Regan v. Taxation With Representation of Washington

Background

Taxation With Representation of Washington is a nonprofit organized to promote views about federal taxation and planned to lobby Congress, the Executive Branch, and the courts. The IRS denied its application for 501(c)(3) tax-exempt status because substantial lobbying is prohibited under that section. TWR sued, claiming the restriction violated the First Amendment and the equal protection component of the Fifth Amendment. The District Court ruled for the government, the en banc D.C. Circuit reversed in part, and the Supreme Court agreed to decide the case.

Reasoning

The central question was whether Congress must subsidize lobbying by allowing tax-deductible donations to pay for it. The Court held that Congress may refuse to subsidize lobbying and that denying tax-deductible status for organizations that engage in substantial lobbying does not violate the First Amendment. The opinion explained that exemptions and deductions operate like subsidies and that refusing to pay for lobbying is not the same as censoring speech. The Court also rejected TWR’s equal protection claim, finding Congress’ different treatment of veterans’ organizations rationally related to legitimate objectives.

Real world impact

The decision means charities cannot rely on tax-deductible donations to fund substantial lobbying. Charities may form separate non-deductible social-welfare affiliates to lobby, and the opinion notes the IRS apparently requires separate incorporation and records to prevent cross-subsidy. The ruling leaves lobbying itself legally permitted but makes public subsidy for it more limited and dependent on Congress and tax rules.

Dissents or concurrances

Justice Blackmun, joined by Justices Brennan and Marshall, concurred in the judgment but emphasized that the result depends on the IRS administering the rules narrowly; broader IRS limits on affiliate activity would raise serious First Amendment concerns.