Source: https://law.justia.com/cases/federal/appellate-courts/F2/631/1030/86772/
Timestamp: 2019-04-24 00:12:48+00:00

Document:
Appeal from the United States District Court for the District of Columbia (Civil Action No. 77-1649).
Robert Jenkins, III, Washington, D. C., for appellant. Jeffrey L. Yablon, Washington, D. C., was on the brief for appellant. Harris Weinstein, Washington, D. C., also entered an appearance for appellant.
Robert A. Bernstein, Atty., Dept. of Justice, Washington, D. C., with whom M. Carr Ferguson, Asst. Atty. Gen., Carl S. Rauh, U. S. Atty., Washington, D. C., at the time the brief was filed, were on the brief, for appellee.
Before TAMM, ROBINSON, and MIKVA, Circuit Judges.
Plaintiff, Big Mama Rag, Inc. (BMR, Inc.), appeals from the order of the court below granting summary judgment to defendants1 and upholding the IRS's rejection of plaintiff's application for tax-exempt status. Specifically, BMR, Inc. questions the finding that it is not entitled to tax exemption as an educational or charitable organization under section 501(c) (3) of the Internal Revenue Code, 26 U.S.C. § 501(c) (3) (1976), and Treas.Reg. § 1.501(c) (3)-1(d) (2) & (3) (1959). Appellant also challenges the constitutionality of the regulatory scheme, arguing that it violates the First Amendment and the equal protection component of the Fifth Amendment and that it unconstitutionally conditions tax-exempt status on the waiver of constitutional rights.
Because we find that the definition of "educational" contained in Treas. Reg. § 1.501(c) (3)-1(d) (3) is unconstitutionally vague in violation of the First Amendment, we reverse the order of the court below.
BMR, Inc. is a nonprofit organization with a feminist orientation. Its purpose is "to create a channel of communication for women that would educate and inform them on general issues of concern to them." App. 76. To this end, it publishes a monthly newspaper, Big Mama Rag (BMR), which prints articles, editorials, calendars of events, and other information of interest to women. BMR, Inc.'s primary activity is the production of that newspaper, but it also devotes a considerable minority of its time to promoting women's rights through workshops, seminars, lectures, a weekly radio program, and a free library.
BMR, Inc. has a predominantly volunteer staff and distributes free approximately 2100 of 2700 copies of Big Mama Rag's monthly issues. Moreover, the organization has severely limited the quantity and type of paid advertising. As the district court found, BMR, Inc. neither makes nor intends to make a profit and is dependent on contributions, grants, and funds raised by benefits for over fifty percent of its income. 494 F. Supp. 473, 476 (D.D.C. 1979).
3. the articles, lectures, editorials, etc., promoting lesbianism.
Appellant then brought a declaratory judgment action in the District Court for the District of Columbia.5 On cross-motions for summary judgment, the judge granted appellees' motion. Although the court rejected appellees' argument that BMR, Inc. was not entitled to tax-exempt status because it was a commercial organization, it agreed that appellant did not satisfy the definitions of "educational" and "charitable" in Treas.Reg. § 1.501(c) (3)-1(d) (2) & (3). The court found no constitutional basis for disturbing the IRS's decision.
Tax exemptions are granted under section 501(c) of the Internal Revenue Code to a variety of socially useful organizations, including the charitable and the educational.6 The Code forbids exemption of an organization if any part of its net earnings inures to the benefit of private persons or if it is an "action organization"-one that attempts to influence legislation or participates in any political campaign. Treasury regulations impose additional requirements: exempt status is accorded only to applicants whose articles of organization limit their activities to furtherance of exempt purposes (the "organizational test") or whose activities are in fact aimed at accomplishment of exempt purposes (the "operational test"). Treas.Reg. § 1.501(c) (3)-1(b) & (c) (1959).
Treas.Reg. § 1.501(c) (3)-1(d) (3) (i) (1959).
The district court found that BMR, Inc. was not entitled to tax-exempt status because it had "adopted a stance so doctrinaire" that it could not meet the "full and fair exposition" standard articulated in the definition quoted above. Appellant's response is threefold. First, it argues, the "full and fair exposition" hurdle is not applicable at all here because BMR, Inc. is not an organization whose primary activity or principal function is advocacy of change. Second, BMR, Inc. contends that its publication does satisfy the requirements of the "full and fair exposition" standard. Finally, appellant maintains that denial of its application for tax-exempt status on the basis of the "full and fair exposition" standard is unconstitutional for a number of reasons.
Vague laws are not tolerated for a number of reasons, and the Supreme Court has fashioned the constitutional standards of specificity with these policies in mind. First, the vagueness doctrine incorporates the idea of notice-informing those subject to the law of its meaning. Smith v. Goguen, 415 U.S. 566, 572, 94 S. Ct. 1242, 1246, 39 L. Ed. 2d 605 (1974); Grayned v. City of Rockford, 408 U.S. 104, 108, 92 S. Ct. 2294, 2298, 33 L. Ed. 2d 222 (1972). A law must therefore be struck down if " 'men of common intelligence must necessarily guess at its meaning.' " Hynes v. Mayor of Oradell, 425 U.S. 610, 620, 96 S. Ct. 1755, 1760, 48 L. Ed. 2d 243 (1976) (quoting Connally v. General Constr. Co., 269 U.S. 385, 391, 46 S. Ct. 126, 127, 70 L. Ed. 322 (1926)). See also Baggett v. Bullitt, 377 U.S. 360, 367, 84 S. Ct. 1316, 1320, 12 L. Ed. 2d 377 (1964).
Second, the doctrine is concerned with providing officials with explicit guidelines in order to avoid arbitrary and discriminatory enforcement. Hynes, 425 U.S. at 622, 96 S. Ct. at 1761; Goguen, 415 U.S. at 572-73, 94 S. Ct. at 1246-47; Papachristou v. City of Jacksonville, 405 U.S. 156, 170, 92 S. Ct. 839, 847, 31 L. Ed. 2d 110 (1972). To that end, laws are invalidated if they are "wholly lacking in 'terms susceptible of objective measurement.' " Keyishian v. Board of Regents, 385 U.S. 589, 604, 87 S. Ct. 675, 684, 17 L. Ed. 2d 629 (1967) (quoting Cramp v. Board of Public Instruction, 368 U.S. 278, 286, 82 S. Ct. 275, 280, 7 L. Ed. 2d 285 (1961)). See also NAACP v. Button, 371 U.S. 415, 466, 83 S. Ct. 328, 355, 9 L. Ed. 2d 405 (1963) (Harlan, J., dissenting) ("Laws that have failed to meet this (vagueness) standard are, almost without exception, those which turn on language calling for the exercise of subjective judgment, unaided by objective norms.").
require (those subject to them) to "steer far wider of the unlawful zone," than if the boundaries of the forbidden areas were clearly marked, . . . by restricting their conduct to that which is unquestionably safe. Free speech may not be so inhibited.
377 U.S. at 372, 84 S. Ct. at 1323 (quoting Speiser v. Randall, 357 U.S. 513, 526, 78 S. Ct. 1332, 1342, 2 L. Ed. 2d 1460 (1958)) (citation omitted). Measured by any standard, and especially by the strict standard that must be applied when First Amendment rights are involved, the definition of "educational" contained in Treas.Reg. § 1.501(c) (3)-1(d) (3) must fall because of its excessive vagueness.
We do not minimize the difficulty and delicacy of the task delegated to the Treasury by Congress under section 501(c) (3) of the Code. Words such as "religious," "charitable," "literary," and "educational" easily lend themselves to subjective definitions at odds with the constitutional limitations we describe above. Treasury bravely made a pass at defining "educational," but the more parameters it tried to set, the more problems it encountered.
The first portion of the regulation relied upon to deny BMR, Inc.'s request for tax-exempt status measures an applicant organization by whether it provides "instruction of the public on subjects useful to the individual and beneficial to the community." Treas.Reg. § 1.501(c) (3)-1(d) (3) (i) (b) (1959). The district court rejected that test with barely a murmur of disagreement from appellees. That standard, held the court below, "would be far too subjective in its application to pass constitutional muster." 494 F. Supp. at 479 n.6.
We find similar problems inherent in the "full and fair exposition" test, on which the district court based affirmance of the IRS's denial of tax-exempt status to BMR, Inc. That test lacks the requisite clarity, both in explaining which applicant organizations are subject to the standard and in articulating its substantive requirements.
A. Who is Covered by the "Full and Fair Exposition" Test?
The fact that an organization, in carrying out its primary purpose, advocates social or civic changes or presents opinion on controversial issues with the intention of molding public opinion or creating public sentiment to an acceptance of its views does not preclude such organization from qualifying under section 501(c) (3) so long as it is not an "action" organization of any one of the types described in paragraph (c) (3) of this section.
Treas.Reg. § 1.501(c) (3)-1(d) (2) (1959). The district court held that this part of the regulation was designed to cover charitable institutions and that BMR, Inc., an educational rather than a charitable organization, must meet the "full and fair exposition" standard rather than the more lenient "action organization" standard of section 1.501(c) (3)-1(d) (2).9 Obviously, if BMR, Inc. is an advocacy group and is not a charitable organization, it may not take cover under the "action organization" standard but must instead meet the "full and fair exposition" test.
The uncertainty of the coverage of the "full and fair exposition" standard is evidenced by its application over the years by the IRS. The Treasury Department's Exempt Organizations Handbook has defined "advocates a particular position" as synonymous with "controversial."11 Such a gloss clearly cannot withstand First Amendment scrutiny. It gives IRS officials no objective standard by which to judge which applicant organizations are advocacy groups-the evaluation is made solely on the basis of one's subjective notion of what is "controversial." And, in fact, only a very few organizations, whose views are not in the mainstream of political thought, have been deemed advocates and held to the "full and fair exposition" standard.12 The one tax-exempt homosexual organization cited by the Government as evidence that the IRS does not discriminate on the basis of sexual preference was required to meet the "full and fair exposition" standard even though it admittedly did not "advocate or seek to convince individuals that they should or should not be homosexuals." Rev.Rul. 78-305, 1978-2 C.B. 172, 173.
The Treasury regulation defining "educational" is, therefore, unconstitutionally vague in that it does not clearly indicate which organizations are advocacy groups and thereby subject to the "full and fair exposition" standard. And the latitude for subjectivity afforded by the regulation has seemingly resulted in selective application of the "full and fair exposition" standard-one of the very evils that the vagueness doctrine is designed to prevent.
B. What Does the "Full and Fair Exposition" Test Require?
Treas.Reg. § 1.501(c) (3)-1(d) (3) (1959). What makes an exposition "full and fair"? Can it be "fair" without being "full"? Which facts are "pertinent"? How does one tell whether an exposition of the pertinent facts is "sufficient ... to permit an individual or the public to form an independent opinion or conclusion"? And who is to make all of these determinations?
The regulation's vagueness is especially apparent in the last clause quoted above. That portion of the test is expressly based on an individualistic-and therefore necessarily varying and unascertainable-standard: the reactions of members of the public. The Supreme Court has recognized that statutes phrased in terms of individual sensitivities are suspect and susceptible to attack on vagueness grounds. See Coates v. City of Cincinnati, 402 U.S. 611, 614, 91 S. Ct. 1686, 1688, 29 L. Ed. 2d 214 (1971) ("Conduct that annoys some people does not annoy others. Thus, the ordinance is vague ... in the sense that no standard of conduct is specified at all."). See also Kingsley Int'l Pictures Corp. v. Regents of the Univ. of New York, 360 U.S. 684, 701-02, 79 S. Ct. 1362, 1372, 3 L. Ed. 2d 1512 (1959) (Clark, J., concurring in the result); Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495, 504-05, 72 S. Ct. 777, 781-82, 96 L. Ed. 1098 (1952).
One of the five examples cited by the Government as evidence of BMR 's failure to meet the "full and fair exposition" test may be used to illustrate our point. Most of the article, discussing Susan Saxe's 1975 plea of guilty to charges stemming from a bank robbery in Philadelphia, is simple journalistic reporting. It discusses the terms of the plea bargain, the reaction of local feminists, the differential treatment accorded Saxe supporters and white men who went to observe the pretrial hearing, and police questioning of women in Philadelphia. In return for Saxe's plea, the Government apparently agreed, among other things, to "call off its investigation of the women's and lesbian communities" in the area and not to ask Saxe to testify against "anyone she has known or know (sic) about in the last five years." By forcing Saxe to choose between her own interests and those of other women, the article continues, "the Government has clarified for us, once again, that we, as women, are inextricably bound up with each other in the struggle." Big Mama Rag, July, 1975, at 1, cols. 1-3, reprinted in App. 447.
The futility of attempting to draw lines between fact and unsupported opinion is further illustrated by the district court's application of that test. The court did not analyze the contents of BMR under its proposed test but merely stated, without further explication, that the publication was not entitled to tax-exempt status because it had "adopted a stance so doctrinaire that it cannot satisfy this standard." 494 F. Supp. at 479. Instead of applying the purportedly objective test the court had formulated, it was forced to resolve the case by resorting to the subjective notion of whether the publication was "doctrinaire." We can conceive of no value-free measurement of the extent to which material is doctrinaire, and the district court's reliance on that evaluative concept corroborates for us the impossibility of principled and objective application of the fact/opinion distinction.
Appellees suggest that the Treasury regulation at issue here embodies a related distinction-between appeals to the emotions and appeals to the mind.16 Material is educational, they argue, if it appeals to the mind, that is, if it reasons to a conclusion from stated facts. Again, the required linedrawing is difficult, a problem which is compounded if the difference between the two relies on the aforementioned fact/opinion distinction.
An example raised by appellees in their brief and discussed at oral argument is illustrative. The American Cancer Society's cause may be better served by a bumper sticker picturing a skull and crossbones and saying "Smoking rots your lungs" than by one that merely states "Smoking is hazardous to your health." Both are intended to impart the same message, and they are identical in degree of specificity of the underlying facts. Although the first may be said to appeal more to the emotions, and the second to the mind, that distinction should not obscure the similarities between the two. They should be considered equal in educational content.
Thus, neither of the distinctions proposed here remedies the imprecise language of the "full and fair exposition" standard or clarifies the requirements imposed by that test.
The definition of "educational" contained in Treas.Reg. § 1.501(c) (3)-1(d) (3) lacks sufficient specificity to pass constitutional muster. Its "full and fair exposition" standard, on the basis of which the denial of BMR, Inc.'s application for tax exemption was upheld by the court below, is vague both in describing who is subject to that test and in articulating its substantive requirements.
The history of appellant's application for tax-exempt status attests to the vagueness of the "full and fair exposition" test and evidences the evils that the vagueness doctrine is designed to avoid. The district court's decision was based on the value-laden conclusion that BMR was too doctrinaire. Similarly, IRS officials earlier advised appellant's counsel that an exemption could be approved only if the organization "agree(d) to abstain from advocating that homosexuality is a mere preference, orientation, or propensity on par with heterosexuality and which should otherwise be regarded as normal." App. 1030. Whether or not this view represented official IRS policy is irrelevant. It simply highlights the inherent susceptibility to discriminatory enforcement of vague statutory language.
We are not unmindful of the burden involved in reformulating the definition of "educational" to conform to First Amendment requirements. But the difficulty of the task neither lessens its importance nor warrants its avoidance. Objective standards are especially essential in cases such as this involving those espousing nonmajoritarian philosophies. In this area the First Amendment cannot countenance a subjective "I know it when I see it" standard.20 And neither can we.
This case is accordingly reversed and remanded for further proceedings consistent with this opinion.
Based on the information submitted, it appears that your corporate activities, which presumably are within the charter powers, are business activities. They are devoted to publishing a newspaper and selling it to the general public in accordance with ordinary commercial publishing practices. Although the newspaper published articles expressing the Feminist point of view, there is no showing that the operations fulfill a corporate role which in and of itself is exclusively charitable, scientific, literary or educational.
The organization in publishing the newspaper is not operated exclusively for educational purposes as required by Code section 501(c) (3) as the content of the publication is not educational, the preparation of the material does not follow methods educational in nature, the distribution of the material is not valuable in achieving an educational purpose and/or the manner in which the distribution is accomplished is not distinguishable from ordinary commercial publishing practices.
(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.
26 U.S.C. § 501(c) (1976).
An organization ... may qualify ... if (1) the content of the publication is educational, (2) the preparation of material follows methods generally accepted as "educational" in character, (3) the distribution of the materials is necessary or valuable in achieving the organization's educational and scientific purposes, and (4) the manner in which the distribution is accomplished is distinguishable from ordinary commercial publishing practices.
Rev.Rul. 67-4, 1967-1 C.B. 121, 122; see Rev.Rul. 77-4, 1977-1 C.B. 141.

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