Nonprofits, Taxes, and Speech

65 Pages Posted: 15 Feb 2023 Last revised: 3 Apr 2024

Date Written: February 10, 2023

Abstract

Federal tax law is of two minds when it comes to speech by nonprofits. The tax benefits provided to nonprofits are justified in significant part because they provide nonprofits great discretion in choosing the specific ends and means to pursue, thereby promoting diversity and pluralism. But current law withholds some of these tax benefits if a nonprofit engages in certain types of political speech. Legislators have also repeatedly, if unsuccessfully, sought to expand these political speech restrictions in various ways. And some commentators have proposed denying tax benefits to groups engaged in other types of disfavored speech, including hate speech and fake news. These latter proposals have recently become more prominent as additional facts come to light about
the role of nonprofits in supporting white supremacy and in disseminating misleading information about COVID-19 treatments.

This Article explores the existing and proposed limitations on speech by tax-exempt nonprofits given the constitutional restrictions on such limitations and the policy justifications for existing nonprofit tax benefits. It explains why the current limits on political campaign intervention and lobbying by charities are both justified given the subsidy provided to charities and their supporters under existing federal tax law and existing and longstanding constitutional case law. It further concludes that any expansion of these limits on charities to cover other types of speech, including hate speech and fake news, would be inconsistent with the existing broad definitions of the purposes that charities can pursue as well as, in some circumstances, constitutionally suspect. The Article also concludes that limits on speech by non-charitable tax-exempt nonprofits, including the existing limit on political campaign intervention for some of these nonprofits, are both unwise as a policy matter and, in some circumstances, constitutionally suspect given the lack of a subsidy
for such speech by these nonprofits.

Keywords: charity, nonprofit, tax, speech, politics

JEL Classification: K34, K39, L39

Suggested Citation

Mayer, Lloyd Hitoshi, Nonprofits, Taxes, and Speech (February 10, 2023). 56 Loyola of Los Angeles Law Review 1291 (2023), Available at SSRN: https://ssrn.com/abstract=4357284 or http://dx.doi.org/10.2139/ssrn.4357284

Lloyd Hitoshi Mayer (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States
574-631-8057 (Phone)
574-631-4197 (Fax)

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