Parks Case Pauses with Unresolved Questions - Alliance for Justice

Parks Case Pauses with Unresolved Questions


Bolder Advocacy

On Friday, December 15, 2017, the Ninth Circuit Court of Appeals issued an unpublished memorandum disposition in the case of Parks v. Commissioner of Internal Revenue. In doing so, the court affirmed the decision of the United States Tax Court, which held the Parks Foundation (a private foundation) liable for non-exempt lobbying expenditures and imposed an excise tax on both the foundation and its manager.

The penalty resulted after the Parks Foundation placed a series of radio advertisements commenting on several issues around the time of a state ballot measure election. Although many of the ads did not reference the ballot measures by name, the Tax Court held that if a communication “employs terms widely used in connection with the measure or describes the content or effect of the measure” it effectively refers to specific legislation and will qualify as lobbying if it expresses a viewpoint on that legislation. It then broadly interpreted what it means to express a viewpoint on specific legislation and held that it is not necessary to explicitly encourage someone to vote for or against a measure in order for a viewpoint to be reflected.

Because of the troubling standards, the Tax Court’s opinion set and the stringent limits it placed on the ability of private foundations to engage in public policy discussions, Alliance for Justice and the Council on Foundations filed a joint amicus brief, arguing for the reversal of the Tax Court’s opinion. We took specific issue with the Court’s broad interpretation of the private foundation lobbying rules, which could potentially expose a wide variety of communications to an excise tax even if they don’t go so far as to name a specific measure on the ballot or tell people how they should vote.

Unfortunately, the Ninth Circuit Court of Appeals did not address our analysis, instead concluding as a preliminary matter that the Parks Foundation’s communications were taxable non-exempt expenditures because they were not made for “educational” purposes. The court’s opinion is unpublished and non-precedential, and it means that (at least for the time being) the U.S. Tax Court’s reasoning continues to stand. In the wake of this development, several questions remain unanswered, including how the Tax Court’s ruling could impact lobbying definitions for public charities in addition to private foundations and whether the Tax Court’s reasoning will extend to public policy advocacy beyond the ballot measure context.

Alliance for Justice will continue to monitor any subsequent court opinions or changes to the tax law on this issue. In the meantime, it is important to recognize that the decision in the Parks case does not mean that private foundations are prohibited from engaging in all advocacy efforts or that they cannot fund grantees who conduct advocacy work. The tax code carves out two ways in which private foundations can support their grantees’ public policy efforts. General support grants and specific project grants both provide private foundations with the option to support grantee advocacy. General support grants are not earmarked for any particular purpose and offer grantees the most flexibility in terms of how to spend grant funds. Specific project grants also permit private foundations to fund the non-lobbying portions of their grantees’ budget requests without earmarking grant funds for lobbying and exposing the private foundation and its managers to an excise tax.

If your foundation has any questions regarding the application of current tax code rules to its communications or its ability to fund advocacy organizations, please reach out to our free technical assistance hotline at or 866-675-6229.