According to the Alliance for Justice, a case before the U.S. Court of Appeals for the Ninth Circuit could have significant implications for the ability of private foundations and public charities to conduct public policy-related activities.
In its 2015 Parks v. Commissioner of Internal Revenue decision (now on appeal), the United States Tax Court found that a series of radio ads funded by the Parks Foundation between 1997 and 2000 conveyed information and commentary relevant to various Oregon state ballot measures and, accordingly, were subject to excise taxes under Internal Revenue Code prohibitions against foundation expenditures for lobbying activities and expenditures — notwithstanding the fact that several of the ads never mentioned a specific ballot measure. In January, AFJ and the Council on Foundations filed a joint amicus brief arguing that Congress defined "lobbying" in limited terms to allow private foundations and public charities to be able to discuss public policy issues, and that the tax court's decision was inconsistent with relevant statutory and regulatory provisions.
Under the regulations, the radio ads disseminated by the foundation would constitute a taxable attempt to influence legislation only if they "refer to" and "reflect a view on" specific legislation. The tax court, in contrast, found that even if a communication does not specifically name a ballot measure but "employs terms widely used in connection with the measure or describes the content or effect of the measure," it will be deemed to refer to specific legislation. In applying this definition, the brief argues, the court relied on an overly broad interpretation of the terms. According to AFJ, the court's interpretation prevents private foundations and other charitable organizations from being able to comment on social and economic issues, in contravention of what the regulations allow. Earlier this week, the Ninth Circuit's three-judge panel heard oral arguments on the appeal in Las Vegas.
"The Parks case is one that private foundations and public charities should be watching very closely," said Abby Levine, director of AFJ's Bolder Advocacy program. "If the original ruling of the tax court is allowed to stand, these organizations could face many more restrictions on their work. We think the tax court's ruling is not in line with how the regulations were meant to be interpreted, and we have argued that in our brief to the Ninth Circuit."