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Seth Korman

Seth Korman

Posted: February 22, 2010 10:07 AM

The Salvation Army, the Red Cross, and Amnesty International cannot, in the weeks before a federal election, endorse or advocate for a political candidate. Until last month, neither could Halliburton, Coca Cola, or the New York Stock Exchange.

Yet the Supreme Court's recent decision in Citizens United v. FEC alters this parity, and affords corporate America "electioneering" rights, or the privilege to endorse and advocate for political candidates in the months, weeks, and days before an election.

This creates an apparent dichotomy: Both for-profit corporations and nonprofit 501(c)(3)s are creatures of the state, artificial entities created to further commercial and socially valuable interests. Yet now the former can lobby and advocate, whereas the latter must remain on the political sidelines.

This distinction seems ripe for challenge.

Justice Kennedy, writing for the majority in Citizens United, notes that "'[s]tate law grants corporations special advantages -- such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets.'" Corporate entities are indisputably afforded benefits -- subsidized, if one will -- by the state.

But Kennedy continues: Such state support, he explains, "does not suffice... to allow laws prohibiting speech. 'It is rudimentary that the State cannot exact as the price of those special advantages the forfeiture of First Amendment rights.'"

So despite the state conferring of benefits on for-profit corporations, it cannot at the same time attach restrictions on that corporation's public speech. The bar on free-speech regulation has, for corporate entities, been significantly lowered.

A registered 501(c)(3) corporation, however, is also granted state benefits, notably the ability to fundraise tax-deductable donations. Yet this state-conferred privilege carries with it a cost: a free-speech restriction on the nonprofit's ability to "influence legislation" or "participate" in a political campaign.

If for-profit corporations now have the free-speech right to electioneer in the days before federal elections, why should nonprofits -- organizations with "religious, charitable, scientific, testing for public safety, literary, or educational purposes" -- not be able to similarly participate?

In other words, if the bar on free-speech restrictions has been so lowered for some corporations, why must it remain for others?

Critics may argue that nonprofits do already have such a right, and that they can lobby and campaign as a 501(c)(4) nonprofit. But 501(c)(4)s cannot receive tax-deductible donations, because, as the Court noted in 1983, "tax exemptions and tax deductibility are a form of [federal] subsidy," and "Congress is not required by the First Amendment to subsidize lobbying."

Yet in Citizens United, the Court seem to hold the very opposite: Congress cannot prevent organizational lobbying and electioneering, despite state incorporation subsidies. Such a prohibition would infringe on these organizations' freedom of speech.

Another interesting implication of the decision relates to the press, particularly newspapers. Some have discussed the nonprofit, or foundation model as a sustainable solution for foundering papers. Ignoring for the moment the many financial impediments to such a switch, a major stumbling block had been the prohibition on nonprofit political advocacy. Many papers would be reluctant to refrain from endorsing candidates or editorializing on legislation. Citizens United may now have removed this roadblock.

For all nonprofits however, Citizens United provides real encouragement. The decision invites further challenges to all organizational free-speech restrictions, and is most apropos to nonprofit 501(c)(3)s.