Case Name: TAXATION WITH REPRESENTATION OF WASHINGTON, Appellant, v. Donald T. REGAN, Secretary of the Treasury, et al.
Court: United States Court of Appeals for the District of Columbia Circuit
Jurisdiction: District of Columbia
Decision Date: 1982-03-26
Citations: 219 U.S. App. D.C. 117
Docket Number: No. 79-1464
Parties: TAXATION WITH REPRESENTATION OF WASHINGTON, Appellant, v. Donald T. REGAN, Secretary of the Treasury, et al.
Judges: Before ROBINSON, Chief Judge, and WRIGHT, TAMM, MacKINNON, ROBB, WILKEY, WALD, MIKVA, EDWARDS, and GINSBURG, Circuit Judges.
Reporter: United States Court of Appeals for the District of Columbia Circuit
Volume: 219
Pages: 117–164

Head Matter:
676 F.2d 715
TAXATION WITH REPRESENTATION OF WASHINGTON, Appellant, v. Donald T. REGAN, Secretary of the Treasury, et al.
No. 79-1464.
United States Court of Appeals, District of Columbia Circuit.
Argued En Banc Oct. 14, 1981.
Decided March 26, 1982.
John Cary Sims with whom Alan B. Morrison and Thomas F. Field, Washington, D. C., were on the brief for appellant.
Frank P. Cihlar, Atty., Dept, of Justice with whom John F. Murray, Acting Asst. Atty. Gen., Charles F. C. Ruff, U. S. Atty. at the time the briefs were filed, Michael L. Paup and Richard Farber, Attys., Dept, of Justice, Washington, D. C., were on the brief for appellees. Ernest J. Brown, Leonard J. Henzke, Jr. and Philip I. Brennan, Attys., Dept, of Justice, Washington, D. C., also entered appearances for appellees.
Before ROBINSON, Chief Judge, and WRIGHT, TAMM, MacKINNON, ROBB, WILKEY, WALD, MIKVA, EDWARDS, and GINSBURG, Circuit Judges.

Opinion:
MIKVA, Circuit Judge:
Taxation with Representation of Washington (Taxation) challenges the lobbying restrictions on certain nonprofit organizations required by Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3), as a violation of its First Amendment and equal protection rights. The whole of Taxation's argument well exceeds the sum of its parts. Taxation's case is weak if it is viewed solely as a First Amendment claim, because the Constitution does not require Congress to subsidize First Amendment activity. Taxation also has a weak case solely in terms of equal protection; Congress has vast leeway under the Constitution to classify the recipients of its benefits and to favor some groups over others. But a First Amendment concern must inform the equal protection analysis in this case. Courts must scrutinize with special care any act by Congress that facilitates the speech of one speaker over another, even when legislation is enacted in the dry, classification-ridden context of the Internal Revenue Code. By subsidizing the lobbying activities of veterans' organizations while failing to subsidize the lobbying of Taxation and other charitable groups, Congress has violated the equal protection guarantees of the Constitution. The district court erroneously rejected Taxation's constitutional challenge, and we accordingly reverse.
Because this case is complex, it may be useful to set out in advance the path that our reasoning follows. The opinion begins with an explanation of the internal revenue provisions at issue (cited as I.R.C. or by Section) and the discrimination established by those provisions. In the second part of the opinion, we explain why the statute's classifications must be given close judicial scrutiny. The third section then identifies and assesses the substantiality of the governmental interests said to justify the discrimination, and concludes that the statute is unconstitutional. The final section of the opinion discusses the appropriate remedy for this violation and the need for a remand to the district court.
I. BACKGROUND
Taxation is a nonprofit charitable and educational organization that was formed to represent the general public on tax issues before Congress, the courts, and the executive branch. After its incorporation in June 1977, Taxation applied to the Internal Revenue Service (IRS) for a declaration that it was an organization described in Section 501(c)(3). Although Taxation oth erwise qualified for tax-exempt status under that section, it did not meet the requirement that "no substantial part" of its activities consist of "attempting to influence legislation." The IRS specifically found that Taxation's "stated purposes include attempting to influence legislation, and legislative advocacy may constitute a substantial part of your activities." Notification of Adverse Ruling, February 14, 1978, Joint Appendix (J.A.) 48. As a result, Taxation was ineligible for several tax benefits provided by Section 501(c)(3), particularly the eligibility to receive tax-deductible contributions from donors.
Taxation exhausted its administrative remedies, and then sought in May 1978 to overturn the IRS decision by bringing a declaratory judgment action under I.R.C. § 7428. Upon consideration of cross-motions for summary judgment, the district court ruled for the defendants. Memorandum Opinion, January 31, 1979, J.A. 56-64. Taxation appealed the district court's decision, and a three-judge panel of this court decided on April 14,1981, to uphold the trial court. On June 11, 1981, a majority of the full court of appeals voted to vacate the panel opinion and rehear the case en bane.
A. The Statutory Scheme
Before considering the issues presented by this case, it is first necessary to examine the classifications that are under review. Congress has excluded various types of organizations from the taxing provisions of the Code, and I.R.C. § 501 "is the linchpin of the statutory benefit system." Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 29 n.1, 96 S.Ct. 1917, 1920 n.1, 48 L.Ed.2d 450 (1976). This section describes several dozen kinds of organizations that are exempt from federal taxation on the income they receive.
There are other important components of the tax benefits provided by Section 501 in conjunction with other provisions of the Code, however. The chief source of income for many of the nonprofit organizations described in the statute is private contributions. In order to encourage such giving, Congress has frequently provided that contributors to various Section 501(c) organizations may take a deduction based on the amount of the contribution. Because the Code imposes three general taxes on individuals — on income, gifts, and estates — the provisions allowing contributors to take these deductions appear in three separate portions of the Code. See I.R.C. § 170, 2055, 2522. Aside from this complexity, however, the general scheme is simple. Congress has accorded certain organizations a double benefit: exemption from taxes on their own income, and eligibility to receive contributions and gifts that are deductible from the donors' taxes as well. Throughout this opinion, tax exemption refers to the first benefit, and tax-deductibility to the second.
Every organization described in Section 501 enjoys some form of tax exemption, but only some are eligible to receive tax-deduct ible contributions. The status of any particular organization, of course, can only be ascertained by examining the other portions of the Code that provide deductions to the organization's donors. A further complication lies in the fact that the Code differentiates among those organizations eligible to receive tax-deductible contributions in terms of the uses to which the organization's income may be put. For the purposes of this case, the crucial distinction promoted by Section 501 is between organizations that may not receive tax-deductible contributions if they lobby substantially, and organizations that may receive such contributions even if they do.
Section 501(c)(3) organizations — sometimes simply called "charitable organizations — are examples of the former. A donor to such an organization may deduct his contributions to it by virtue of the relevant provisions in the Code. See I.R.C. § 170(c)(2) (income tax deductions); I.R.C. § 2055(a)(2), 2106(a) (estate tax deductions); I.R.C. § 2522(a) (gift tax deductions). The Code limits the amount of lobbying that may be conducted by the Section 501(c)(3) organization, however, whether or not the lobbying is related to its exempt purpose. See Slee v. Commissioner, 42 F.2d 184 (2d Cir. 1930). Section 501(c)(4) organizations, on the other hand, are exempt from income taxes even if they engage in substantial lobbying. These organizations are not eligible to receive tax-deductible contributions, however.
In contrast, other Section 501(c) organizations may receive tax-deductible contributions without regard to any lobbying limitation. Contributions to certain cemetery or burial companies, which are exempt under Section 501(c)(13), are deductible under Section 170(c)(5) without explicit statutory limitations concerning lobbying activities. The same is true of contributions to the federal or state governments for exclusively public purposes. See Section 170(c)(1). Labor unions and business leagues are exempt under Sections 501(c)(5) and 501(c)(6) respectively, even if lobbying is their primary purpose. Contributions to such organizations, usually in the form of dues, generally are deductible only to the extent they are "business expenses."
Analysis of where other Section 501(c) organizations fall in this scheme is complicated by the fact that IRS regulations may impose lobbying limitations even when the Code itself is silent. Fraternal beneficiary societies that operate through local lodges and meet certain other requirements, for example, are exempt under Section 501(c)(8). Although contributions to such societies are tax-deductible only if the contributions are to be used for the group's exempt purposes, the statute imposes no lobbying restriction for gift or income tax purposes, but does for estate tax purposes. Compare I.R.C. § 2055(a)(3) (explicit limitation for estate tax purposes) with I.R.C. § 2522(a)(3) (no restriction for gift tax purposes) and I.R.C. § 170(c)(4) (no restriction for income tax purposes). Treasury Regulations appear to fill this gap, however. The regulations provide that a charitable fund operated by a fraternal beneficiary society will not qualify for tax-deductible contributions under these provisions if the society is an "action organization," which includes organizations that engage in substantial lobbying. Treas. Reg. § 1.501(c)(3)-1(c)(3). See, e.g., id. § 25.-2522(a)-1(a)(4) (gift tax deductions); id. § 1.170A—1(h)(5) (income tax deductions); id. § 2055(a) (estate tax deductions). Despite the impression given by the statute alone, then, fraternal beneficiary societies resemble Section 501(c)(3) organizations because they are barred by regulation from using tax-deductible contributions to engage in substantial lobbying.
Veterans' organizations, which are exempt under Section 501(c)(19), require even closer analysis than fraternal beneficiary societies. Unlike Section 501(c)(3) organizations, veterans' organizations are not subjected to a lobbying limitation as a prerequisite for receiving tax-deductible contributions. See, e.g., I.R.C. § 170(c)(3) (income tax deductions); I.R.C. § 2055(a)(4) (estate tax deductions); I.R.C. § 2522(a)(4) (gift tax deductions). Again, however, Treasury Regulations condition exemption from income taxes on whether such groups devote themselves "exclusively" to certain veterans' functions. See Treas. Reg. § 1.501(c)(19)-l. Moreover, the Treasury Regulations seem to require that veterans' groups obey a lobbying limitation in order to enable their contributors to deduct donations for income tax purposes, id. § 170A-1(h)(5), if not for estate or gift tax purposes. In practice, however, veterans' organizations enjoy very different tax treatment. Counsel for the government candidly admitted during oral argument that the regulation governing deductibility of contributions for income tax purposes is not enforced with regard to veterans groups, and the IRS has stated that it will not challenge income tax deductions taken with regard to donations made to these groups. IRS Publication No. 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1954 (1980).
B. Consequences Suffered by Taxation
The effect of the statutory scheme, with regulations engrafted, is that different exempt organizations receive disparate tax treatment, depending on their lobbying activities. Section 501(c) runs the gamut from organizations that may lobby but receive no tax-deductible contributions, e.g., Section 501(c)(4); organizations that may receive tax-deductible contributions but may not lobby, e.g., Section 501(c)(3); and organizations that in practice may do both, i.e., veterans' organizations under Section 501(c)(19). An organization such as Taxation may not receive tax-deductible contributions if it engages in "substantial" lobbying, but a qualifying veterans' organization may continue to receive tax-deductible contributions even if it lobbies as much and on as many issues as it chooses.
Perhaps as a result of this uneven treatment, veterans' groups such as the American Legion and the Veterans of Foreign Wars are active before Congress on a large number of different issues. The American Legion and its affiliates "have historically been among the most active lobbying organizations on the national scene." Troyer, Charities, Law-Making, and the Constitution: The Validity of the Restrictions on Inñuencing Legislation, 31 N.Y.U. Inst. on Fed. Tax. 1415, 1439 (1973). Veterans' organizations have sought to influence legislation involving ratification of the Panama Canal treaties, Alaska national parks, national security issues, and elimination of Saturday mail delivery. But a § 501(c)(3) charitable organization, such as one formed to promote health care, may not engage in substantial lobbying even when the legislation relates directly to its exempt purpose, say a bill for the construction of more hospitals.
Two preliminary arguments, which could be said to concern standing, should be addressed before turning to the central issues of this case. First, the government notes that because a charitable organization may be exempt from payment of income taxes under Section 501(c)(4) even if it engages in substantial lobbying, Section 501(c)(3) in no way constitutes a direct governmental interference with Taxation's lobbying. Supplemental Brief for Appellee United States (IRS Supp. Brief) at 14. The implication is that Taxation has suffered no injury from denial of Section 501(c)(3) status because the provisions of the Code "neither restrict Taxation's lobbying activities nor deny Taxation tax exempt status because of its planned activities." Id. As the description of the statutory scheme shows, however, disparate tax benefits depend on the specific statutory provision under which an organization is determined to be exempt from federal income tax. Taxation's lack of Section 501(c)(3) status causes it substantial disadvantages, notably exclusion from the IRS "Cumulative List" of organizations entitled to receive tax-deductible donations and foundation grants. "[Ajppearance on the Cumulative List is a prerequisite to successful fund raising for most charitable organizations. Many contributors simply will not make donations to an organization that does not appear on the Cumulative List." Bob Jones University v. Simon, 416 U.S. 725, 729-30, 94 S.Ct. 2038, 2042-43, 40 L.Ed.2d 496 (1974). It is therefore irrelevant to Taxation's case that it might lobby substantially and still be exempt from payment of income taxes under Section 501(c)(4).
A second preliminary argument suggested by the government is related to the first. Because the chief effect of Taxation's refusal to comply with the "no substantial lobbying" clause of Section 501(c)(3) is that its contributors may not make tax deductible contributions, the government implies that Taxation is not the proper party to bring this case. IRS Supp. Brief at 19. "The attenuated effect on Taxation of denying a deduction to its potential contributors" is said not to constitute a "significant encroachment" or "serious infringement" of Taxation's right to lobby, id., and "does not infringe Taxation's First Amendment rights," id. at 26. This argument too may be easily dismissed. Taxation has standing to raise First Amendment claims on behalf of its members and supporters, and it is clearly evident that Taxation will be harmed if its contributors cease giving it money. Regardless of the merits of its case, Taxation undoubtedly is an appropriate party to bring this action.
In short, Taxation has complained that Section 501(c) exposes the lobbying of various tax-exempt groups to discriminatory tax treatment and thereby violates Taxation's First Amendment and equal protection rights. The statutory provision effectively limits the ability of charitable organizations to present to legislators their views on legislation even when the legislation directly affects their charitable objects, There is a difference, of course, between showing that a statute has a discriminatory application and that it is unconstitutional, But Taxation has met the threshold requirement of demonstrating injury from the unequal application of a statute, and it is to the constitutionality of that statute we now turn.
II. THE APPROPRIATE STANDARD OF REVIEW
The starting point for our review must be determination of the appropriate standard to apply in reviewing appellant's constitutional claims. See Harris v. McRae, 448 U.S. 297, 322, 100 S.Ct. 2671, 2691, 65 L.Ed.2d 784 (1980). We find that a high level of scrutiny is required because the lobbying restriction of Section 501(c)(3) constitutes a limitation on protected First Amendment activity, and because Taxation's equal protection argument therefore involves what is clearly a fundamental right. In analyzing the differential treatment challenged here, the question then must be whether a substantial governmental interest supports the classification and whether the classification is narrowly drawn to serve that interest.
A. First Amendment Implications
There is no question whatsoever that lobbying comes within the protection of the First Amendment. See, e.g., California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510-11, 92 S.Ct. 609, 611-12, 30 L.Ed.2d 642 (1972); New York Times Co. v. Sullivan, 376 U.S. 254, 270, 84 S.Ct. 710, 720, 11 L.Ed.2d 686 (1964); Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 137-38, 81 S.Ct. 523, 529-30, 5 L.Ed.2d 464 (1961). It is also beyond dispute that First Amendment freedoms are fundamental rights in our society. See, e.g., Schad v. Borough of Mount Ephraim, 452 U.S. 61, 67, 101 S.Ct. 2176, 2182, 68 L.Ed.2d 671 (1981); Central Hudson Gas & Electric Corp. v. Public Service Comm'n, 447 U.S. 557, 565, 100 S.Ct. 2343, 2350, 65 L.Ed.2d 341 (1980). Were this a case in which the government sought to suppress the lobbying activities of Taxation directly, the appropriate level of scrutiny would be obvious. See, e.g., N.A.A.C.P. v. Button, 371 U.S. 415, 438-39, 83 S.Ct. 328, 340-41, 9 L.Ed.2d 405 (1963); Bates v. Little Rock, 361 U.S. 516, 524, 80 S.Ct. 412, 417, 4 L.Ed.2d 480 (1960).
First Amendment rights are not abridged, however, merely because the government refuses to subsidize those rights. In Cammarano v. United States, 358 U.S. 498, 79 S.Ct. 524, 3 L.Ed.2d 462 (1959), the Supreme Court upheld Treasury regulations that prohibited business deductions of lobbying expenses on the ground that governmental refusal to underwrite lobbying costs does not violate the First Amendment. See Harris v. McRae, 448 U.S. at 318, 100 S.Ct. at 2689 (whether Congress should subsidize the exercise of a fundamental constitutional freedom is "not a matter of constitutional entitlement"). For the same reasons, in "Americans United" Inc. v. Walters, 477 F.2d 1169, 1182 (D.C. Cir. 1973), rev'd on other grounds sub nom. Alexander v. "Americans United" Inc., 416 U.S. 752, 94 S.Ct. 2053, 40 L.Ed.2d 518 (1974), this court followed Cammarano in dismissing the appellants' claim that Section 501(c)(3)'s lobbying restriction violated the First Amendment on its face.
Taxation makes a valiant attempt to avoid these holdings by claiming that the lobbying restriction of Section 501(c)(3) constitutes an "unconstitutional condition" on the exercise of its First Amendment rights. In Perry v. Sindermann, 408 U.S. 593, 597, 92 S.Ct. 2694, 2697, 33 L.Ed.2d 570 (1972), the Supreme Court explained that "even though a person has no 'right' to a valuable governmental benefit and even though the government may deny him the benefit for any number of reasons," the government "may not deny a benefit to a person on a basis that infringes his constitutionally protected interests — especially, his interest in freedom of speech." Accord, McDaniel v. Paty, 435 U.S. 618, 626, 98 S.Ct. 1322, 1327, 55 L.Ed.2d 593 (1978); Pickering v. Board of Educ., 391 U.S. 563, 568, 88 S.Ct. 1731, 1734, 20 L.Ed.2d 811 (1968); Shelton v. Tucker, 364 U.S. 479, 485-86, 81 S.Ct. 247, 250-51, 5 L.Ed.2d 231 (1960); Tygrett v. Barry, 627 F.2d 1279 (D.C. Cir. 1980). Cf. Speiser v. Randall, 357 U.S. 513, 518, 78 S.Ct. 1332, 1338, 2 L.Ed.2d 1460 (1958) ("conditions imposed upon the granting of privileges or gratuities must be 'reasonable' "). The Supreme Court's decisions "have prohibited conditions on public benefits . . . which dampen the exercise generally of First Amendment rights, however slight the inducement to the individual to forsake those rights." Elrod v. Burns, 427 U.S. 347, 358 n.11, 96 S.Ct. 2673, 2682 n.11, 49 L.Ed.2d 547 (1976) (plurality opinion). Taxation could enjoy the "public benefits" of Section 501(c)(3), provided it did not exceed a "substantial" level of lobbying. Because Section 501(c)(3) expressly conditions receipt of these benefits on a charity's willingness to refrain from a greater level of expression, Taxation contends, an unconstitutional condition has been placed on the furnishing of these tax benefits. "The Government has no obligation whatever to grant tax advantages to charities, but if it decides to do so, it cannot condition receipt of the advantages on a surrender of First Amendment rights." Brief for Appellant Taxation (Taxation Brief) at 21.
This argument has some strength, but we reject its premise. It is true that under certain conditions, the indirect aid granted through tax exemptions and deductions is the functional equivalent of a direct government payment. See Committee for Public Education and Religious Liberty v. Nyquist, 413 U.S. 756, 790-91, 93 S.Ct. 2955, 2974-75, 37 L.Ed.2d 948 (1973) (declaring a tax benefit system invalid under the Establishment Clause); Green v. Connally, 330 F.Supp. 1150, 1156-57 (D.D.C.), aff'd mem. sub nom. Coit v. Green, 404 U.S. 997, 92 S.Ct. 564, 30 L.Ed.2d 550 (1971) (§ 501(c)(3) may not be used to benefit racially discriminatory private schools). "To deny an exemption to claimants who engage in certain forms of speech is in effect to penalize them for such speech. Its deterrent effect is the same as if the State were to fine them for this speech." Speiser v. Randall, 357 U.S. at 518, 78 S.Ct. at 1338. Taxation's argu ment would therefore be troublesome if it were the case that the government conditioned its provision of tax benefits on a charitable organization's waiver of First Amendment rights.
It is overly mechanistic, however, to suggest that the Section 501(c)(3) lobbying restriction actually is a condition on the receipt of tax benefits by charities. A group such as Taxation can easily structure itself along dual lines, under both Sections 501(c)(3) and 501(c)(4) of the Code, using the latter organization only for lobbying purposes. Because Section 501(c)(4) organizations may lobby freely without losing the tax benefits for which they qualify, the use of both subsections accords a charitable organization full tax benefits other than the ability to lobby with tax-deductible contributions — and this distinction is entirely permissible under Cammarano. Charitable organizations are simply not required to waive their First Amendment rights in order to obtain public benefits — they simply may not lobby with tax-deductible contributions — and Taxation's "unconstitutional condition" argument must therefore fail.
As we observed at the outset, then, Taxation has no compelling claim based solely on the First Amendment. We reject "the notion that First Amendment rights are somehow not fully realized unless they are subsidized by the State." Cammarano v. United States, 358 U.S. at 515, 79 S.Ct. at 534 (Douglas, J., concurring). We also reject Taxation's "unconstitutional condition" argument, because charitable organizations are governed by no conditions other than those upheld in Cammarano. Taxation has not shown that Section 501(c)(3)'s lobbying restriction abridges its First Amendment rights.
B. Equal Protection Implications
Our discussion of Taxation's First Amendment claims does not resolve the appropriate standard of review, because this is not a situation in which the government refuses impartially to subsidize all lobbying activities. Although the government need not subsidize the exercise of First Amendment rights, the question remains the appropriate standard of review when government subsidizes the exercise of First Amendment rights in a discriminatory fashion.
In Speiser v. Randall, 357 U.S. 513, 518, 78 S.Ct. 1332, 1338, 2 L.Ed.2d 1460 (1958), the Supreme Court held that discriminatory denial of tax exemptions for engaging in speech can impermissibly infringe First Amendment rights. Speiser concerned a California statute that conditioned property tax exemptions on the taking of a loyalty oath. The Court held that even though the statute involved merely the discriminatory denial of tax exemptions, and not the direct suppression of speech, a strict level of scrutiny was appropriate. "When we deal with the complex of strands in the web of freedoms which make up free speech, the operation and effect of the method by which speech is sought to be restrained must be subjected to close analysis and critical judgment in the light of the particular circumstances to which it is applied." Id. at 520, 78 S.Ct. at 1338. After conducting this close analysis, the Court concluded that California "clearly has no such compelling interest at stake" as would justify the operation of the statute. Id. at 529, 78 S.Ct. at 1343.
Although Speiser was decided a year earlier than Cammarano, nothing in the later case repudiates this ruling. Indeed, Justice Harlan's opinion for the Court in Cammarano carefully distinguished the earlier decision:
Speiser has no relevance to the cases before us. Petitioners are not being denied a tax deduction because they engage in constitutionally protected activities, but are simply being required to pay for those activities entirely out of their own pockets, as everyone else engaging in similar activities is required to do under the provisions of the Internal Revenue Code. Nondiscr¡minatory denial of deduction from gross income to sums expended to promote or defeat legislation is plainly not " 'aimed at the suppression of dangerous ideas.' " 357 U.S., at 519 [78 S.Ct., at 1338]. Rather, it appears to us to express a determination by Congress that since purchased publicity can influence the fate of legislation which will affect, directly or indirectly, all in the community, everyone in the community should stand on the same footing as regards its purchase so far as the Treasury of the United States is concerned.
358 U.S. at 513, 79 S.Ct. at 533 (emphasis added). The Court's emphasis on "nondiscriminatory" denial of benefits clearly dis tinguishes Cammarano from this case. Cammarano and Speiser are therefore consistent in requiring a strict standard of review for situations in which the government grants tax exemptions affecting First Amendment rights on a discriminatory basis.
This court's previous decisions explicitly adopt this reading of the relationship between Speiser and Cammarano. In "Americans United" Inc. v. Walters, 477 F.2d 1169, we held that the appellants' claim that Section 501(c)(3)'s lobbying restriction was unconstitutionally discriminatory raised a substantial constitutional question:
Cammarano, while disposing of appellants' claim that first amendment rights are violated by the questioned statute, does not attempt to deal with possible discriminatory conduct. . . . Americans United, on the other hand, alleges just that discriminatory conduct found lacking in Cammarano. . .
If discrimination exists here it relates to the exercise of the most fundamental of rights, those protected by the first amendment. . . . This is neither a frivolous challenge nor one which, as of the writing of this opinion, has been foreclosed by the Supreme Court.
Id. at 1182-83. See Big Mama Rag, Inc. v. United States, 631 F.2d 1030, 1034 & n.7 (D.C. Cir. 1980); Haswell v. United States, 500 F.2d 1133, 1147-48 (Ct.Cl.1974), cert. denied, 419 U.S. 1107, 95 S.Ct. 779, 42 L.Ed.2d 803 (1975). Similarly, in Community-Service Broadcasting of Mid-America, Inc. v. FCC, 593 F.2d 1102 (D.C. Cir. 1978) (en banc), this court invalidated a requirement that noncommercial educational stations record and maintain copies of broadcasts on issues of public importance because
where noncontent-based distinctions are drawn in a statute affecting First Amendment rights, the Supreme Court has held that the government interest served must be "substantial" and the statutory classification "narrowly tailored" to serve that interest if the statute is to withstand equal protection scrutiny.
Id. at 1122; see id. at 1111.
The case before us arguably differs from Community Service and even Speiser in the sense that it involves unequal levels of governmental subsidy of First Amendment rights, rather than a more intrusive governmental restriction of those rights. The question apparently remains open whether courts may adopt a different level of scrutiny in cases of this sort, one that is somewhat less searching than the scrutiny applied when the government directly bans First Amendment expression. See Perry Local Educators' Ass'n v. Hohlt, 652 F.2d 1286, 1296-97 (7th Cir. 1981) (suggesting existence of sliding scale that "may vary with the particular right in question"). It is not necessary to decide whether, in view of the nature of the inhibition of Taxation's First Amendment rights, the appropriate level of review is the most stringent courts employ. It is certainly inadequate simply to ask whether the classifications at issue in this case "bear some rational relationship to a legitimate state end." McDonald v. Board of Election Commissioners, 394 U.S. 802, 809, 89 S.Ct. 1404, 1408, 22 L.Ed.2d 739 (1969). Plainly, this case is not like Cammarano, in which the indirect burdens on First Amendment expression fell equally on all. Only a heightened scrutiny test fully accords with decisions in other cases. In deed, our analysis must be guided by Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976), in which the Supreme Court heard challenges to public financing provisions for presidential campaigns that provided far greater financial support to major-party candidates. In determining the standard of review appropriate under the Fifth Amendment, the Court started from precedents holding that direct "restrictions on access to the electoral process must survive exacting scrutiny." Id. at 94, 96 S.Ct. at 670. See, e.g., Lubin v. Panish, 415 U.S. 709, 718, 94 S.Ct. 1315, 1321, 39 L.Ed.2d 702 (1974) (indigent candidates may not be required to pay filing fees absent alternative means of ballot access); Williams v. Rhodes, 393 U.S. 23, 31, 89 S.Ct. 5, 10, 21 L.Ed.2d 24 (1968) (appearance of minor parties on ballot may not be conditioned on whether they can obtain voter petitions with signatures totaling 15 percent of the number of ballots cast in the previous gubernatorial election). These "direct burdens" were much more restrictive than discriminatory funding of presidential candidates, the Court said, thereby implying that less than "exacting scrutiny" was appropriate. Id. But it is highly significant that the Court went on to analyze the discriminatory funding provisions in heightened scrutiny terms. "In any event, Congress enacted Subtitle H in furtherance of sufficiently important governmental interests," id., 424 U.S. at 95, 96 S.Ct. at 671, because "public financing as a means of eliminating the improper influence of large private contributions furthers a significant governmental interest." Id. at 96, 96 S.Ct. at 671 (emphasis added). The standard of review we select in this case must be no lower than that applied in Buckley, even though neither situation involves a "direct burden" on First Amendment expression. Cf. Citi zens Against Rent Control/Coalition for Fair Housing v. Berkeley, - U.S. -, -, 102 S.Ct. 434, 436, 70 L.Ed.2d 492 (1981) ("regulation of First Amendment rights is always subject to exacting judicial review.").
In short, we must apply a heightened level of scrutiny to the discriminatory treatment of lobbying activities given by Section 501(c) to different tax-exempt groups. It may be true that "in taxation, even more than in other fields, legislatures possess the greatest freedom in classification," Madden v. Kentucky, 309 U.S. 83, 88, 60 S.Ct. 406, 408, 84 L.Ed. 590 (1940), but that power is not unlimited. As the Supreme Court held in Police Dep't v. Mosley, 408 U.S. 92, 99, 92 S.Ct. 2286, 2292, 33 L.Ed.2d 212 (1972), there is a profound constitutional distinction between regulating all picketing and doing so selectively. "Because picketing plainly involves expressive conduct within the protection of the First Amendment, . . . discriminations among pickets must be tailored to serve a substantial governmental interest." See Carey v. Brown, 447 U.S. 455, 471, 100 S.Ct. 2286, 2296, 65 L.Ed.2d 263 (1980) (reaffirming Mosley); California v. LaRue, 409 U.S. 109, 138, 93 S.Ct. 390, 407, 34 L.Ed.2d 342 (1972) (Marshall, J., dissenting). The issue in this case therefore becomes whether the discriminatory framework of Section 501(c) serves a substantial governmental interest and whether the statute is narrowly tailored to serve that end.
III. CONSTITUTIONALITY OF DIFFERENTIAL TAX TREATMENT OF LOBBYING
When Cammarano v. United States was decided in 1959, its foundation was the congressional "neutrality" toward lobbying that existed at the time of the decision. See 358 U.S. at 513, 79 S.Ct. at 533. Since that time, Congress has departed substantially from the policy that government should not subsidize any lobbying. Taxation claims that the refusal to subsidize lobbying by Section 501(c)(3) organizations to the same extent that lobbying by other Section 501(c) organizations is subsidized constitutes a violation of equal protection.
On these facts, we agree. In the starkest terms, Congress has used the Code, perhaps inadvertently, to do one of two things. If veterans' organizations and organizations such as Taxation lobby on different sides of the same questions, Congress has chosen to favor one lobbyist on a particular issue over another. If veterans' organizations and Section 501(c)(3) organizations lobby on entirely distinct matters, Congress has ensured that greater attention will be devoted to some causes than others. Either outcome is unconstitutional unless an evaluation of the differential treatment in terms of the heightened level of scrutiny appropriate here demonstrates that there is an important governmental interest justifying the First Amendment preference. We turn to that question now.
A. State Interests Furthered by the Classification
Before the court can determine whether a substantial governmental interest supports the differential classification under review, it must first determine what interests are said to justify the classifications. Once these interests are identified, it can then be asked whether they are substantial. The pertinent classifications made in the Code are as follows.
1. Business lobbying
On rehearing, Taxation has dropped its equal protection challenge to the right of businesses to deduct lobbying expenses, Taxation Supp. Brief at 18 n.3, and it has not hitherto been necessary to explain these provisions of the Code. Nevertheless, the tax treatment of business lobbying is worthy of some attention because the reasons behind that treatment exemplify the sorts of governmental interests that we seek to identify in this section of the opinion.
I.R.C. § 162(e) permits the deduction of all "ordinary and necessary expenses" incurred in carrying on any trade or business, including lobbying costs incurred in "direct connection" with "legislation or proposed legislation of direct interest to the taxpay er." There is a significant difference between profitmaking and nonprofitmaking entities, and it seems probable that each type lobbies with different motives. See Haswell v. United States, 500 F.2d at 1150. But the fact that a difference exists does not by itself demonstrate the state interest behind the distinction.
The Senate Report explaining the addition of Section 162(e) in 1962 mentions several policy considerations, however. Lobbying is a cost of doing business, and the deduction of lobbying expenses permits a more accurate measurement of a business' net income. Sen.Rep.No.1881, 87th Cong., 2d Sess. 22-23 (1962), reprinted in [1962] U.S.Code Cong. & Ad.News 3304, 3325. The Report mentions three other explanations: the anomaly of allowing deductions for expenses incurred in presenting a business' viewpoint to administrative agencies and the executive branch but excluding the legislative branch; the importance of some legislation to a business' continued existence; and the desirability of encouraging business people to bring relevant information to the attention of Congress. Id.
2. Veterans' organizations
It is far more difficult to identify the governmental interest that is promoted by giving veterans' organizations a lobbying advantage over other Section 501(c) organizations. Just as there are differences between business and nonbusiness groups, of course, veterans groups may be distinguished from other Section 501(c) organizations. As noted above, however, the mere fact that differences exist between any two distinct entities does not demonstrate a substantial state interest that can justify discrimination in the exercise of constitutional rights. Descriptive terms alone have little relevance in identifying the governmental interest furthered by a differential statutory classification.
The government offers only two state interests that are said to justify preferential tax treatment of lobbying by veterans' organizations. First, veterans deserve substantial benefits and rewards in return for their service to the country. These benefits "compensate them for disruption of civilian pursuits," assist in the "readjustment to civilian life," and help "make military service more attractive." IRS Supp. Brief at 44. Second, the government suggests that legislative activity by veterans' organizations is necessary in order to protect veterans' benefits from subversion by hostile forces. "Since these benefits are provided by legislatures, it is reasonable for Congress to allow veterans' organizations to engage in lobbying activities to preserve their benefits without risk of losing their tax deductible contributions." Id.
In identifying the governmental interests furthered by the tax treatment of these groups, however, it must be cautioned that our effort risks becoming a post hoc attempt to rationalize an otherwise inexplicable distinction in the Code. The government made no attempt in the district court to present affidavits or other evidentiary materials. Our identification of the relevant state interests must depend on the legislative history of the statute — but that history is sparse indeed. Despite the apparently unambiguous distinction drawn in the statute, there is no indication in the legislative history of these sections that Congress intended to grant any tax-exempt organization a lobbying advantage over any others. In fact, the scant legislative history that exists is to the contrary, and suggests that Congress meant to treat the lobbying of all § 501(c) organizations equally.
Tax exemptions for religious, charitable, and educational organizations — -and the correlative provisions permitting taxpayers to deduct their contributions to such groups— are much older than similar treatment of veterans' organizations. Not until after World War One did Congress explicitly extend these benefits to a named veterans' group. Section 214(a) of the Revenue Act of 1921, ch. 136, 42 Stat. 227, accorded exempt status to posts of the American Legion, and it is greatly suggestive that Congress in 1921 viewed the American Legion no differently than any other charitable group. Senator Lodge, who proposed the extension in the Senate, considered it one "to which I think there can be no possible objection," 61 Cong.Rec. 7066 (1921), and the lack of debate bears him out. As enacted, the predecessor section to I.R.C. § 170 simply added the American Legion to other organizations, by allowing deductions for
Contributions or gifts made within the taxable year to or for the use of: (A) The United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes; (B) any corporation, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including posts of the American Legion or the women's auxiliary units thereof, 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 stockholder or individual; or (C) the special fund for vocational rehabilitation authorized by section 7 of the Vocational Rehabilitation Act.
Section 214(a)(11), 42 Stat. 241 (emphasis added). In the beginning, then, Congress not only expected that veterans' organizations and charitable groups would be treated equally, but it included both groups in the same subsection of the tax laws.
Congress extended this tax treatment to veterans' organizations generally in 1924. Section 214(a)(10), Revenue Act of 1924, ch. 234, 43 Stat. 253. By this time, however, the statute had become considerably more detailed, and Congress created a new subsection for the veterans' groups. Contributions or gifts were deductible if given to
(A) The United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes; (B) any corporation, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, 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; (C) the special fund for vocational rehabilitation authorized by section 7 of the Vocational Rehabilitation Act; (D) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual; or (E) a fraternal society, order, or association, operating under the lodge system, but only if such contributions or gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.
Section 214(a)(10), 43 Stat. 271. Again, however, the legislative history creates no inference that Congress sought to treat these groups differently than charitable organizations. The change was approved without comment on the floor in either house, see 65 Cong.Rec. 2860, 7126 (1924), and received almost no mention in the reports accompanying the revenue act. See S.Rep.No. 398, 68th Cong., 1st Sess. 24 (1924); H.R.Rep.No. 844, 68th Cong., 1st Sess. 18 (1924). It is also noteworthy that Congress enacted the same restrictions concerning earnings that inured to the benefit of private individuals for both types of organizations.
The lobbying limitation on charitable organizations was not enacted until 1934, and it is true that Congress inserted it only in the subsection of the statute dealing with charitable organizations. Section 23(o)(2), Revenue Act of 1934, 48 Stat. 690. This may simply have been a drafting oversight, however. Indeed, Senator Harrison, the chairman of the reporting committee, suggested that a more carefully drafted amendment would apply to "war organizations" as well:
In considering that amendment, as I recall, the sentiment of the committee was that the provision should apply to any organization that is receiving contributions, the proceeds of which are to be used for propaganda purposes or to try to influence legislation.
I called the attention of the experts to the fact that it seemed to me the proviso at the end of the second paragraph [the lobbying provision] should apply to all four paragraphs. Of course, that would affect some war organizations, but personally I see no difference between one organization that might be on one side of the fence getting contributions to propagandize and influence legislation and being permitted to proceed without interference, while at the same time preventing one that might have a different viewpoint from receiving or making use of contributions for the same purpose.
78 Cong.Rec. 5861 (1934) (emphasis added). Senator LaFollette, another member of the Senate Finance Committee, agreed to the desirability of uniformity:
I recognize . . . that there are certain types of organizations to which Congress and the executive branch of the Government might desire to encourage contributions. . In my opinion, it will not make a penny's worth of difference, so far as the contributions to these various organizations are concerned, if they are all excluded from this immunity and all treated alike. It is my judgment that we never shall get away from mistakes of administration and from decisions which may seem like favoritism until all contributions to organizations of this kind are made subject to the income tax.
Id. at 5959. See id. at 5861 (Senator Reed) (stating "no disagreement" with Senator Harrison's remarks). The amendment was eventually agreed to with the understanding that it would undergo redrafting by the conference committee. See 78 Cong. Rec. 5959 (Senator Couzens) (amendment should "go to conference, and we can change the language if it is found to do any inequity"); id. (Senator Reed) ("if the amendment shall be agreed to we will have from now until the conference to study the subject and prepare better phraseology"). There is no explanation in the legislative history for the fact that the language of the enacted version was identical to that of the amendment as proposed.
Congress has not indicated since 1934 that it specifically wishes to impose the lobbying restriction less than uniformly, other than by enacting a Code that articulates lobbying limitations in some provisions and not others. No stated intent to discriminate among the lobbying activities of various tax-exempt organizations is shown by the 1972 addition of Section 501(c)(19), which created a new subsection for veterans' organizations in Section 501 to correspond with the separate veterans' subsection in Section 170. The legislative history suggests that this addition was only a technical, nonsubstantive amendment designed to correct the tax treatment of certain income by veterans' organizations inadvertently changed by the Tax Reform Act of 1969. There is no indication that Congress meant to benefit veterans' organizations vis-a-vis other tax exempt organizations in any respect. Most importantly, in explaining the effect of the new provision the Senate Report noted: "The committee does not intend for any expenditures for lobbying purposes to come under this exception." S.Rep.No. 1082, 92d Cong., 2d Sess. 5 (1972), reprinted in [1972] U.S. Code Cong. & Ad. News 3141, 3145. It is therefore difficult to resist the conclusion that the tax preferences for lobbying by veterans' organizations reflect no policy, but simple lack of attention and consistency on the part of Congress and the IRS.
3. Section 501(c)(3) charitable organizations
In addition to searching for the governmental interests promoted by preferential treatment of lobbying by veterans' organizations, we must also examine the governmental interests behind restrictive treatment of lobbying by charitable groups and other Section 501(c)(3) organizations. As the government emphasizes, Congress, when it does not impinge impermissibly upon fundamental rights, "may address a problem 'one step at a time.' " IRS Supp. Brief at 40 (quoting Jefferson v. Hackney, 406 U.S. 535, 546, 92 S.Ct. 1724, 1731, 32 L.Ed.2d 285 (1972)). "[T]he Constitution permits Congress to single out the greatest problems and legislate respecting the most serious abuses, while leaving less serious problems to a later date." IRS Supp. Brief at 42. See Buckley v. Valeo, 424 U.S. at 105, 96 S.Ct. at 675; Katzenbach v. Morgan, 384 U.S. 641, 657, 86 S.Ct. 1717, 1727, 16 L.Ed.2d 828 (1966). If the legislative history demonstrates a compelling reason for Congress to focus with particularity on special problems created by charitable lobbying with tax-deductible dollars, this might suffice to justify the differential treatment indicated in the Code sections before us.
Initially, it does seem far easier to discern the governmental interests promoted by the lobbying restriction on charitable organizations than those advanced by not extending this restriction to veterans' groups. Federal tax exemptions for religious, charitable, and educational organizations are as old as the Income Tax Act of 1894, but there were no statutory limitations on the lobbying activities of exempt organizations for the next forty years. As described above, Congress amended the tax laws in 1934 to make clear that what are now Section 501(c)(3) organizations were not to engage in substantial lobbying activities. Unlike the legislation concerning veterans' organizations, the lobbying restriction was enacted only after a number of explanatory remarks by members of Congress, and this makes it seem relatively easy to identify the governmental interests promoted by the measure.
In discussing the amendment on the floor of the Senate, for example, Senator Harrison explained:
the attention of the Senate committee was called to the fact that there are certain organizations which are receiving contributions in order to influence legislation and carry on propaganda. The committee thought there ought to be an amendment which would stop that, so that is why we have put this amendment in the bill.
78 Cong.Rec. 5959 (1934). Senator Reed, who was also a member of the reporting committee, addressed
what we were trying to do by this amendment. There is no reason in the world why a contribution made to the National Economy League should be deductible as if it were a charitable contribution if it is a selfish one made to advance the personal interests of the giver of the money. . .
Id. at 5861. These statements suggest that Congress acted to curb what it regarded as abuses by Section 501(c)(3) organizations then eligible to use tax-deductible contributions for lobbying activities. Based partly on these comments, the district court below articulated three "legitimate governmental purposes" served by the lobbying restriction: "assurance of governmental neutrality with respect to the lobbying activities of charitable organizations; prevention of abuse of charitable lobbying by private interests; and preservation of a balance between the lobbying activities of charitable organizations and those of non-charitable organizations and individuals." Memorandum Order, J.A. 62.
It would be grossly simplistic to read too much into these comments, however. Legislation is never passed in a vacuum, and any genuine understanding of its purpose must take some account of what conditions were before it was enacted. There is an early history of restrictions on political activity by charitable organizations well preceding the 1934 statutory change. In 1919, for example, the Treasury provided by regulation that "associations formed to disseminate controversial or partisan propaganda are not educational within the meaning of the statute." Treas. Reg. 45, art. 517 (1919), in T.D. 2831, 21 Treas.Decs.Int.Rev. 285 (1920). The principle was successfully applied in several cases before the Board of Tax Appeals in the 1920s, and was central to Judge Learned Hand's opinion in Slee v. Commissioner, 42 F.2d 184 (2d Cir. 1930):
Political agitation as such is outside the statute, however innocent the aim, though it adds nothing to dub it "propaganda," a polemical word used to decry the publicity of the other side. Controversies of that sort must be conducted without public subvention; the Treasury stands aside from them.
Id. at 185. Obviously, because of the close connection in the statute between veterans' organizations and other charitable groups, the regulations and judicial pronouncements presumably applied to veterans' organizations too.
These restrictions on political activity by charitable organizations prior to 1934 make it difficult to interpret the congressional intent behind the 1934 amendment with total confidence. "In view of the existing case law on the subject, it is not clear what the proponents of the legislation sought to accomplish." Clark, The Limitation on Political Activities: A Discordant Note in the Law of Charities, 46 Va.L.Rev. 439, 447 (1960). The addition to the statute may have been meant simply to codify preexisting regulation of charitable organizations. To a great extent, however, commentators hold the view that the 1934 enactment was a reform measure intended to liberalize the case law. It appears that the proponents wanted to restrict selfishly motivated political agitation, meant to secure some personal interests of the donor, without providing that all political activity by charitable organizations was inherently improper. The breadth of the lobbying restriction has therefore been attributed primarily to the inability of Congress to draft a more "appropriate" test. This theory finds support in the debates. Senator Reed, who was also a member of the Senate Finance Committee, observed on the floor that "we found great difficulty in phrasing the amendment. I do not reproach the draftsmen. I think we gave them an impossible task; but this amendment goes much further than the committee intended to go." 78 Cong.Rec. 5861 (1934).
Whatever the strength of these views, they strongly suggest that the 1934 amendment applying only to charitable organizations cannot automatically be presumed to show that Congress addressed only "the phase of the problem which seem[ed] most acute to the legislative mind." Williamson v. Lee Optical Co., 348 U.S. 483, 489, 75 S.Ct. 461, 99 L.Ed. 563 (1955). If the 1934 amendment was intended to liberalize the case law, the fact that it applied only to charitable organizations would suggest that Congress meant to treat lobbying by such groups less stringently than similar activity by other groups. The legislative history provides no positive assurance for this proposition, of course, but it also fails utterly to demonstrate that Congress restricted the lobbying of charitable organizations because of special problems arising in that area alone.
B. Substantiality of the State Interests
If there are any other governmental interests furthered by disparate tax treatment of lobbying activities by tax-exempt organizations and other groups, they have not been identified in the legislative history or by the parties in this case. The question now becomes whether any of these interests are sufficiently substantial to justify the differential tax treatment, and if so whether the statute is narrowly tailored to meet them.
The preceding discussion clearly identified governmental interests that justify allowing businesses to deduct the cost of business lobbying. Because the government assesses taxes on net business income, such deductions are necessary in order to permit accurate measurement of the cost of producing goods and services. In contrast, tax-exempt organizations have no comparable need for a realistic reflection of income. The governmental interest in distinguishing between these two kinds of organizations is a substantial one, and the Code's differentiation between businesses and Section 501(c)(3) organizations is both relevant to that interest and narrowly tailored to serve it.
The addition of Section 162(e) has import in assessing the strength of the government's analysis in this case, however, because it demonstrates that lobbying is not an inherently improper activity concerning which Congress seeks as much neutrality as possible. Section 162(e) unquestionably demonstrates a decision by Congress to depart from the posture of neutrality toward lobbying that once was affirmed by Cammarano. It therefore undercuts any suggestion that because efforts to influence legislation present "well-recognized dangers to representative Government," Haswell v. United States, 500 F.2d at 1150, such efforts should never be subsidized through tax deductions. The first of the three governmental interests given by the district court for the restriction on lobbying by charitable organizations — the preservation of governmental neutrality concerning lobbying — therefore disappears.
The second such interest, prevention of abuse of charitable lobbying by private interests, also fails to pass constitutional muster under a close scrutiny test. There is no evidence whatsoever that the lobbying of veterans is less subject to abuse by private interests than that of other Section 501(c) groups. Thus, although this interest is doubtless valid, it cannot be suggested that Section 501(c) has been tailored to meet it. We decline the government's invitation to infer that because Congress did not apply the lobbying exemption to all exempt organizations, it saw no problem in according special tax benefits to veterans' organizations despite their lobbying activities. The legislative history discussed above provides no support for such an inference.
The final interest said to require special treatment of lobbying by charitable organizations — "preservation of a balance between the lobbying activities of charitable organizations" and those of other groups— also fails to meet the heightened standard applicable here. There is absolutely no evidence that Congress sought to achieve this objective when it enacted the lobbying restriction in 1934. Even if charities before that time could lobby with deductible contributions, there is no indication that charities had become so powerful that they threatened to drown out the voices of those whose lobbying was not similarly subsidized. Moreover, had this been the intent of Congress, courts would consider such a purpose constitutionally illegitimate. "[Wjhere, as here, the legislature's suppression of speech suggests an attempt to give one side of a debatable public question an advantage in expressing its views to the people, the First Amendment is plainly offended." First National Bank of Boston v. Bellotti, 435 U.S. 765, 785-86, 98 S.Ct. 1407, 1420-21, 55 L.Ed.2d 707 (1978); see id. at 790-91, 98 S.Ct. at 1423-24. "[T]he concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment." Buckley v. Valeo, 424 U.S. at 48-49, 96 S.Ct. at 648-649. The governmental purposes said to require special restrictions on lobbying by Section 501(c)(3) organizations are therefore either illegitimate, insubstantial, or inadequately promoted by a statute that is not narrowly tailored to serve them.
Moreover, the Code's discriminatory treatment of lobbying by veterans' organizations does not even satisfy the test of rationality, much less the heightened level of scrutiny appropriate here. The legislative history of the tax exemptions accorded veterans demonstrates absolutely no governmental interest whatsoever that is served by allowing such groups to conduct substantial lobbying with tax-deductible contributions. The post hoc rationales suggested by the government are constitutionally illegitimate. Allowing veterans to lobby freely in order to protect their benefit programs does not explain why other groups that may be equally dependent upon Congress for support should have less access to the legislature. Other tax-exempt groups, such as universities, are equally beset by hostile forces but are nevertheless limited by Section 501(c)(3) in the amount of lobbying they may do to maintain or increase their level of congressional funding. Finally, it emphatically does not follow that because veterans deserve special benefits in recognition of their service to the country, they are entitled to greater First Amendment rights than other citizens. The First Amendment proscribes governmental efforts to favor one speaker over another. See, e.g., Carey v. Brown, 447 U.S. at 462-63, 100 S.Ct. at 2291-92; First National Bank of Boston v. Bellotti, 435 U.S. at 784-85, 98 S.Ct. at 1420; Police Dep't v. Mosley, 408 U.S. at 96, 92 S.Ct. at 2290. "First Amendment rights may not be used as a type of 'currency' to reward those who have rendered service to the nation or who are otherwise determined to be worthy." Taxation Supp. Brief at 19.
In short, the Code's classification according tax benefits to lobbying by some tax-exempt groups but not others does not withstand constitutional scrutiny. No identifiable governmental interests justify the differential tax treatment of lobbying by veterans' groups and Section 501(c)(3) organizations. The distinctions and interests suggested by the government are either completely unrelated to any substantial purpose, or reflect only illegitimate governmental goals. "[I]t has been open to courts since the enactment of the Fourteenth Amendment to determine, if on the particular facts they must, that a discrimination reflects no policy, but simply arbitrary and capricious action." Baker v. Carr, 369 U.S. 186, 226, 82 S.Ct. 691, 714, 7 L.Ed.2d 663 (1962) (emphasis by the Court).
C. The Unconstitutionality of These Classifications
Because no substantial purpose justifies the disparate treatment of lobbying by Section 501(c) when that statute is subjected to careful scrutiny, the discriminatory treatment of Taxation's First Amendment activities constitutes a denial of equal protection, and is unconstitutional. Even so, this remains a troublesome case. Congress has enormous leeway in classifying the recipients of its benefits and funds, and in favoring certain groups over others. If Congress provided office space and government surplus furniture to veterans' organizations, for example, as Congress clearly has authority to do, it would indirectly facilitate the lobbying of such groups by freeing up funds that other organizations such as Taxation would have to spend for rent and supplies. Moreover, Congress occasionally appropriates grants for certain groups with the understanding that the money may be used for public education, litigation, and lobbying. Similarly, in other contexts such as National Public Radio and Television, the government directly funds First Amendment activity that by necessity excludes some speakers and favors others. See Emerson, The Affirmative Side of the First Amendment, 15 Ga.L.Rev. 795, 823-28 (1981); Note, Freeing Public Broadcasting from Unconstitutional Restraints, 89 Yale L.J. 719 (1980) (arguing that direct state subsidy of the Public Broadcasting Service violates the First Amendment).
We suggest nothing concerning the constitutionality of any of these grants and programs, which of course are not before us. Nevertheless, it may be observed that certain principles do distinguish many of these programs from the lobbying preference now given to veterans. First, it is well established that although government may not directly facilitate the speech of one person over that of another, government too is a rightful participant in the "marketplace of ideas." Examples such as the Voice of America and the press offices of executive departments and agencies illustrate the government's authority to communicate with its citizens and the people of the world. Under some conditions, it is possible that the government could also subsidize private groups or speakers in an effort to get its own message across. Compare Community-Service Broadcasting of Mid-America, Inc. v. FCC, 593 F.2d at 1110 n.17, with Shiffrin, Government Speech, 27 U.C.L.A.L.Rev. 565 (1980). Second, the very nature of government may dictate that it alone can provide certain forums for First Amendment expression, from parks with rostrums to a national public television system. First Amendment principles apply to these forums, of course, but they require that access be nondiscriminatory rather than that government not create the facilities at all. Finally, it is possible that a thorough constitutional analysis of certain programs might well demonstrate that although the government program does discriminatorily subsidize certain speakers, the state interest is sufficiently compelling that the discrimination is not unconstitutional. Until other programs that arguably subsidize First Amendment rights in a discriminatory fashion come before us, however, it would be injudicious to undertake any elaborate constitutional analysis of what might now seem analogous situations.
What does remain crucially important, however, is that none of these possible justifications can uphold discriminatory tax treatment of lobbying by different kinds of Section 501(c) organizations. There is a brightline distinction between direct legislative promotion of speech, and indirectly facilitating speech by providing an organization with other kinds of support. It cannot conceivably be argued that the lobbying preference for veterans' organizations demonstrates the government's attempt to get its own message across to the public, because the Code provides open-ended subsidization of any position that these groups choose to espouse even if those positions directly challenge the policy of the government. Without passing judgment on the constitutionality of congressional attempts to advance the message of Congress itself by funding the speech of particular groups, it is clear that Congress cannot write favored organizations a blank check payable on the First Amendment.
IV. THE CONSTITUTIONAL REMEDY
Section 501(c)'s disparate treatment of lobbying by particular tax-exempt groups leads to an unconstitutional violation of equal protection principles. The final question before us is the appropriate relief. The most obvious remedy — striking down the Section 501(c)(3) lobbying limitation that now governs Taxation — poses the most obvious problems. The legislative history of that limitation clearly shows a congressional determination that the public interest requires regulating the amount of tax-deductible dollars flowing to Section 501(c)(3) organizations that may be used for lobbying purposes. Extending the lobbying treatment now given to veterans' organizations to all Section 501(c)(3) groups might open a Pandora's Box of woes and abuse. The government notes, for example, that during the 1980 fiscal year, there were 319,-842 organizations listed as exempt under Section 501(c)(3), but only 22,247 veterans' groups. In 1978, contributions, grants, and gifts to Section 501(c)(3) organizations aggregated more than $21.9 billion, nearly 1500 times the $16.7 million given to veterans' organizations. If we permitted Section 501(c)(3) groups to lobby as freely as veterans' organizations, there would be a clear risk of abuse by private interests and an increase in the amount of "selfish" contributions "made to advance the personal interests of the giver of the money." 78 Cong.Rec. 5861 (Senator Reed). Even when they attempt to remedy constitutional violations, courts must resist ordering relief that clearly exceeds the legitimate expectations of Congress.
A second remedy is also possible in this case. As the Supreme Court has recognized, in certain situations benefits may be taken away from a preferred group in order to cure unconstitutionally unequal treatment, even if that group is not before the court. See, e.g., Welsh v. United States, 398 U.S. 333, 361-65, 90 S.Ct. 1792, 1807-09, 26 L.Ed.2d 308 (1970) (Harlan, J., concurring in result); Skinner v. Oklahoma ex rel. Williamson, 316 U.S. 535, 543, 62 S.Ct. 1110, 1114, 86 L.Ed. 1655 (1942). "The right invoked is that to equal treatment; and such treatment will be attained if either their competitors' taxes are increased or their own reduced." Iowa-Des Moines National Bank v. Bennett, 284 U.S. 239, 247, 52 S.Ct. 133, 136, 76 L.Ed. 265 (1931). Cf. Kirk v. Commissioner, 425 F.2d 492, 495 (D.C.Cir.), cert. denied, 400 U.S. 853, 91 S.Ct. 53, 27 L.Ed.2d 91 (1970) (refusing to reach constitutionality of income exclusion for ministers because even if the statute violated the Establishment Clause, "it would not affect the tax liability in this case. Rather ministers of the gospel would then no longer be entitled to the benefits of the exclusion."). Although a number of cases involving equal protection challenges to underinclusive federal benefit statutes suggest that "extension, rather than nullification, is the proper course," Califano v. Westcott, 443 U.S. 76, 89, 99 S.Ct. 2655, 2663, 61 L.Ed.2d 382 (1979), "[i]n choosing between these alternatives, a court should attempt to accommodate as fully as possible the policies and judgments expressed in the statutory scheme as a whole." Id. at 94, 99 S.Ct. at 2665 (Powell, J., dissenting). It seems evident that the legislative judgments expressed in Section 501(c) will be less disturbed by striking down the preferential treatment now accorded the lobbying of veterans' organizations than by extending that treatment to Section 501(c)(3) organizations. The legislative history, suggesting that the current treatment of veterans may have been inadvertent but demonstrating a clear congressional concern to prevent abuse of charitable lobbying by private interests, fully confirms this view.
This remedy appears the most logical and most in accordance with the judgments expressed by Congress. But the veterans' organizations that would be directly affected by nullification of preferential treatment in Section 501(c) have not heretofore been parties to this litigation. Courts must always be cautious when dealing with the interests of those who have not had an opportunity to present their own arguments and defenses, partly because judicial legitimacy stems in large measure from hearing the views of all those who are directly involved. See Fiss, The Supreme Court, 1978 Term—Foreword: The Forms of Justice, 93 Harv.L.Rev. 1, 44-46 (1979). It is less significant, though still noteworthy, that Taxation also opposes this solution to the unconstitutionality of Section 501(c). We therefore decline to adopt this remedy at this time.
Accordingly, this case is remanded to the district court with the instruction that it cure the constitutionally invalid operation of Section 501(c) after inviting veterans' organizations to participate in framing the relief. In the interim, of course, the IRS may seek other remedies. It may decide that additional regulations governing lobbying by veterans' organizations — and more diligent enforcement of the lobbying regulations that already govern those organizations — are in fact in accordance with the congressional purpose behind Section 501(c). The IRS and veterans' groups might also seek from Congress a clearer determination of the purposes, if any, that Congress had in mind when it enacted legislation giving preferential tax treatment to lobbying by veterans, or passage of more narrow legislation that could show that veterans' groups actually speak for Congress in advocating specific kinds of veterans' programs and benefits. On the record before us, however, it is not even clear that Section 501(c)'s unequal application reflects any congressional intent whatsoever. The broad tax support provided to veterans' organizations for lobbying on any side of any issue they choose, and the companion restriction on lobbying by charitable groups and other Section 501(c)(3) organizations, creates an unconstitutional disparity. Exactly how this problem should be cured is not a matter that should be decided initially by this appellate court, especially when all directly affected parties are not before us.
CONCLUSION
The First Amendment occupies a preferred place in our scheme of government. Thomas v. Collins, 323 U.S. 516, 530, 65 S.Ct. 315, 322, 89 L.Ed. 430 (1945). This does not mean, however, that its application in a legal dispute is always simple. The lines will seem clearer when Congress directly prohibits a particular group from speaking in a particular place, and more confused when Congress subsidizes First Amendment expression unevenly through the intricacies of the Internal Revenue Code. Nevertheless, the principle remains the same. Because the Code differentiates in its treatment of protected First Amendment activity by various tax-exempt organizations, the constitutionality of its classifications must be judged by a heightened level of scrutiny.
When viewed in that light, there can be no question that the suggested distinctions between Taxation and preferred tax-exempt organizations are constitutionally meaningless. Discrimination in government subsidization of First Amendment rights must be narrowly tailored to meet a substantial state purpose, and the proffered distinctions between the favored groups and Section 501(c)(3) organizations are either unrelated to any governmental interest whatsoever or are illegitimate bases for governmental classification. Indeed, although it has not been necessary to reach the question, it is possible that these discriminations could not even be upheld under a test asking whether they were "rationally related to a legitimate governmental purpose," for the discrimination may have been nothing more than an accidental or inadvertent result of legislative drafting.
Tax discrimination against the lobbying of Taxation and similar tax-exempt organizations therefore fails to meet the constitutional standard appropriate here. We reverse and remand this case with instructions that the unequal treatment be cured, either by restricting the tax benefits accorded veterans' organizations or by extending those benefits to Section 501(c)(3) organizations. Even in the arcane intricacies of the tax code, the government cannot give special voice nor lend special ear to any person or group no matter how worthy their ideas or their credentials. The exacting standards of the First Amendment do not allow the government to provide a preferred place for certain parties — at least not without a more substantial state purpose than has been shown here.
Reversed and remanded.
. Taxation was created as the result of a merger between .two other organizations, Taxation with Representation Fund (TWRF), a group devoted to courtroom advocacy, and Taxation with Representation (TWR), a group devoted to legislative activity. TWR had been incorporated in 1970 as a social welfare organization exempt from federal income taxes under Section 501(c)(4), 26 U.S.C. § 501(c)(4) [hereinafter cited as I.R.C.], but liable for unemployment taxes and ineligible for tax deductible contributions under I.R.C. § 170. In 1974, TWR was denied classification as a Section 501(c)(3) organization, and appealed unsuccessfully in Taxation with Representation v. United States, 585 F.2d 1219 (4th Cir. 1978), cert. denied, 441 U.S. 905, 99 S.Ct. 1994, 60 L.Ed.2d 374 (1979).
Taxation apparently absorbed the functions of TWR after TWR lost its appeal, see Brief for Appellee United States (IRS Brief) at 4, and Taxation makes the same claims here that were rejected by the Fourth Circuit. Despite this close relationship between issues and parties, however, the government has not pleaded or argued that Taxation should be precluded by res judicata from litigating this case, and we decline to reach the question sua sponte.
Several litigants in this and other courts have also unsuccessfully raised issues related to those we decide here. See, e.g., Christian Echoes National Ministry, Inc. v. United States, 470 F.2d 849 (10th Cir. 1972), cert. denied, 414 U.S. 864, 94 S.Ct. 41, 38 L.Ed.2d 84 (1973) (religious organization challenged loss of exemption as result of substantial legislative activity as violation of free exercise clause); Haswell v. United States, 500 F.2d 1133 (Ct.Cl.1974), cert. denied, 419 U.S. 1107, 95 S.Ct. 779, 42 L.Ed.2d 803 (1975) (taxpayer sued for refund on theory that his contributions to organization that engaged in extensive lobbying should have been deductible as charitable contributions); Tax Analysts & Advocates v. Shultz, 376 F.Supp. 889 (D.D.C.1974), app. dismissed mem. sub nom. Tax Analysts & Advocates v. Simon, 512 F.2d 992 (D.C.Cir.1975) (suit for declaratory judgment that legislative activity restrictions of Section 501(c)(3) were unconstitutional dismissed because action barred by I.R.C. § 7421(a), barring suits to restrain or enjoin collection of taxes). Taxation with Representation was also a party to the latter suit, but its complaint was dismissed without prejudice. See 35 A.F.T.R.2d 1352.
. Section 501(c)(3) applies to:
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 inñuence 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.
(emphasis added). Such organizations are exempt from taxation under the income tax subtitle unless such exemption is denied under I.R.C. § 502, 503, and 504.
. See I.R.C. § 170(c). Other tax benefits accruing to a § 501(c)(3) organization include exemption from federal social security taxes (FICA), I.R.C. § 3121(a), and exemption from federal unemployment taxes (FUTA), I.R.C. § 3306.
. I.R.C. § 7428 authorizes certain courts to issue declaratory judgments in appropriate cases relating to the status and classification of organizations under I.R.C. § 501(c)(3). Congress enacted this section of the Code as part of the Tax Reform Act of 1976, Pub.L. No. 94-455, 90 Stat. 1520.
. I.R.C. § 170(a) states the "general rule" that deductions shall be allowed for "any charitable contribution" defined in subsection (c). Section 170(c) defines "charitable contribution" as a contribution or gift to or for the use of
(2) A corporation, trust, or community chest, fund, or foundation—
(A) created or organized in the United States or any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States;
(B) organized and operated exclusively for religious, charitable, scientific, 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;
(C) no part of the net earnings of which inures to the benefit of any private shareholder or individual; and
(D) which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, 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.
(emphasis added). Similar language permits donors to make analogous deductions with respect to gift tax, I.R.C. § 2522(a)(2) (citizens or residents) and (b)(2) (nonresident aliens), and estate tax, I.R.C. § 2055(a)(3) (citizens or residents) and 2106(a)(2)(A)(ii) (nonresident aliens). Gift and estate tax deductions will soon become of less significance, however, in light of changes made by the Economic Recovery Tax Act of 1981, Pub.L. No. 97-34, 95 Stat. 172. As a final point, foundations may be deterred from contributing to an organization lacking § 501(c)(3) status because foundations and their managers are subject to tax if the foundation pays any amount "to carry on propaganda, or otherwise to attempt to influence legislation." I.R.C. § 4945(a) and (d)(1).
. See, e.g., Rev.Ruling 67-293, 1967-2 Cum. Bull. 185 (nonprofit organization that operates facility for protection of stray animals does not qualify for exemption if a substantial part of its activities consists of attempts to influence state and local legislation related to welfare of animals); Kuper v. Commissioner, 332 F.2d 562, 563 (3d Cir. 1964) (upholding disallowance of deduction for contributions to local chapter of League of Women Voters because of "the general legislative program of the League"); League of Women Voters v. United States, 180 F.Supp. 379, 383 (Ct.Cl.1960) (forum discussions by members in formulating position to be taken on questions of public interest held to constitute "preparation for the influencing of legislation" and were therefore legislative activities). "In practice, the in terrorem effect of the vague statutory proscription causes many charities to avoid most direct or indirect efforts to support or oppose legislation, even when the legislation is directly related to the charitable purposes for which they are organized and operated." Caplin & Timbie, Legislative Activities of Public Charities, 39 L. & Contemp.P. 183, 196 (Autumn 1975). This effect flowed from the inherent ambiguity of the statute. See Krohn v. United States, 246 F.Supp. 341, 347—48 (D.Colo.1965) (meaning of "substantial" may vary with different types of organizations, and may turn on extent of the organization's other noncharitable activities as well as the extent of its charitable activities).
Congress sought to ease this problem somewhat in the Tax Reform Act of 1976, Pub.L.No. 94—455, 90 Stat. 1720, which allows certain public charities to be governed by new Code sections 501(h) and 4911. These allow the organization to devote a percentage of its resources to lobbying, and thus provide explicit dollar ceilings on lobbying rather than requir ing the organization to adhere to the less certain "substantiality" test of Section 501(c)(3). All charities, however, continue to have their lobbying restricted under one standard or the other. "Taxation has not made, and does not plan to make, an election to be covered by the new provisions." Taxation Brief at 27 n.9. The new standard is accordingly not before us and is of little relevance to the discussion below. But see note 40 infra.
. Section 501(c)(4) applies to:
Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
. Such companies must be barred by their charters, however, from engaging in any other activities. I.R.C. § 170(c)(5).
. These sections thus track I.R.C. § 162(e), described in more detail at pp. 731-732 infra. Section 162(e) was enacted by Congress in 1962 to allow businesses to deduct the costs of lobbying directly related to legislation of interest to the taxpayer. If Section 501(c)(5) and (6) organizations use dues for lobbying, the dues are deductible by contributors only to the extent that the requirements of Section 162(e) are satisfied.
.Section 501(c)(8) and (10) provide for exemption of
(8) Fraternal beneficiary societies, orders, or associations—
(A) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and
(B) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents.
(10) Domestic fraternal societies, orders, or associations, operating under the lodge system—
(A) The net earnings of which are devoted exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and
(B) which do not provide for the payment of life, sick, accident, or other benefits.
. See, e.g., Inclusion of Alaska Lands: Hearings Before the Subcommittee on General Oversight and Alaska Lands of the House Committee on Interior and Insular Affairs, 95th Cong., 1st Sess. 100 (1977) (statement of Delmar L. Shull, VFW); Six-Day Mail Delivery: Hearings Before the House Committee on the Post Office and Civil Service, 95th Cong., 1st & 2d Sess. 197 (1977-1978) (statement of Spike Brooker, Commander, Post 58, American Legion); id. at 216 (statement of Robert Copenbarger, VFW Post of El Paso); Postal Service Act of 1977: Joint Hearings Before the Subcommittee on Postal Operations and Services and Subcommittee on Postal Personnel and Modernization of the House Committee on the Post Office and Civil Service, 95th Cong., 1st Sess. 103 (1977) (statement of James F. O'Neil, publisher, American Legion magazine); id. at 106 (statement of Donald H. Schwab, director national legislative service, VFW); Department of Defense Appropriations for 1977: Hearings Before a Subcommittee of the House Committee on Appropriations, 95th Cong., 2d Sess., pt. 8, 685-710 (1978) (National Security Resolution adopted by the 59th National Convention of the American Legion supporting, inter alia, development of the B-1 bomber, M-X missile, cruise missiles, and reestablishment of selective service system). Veterans' organizations have even lobbied on matters that presumably have special interest to organizations such as Taxa tion. E.g., Tax Simplification Proposals: Field Hearings Before the Subcommittee on Oversight of the House Committee on Ways and Means, 95th Cong., 1st & 2d Sess. 234 (1977-1978) (statement of James Lund, VFW).
. IRS Publication No. 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1954 (1980) (periodically updated). "The listing of an organization in [the Cumulative List] signifies it has received a ruling or determination letter . . stating that contributions by donors to the organization are deductible as provided in section 170 of the Code." Rev.Proc. 72-39, 1972-2 Cum.Bull. 818. "The Service has announced that, with narrowly limited exceptions, a donor may rely on the Cumulative List for so long as the beneficiaries of his largesse maintain their listing, regardless of their actual tax status." Bob Jones University v. Simon, 416 U.S. 725, 729, 94 S.Ct. 2038, 2042, 40 L.Ed.2d 496 (1974). An organization's loss of this status, and "the crucial right to receive deductible contributions," is "tantamount to a death sentence." Caplin & Timbie, supra note 6, at 195. "From the practical point of view, charities are not very much concerned about their own taxes... . It is, however, vital that they qualify as exempt charities in order that donors may deduct contributions made to them." Clark, The Limitation on Political Activities: A Discordant Note in the Law of Charities, 46 Va.L.Rev. 439, 445—46 (1960).
. It is far from clear, however, that Taxation could seek tax-exempt status as a social welfare organization after denial of Section 501(c)(3) status. In 1976, Congress provided that a Section 501(c)(3) organization that forfeits its exemption by lobbying may not then qualify as a social welfare organization under Section 501(c)(4). See I.R.C. § 504. Congress enacted that provision to prevent a Section 501(c)(3) organization from "buildpng] up an endowment out of deductible contributions as a charitable organization and then us[ing] that tax-favored fund to support substantial amounts of lobbying as a section 501(c)(4) social welfare organization." S.Rep.No.938, pt. 2, 94th Cong., 2d Sess. 83, reprinted in [1976] U.S.Code Cong. & Ad.News 4030, 4107-08.
. See, e.g., NAACP v. Alabama, 357 U.S. 449, 458, 78 S.Ct. 1163, 1169, 2 L.Ed.2d 1488 (1958) (an organization may assert, on behalf of its members, certain of their First Amendment rights); Bates v. Little Rock, 361 U.S. 516, 523 n.9, 80 S.Ct. 412, 416 n.9, 4 L.Ed.2d 480 (1960). In Buckley v. Valeo, 424 U.S. 1, 12, 96 S.Ct. 612, 631, 46 L.Ed.2d 659 (1976), the Court held that appellants had standing to challenge a limitation of $1,000 on individual contributions. The limitation "precludes most associations from effectively amplifying the voice of their adherents" and "is simultaneously an interference with the freedom of [their] adherents." Id. at 22, 96 S.Ct. at 636 (quoting Sweezy v. New Hampshire, 354 U.S. 234, 250, 77 S.Ct. 1203, 1211, 1 L.Ed.2d 1311 (1957) (plurality opinion)).
. The government also makes the astounding argument that "discrimination" is not shown simply because of "disparities in the treatment accorded somewhat similarly situated taxpayers — particularly organizations exempt from tax under different provisions of the Code," and that "the federal tax laws pertaining to the lobbying activities of tax exempt organizations are no less 'neutral' now" than they were in 1959, before Congress enacted Section 162(e). IRS Supp. Brief at 24. The Supreme Court has soundly repudiated the contention that the demands of equal protection are met when the law applies equally to all within the statutory class:
application among the members of the class defined by Judicial inquiry . . . does not end with a showing of equal the legislation. The courts must reach and determine the question whether the classifications drawn in a statute are reasonable in light of its purpose.
McLaughlin v. Florida, 379 U.S. 184, 191, 85 S.Ct. 283, 287, 13 L.Ed.2d 222 (1964). See Skinner v. Oklahoma ex rel. Williamson, 316 U.S. 535, 541, 62 S.Ct. 1110, 1113, 86 L.Ed. 1655 (1942); Rinaldi v. Yeager, 384 U.S. 305, 308-09, 86 S.Ct. 1497, 1499-1500, 16 L.Ed.2d 577 (1966).
The dissent suggests that Congress has limited the lobbying and political activities of the nation's more prominent veterans' groups by incorporating them with federal charters that "uniformly contain provisions barring them from engaging in partisan political activity...." Dissent at 760-761. This raises several questions of fact not addressed by the district court, including which of the nation's 22,000 veterans' organizations have such charters and whether these charters are actually enforced. The Veterans of Foreign Wars, for example, does not seem to have charter limitations on its political activities. See 36 U.S.C. § 111 et seq. (1976). Indeed, the VFW endorsed a presidential candidate in the 1980 election. See "The Republicans in Detroit; Veterans' Group Endorses Reagan," Washington Post, July 17, 1980, at All. Moreover, the fact that some veterans' organizations are federally chartered does not distinguish them from section 501(c)(3) organizations, which may also have federal charters. See, e.g., 36 U.S.C. § 1 (1976) (American National Red Cross); id. § 21 (Boy Scouts of America); id. § 271 (Future Farmers of America); id. § 371 (United States Olympic Committee); id. § 461 (National Safety Council); id. § 881 (Big Brothers of America). Indeed, the juxtaposition of veterans' organizations and section 501(c)(3) organizations throughout this title illustrates the essential similarity of these "private corporations established under Federal law." Id. § 1101.
. Because the challenged classification is created by federal statutes, the equal protection guarantees of the Fifth Amendment rather than the Fourteenth Amendment apply. See, e.g., Buckley v. Valeo, 424 U.S. 1, 93, 96 S.Ct. 612, 670, 46 L.Ed.2d 659 (1976); Weinberger v. Wiesenfeld, 420 U.S. 636, 638 n.2, 95 S.Ct. 1225, 1228 n.2, 43 L.Ed.2d 514 (1975); Johnson v. Robison, 415 U.S. 361, 364 n.4, 94 S.Ct. 1160, 1164 n.4, 39 L.Ed.2d 389 (1974); Bolling v. Sharpe, 347 U.S. 497, 499, 74 S.Ct. 693, 694, 98 L.Ed. 884 (1954).
. This statement was made in the context of only the first of several constitutional arguments rejected in McRae, that congressional restriction of the availability of certain medically necessary abortions under Medicaid impinged on the liberty interests protected by the Due Process clause as recognized in Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973), and its progeny. See 448 U.S. at 312, 100 S.Ct. at 2686. The Court elaborated the theme later in the opinion: "It cannot be that because government may not prohibit the use of contraceptives . or prevent parents from sending their child to a private school . ., government, therefore, has an affirmative constitutional obligation to ensure that all persons have the financial resources to obtain contraceptives or send their children to private schools." Id. 448 U.S. at 318, 100 S.Ct. at 2689.
.In reversing, the Supreme Court held simply that Americans United's request for injunctive relief requiring reinstatement of its tax-exempt status was barred by the Anti-Injunction Act's prohibition against suits "for the purpose of restraining the assessment or collection of any tax." 416 U.S. at 757, 94 S.Ct. at 2056 (quoting I.R.C. § 7421(a)). The Court did not discuss the merits of appellants' case, other than noting that "[t]he consequences of the present regime for § 501(c)(3) organizations can be harsh indeed... "Id. at 763 n.14, 94 S.Ct. at 2059 n.14. See id at 782, 94 S.Ct. at 2068 (Blackmun, J., dissenting) (implying no opinion on merits of underlying controversy, but agreeing with court of appeals that case presented a substantial constitutional question).
. See, e.g., Surrey & McDaniel, The Tax Expenditure Concept and the Budget Reform Act of 1974, 17 B.C.Indust. & Comm.L.Rev. 679 (1979); cf. Dodyk, The Tax Reform Act of 1969 and the Poor, 71 Colum.L.Rev. 758 (1971). The government accepts the analogy between tax exemptions and direct governmental subsidies for purposes of this case, while cautioning that they have different characteristics. IRS Supp. Brief at 11 n.12. See, e.g., Walz v. Tax Commission, 397 U.S. 664, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970), which held that a property tax exemption for religious organizations does not violate the Establishment Clause of the First Amendment, there being no "genuine nexus between tax exemption and establishment of religion." In Marker v. Shultz, 485 F.2d 1003 (D.C.Cir.1973), this court held that tax exemptions for unions under Section 501(c)(5) did not constitute state involvement and prohibited support for union political activities. "A tax exemption is consistent with a 'benevolent neutrality' and government noninvolvement with the exempted organization." Id. at 1006. See Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 173, 92 S.Ct. 1965, 1971, 32 L.Ed.2d 627 (1972) (state provision of necessary services such as police and fire protection, given to everyone without connotation of approval, does not constitute fostering or encouragement of racial discrimination).
. If this were the case, we would be forced to decide whether the restrictions on charities that received benefits under Section 501(c)(3) were both important and necessary to assure that the objects of the benefit program were attained. See, e.g., Buckley v. Valeo, 424 U.S. 1, 57 n.65, 96 S.Ct. 612, 653 n.65, 46 L.Ed.2d 659 (1976) (Congress may condition candidates' receipt of federal financing on agreement to abide by limitations on overall campaign expenditures); Civil Service Comm'n v. National Ass'n of Letter Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973) (upholding restriction of political activity by federal employees). Taxation makes a strong argument that lobbying activities are not inconsistent with charitable purposes, see, e.g., 2 Restatement (Second) of Trusts § 374 (1959); IV R. W. Scott, The Law of Trusts § 374 (3d ed. 1967), but our disposition of Taxation's First Amendment claim makes it unnecessary to consider this argument.
. As noted above, see note 1 supra, Taxation in fact originally followed this dual organizational structure. Although a Section 501(c)(3) organization may be barred from converting to a Section 501(c)(4) organization, see note 13 supra, nothing keeps such an organization from forming a new arm at any time and using non-deductible contributions made to it for lobbying purposes.
. Taxation does not challenge the proscription against "substantial lobbying" on grounds of vagueness, however, and that question is not considered in this opinion. See Borod, Lobbying for the Public Interest, 42 N.Y.U.L.Rev. 1087, 1106-10 (1967); Clark, supra note 12, at 451-54; Troyer, Charities, Law-Making, and the Constitution: The Validity of Restrictions on Influencing Legislation, 31 N.Y.U.Inst. on Fed.Tax. 1415, 1456-62 (1973).
. It may be misleading to treat First Amendment and equal protection questions as though they were entirely separate, however. In cases such as this, there is a distinct interplay between these two constitutional principles. See Emerson, The Affirmative Side of the First Amendment, 15 Ga.L.Rev. 795, 802-03, 819 (1981) (discussing "an equal protection element in the first amendment guarantee" in the context of governmental subsidies for speech). "The peculiar identity of equal protection and first amendment analyses in differential access cases follows logically from the explicit constitutional designation of speech as fundamental and from the fact that the first amendment's proscription against censorship is itself simply a specialized equal protection guarantee." Perry Local Educators' Ass'n v. Hohlt, 652 F.2d 1286, 1296 (7th Cir. 1981). See Karst, Equality as a Central Principle in the First Amendment, 43 U.Chi.L.Rev. 20 (1975). The Supreme Court has recognized this interplay many times. See, e.g., Carey v. Brown, 447 U.S. 455, 460-61, 466-71, 100 S.Ct. 2286, 2290-91, 2293-96, 65 L.Ed.2d 263 (1980); Tinker v. Des Moines Independent Community School District, 393 U.S. 503, 510-11, 89 S.Ct. 733, 738-39, 21 L.Ed.2d 731 (1969) (although classrooms are not public forums, rule prohibiting students from wearing armbands in protest of the Vietnam War struck down in part because school did not prohibit wearing of other symbols of political significance).
. Although it could be suggested that Speiser should be understood as striking down a statute "frankly aimed at the suppression of dangerous ideas," 357 U.S. at 519, 78 S.Ct. at 1338, and therefore inapposite here, that interpretation conflicts with the approach taken by the Court. Speiser was decided in 1958, soon after the decision in Dennis v. United States, 341 U.S. 494, 71 S.Ct. 857, 95 L.Ed. 1137 (1951). The California statute was an attempt to enforcé Article XX, § 19, of the California Constitution, which denied tax exemptions to any "person or organization which advocates the overthrow of the Government of the United States or the State by force or violence," see 357 U.S. at 516, 78 S.Ct. at 1336. The Court explicitly refused to reach the question of whether "California may deny tax exemptions to persons who engage in the proscribed speech for which they might be fined or imprisoned." Id. at 520, 78 S.Ct. at 1338. Instead, the Court applied strict scrutiny to the "procedural safeguards" and "burden of proof' established by the statute, id. at 521, 78 S.Ct. at 1339, and found that "this allocation of the burden of proof, on an issue concerning freedom of speech, falls short of the requirements of due process." Id. at 523, 78 S.Ct. at 1340. Although it may be correct that an underlying hostility to the California sedition law actually explains Speiser, see Pennsylvania v. Nelson, 350 U.S. 497, 76 S.Ct. 477, 100 L.Ed. 640 (1956), the Court itself was careful to decide the case in light of the strict scrutiny that must be applied to discriminatory tax treatment that implicates any First Amendment rights.
. It should be noted, however, that appellant in "Americans United" dropped its First Amendment claims on appeal. See 477 F.2d at 1181 ("at oral argument and in its Reply Brief it has narrowed its focus, and we believe wisely so, to the 'discriminatory' aspects of § 501(c)(3)").
. Judge Wisdom's comments in Perry Local Educators' Ass'n v. Hohlt, 652 F.2d 1286 (7th Cir. 1981), which concerned an analogous equal-access claim by a union to use a school board's internal mail system already being used by another union, are instructive:
Despite the sweeping language of [Police Department v. ] Mosley [408 U.S. 92, 92 S.Ct. 2286, 33 L.Ed.2d 212] quoted above, other Supreme Court cases demonstrate that it is not invariably true that the government may never discriminate among constitutionally protected speech on the basis of its content or on the basis of the speaker, nor even that all such discrimination must always be scrutinized with equal strictness. Because a ma jority of the Court were unable to agree on any one rationale in some of these cases, it is not always easy to determine the appropriate standard of review. Even interpreting the cases in the way most favorable to the defendants, however, they require rigorous scrutiny to be applied here. . . . [Sjpeech restrictions keyed to the identity of the speaker are always scrutinized strictly: they almost invariably are not neutral with respect to the viewpoints they tend to disfavor.
Id. at 1294-95. National Black United Fund, Inc. v. Devine, 667 F.2d 173 (D.C.Cir., 1981), which rejected a claim that refusal to allow participation in the Combined Federal Campaign by a nonqualifying charity abridged appellant's First Amendment rights, is not to the contrary. The opinion observed that the mere "possibility" that the voices of some charities might be amplified at the expense of others did not "compel strict scrutiny of every Commission decision," at 179, because the regulations at issue were "intended to serve interests unrelated to the suppression of speech" and were thus subject to evaluation under a different standard. Id. at 179. By contrast, the Section 501(c) lobbying restriction clearly was intended to regulate speech. "A rule that substantially impairs the ability of certain groups to convey their message to a desired audience, on the other hand, effectively 'abridges speech' even if it is not intended to curtail public debate. . . . Government must bear a far heavier burden of justification for such a rule. Its content-neutral interests must be 'compelling' and it must demonstrate the absence of any 'less drastic means' for achieving its purpose." Id. In the case now before us, even the government acknowledges that "[t]he democratic process as a whole is jeopardized where the government provides undue support to any one lobbying faction, including the class of charitable organizations." IRS Brief at 29.
. Buckley is directly analogous to this case because Congress had approved greater public funding of First Amendment activities for some candidates as opposed to others. Buckley is also distinguishable, however, in the sense that it involved less restrictive discriminations than those at issue here. The Court noted that correlative restrictions on major-party candidates helped offset the lack of full financing given to minor parties: "But since any major-party candidate accepting public financing of a campaign voluntarily assents to a spending ceiling, other candidates will be able to spend more in relation to the major-party candidates." 424 U.S. at 99, 96 S.Ct. at 673. No such offsetting advantages in Section 501 for charitable groups have been suggested here. The Court also observed in Buckley that the "risk of harm to minority interests is speculative" because the statute had yet to go into force, id. at 101, 96 S.Ct. at 674, and cautioned that "we of course do not rule out the possibility of concluding in some future case, upon an appropriate factual demonstration, that the public financing system invidiously discriminates against nonmajor parties." Id. 424 U.S. at 97 n.131, 96 S.Ct. at 672 n.131. Again, in contrast, the Section 501(c)(3) restriction on lobbying by charitable organizations has been in effect since 1934.
. The government argues that no Supreme Court cases have ever held that classifications in federal tax statutes are to be measured by more than a rational basis standard, IRS Supp. Brief at 30, and that it knows of no Supreme Court cases holding a federal tax statute invalid on equal protection grounds, id. at 31. See San Antonio Independent School Dist. v. Rodriguez, 411 U.S. 1, 41, 93 S.Ct. 1278, 1301, 36 L.Ed.2d 16 (1973) (quoting Madden v. Kentucky); Lenhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 360, 93 S.Ct. 1001, 1004, 35 L.Ed.2d 351 (1973) (tax statute must be "palpably arbitrary" or "invidious" to violate equal protection guarantees). These cases do not involve First Amendment claims, however, which must be measured under a more searching standard. Speiser v. Randall, 357 U.S. at 518, 78 S.Ct. at 1338.
Federal tax statutes have been overturned, however — by the Supreme Court as well as lower federal courts. E.g., National Life Ins. Co. v. United States, 111 U.S. 508, 520, 48 S.Ct. 591, 593, 72 L.Ed. 968 (1928) ("The suggestion that as Congress may or may not grant deductions from gross income at pleasure, it can deny to one and give to another is specious, but unsound"); id. at 534, 48 S.Ct. at 598 (Brandeis, J., dissenting) ("The Court has, of course, power to declare that the system of taxation established by Congress is unconstitutional"); Moritz v. Commissioner, 469 F.2d 466 (10th Cir. 1972), cert. denied, 412 U.S. 906, 93 S.Ct. 2291, 36 L.Ed.2d 971 (1973) (dependent care deduction provision of Code impermissibly distinguished between unmarried male and unmarried female taxpayers); cf. Golden Rule Church Ass'n, 41 T.C. 719, 729 (1964) ("Although tax benefits may be matters of legislative grace . . nevertheless, a denial of such benefits granted to others of essentially the same class may well rise to the level of an unconstitutional discrimination"). Moreover, state tax classifications have been struck down for incompatibility with equal protection principles. E.g., Iowa-Des Moines National Bank v. Bennett, 284 U.S. 239, 52 S.Ct. 133, 76 L.Ed. 265 (1931); cf. In re Estate of Legatos, 1 Cal.App.3d 657, 81 Cal.Rptr. 910 (1969) (equal protection proscribes arbitrary tax classifications). In addition, despite popular conceptions, Social Security is more akin to a tax than an insurance payment. See Califano v. Goldfarb, 430 U.S. 199, 217-18, 97 S.Ct. 1021, 1032-33, 51 L.Ed.2d 192 (1977) (Stevens, J., concurring in judgment). The Supreme Court, applying an elevated but not its most stringent standard of review, has found certain gender-based classifications in the Social Security Act unconstitutional. See Weinberger v. Wiesenfeld, 420 U.S. 636, 95 S.Ct. 1225, 43 L.Ed.2d 514 (1975); Califano v. Goldfarb, supra. See generally Van Alstyne, The Demise of the Right-Privilege Distinction in Constitutional Law, 81 Harv.L.Rev. 1439, 1461 (1968) ("A minimum demand of uniformly reasonable rules in the management of public largesse is surely an unexceptional requirement of constitutional government").
The government suggests that Moritz is a case "of questionable vitality" in light of Kahn v. Shevin, 416 U.S. 351, 355, 94 S.Ct. 1734, 1737, 40 L.Ed.2d 189 (1974), in which the Supreme Court held that Florida could provide a property tax exemption for widows but not for widowers without violating equal protection guarantees. IRS Supp. Brief at 31 n.25. The two cases are clearly distinguishable, however, and even in Kahn the statute was upheld after a level of review showing that the differential treatment had "a fair and substantial relation to the object of the legislation." Id. at 355, 94 S.Ct. at 1737 (quoting Reed v. Reed, 404 U.S. 71, 76, 92 S.Ct. 251, 254, 30 L.Ed.2d 225 (1971))
It is true that almost three decades ago, this court applied a rational basis test in upholding provisions of the Subversive Activities Control Act that denied tax exemptions or deductibility of contributions to any communist-action organization, regardless of its status under I.R.C. § 170 and 501.
The sanctions with reference to tax exemptions and deductions, which are in Section 11 of the Act, forbid income tax deductions for contributions to a registered organization and deny income tax exemptions to such organizations. These allowances and denials fall within the field of congressional grace so long as a reasonable basis appears. This is too well established to require citation. We think these provisions clearly valid.
Communist Party of the United States v. Subversive Activities Control Board, 223 F.2d 531, 557 (D.C.Cir.1954), rev'd on other grounds, 351 U.S. 115, 76 S.Ct. 663, 100 L.Ed. 1003 (1956). But this case is of doubtful authority in view of Speiser v. Randall, which was decided four years later. Compare Seasongood v. Commissioner, 227 F.2d 907, 911 (6th Cir. 1955) (construing "propaganda" to reach only coloring or distortion of facts with an ulterior motive, and holding that a Good Government League was not disqualified from receiving deductible contributions because a different construction might violate First Amendment).
. Indeed, the IRS in Cammarano argued against a business deduction for lobbying expenses on the ground that it "would upset the tax equilibrium which existed due to the then existing uniform prohibition against subvention." Garrett, Federal Tax Limitations on Political Activities of Public Interest and Educational Organizations, 59 Geo.L.J. 561, 583 & n.38 (1971) (citing Brief for Respondents at 12, Cammarano v. United States, 358 U.S. 498, 79 S.Ct. 524, 3 L.Ed.2d 462 (1959)).
. See note 9 supra. Section 162(e) also permits businesses to deduct indirect lobbying expenditures that are paid as dues to an organization of which the taxpayer is a member, such as a trade association.
. See, e.g., Memorandum in Support of Cross-Motion by Defendants for Summary Judgment, October 28, 1978, at 5 (legislative history is "surprisingly sparse"); Garrett, supra note 29, at 564 ("The statutory history of this amendment is unclear as to the underlying rationale and scope of the prohibition"); Troyer, supra note 22, at 1421 (legislative history of the 1934 amendment "is sparse and unclear"); Note, Regulating the Political Activity of Foundations, 83 Harv.L.Rev. 1843, 1845 (1970) ("neither the extent of the proscription nor its rationale has ever been clearly enunciated by Congress").
. The legislative scheme provides further support for this broad reading of the scope of the 1934 lobbying restriction. When the limitation was enacted, it was added to all relevant portions of the Code — the section establishing an exemption for charitable organizations and the three provisions permitting deduction of charitable contributions for income, estate, and gift tax purposes. See Revenue Act of 1934, Pub.L. No. 73-216, § 101(6), 23(o)(2), 406, 517, 48 Stat. 700, 690, 755, 760 (current version at I.R.C. § 501(c)(3), 170(c)(2)(D), 2055(a)(2), 2522(a)(2)). There was no intent — and no conceivable reason — to apply the lobbying restriction to some, but not all, of the primary tax benefits accorded exempt organizations.
. Until 1972, veterans' organizations were themselves exempt from taxation either as social welfare organizations under Section 501(c)(4) or as social clubs under Section 501(c)(7). Until 1969, organizations exempt under these categories were not subject to the unrelated business income tax. The Tax Reform Act of 1969 extended the unrelated business income tax to these categories, however. The 1972 law therefore created a new subsection for veterans' organizations, and added Section 512(a)(4) so that the income that a veterans' organization received from insuring its members and their dependents was not subject to the unrelated business income tax. See S.Rep. No. 1082, 92d Cong., 2d Sess. (1972); H.R.Rep. No. 851, 92d Cong., 2d Sess. (1972).
. The 1969 extension of the unrelated business income tax, for example, had been prompted by a desire "to avoid unequal treatment of the various types of tax-exempt organizations." H.R.Rep. No. 413, pt. 1, 91st Cong., 1st Sess. 44 (1969) U.S.Code Cong. & Admin. News 1969, pp. 1645 (amending I.R.C. § 511(a)(2)(A)). The 1972 revision was based on a similar concern. See 118 Cong.Rec. 6033 (1972) (Rep. Mills) ("the veterans' organizations should not be taxed on this insurance income since other exempt organizations are permitted to insure their members without being taxed on the income from this activity"); id. (Rep. Matsunaga) (bill "would place veterans' organizations in exactly the same tax position as fraternal beneficiary associations now enjoy").
.The government argues that this language modifies only income received from insurance activities and set aside for charitable purposes under Section 512(a). IRS Supp. Brief at 38 n.33. Even if this reading is correct, great weight should still be given to the restriction. The new rule excluded from the unrelated business income tax all insurance receipts used or set aside for insurance benefits "or for religious, charitable, scientific, literary, educational, etc., purposes" that were then identifíed as "the purposes specified in sec. 170(c)(4)." S.Rep.No.1082, at 5, U.S.Code Cong. & Admin. News 1972, p. 3145. These purposes, the Report said,
are to include programs involving Americanism, youth activities, community activities, and information and educational programs relative to national security and foreign affairs for purposes of this provision.
Id. If these "purposes specified in sec. 170(c)(4)" do not include lobbying when income is derived from one source, it is hard to see how they can include lobbying simply because income is derived from a different source.
. Act of August 27, 1894, ch. 349, 28 Stat. 509 (held unconstitutional in Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108 (1895)). A similar exemption provision was included in the Income Tax Act of 1913, ch. 16, 38 Stat. 114, and subsequent revenue acts. The correlative provision permitting taxpayers to deduct contributions from their income taxes was enacted in 1917. War Revenue Act, ch. 63, 40 Stat. 300, 330 (now I.R.C. § 170).
. See, e.g., Herbert E. Fales, 9 B.T.A. 828 (1927) (evidence indicated that Scientific Temperance Federation, Massachusetts Anti-Saloon League, Massachusetts Anti-Cigarette League, and International Reform Bureau were formed to disseminate controversial propaganda); Sophia G. Coxe, 5 B.T.A. 261 (1926) (League to Enforce Peace not exclusively charitable). See generally Jackson v. Phillips, 96 Mass. (14 Allen) 539 (1867) (trust to promote "women's rights" not charitable); Bowditch v. Attorney General, 241 Mass. 168, 134 N.E. 796 (1922) (trust for promotion of temperance held charitable). The later case of Slee v. Commissioner, 42 F.2d 184 (2d Cir. 1930), was widely followed. E.g., James J. Forstall, 29 B.T.A. 428, 436 (1933); Leubuscher v. Commissioner, 54 F.2d 998, 1000 (2d Cir. 1932); Weyl v. Commissioner, 48 F.2d 811, 812 (2d Cir. 1931).
. See, e.g., Seasongood v. Commissioner, 227 F.2d 907, 910 (6th Cir. 1955) (courts "have also applied the principle, that the section being remedial must be liberally construed"); Clark, supra note 12, at 447; Borod, supra note 22, at 1113 (1934 amendments "were intended to some extent to liberalize, rather than restrict, the administration of the revenue laws in regard to charitable organizations"); Caplin & Timbie, supra note 6, at 185 ("A persuasive case can be made" that "Congress intended a more limited proscription than a literal reading of the statute would suggest"). The restriction has been widely excoriated. E.g., Note, The Tax Code's Differential Treatment of Lobbying Under Section 501(c)(3), 66 Va.L.Rev. 1513, 1525 (1980); Note, Political Activity and Tax Exempt Organizations Before and After the Tax Reform Act of 1969, 38 Geo.Wash.L.Rev. 1114, 1136 (1970) (restriction is "obscure in origin, uncertain in application, and perhaps harmfully outmoded").
. Garrett, supra note 29, at 564; see Clark, supra note 12, at 447.
. Some additional support for this argument may lie in the enactment of Section 501(h) in 1976, see note 6 supra, which liberalized the rules governing lobbying by charitable organizations by freeing them from the uncertain application of the "substantiality" test. See Hearings on Legislative Activity by Certain Types of Exempt Organizations Before the House Comm, on Ways and Means, 92d Cong., 2d Sess. 1 (1972); Geske, Direct Lobbying Activities of Public Charities, 26 Tax Lawyer 305 (1972).
. The same reasoning supports the deductibility of contributions to unions and business leagues under Sections 501(c)(5) and 501(c)(6). As noted above, such contributions are deductible only to the extent they are "business expenses" under Section 162. See note 9 supra.
It may be noted in passing, however, that some of the governmental concerns articulated in the reports accompanying the enactment of Section 162(e) are of doubtful constitutional validity. Neither the importance of some legislation to a business' existence nor the desirability of encouraging business people to bring relevant information to the attention of Congress offers a clear and substantial justification for subsidizing lobbying by particular groups over others. See S.Rep.No.1881 at 22-23, [1962] U.S.Code Cong. & Ad.News at 3325.
. See, e.g., Garrett, supra note 29, at 583 ("By reversing the Supreme Court, the 1962 amendment to section 162(e) indicates a changed congressional position on subvention, makes defense of the policy difficult since it is no longer uniformly applied, and raises serious first amendment issues regarding whether the restrictions applied to section 501(c)(3) and 170(c)(2) organizations operate discriminatorily to suppress constitutional freedoms"); influencing Legislation by Public Charities: Hearings Before the House Comm, on Ways and Means, 94th Cong., 2d Sess. 68 (1974) (ABA statement):
[N]ow that direct business lobbying has become a deductible activity under § 162(e), the former "neutral posture of the tax law with respect to lobbying" (see Cammarano v. United States, supra) has been upset in favor of the business interests as opposed to the charitable organizations.
The reports accompanying section 162(e) also suggest that federal policy is not neutral, but is one of encouraging business participation in the legislative process. S.Rep.No.1881 at 23, [1962] U.S.Code Cong. & Ad.News at 3325.
.The Supreme Court has recognized that departures from uniform pursuit of an asserted governmental purpose raise doubts as to whether that purpose is genuinely important. See, e.g., Metromedia, Inc. v. San Diego, 453 U.S 490, 516, 101 S.Ct. 2882, 2897, 69 L.Ed.2d 800 (1981) ("exceptions to the general prohibition are of great significance in assessing the strength of the city's interest"); Schad v. Borough of Mount Ephraim, 452 U.S. at 73, 101 S.Ct. at 2185 n.14 ("The Borough's decision to permit live entertainment as a nonconforming use only undermines the Borough's contention that live entertainment poses inherent problems that justify its exclusion").
. Members of this court have suggested that in First Amendment cases, judges should consider only the actual governmental purposes behind challenged legislation rather than possible or hypothetical ones. See, e.g., Community-Service Broadcasting of Mid-America, Inc. v. FCC, 593 F.2d at 1128 (Robinson, J., concurring in part) ("courts cannot rely upon aims that apparently never crossed the minds of the legislators, particularly when confronted by the possibility of danger to a fundamental interest") (footnote omitted); id. at 1146 & n.51 (Leventhal, J., concurring) ("Courts engaged in the careful scrutiny of legislation . . . are not free to conjecture an important governmental interest when one has not surfaced in congressional deliberations."). Cf. Califano v. Goldfarb, 430 U.S. 199, 212-17, 97 S.Ct. 1021, 1029-32, 51 L.Ed.2d 270 (1977) (plurality opinion) (examining legislative history of challenged statute to determine "actual purpose" of discrimination, and refusing to accept objectives advanced by appellants because Congress had given no attention to them).
. Article I, Section 8 of the Constitution empowers Congress to lay and collect taxes and expend public funds for the general welfare. Its powers under this clause are broad. See Steward Machine Co. v. Davis, 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. 1279 (1937).
. See, e.g., 42 U.S.C. § 2996f(a)(5) (1980) (Legal Services Corporation prohibited to use funds to influence passage or defeat of federal or state legislation except in delineated circumstances); 42 U.S.C. § 5653 (1980) (National Institute for Juvenile Justice and Delinquency Prevention authorized to prepare studies and recommendations and disseminate information to individuals, agencies, and organizations concerned with prevention and treatment of juvenile delinquency).
. See, e.g., Greer v. Spock, 424 U.S. 828, 838 n.10, 96 S.Ct. 1211, 1217 n.10, 47 L.Ed.2d 505 (1976); Toward a Gayer Bicentennial Committee v. Rhode Island Bicentennial Foundation, 417 F.Supp. 632, 638-39 & n.9 (D.R.I.1976) (state can inquire whether applicants proposed use of public area comports with theme speci fied by government). The government also possesses editorial powers when it acts as the proprietor of an entity with press rights. See Avins v. Rutgers, State Univ. of New Jersey, 385 F.2d 151 (3d Cir. 1967), cert. denied, 390 U.S. 920, 88 S.Ct. 855, 19 L.Ed.2d 982 (1968) (state university law review had editorial prerogative of rejecting article). It may be difficult, of course, to distinguish between government-sponsored speech and private speech in close cases. Compare Bonner-Lyons v. School Committee, 480 F.2d 442 (1st Cir. 1973) with Buckel v. Prentice, 572 F.2d 141 (6th Cir. 1978). See generally Perry Local Educators' Ass'n v. Hohlt, 652 F.2d 1286, 1292-96 (7th Cir. 1981); Emerson, supra note 23, at 831, 837; Shiffrin, Government Speech, 27 U.C.L.A.L.Rev. 565, 577-88 (1980); Yudof, When Governments Speak: Toward a Theory of Government Expression and the First Amendment, 57 Tex.L.Rev. 863, 908-12 (1979).
. See, e.g., Police Department v. Mosley, 408 U.S. 92, 92 S.Ct. 2286, 33 L.Ed.2d 212 (1972); Healy v. James, 408 U.S. 169, 92 S.Ct. 2338, 33 L.Ed.2d 266 (1972); Cox v. Louisiana, 379 U.S. 536, 85 S.Ct. 453, 13 L.Ed.2d 471 (1965); Hague v. CIO, 307 U.S. 496, 59 S.Ct. 954, 83 L.Ed. 1423 (1939). Similar principles govern the time, place, and manner restraints that may be applied to First Amendment expression without violating the Constitution. See, e.g., Grayned v. City of Rockford, 408 U.S. 104, 116, 92 S.Ct. 2294, 2303, 33 L.Ed.2d 222 (1972) ("The crucial question is whether the manner of expression is basically incompatible with the normal activity of a particular place at a particular time"); Kovacs v. Cooper, 336 U.S. 77, 69 S.Ct. 448, 93 L.Ed. 513 (1949) (loudspeakers); Cox v. New Hampshire, 312 U.S. 569, 61 S.Ct. 762, 85 L.Ed. 1049 (1941) (parades).
In certain situations, the fact that government has created the forum seems to permit some discrimination among speakers that is directed toward content but neutral with regard to viewpoint. See, e.g., FCC v. Pacifica Foundation, 438 U.S. 726, 98 S.Ct. 3026, 57 L.Ed.2d 1073 (1978) (FCC can regulate use of certain words on airwaves); Lehman v. City of Shaker Heights, 418 U.S. 298, 94 S.Ct. 2714, 41 L.Ed.2d 770 (1974) (plurality opinion) (municipal bus system can permit commercial but not political advertising). Compare Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 95 S.Ct. 1239, 43 L.Ed.2d 448 (1975) (granting claim for access to municipal theatre by promoter of controversial production) with Young v. American Mini Theatres, Inc., 427 U.S. 50, 96 S.Ct. 2440, 49 L.Ed.2d 310 (1976) (plurality opinion) (upholding restrictive zoning ordinance for theatres exhibiting sexually explicit films). See generally Karst, Public Enterprise and the Public Forum, 37 Ohio St.L.J. 247 (1976); Comment, Access to State-Owned Communications Media—the Public Forum Doctrine, 26 U.C.L.A.L.Rev. 1410 (1979); Note, The Public Forum: Minimum Access, Equal Access, and the First Amendment, 28 Stan.L.Rev. 117 (1975). Other standards may be appropriate where the "forum" is not public at all. See United States Postal Service v. Council of Greenburgh Civic Ass'ns, 453 U.S. 114, 101 S.Ct. 2676, 69 L.Ed.2d 517 (1981) (upholding statute prohibiting deposit of unstamped "mailable" matter in officially approved mailboxes).
.As noted earlier, see note 11 supra, veterans' organizations have not restricted their lobbying to issues of particular importance to veterans, such as veterans' benefit programs. A particularly notable example is the lobbying of many veterans' organizations against the proposed Panama Canal treaties. See, e.g., Panama Canal Treaties: Hearings Before the Senate Comm. on Foreign Relations, 95th Cong., 1st Sess. 566 (1977) (statement of Robert Charles Smith, National Commander, American Legion); id. at 578 (statement of Frank D. Ruggiero, National Commander, Amvets); id. at 582 (statement of Maj. Gen. J. Milnor Roberts, U. S. Army Reserve, executive director, Reserve Officers Ass'n.); id. at 595 (statement of Col. Phelps Jones, USA-Ret., director national security and foreign affairs, VFW); Proposed Panama Canal Treaties, Hearings Before the House Comm, on International Relations, 95th Cong., 1st & 2d Sess. 155 (1977-1978) (statement of Dr. John Wasylik, National Commander in Chief, VFW); id. at 163 (statement of William J. Rogers, immediate past national commander, American Legion); id. at 171 (statement of Frank D. Ruggiero, National Commander, Amvets); id. at 175 (statement of Dr. Robert P. Foster, chairman national foreign relations commission, American Legion); id. at 177 (statement of Col. Phelps Jones, director national security and foreign affairs, VFW).
. IRS Supp. Brief at 40 (citing IRS Exempt Organizations Master File, 1980 IRS Ann.Rep. 76). The government cautions that this does not represent a true universe of Section 501(c)(3) organizations, however, because certain organizations such as churches need not apply for recognition unless they desire a ruling, and because the ruling letter covers not only the applying organization but all of its subordinate units.
. Id. (based on 90 percent of all information returns filed by such organizations for the 1978 taxable year).
. Taxation also implies the existence of a considerably narrower remedy. It claims that the most repugnant feature of the current lobbying limitation in Section 501(c)(3) is that organizations that engage in "substantial lobbying" lose their right to receive any tax-deductible contributions and not just those contributions used specifically for lobbying. In his concurring opinion in Cammarano v. United States, for example, Justice Douglas suggested that the statute in question would have been found invalid had it denied all deductions to an organi zation that spent money to promote or oppose an initiative, rather than simply denying deduction of the money spent in that effort. 358 U.S. at 515, 79 S.Ct. at 534. Taxation therefore suggests that an analogous remedy in this case would be to deny tax-deductibility only in an amount proportionate to the amount of lobbying in which a Section 501(c)(3) organization engaged. Cf. Harris v. McRae, 448 U.S. 297, 317 n.19, 100 S.Ct. 2671, 2689 n.19, 65 L.Ed.2d 784 (1980), which held that a "broad disqualification from receipt of public benefits" may be unconstitutional even when a more limited exclusion is permissible. In that case, the Court held that although Congress might decline to subsidize certain medically necessary abortions, a "substantial constitutional question would arise if Congress had attempted to withhold all Medicaid benefits from an otherwise eligible candidate simply because that candidate had exercised her constitutionally protected freedom to terminate her pregnancy by abortion." Id. Taxation argues that precisely the same disproportionate penalty is imposed by Section 501(c)(3) when an organization exercises First Amendment rights fully, and urges that the Constitution requires at the very least that its contributors' deductions be limited only to the extent of the amounts actually spent on lobbying by a Section 501(c)(3) organization.
Taxation's argument is not without merit, but we decline to grant the alternative remedy for the same reason discussed above. Each of the several hundred thousand Section 501(c)(3) organizations now monitored by the IRS may have hundreds of thousands of separate contributors. For each organization, the IRS would have to ascertain the proportion of lobbying activities to other expenses of the organization, and then trace that percentage through to the individual contributions in order to limit the amount of their deductibility to the same proportion. In a less complex world, this logical scheme might be appropriate, although it would not cure the equal protection violation found here. But this remedy could easily overload and destroy any IRS capacity for monitoring these organizations and become an administrative nightmare subject to widespread disregard or abuse. Although mandating such a remedy is within the authority of Congress, this court should not impose a massive new workload on the IRS that leads to so partial a cure of the discrimination shown here.
. Taxation Supp. Brief at 20 n.4. In Iowa-Des Moines Bank v. Bennett, 284 U.S. at 247, 52 S.Ct. at 136, the Court ordered a refund of "the excess of taxes exacted" from appellants because "it is well settled that a taxpayer who has been subjected to discriminatory taxation through the favoring of others in violation of federal law, cannot be required himself to assume the burden of seeking an increase of the taxes which the others should have paid."
. The IRS presumably came to analogous conclusions concerning the treatment of lobbying by fraternal beneficiary societies, despite the apparent silence of the Code on that question.
See pp. 720-721 supra.