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L. Paige Whitaker Legislative Attorney - page 27 / 31





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Legislative Options After Citizens United v. FEC: Constitutional and Legal Issues

limitation infringed on the organization’s First Amendment rights.161 Rather, the Court, noting it had held in Cammarano that the First Amendment does not require the federal government to subsidize lobbying, explained that “Congress has merely refused to pay for the lobbying out of public moneys” and stated that it “again reject[s] the notion that First Amendment rights are somehow not fully realized unless they are subsidized by the State.” 162

An excise tax on corporate campaign expenditures would not, in general, appear to be supported by the non-subsidization rationale discussed in Cammarano. Instead, depending on the specifics of the proposal, a court might find the tax to be a restriction on speech, perhaps comparably onerous to the prohibition struck down in Citizens United, which would then place a heavy burden on the government to justify the provision.163 It is not possible to say how a court would analyze a proposal; however, characteristics that might affect the analysis could include the rate of tax (e.g., a high rate might look more like a restriction or de facto prohibition); the scope of taxpayers subject to the tax (e.g., a court might look less favorably at a tax limited to certain taxpayers); the scope of activities subject to tax (e.g., a generally applicable tax might be less scrutinized than one that applies only to campaign expenditures);164 and the purpose of the tax (e.g., a court might look differently at a tax enacted as part of a campaign finance regulatory regime than one with other regulatory or traditional revenue raising purposes).

Proponents of an excise tax on corporate campaign expenditures might point to the existence of several taxes that apply to tax-exempt organizations making political expenditures for support of the idea that Congress could enact such a tax, for example:

  • IRC § 527(f) imposes a tax on § 501(c) organizations that make expenditures for influencing elections or similar activities. The tax is imposed at the highest corporate rate on the lesser of the expenditures or the organization’s net investment income.

  • IRC § 4955 imposes a tax on § 501(c)(3) organizations making campaign expenditures. These organizations are prohibited under the tax laws from making these types of expenditures. The tax equals 10% of the expenditures, with an additional 100% tax imposed if the expenditures are not corrected in a timely manner.

  • IRC § 4945 imposes a similar tax on the political expenditures of private foundations, although it covers a broader range of activities, some of which fall outside the § 501(c)(3) campaign intervention prohibition. Private foundations are § 501(c)(3) organizations that receive contributions from limited sources. Due to fear of abuse, they are subject to stricter regulation than other § 501(c)(3) organizations.

161 See id. at 546. The Court noted the organization had the option to set up a separate § 501(c)(4) organization that could engage in the lobbying activities.

162 Id. at 545-46 (internal citations omitted).

163 See Minneapolis Star & Tribune Co. v. Minn. Comm’r of Revenue, 460 U.S. 575, 582 (1983) (“A tax that burdens rights protected by the First Amendment cannot stand unless the burden is necessary to achieve an overriding governmental interest.”).

164 The decision by Congress to not exclude campaign expenditures from a generally applicable tax might be supported by the non-subsidization rationale expressed in Cammarano.

Congressional Research Service


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