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July 31, 2007 [feather]
Should the IRS go to college?

Most of our recent discussions about government's role in ensuring that colleges and universities receiving federal funding live up to their legal obligations center on the Solomon Amendment, military recruiting on campus, and ROTC. As anyone who hasn't been asleep for the last two years knows, the Supreme Court ruled in early 2006 that higher education institutions that allow their political opinion of the military to interfere with students' rights to explore employment in the military or to train as an officer will forfeit their federal funding.

The Solomon Amendment was written with this sort of regulatory intention in mind--and it has gone a long way toward preventing schools from putting their desire to protest DADT ahead of their obligations to student choice and expression. But are there other laws that could have the same sort of power if enforced?

Brooklyn College's Mitchell Langbert thinks so:

Although agenda-driven groups like the American Association of University Professors and the New York State United Teachers claim otherwise, universities no longer defend academic freedom as the freedom to debate ideas and theories based on scientific deduction and evidence. Instead, today's professoriate defines academic freedom as the academic collective's freedom from external expectations. But no institution ought to enjoy complete freedom from legal and social norms. Universities have no freedom to harass Jewish students; to propagandize; or to support liberal political candidates. These limitations on are not just ethical. They are enshrined in tax code section 501 (c) (3) and related regulations that grant universities tax exemptions worth tens of billions of dollars and allow donors to deduct their donations.

The possibility that established universities might incur tax liabilities, to include partial penalties, when they propagandize or engage in anti-Semitism is virgin territory for the Internal Revenue Service. Governmental agencies, including the IRS, have deferred to universities' claims of collectivist academic freedom. But things have gotten out of hand. It is time for the IRS to take a closer look at universities' violations of the tax code's legal requirements upon which their tax exemptions are based.

The educational exemption under section 501(c) (3) is predicated on the principle that 'no substantial part' of what universities do can involve political activities, propaganda or attempting to influence legislation. The IRS has been inclined to interpret these restrictions liberally with respect to universities. However, the IRS has not allowed the educational tax exemption to white supremacist groups that voice anti-Semitic views. Since universities have increasingly become anti-Semitic fonts, they have veered across the line that distinguishes David Duke from Duke University.

Moreover, last year, the New York Sun quoted Brooklyn College's now-retiring provost, Roberta Matthews, as having said that 'teaching is a political act.' Literal or over-zealous application of Provost Matthews's opinion would disqualify a university from eligibility for tax exemption and tax deductibility. Section 501(c)(3) prohibits institutions from engaging in substantial degrees of political activism.

The case law concerning section 501(c)(3) is in flux, but its direction is established. In the 1959 case of Cammarano v. United States, the Supreme Court decided that monies spent for the exploitation of propaganda and lobbying are not deductible by not-for-profits like universities. In the 1979 case of Taxation with Representation of Washington v. Regan, the Supreme Court held that section 501(c)(3)'s restriction on legislative activity does not violate the First Amendment. Charities and educational institutions are free to lobby, but they have no right to a tax exemption when doing so.

With respect to propagandizing and anti-Semitism, the federal courts have held that organizations are not educational in nature when they propagate particular ideas or doctrines. Regulations have defined educational activities as involving 'full and fair exposition of the pertinent facts so as to permit an individual or the public to form an independent opinion or conclusion.' In the 1980 case of Big Mama Rag Inc. v. United States, which concerned a feminist newspaper, a federal appeals court decided that the 'full and fair exposition' rule was too vague. In the 1983 case of National Alliance v. United States the IRS addressed the federal courts' vagueness concern by introducing its current methodology test, under which the IRS bases the meaning of educational on the methods that an organization uses.

The National Alliance, a white supremacist group, had engaged in pseudo-educational activities aimed to arouse in white Americans of European ancestry 'an understanding of and a pride in their racial and cultural heritage and an awareness of the present dangers to that heritage.' The IRS argued that National Alliance's methods were not educational because they failed to provide factual foundations. According to the IRS, factors indicating that an organization is not educational include presentation of viewpoints unsupported by facts; distortion of facts; use of inflammatory and disparaging terms; and express conclusions on the basis of strong emotional feelings. Yet such factors are present in today's universities, especially in such fields such as Middle Eastern studies.

The IRS has not brought any important cases against established educational institutions. Yet, there is little question that violation of the section 501(c)(3) standards is common in universities.

Prince Alwaleed bin Talal bin Abdulaziz Alsaud gave $20 million gifts to Georgetown and Harvard Universities. Also, the United Arab Emirates donated $200,000 to Columbia University to establish a chaired professorship. Gary Tobin, Aryeh K. Weinberg and Jenna Ferer's 2005 book Uncivil University points out that Middle Eastern Studies departments around the country are little more than propaganda organizations characterized by poor scholarship and dominated by a specific political outlook. Such Middle Eastern Studies departments are no more deserving of tax exemption than are lobbying organizations like the Committee on America Islamic Relations or the American Israel Public Affairs Committee that do not receive tax exemptions. The IRS has permitted universities an illegal tax break.

There is a lot more, all difficult, and all worth thinking about.

I imagine that the prospect of the IRS auditing the content of academic scholarship and teaching would strike most academics as outrageous, impossible, threatening, and wrong. But at the same time, Langbert is pointing out a liability that higher ed institutions may well have opened themselves up to with their ongoing refusal to police themselves. And in pointing out that the IRS has made legitimate rulings on the content of other organizations' "teachings," Langbert raises real questions about the extent to which academic freedom can reasonably be invoked as a buffer against accountability--which is how, increasingly, defenders of the academic status quo like to use the concept.

posted on July 31, 2007 12:33 PM

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"the federal courts have held that organizations are not educational in nature when they propagate particular ideas or doctrines"...I wonder about all the foundations, think-tanks, etc, many of which do seem to be in the business of propagating ideas and doctrines. Is their tax exemption based on some section of the code different from that applying to educational institutions? Any tax lawyers out there?

Posted by: david foster at July 31, 2007 6:01 PM