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Monday, January 02, 2012

Is Being Endorsed an Endorsement?

Some prawfs readers may have heard of this fellow, Newt Gingrich.  It seems that in some circles, having your university praised in glowing terms by Mr. Gingrich is seen as a splended promotional opportunity, perhaps surpassing even the efficacy of an enormous inflatable gorilla  (warning:audio) or a 30-minute late-night infomercial in commanding the consumer's attention.  And evidently this endorsement is especially valuable in a state where that gentleman is currently the star of roughly 65% of the non-programmed television time (Iowa).  Since universities such as the one in question are usually 501(c)(3) organizations, and are therefore absolutely prohibited from engaging in "electioneering" activity, you might ask, "Hey, is that legal?"  (Or, as one recent report put it, "I hope they have good tax lawyers.")

In realist terms, the answer turns out to be likely "yes" on both fronts (they have good lawyers, and therefore it is effectively legal).  Here's the deal.  The IRS has issued a ruling setting out examples of activity that would either definitely cross the line or would definitely be ok.  For example, it's kosher for a rabbi to invite a candidate to visit a shul, as long as the visit is in the candidate's "individual capacity" (I guess she has to leave her campaign button at the door?) and the rabbi doesn't mention the candidate's candidacy to others during official temple events.   So we have existing law that the mere imprimatur of associating candidate with organization, albeit indirectly, is ok. 

Were I a lawyer for Liberty, I'd argue that Newt's commercial "on their behalf" is a sort of digital version of the kosher visit: they're not necessarily endorsing him.  Of course, there's the remarkable coincidence that this ad runs during the Iowa primary.  The IRS guidance does take into account the possibility that innocent-seeming statements can take on different meaning when they're made in the heat of a campaign. 

But -- and here's the brilliance, I think, of the lawyering.  Given that the ad falls into such a gray area, any enforcement action is going to leave the IRS open to charges of playing politics.  If Newt wins the primary, can the IRS really bring this action before Nov. 2012 without a firestorm?  And after that, if any of Newt's rivals, red or blue, is sitting in the White House, won't an enforcement action look like payback?  The legal arguments in defense of running the ad certainly aren't airtight.  But, given that dynamic in the background, they're good enough to make the Service think a long, long time before they open an auduit.  And Liberty's lawyers are good enough to know it. 

So, if you didn't know anything about the regulation of nonprofit politics, and were wondering, "Hey, is it like one of those cool fractals where it has infinite surface area but zero actual volume?"  The answer is yes. 


Posted by BDG on January 2, 2012 at 06:20 PM in Tax | Permalink


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Really interesting, Brian. At the risk of endorsing a particular religious perspective, this is why G-d made law professor blogs.

Posted by: Jason Solomon | Jan 3, 2012 10:58:46 AM

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