March 30, 1971
Page 8517
By Mr. MUSKIE (for himself, Mr. JACKSON, Mr. JAVITS, Mr. METCALF, Mr. MOSS, Mr. RANDOLPH, Mr. STEVENSON, and Mr. TUNNEY) :
S. 1408. A bill to amend the Internal Revenue Code of 1954 so as to permit certain tax-exempt organizations to engage in communications with legislative bodies, and committees and members thereof. Referred to the Committee on Finance.
Mr. MUSKIE. Mr. President, today I am introducing a bill that would revise the tax code to allow tax-exempt charitable organizations to advocate the public interest directly before Congress on an equal basis with private business.
The March 4 issue of the Washington Post and the March 8 issue of the New York Times contained advertisements paid for by an organization named American Labor and Industry for the SST. This organization was recently formed to develop and coordinate industry and grassroots support for the supersonic transport. The organization is a business association, organized pursuant to section 501 (c) (6) of the Internal Revenue Code. As such, it is tax exempt, and for Federal income tax purposes contributions to it are deductible. Thus the massive lobbying effort which has been launched in support of the SST is, in effect, subsidized by the Federal Government by means of favorable tax treatment.
Mr. President, in 1962 I supported the amendment to section 162 of the Internal Revenue Code which permits tax-exempt business associations such as the SST coalition to engage in lobbying activities. I did so to assure that Congress would have the most complete record possible as it considers legislation. I did so with the feeling that the denial of tax-exempt status for such organizations would hamper their ability to communicate effectively with the Congress on matters where their expertise, experience, and interest were directly involved. The 1962 amendment which added section 162(e) to the tax laws has resulted in a flow of valuable information to the Congress.
Public interest and environmental organizations, however, are legally prohibited from contributing to the legislative process. These organizations can be a valuable source of information; they can broaden legislators' understanding of proposed legislation; and they can suggest valuable legislative alternatives.
Tax-exempt status is available to these organizations only so long as no substantial part of their activities constitutes attempts to influence legislation. This limitation has had a severe impact on the ability of charitable and public interest groups to participate meaningfully in the formulation of public policy. A determination that such an organization has engaged "substantially" in attempting to affect legislation will result in a denial of tax-exempt status and a consequent denial of deductions for contributions which the organization receives. This is the equivalent to death for many of them. Even a review of their tax-exempt status can dry up desperately needed funds. It makes no sense to decide that these organizations operate in the public interest and grant them tax-exempt status and then silence them when they attempt to speak to those who must decide public policy.
The groups which suffer most under these limitations of the Internal Revenue Code are civil rights organizations, consumer and environmental groups, and the recently established public interest law firms. The outstanding characteristic of these groups has been their advocacy of the views of those who are under-represented before governmental agencies, in the courts, and Congress. It is fundamental to our constitutional system that they should have equal access along with business groups and others in presenting views to Congress. This is so, not because the views of the public interest groups are necessarily correct, but because in considering the increasingly complex matters which come before it, the Congress should hear and weigh all views to the fullest extent possible.
On this point, it is instructive to review the language of the Senate committee report which accompanied the 1962 trade lobbying provision. The committee stated:
It is also desirable that taxpayers who have information bearing on the impact of present laws, or proposed legislation, on their trade or business not be discouraged in making the information available to the members of the Congress or legislators in other levels of Government. The presentation of such information to the legislators is necessary to a proper evaluation on their part of the impact of present or proposed legislation. S. Rept. No. 1881, 87th Congress, 2nd Session.
This reasoning is eminently sound and should be applied fairly to all groups which represent interests affected by legislation.
Today the business community spends enormous sums of money trying to influence public opinion and Congress on legislative matters. Yet public interest groups, conservation groups, and other nonprofit tax-exempt organizations speaking for other parts of our society, have their voices stifled by the tax code. Why should the Government encourage private business to communicate with Congress by making lobbying a business expense which can be deducted from
taxes, while preventing strong efforts of public interest groups to speak to lawmakers by removing their tax-exempt status when they raise their voices?
I believe that voices of the environmentalists, of the civil rights and poverty groups, of public interest law firms, are just as important – if not more important today – than the already finely orchestrated views of private business pursuing private policy.
Accordingly, I am today introducing a bill to amend section 501 of the Internal Revenue Code. The amendment would permit certain charitable and educational organizations which qualify as tax exempt under section 501 (c) (3) to communicate directly with Congress, with the legislatures of the States, and with their members, to affect legislation of direct interest to the organization.
The amendment would not apply to those charitable organizations which are private foundations. Therefore, it would not affect the activities of any private foundation as defined in the Tax Reform Act of 1969.
Nor would the amendment change the provision of existing law which denies exempt status to organizations which engage in so-called grassroots lobbying, or which participate in political campaigning on behalf of a candidate for public office.
The amendment would allow charitable organizations which rely on public support to express their views in appropriate ways before the Congress, without the fear of losing their tax exemption.
Those who control the power of government are not responsive enough to the needs of our people. Congress itself is not as accessible as it should be, and it is often accessible only to the privileged few. If we are to maintain a democratic form of government in practice, and if the Congress is to reach reasoned judgments on the important issues before it, we must assure that every segment of our society is able to communicate with Congress. With its present restrictions, the Tax Code seriously impedes such communication. I hope the Congress will remove that impediment and restore full access to information which we need in order to consider fairly the issues which come before us.
The bill which I offer today is modeled after a resolution of the American Bar Association which recommended in 1969 an amendment to the Internal Revenue Code to accomplish these same purposes. I ask unanimous consent that the text of the ABA resolution and recommended amendment be printed in the RECORD, along with the text of my bill.
There being no objection, the bill and material were ordered to be printed in the RECORD, as follows:
S. 1408
A bill to amend the Internal Revenue Code of 1954 so as to permit certain tax exempt organizations to engage in communications with legislative bodies, and committees and members thereof.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
That Section 501 of the Internal Revenue Code of 1954 is amended by redesignating subsection (f) as subsection (g) and inserting after subsection (e) the following new subsection:
"(f) APPEARANCES, ETC., WITH RESPECT TO LEGISLATION.
"(1) IN GENERAL.– In the case of an organization described in section 509 (a) (1), (2) or (3), none of the following activities shall be deemed 'carrying on propaganda, or otherwise attempting, to influence legislation':
"(A) appearances before, submission of statements to, or sending communications to, the committees, or individual members, of Congress or of any legislative body of a State, a possession of the United States, or a political subdivision of any of the foregoing with respect to legislation or proposed legislation of direct interest to the organization; or
"(B) Communication of information between the organization and its members or contributors with respect to legislation or proposed legislation of direct interest to the organization.
"(2) MATTERS OF DIRECT INTEREST.– For purposes of paragraph (1), matters of direct interest to the organization are those directly affecting any purpose for which it is organized and operated.
"(3) LIMITATION.– Paragraph (1) shall not apply to any attempt to influence the general public, or segments thereof, with respect to legislative matters, elections, or referendums."
SEC. 2. Section 170(c) of such Code is amended by adding the following new sentence at the end thereof:
"As used in subparagraph (D) of paragraph (2), the phrase 'carrying on propaganda, or otherwise attempting, to influence legislation' shall be subject to the exception set forth in section 501(f)."
SEC. 3. Section 2055(x) of such Code is amended by adding the following new sentence at the end thereof:
"As used in paragraphs (2) and (3), the phrase 'carrying on propaganda, or otherwise attempting, to influence legislation' shall be subject to the exception set forth in section 501(f)."
SEC. 4. Section 2106 (a) (2) (A) of such Code is amended by adding the following new sentence at the end thereof:
"As used in clauses (ii) and (iii), the phrase 'carrying on propaganda, or otherwise attempting, to influence legislation' shall be subject to the exception set forth in section 501(f)."
SEC. 5. Section 2522 of such Code is amended by redesignating subsections (c) and (d) as subsections (d) and (e) and inserting after subsection (b) the following new subsection:
"(c) CARRYING ON PROPAGANDA, OR OTHERWISE ATTEMPTING, TO INFLUENCE LEGISLATION.– As used in paragraph (2) of subsection (a) and in paragraphs (2) and (3) of subsection (b), the phrase 'carrying on propaganda, or otherwise attempting, to influence legislation' shall be subject to the exception set forth in section 501(f)."
SEC. 6. These amendments shall be applicable to taxable years beginning after the date of enactment thereof and to estates of decedents dying after the date of enactment thereof. .
RECOMMENDED AMENDMENT
Resolved, That the American Bar Association recommends to the Congress that the Internal Revenue Code of 1954 be amended to permit organizations which are exempt from taxation under section 501(c) (3) (e.g., religious, charitable, scientific, and educational organizations) to engage in direct legislative activity with respect to matters of direct interest without losing their tax exempt status and without loss of tax deductions for contributions made to such organizations; and
Further Resolved, That the Association proposes that these results be effected by amending sections 170, 501, 2055, 2106 and 2522 of the Internal Revenue Code of 1954; and
Further Resolved, That the section of taxation is directed to urge the following amendments, or their equivalent in purpose and effect, upon the proper committees of Congress:
SEC. 1. Section 501 is amended by redesignating subsection (e) as subsection (f) and inserting after subsection (d) the following new subsection (insert new matter in italics)
(C) APPEARANCES, ETC., WITH RESPECT TO LEGISLATION
(1) None of the following activities by an organization described in subsection (c) (3) shall be deemed "carrying on propaganda, or otherwise attempting, to influence legislation":
(A) Appearances before, submission of statements to, or sending communications to, the committees, or individual members, of Congress or of any legislative body of a State, a possession of the United States, or a political subdivision of any of the foregoing with respect to legislation or proposed legislation of direct interest to the organization.
(B) Communication of information between the organization and its members or contributors with respect to legislation or proposed legislation of direct interest to the organization.
(C) For purposes of this paragraph, matters of direct interest to the organization include
(i) those directly affecting its exemption under this section;
(ii) those directly affecting the deduction of contributions to such organization under sections 170, 642, 2055, 2106, or 2522;
(iii) those directly affecting any exempt purpose or function for which the organization was organized and is operating, in the case of an organization which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under this section) from the United States or any State or possession or political subdivision thereof or from direct or indirect contributions from the general public.
(2) Activities described in paragraph (1) shall not include any attempt to influence the general public, or segments thereof, with respect to legislative matters, elections or referendums.