Regan v. Taxation With Representation of Washington

PETITIONER: Donald Regan, Secretary of the Treasury
RESPONDENT: Taxation With Representation of Washington
LOCATION: Internal Revenue Service

DOCKET NO.: 81-2338
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 461 US 540 (1983)
ARGUED: Mar 22, 1983
DECIDED: May 23, 1983

John Cary Sims - argued the cause for the appellee in No. 81-2338
Rex E. Lee - Solicitor General, Department of Justice, argued the cause for the appellants in No. 81-2338

Facts of the case

Two non-profit groups merged to form the group Taxation With Representation of Washington (TWR). One of the original groups obtained 501(c)3 status from the Internal Revenue Service (IRS), which allowed donors to make tax-deductible donations to it. Because the other group participated in political lobbying, it did not qualify for 501(C)(3) status and could not offer tax-deductible donations. Since the newly formed TWR also participated in "substantial lobbying," the IRS denied it tax-deduction privileges. TWR alleged in District Court that the IRS's "substantial lobbying" restriction for 501(C)(3) status violated its First Amendment rights by imposing an "unconstitutional burden" on its ability to receive tax-deductible donations. TWR also argued that the restriction violated its Fifth Amendment equal protection rights since veterans' organizations that lobbied extensively could receive tax-deductible donations. The District Court dismissed the complaint but the Court of Appeals for the District of Columbia ruled that the "substantial lobbying" restriction did impair TWR's Fifth Amendment equal protection rights.


Does the IRS violate the First Amendment by denying 501(c)3 tax-deduction privileges to non-profit groups that participate in "substantial lobbying"? Does the IRS violate the equal protection component of the Fifth Amendment by denying 501(c)3 tax-deduction privileges to non-profit groups that participate in "substantial lobbying"?

Media for Regan v. Taxation With Representation of Washington

Audio Transcription for Oral Argument - March 22, 1983 in Regan v. Taxation With Representation of Washington

Warren E. Burger:

We will hear arguments first this morning in Regan against Taxation with Representation of Washington.

Mr. Solicitor General, you may proceed whenever you're ready.

Rex E. Lee:

Mr. Chief Justice, and may it please the Court:

Congress has provided two general types of tax relief, either or both of which may be available to certain kinds of organizations.

First, Section 501(c) exempts the income of about two dozen different types of organizations from taxation on that income.

Second, Section 170 entitles the donors to a smaller number of 501(c) organizations including both veterans groups and also groups qualifying under 501(c)(3) to deduct their contributions.

One of the qualifications for 501(c)(3) status, and, therefore, both tax exemption and also donor contribution deductibility, is that no substantial part of the entity's activity consists of attempts to influence legislation.

The proposed activities of the Appellee which has unsuccessfully sought recognition as a 501(c)(3) organization will consist principally of attempts to influence legislation.

It attacks the constitutionality of the scheme that I just described on two grounds.

The first is that withholding tax exempt status from 501(c)(3) or any other organizations which lobby is a violation of a first amendment right.

The second is that since Congress has afforded tax exempt status to veterans organizations which lobby but not to 501(c)(3) organizations which lobby, its equal protection rights have been denied.

The En Banc Court of Appeals unanimously held, and we agree, that the Appellees' first amendment argument is foreclosed by this Court's unanimous holding in Cammarano versus The United States that the constitution does not require Congress to subsidize First Amendment activity.

With respect to equal protection, the Court of Appeals further observed, and I am quoting, that

"Taxation also has a weak case solely in terms of equal protection because of Congress's vast leeway under the constitution to classify the recipients of its benefits and to favor some groups over others. "

Nevertheless, the Court of Appeals ruled that a heightened standard of equal protection scrutiny was applicable and that it was infringed in this case because First Amendment rights were affected even though they had not been infringed.

The Court remanded to the District Court with instruction to cure the unequal treatment which it found by one of two alternatives.

William H. Rehnquist:

Well, did the Court of Appeals use that rather obscure phrase that you just used that First Amendment rights were affected but not infringed?

Rex E. Lee:

Well, it first held, Justice Rehnquist, that under Cammarano they had not been violated.

I think that is more my characterization, but I think that is the only fair way that the Court of Appeals' opinion can be read because of the effect upon First Amendment rights.

The Court identified as the most logical remedy option to impose the lobbying restriction on veterans organizations none of which is a party to this litigation.

It also identified another alternative: judicially enlarging the Congressional list of exempt organizations to include the 501(c)(3)'s which the Court observed, correctly in our view, might open a Pandora's box of woes and abuse.

In our view, the underpinning of the Court of Appeals' holding has to be that Congress has violated the equal protection clause even though there is no direct infringement of a First Amendment right if Government treats different groups of people in different ways and the deferential treatment comes to rest on a First Amendment or other fundamental right interest.

That is the combination of circumstances that brings the equal protection guarantee into play.

Whatever appeal that argument might have had, if we were at the dawning of its day in Court, I submit that it comes too late because it has already been considered and rejected by this Court which has held on at least three separate occasions that Government subsidization of one group but not another even where the fundamental rights of the nonsubsidized group will be affected violates no constitutional guarantee.

Buckley versus Valeo, for example, upheld provisions of the Internal Revenue Code which granted public funds to the candidates of major parties but not minor parties.

There was clearly unequal treatment, and there was an arguable impact on First Amendment values.

Similarly, in Monner versus Roe and Harris versus McRae congressional statutes providing medicaid funds for indigent live births but prohibiting such funds for abortions were attacked on the same grounds advanced here, namely, that the impact of the different treatment came to rest on a fundamental constitutional right of the disfavored group, namely, the right to decide whether or not to have an abortion.

Harry A. Blackmun:

But the Court in those cases left open a situation which I take it you are going to come to.

Rex E. Lee:

Yes, but the difference of treatment in those cases was undeniable, and the effect was on a fundamental constitutional right.

Nevertheless, the Court held that there was a legal protection violation because there is a basic difference between direct state interference with a protective activity and state encouragement of an alternative activity consonant with legislative policy.