Court Opinion

ID: 4485793
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:33:59.800828+00
Date Added: 2024-06-11T14:54:07.558848
License: Public Domain

CHABOT, J., dissenting: The majority hold that an organization does not participate in political campaigns on behalf of candidates for public office when the organization rates the qualifications of candidates for elective judicial public office, and publishes those ratings with the hope that the ratings will influence the voters. I would hold that this activity constitutes participation in political campaigns on behalf of the more highly rated candidates, and thereby violates the restrictions of section 501(c)(3). I. The Statute Petitioner asks us to declare, under section 7428,1 that it is a section 501(c)(3) organization. The relevant portions of section 501(c)(3) are set forth supra, in the majority’s opinion at note 7. As may be seen from the text of section 501(c)(3), an organization must clear each of many separate hurdles in order to be described in section 501(c)(3). Such an organization must show the following: (1) It is organized exclusively for one or more of the purposes listed in the statute; and (2) It is operated exclusively for one or more of these listed purposes; and (3) No part of its net earnings inures to the benefit of any private shareholder or individual; and (4) No substantial part of its activities constitutes lobbying; and (5) It “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”, commonly referred to as “electioneering”. As we state in Hancock Academy of Savannah, Inc. v. Commissioner, 69 T.C. 488, 492 (1977), “the requirements for exemption under section 501(c)(3) are stated in the conjunctive; failure to satisfy any one of them will prevent exemption.” II. The Facts The majority have found as follows: Petitioner states that one of its “principal activities” is the rating of “candidates for judicial office”. (P. 601.) The ratings (“approved”, “not approved”, or “approved as highly qualfied”) are made known to petitioner’s members and “are released to the general public in the form of press releases”. (P. 603.) Sometimes, all the competing candidates for a given position receive the same rating. (P. 604.) During the 5 years from 1980 through 1984, only 56 percent of the judicial candidates were rated “approved”, while 42 percent were rated “not approved”. Evidently, competing candidates often do not receive the same rating. See table on p. 604. “[T]here obviously would be no point to making the ratings if they were kept secret, and it is equally obvious that the ratings are published with the hope that they will have an impact on the voter.” (P. 610.) III. Applying the Facts to the Law Although many maintain that popular election of judges is bad, for a variety of reasons (and the Federal judiciary has been appointive from its inception), New York State chooses to retain popular elections for most judges, as do many other jurisdictions in the United States.2  Although the details of the process may vary from jurisdiction to jurisdiction, it does not appear that there is any doubt that, in New York, each of the judicial candidates who runs in the party primaries and then on party lines in the general election is (in the words of sec. 501(c)(3)) a “candidate for public office” and is conducting a “political campaign”. The majority’s findings make it clear that petitioner’s ratings are attempts to influence the voters in these political campaigns to support “approved” candidates over “not approved” candidates. It is apparent, from the table in the majority’s opinion (p. 604), that the “approved” rating is not routinely granted and that, in many cases, petitioner provides and publishes ratings that prefer some candidates over others.3  Thus, it seems to be clear that one of petitioner’s “principal activities” is to participate in political campaigns on behalf of candidates for public office. For the past 33 years, the Congress has said that this is an impermissible activity for section 501(c)(3) organizations. It follows that petitioner fails one of the requirements for section 501(c)(3) status, and our declaratory judgment, in the instant case, should be for respondent. The majority point out that petitioner is already exempt under section 501(a) as an organization described in section 501(c)(6) (p. 600) and that respondent does not propose to change his favorable ruling on that score (p. 605), but the majority imply that petitioner’s real objective in this litigation may be to achieve eligible contribution donee status under sections 170 (as to which we clearly have authority under see. 7428(a)(1)(A) to render a declaratory judgment), 2055, 2106, and 2522. (P. 600.) As the majority also point out, for the past 18 years the Congress has said that the section 501(c)(3) anti-electioneering rules apply to the charitable contribution deduction provisions as well to section 501(c)(3), itself. (Pp. 607-608.) IV. Other Matters Nonpartisan, Nonpolitical, Objective The majority seem to believe that it is relevant that “Petitioner does not base its ratings on partisan or political preferences” and that petitioner intends its standards to be “objective”. (P. 611.) The Congress has made the provision we deal with depend on participation in a “political campaign”, and the judicial elections here involved clearly are political campaigns. Nothing in the statute suggests that participation in a political campaign is to be ignored if it proceeds from nonpartisan or “nonpolitical” preferences. Nor does anything in the statute suggest that “objective” determinations to urge voters to vote for certain candidates are permissible, that only nonobjective determinations are forbidden. Objectivity may be relevant in determining whether the organization is operating exclusively for educational purposes (see sec. 1.501(c)(3)-l(d)(3)(i), Income Tax Regs.), but neither the statute nor the regulation draws this line with regard to the anti-electioneering requirement. See, e.g., Hancock Academy of Savannah, Inc. v. Commissioner, supra, to the effect that failure to satisfy any one of the requirements of paragraph (3) of section 501(c) will prevent exemption under that paragraph. Voter Education The majority' state that the narrow issue is whether “petitioner’s rating activities do not constitute permissible voter education activities.” (P. 609.) Petitioner provides voters with little information explaining “not approved” ratings and no information at all explaining “approved” and “approved as highly qualified” ratings. (P. 611.) As a result, it hardly seems that petitioner’s candidate rating activity could qualify as “educational”. See sec. 1.501(c)(3)-l(d)(3)(i), Income Tax Regs., which provides in relevant part as follows:" An organization may be educational even though it advocates a particular position or viewpoint so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion. What petitioner did is far from what most would regard as voter education. Organizations that conduct voter education activities urge citizens to register to vote, they urge citizens to enroll in the party of their choice and vote in primary elections (where this is the procedure under their State’s laws), they urge people to vote in general elections, and they explain why it is an obligation of citizens to do so in this Nation and a privilege that is nonexistent or not meaningful in much of the rest of the world. Voter education activities focus on giving voters and candidates access to each other on an impartial basis, i.e., access to and by all the candidates and not merely those favored by the organization’s leaders or by a special rating committee. Passive Activity The majority seem to believe that it is not only relevant, but “important to note that petitioner merely reports its ratings and does not actively seek to influence the outcome of elections, for example, by distributing statements or other campaign literature on behalf of or in opposition to any candidate.” (P. 611.) Firstly, the majority have .found that petitioner’s ratings “are released to the general public in the form of press releases”. (P. 603.) The majority acknowledge that “there obviously would be no point to making the ratings if they were kept secret, and it is equally obvious that the ratings are published with the hope that they will have an impact on the voter.” (P. 610.) That petitioner, because of the prestige it enjoys, can achieve its desired effect in a dignified manner does not take away from the fact that it acts in a manner intended to affect the outcome of the elections on behalf of certain candidates for public office and in opposition to other candidates for public office. It is as active as it needs to be in order to make its endorsements known to the public. Secondly, the statutory reference to “including the publishing or distribution of statements” is merely an illustration of the kind of activity that is subject to the statutory prohibition. It is likely that the Congress inserted this parenthetical into the last clause of section 501(c)(3) out of an abundance of caution, to prevent someone from seriously contending that publishing or distributing of materials written by others is not within the prohibition. In any event, nothing in the statute’s text or its legislative history indicates that this phrase is intended to swallow up the whole rule; rather, the use of the word “including” to introduce the phrase indicates that the enumerated activities are not all-inclusive. Consequences Many section 501(c)(3) organizations have an interest in certain legislation, or other governmental matters. The majority’s opinion will permit churches and synagogues, for example, to endorse (approve) or oppose (not approve) candidates for public elective office on the basis of where they stand on permitting abortions or using public funds for abortions. Organizations that focus on research to prevent, cure, or ameliorate the effects of specific diseases will not only be able to “lobby” public officials (as they now may clearly do within limits, see sec. 501(h)), but they may threaten recalcitrant officials with retribution at the polls (by brandishing their membership lists and press releases). Indeed, if the organizations perceive that funds are limited, this may turn into a battle among the organizations, with victory perhaps dependent on the length of their respective membership lists. A university may circularize its alumni to exert unified power at the polls in support of “qualified” candidates, i.e., those who agree with the university’s positions on any of a wide range of items, from unrelated business income tax, to nuclear-free zones, to boycotting goods from specific countries. The only care that must be taken, in order to fit within the majority’s opinion, is that the section 501(c)(3) organization limit its nonmembership electioneering to press releases. That may be the law as some of us would wish it to be, but that is not the law that the Congress wrote. V. Conclusion Petitioner “flat-out” told the public that certain candidates for public office should be voted for and other candidates should be voted against. It made an effort to get this message to the voting public by issuing press releases. It intended that the voters be persuaded by this advice as to which candidates to vote for or against. Petitioner thereby violated one of the specific requirements of the statute whose benefits it seeks. The Congress put the anti-electioneering provision into the law in 1954. After what some might regard as a “loophole” became apparent in Dulles v. Johnson, 273 F.2d 362 (2d Cir. 1959), the Congress added the anti-electioneering provision to the successor of the estate tax provision interpreted in Dulles v. Johnson and also to the income and gift tax provisions. Petitioner, a prestigious bar association, appears to perform a useful function for the people of New York. Apparently, but for this activity, petitioner would qualify for section 501(c)(3) status. We should not twist the language of the statute merely because petitioner is prestigious or because this activity, when done with care and highmindedness, may justly be viewed as an example of the legal professional acting honorably to uphold and heighten the standards of the judiciary. As members of the bar and the bench, we may applaud petitioner for its work, but we do no honor to the bar or to the bench when we ignore or twist the language of the statute because the statute fails to suitably reward petitioner’s good work. The Congress wrote the statute; we might have written this provision differently or not at all; we should apply the statute as the Congress wrote it. Respectfully, I dissent. Parker, Cohen, Clapp, Jacobs, and Wright, JJ, agree with this dissent.   Sec. 7428(a) provides, in pertinent part, as follows: SEC. 7428. DECLARATORY JUDGMENTS RELATING TO STATUS AND CLASSIFICATION OF ORGANIZATIONS UNDER SECTION 501(c)(3), ETC. (a) Creation of Remedy. — In a case of actual controversy involving— (1) a determination by the Secretary— (A) with respect to the initial qualification or continuing qualification of an organization as an organization described in section 501(c)(3) which is exempt from tax under section 501(a) or as an organization described in section 170(c)(2), ******* upon the filing of an appropriate pleading, the United States Tax Court * * * may make a declaration with respect to such initial qualification * * *. Any such declaration shall have the force and effect of a decision of the Tax Court * * * and shall be reviewable as such. * * *    The elective process has produced many of our Nation’s shining judicial adornments. We deal with New York State in the instant case. A New Yorker, Benjamin N. Cardozo, may well be the supreme example of how the popular elective process can work to place highly qualified people into judicial office.    Presumably, petitioner’s rating of five candidates during this period as “approved as highly qualified” would be understood by voters as an indication that the voters ought to vote for those five, even in preference to candidates who received “approved” ratings.