Alliance for Justice and Council on Foundations File Amicus Brief


On January 31, 2017, Alliance for Justice and Council on Foundations filed a joint amicus brief in Parks Foundation v. Commissioner of Internal Revenue in the United States Court of Appeals for the Ninth Circuit. The case raises significant yet rarely addressed issues regarding the application of the Internal Revenue Code’s lobbying rules to private foundations and charitable organizations. If the Tax Court’s decision were to stand, both private foundations and public charities would face great restrictions on their policy-influencing activities, particularly in the ballot measure context.

Our amicus brief, written by Michael B. Trister and Joseph W. Steinberg of Trister, Ross, Schadler & Gold, describes the legislative history of the 501(c)(3) lobbying rules—and how Congress defined lobbying in limited terms to allow private foundations and public charities to discuss public policy issues—and then explains how the Tax Court’s decision is inconsistent with relevant statutory and regulatory provisions.

About the Case

In the decision now on appeal, the United States Tax Court examined a series of radio messages created and funded by a private foundation between 1997 and 2000 and determined that the messages, for the most part, constituted taxable expenditures under the Internal Revenue Code (IRC). The messages, which contained information and commentary regarding a variety of issues relevant to upcoming state ballot measure elections, were each around 30-60 seconds long. Although several of the ads did not mention specific ballot measures by name, the Court decided that both the foundation and its manager were liable for excise taxes under IRC provisions applicable to foundation expenditures for lobbying activities and for expenditures that do not promote tax exempt purposes.

Our Argument

Under the regulations, the radio messages disseminated by the Foundation constitute a taxable attempt to influence legislation only if they “refer to” and “reflect a view on” specific legislation or, in this case, a ballot measure. We contend that in applying this definition, the Tax Court relied on an overly broad interpretation of these terms, which is not supported in the legislative history or regulations.

The Tax Court found that even if a communication does not specifically name a ballot measure but instead “employs terms widely used in connection with the measure or describes the content or effect of the measure” it will be deemed to refer to specific legislation. We disagree with this interpretation, as any communication made by a private foundation that describes the content of a measure or use terms common to the measure would then create a taxable expenditure if those communications also reflect a viewpoint on the measure itself.

The Tax Court then highlighted examples from the foundation’s messages that it determined were indications of the foundation’s viewpoint on the ballot measures at issue, broadly interpreting the “reflects a view” language to include instances where the messages merely indicate the potential effect of legislation. In combination, these two decisions by the Tax Court to take such an expansive approach to interpreting the definition of what it means to “attempt to influence legislation” in the ballot measure context that they create a situation where a wide variety of communications can be considered direct lobbying communications even if they fall short of naming specific legislation and telling people how to vote. This interpretation prevents private foundations and other charitable organizations from being able to comment on social and economic issues, in contravention of what the regulations allow.

We will keep you posted about the progress of this case. For more information, contact Abby Levine,  or Lara Kalwinski,