California Attorney General Xavier Becerra hit a low note recently during a press conference marking his first 100 days in office. Out of the blue, Becerra lashed out at nonprofit groups for “doing politics.” He threatened to investigate “these groups that are getting tax breaks [while] influencing our political system,” and claimed their donors were illegally taking charitable tax deductions. In his tirade, Becerra misstated the law. As California’s top law enforcement official, he should know better. Then again, his remarks continue his predecessor’s war against nonprofits’ First Amendment rights.
If Becerra’s claim that nonprofits are illegally participating in politics were true, that would mean he was the ringleader and beneficiary of a criminal enterprise during his 20 years in Congress. After all, his congressional campaign committee — which existed for the sole purpose of promoting his election and reelection — was a nonprofit organization under the tax code. If Attorney General Becerra wants to crack down on nonprofit groups engaging in politics, he should begin by prosecuting himself. Fortunately for Becerra, he’s wrong about the law.
Under the tax law, only donations to certain nonprofits are tax-deductible. These are primarily charities that fall under section 501(c)(3) of the tax code. To prevent tax deductions from subsidizing election campaigns, the law prohibits charities from engaging in any political activities. Even the biggest proponents of more regulation of nonprofits have not alleged any widespread violations by 501(c)(3) charities involving themselves in politics. Thus, Becerra’s suggestion that donors are taking charitable deductions for donating to groups that engage in politics is false.
The faux controversy that supporters of more speech regulations have ginned up lately concerns political activities by nonprofit advocacy groups that fall under section 501(c)(4) of the tax code. Donors to 501(c)(4) groups may not deduct their donations. Like charities and section 527 political organizations, however, 501(c)(4) groups are exempt from taxation on their income. That is as it should be.
As an individual, if you were to buy a meal for a homeless person, you would not have to pay more income tax. Likewise, if you were to publish a flyer advocating for or against a government policy or a candidate for elected office, no extra income tax is due either. In the same way, nonprofit groups generally do not pay an additional tax when they perform those same activities with money pooled from individuals. As their name suggests, nonprofit groups are not taxed on their income because they generally do not engage in for-profit activities.
In fact, 501(c)(4) groups must pay a federal surtax on their political spending. Thus, to the extent Becerra was referring to 501(c)(4) groups, his suggestion that taxpayers are subsidizing these organizations’ political activities also could not be further from the truth. And contrary to Becerra’s claim that these groups are violating the law, the Internal Revenue Service’s regulations have permitted 501(c)(4) entities to engage in a substantial amount of political activity for the past 50-plus years. To this day, both the internal and public guidance from the IRS also expressly permit these groups to participate in election campaign activities.
Unfortunately, Becerra’s ignorant or disingenuous attack on nonprofit groups’ political speech rights follows the shameful legacy of his predecessor (and now U.S. senator) Kamala Harris. As state attorney general, Harris sought without any legal basis to force nonprofit groups in California to turn over their private donor lists to her office. If they refused, she would not permit them to exercise their constitutional right to solicit funds in the state. That audacious assertion and abuse of official power threatened donors’ First Amendment right to associational speech and privacy, as the U.S. Supreme Court recognized decades ago.
Going forward, members of the nonprofit community must stand up and resist this intimidation campaign in California and elsewhere. Public officials must be called out for misstating the law about nonprofits’ First Amendment rights. Lawsuits must be brought against government officials who misuse the law to impede citizens’ right to freely associate. And political pressure must be applied to protect the vital role that nonprofits play in our political discourse. Remaining silent in response to attacks like Becerra’s will only invite further and more serious incursions.
This post originally ran in The Hill on June 9th 2017.
