as the classification bears a rational relation to a legitimate governmental purpose.
Facts:
- Taxation With Representation of Washington (TWR) is a nonprofit corporation organized to advocate for what it considers the 'public interest' in federal taxation.
- TWR was formed to take over the operations of two other nonprofits: a § 501(c)(3) organization for non-lobbying activities and a § 501(c)(4) for lobbying activities.
- TWR applied for tax-exempt status as a single entity under § 501(c)(3), which allows donors to receive tax deductions for their contributions.
- A condition of § 501(c)(3) status is that no substantial part of an organization's activities may consist of attempting to influence legislation (lobbying).
- The Internal Revenue Service (IRS) denied TWR's application because a substantial part of TWR's planned activities involved lobbying.
- In contrast, § 501(c)(19) allows veterans' organizations to engage in substantial lobbying while also qualifying to receive tax-deductible contributions.
Procedural Posture:
- Taxation With Representation of Washington (TWR) sued the Commissioner of Internal Revenue in U.S. District Court, seeking a declaratory judgment that it qualified for § 501(c)(3) status.
- The District Court (trial court) granted summary judgment for the government defendants.
- TWR, as appellant, appealed to the U.S. Court of Appeals for the District of Columbia Circuit.
- The en banc Court of Appeals (intermediate appellate court) reversed, holding that the § 501(c)(3) lobbying prohibition violated the Fifth Amendment, but not the First Amendment.
- The government defendants, as appellants, appealed to the U.S. Supreme Court, and TWR, as appellee, cross-appealed.
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Issue:
Does Section 501(c)(3) of the Internal Revenue Code violate the First Amendment and the equal protection component of the Fifth Amendment's Due Process Clause by prohibiting tax-exempt charitable organizations from engaging in substantial lobbying while permitting tax-exempt veterans' organizations to do so?
Opinions:
Majority - Justice Rehnquist
No, Section 501(c)(3) does not violate the First Amendment or the Fifth Amendment's equal protection component. The government's refusal to subsidize lobbying through tax deductions is not an infringement on First Amendment rights. The legislature's decision not to subsidize the exercise of a fundamental right does not infringe the right itself. Following Cammarano v. United States, the Court held that Congress is not required to subsidize lobbying. The equal protection challenge also fails because the distinction between charitable organizations and veterans' organizations is not based on a suspect classification and does not impinge on a fundamental right in a way that requires strict scrutiny. Applying rational basis review, the Court found that Congress's decision to subsidize veterans' lobbying is rationally related to the legitimate government purpose of rewarding veterans for their military service. Legislatures have especially broad latitude in creating classifications in tax statutes.
Concurring - Justice Blackmun
No, the statute is constitutional, but only under the assumption that the IRS administers it in a way that allows for a viable alternative channel for speech. While the lobbying restriction in § 501(c)(3), viewed in isolation, would be an unconstitutional condition on the exercise of First Amendment rights, the overall statutory scheme is saved by the existence of § 501(c)(4). An organization can form a § 501(c)(3) for non-lobbying activities and a § 501(c)(4) affiliate to lobby, thus preserving its ability to speak without losing tax benefits for its other work. However, if the IRS were to impose significant restrictions on the relationship between these affiliated entities, such as limiting the § 501(c)(3) organization's control over its lobbying arm, the statutory scheme would become an unconstitutional penalty on speech.
Analysis:
This decision significantly clarifies the unconstitutional conditions doctrine, establishing a key distinction between a penalty on protected speech and a mere refusal to subsidize it. The ruling grants Congress wide deference in using tax exemptions and deductions to encourage certain activities over others, so long as it does not discriminate on the basis of viewpoint or use a suspect classification. By applying rational basis review to a subsidy that affects speech, the Court solidified the principle that the government is not constitutionally required to fund the exercise of fundamental rights. This precedent remains critical in cases involving government funding of private speech and activities.
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