|
|
 |
|
Protecting citizens' rights in the courts
|
|
||||
|
|
 |
|
||||
|
|
  COMMENTS OF PUBLIC CITIZEN, INC. AND PUBLIC CITIZEN
Introduction
Public Citizen, Inc. and Public Citizen Foundation, Inc. welcome the IRS's consideration of this issue, and the comments we set forth below are intended to assist the IRS in its preliminary examination of the manner in which exempt organizations use the internet. We want to emphasize at the outset, however, that because the internet is a powerful tool for expression and communication, any regulation of its use by organizations engaged in public education and advocacy will be measured against the most exacting First Amendment standards. Thus, the IRS -- and indeed the government generally -- must tread cautiously in assessing what rules to lay down to govern the use of the internet by exempt organizations.
Public Citizen, Inc. and Public Citizen Foundation, Inc. are affiliated exempt organizations organized under IRC § 501(c)(4) and § 501(c)(3), respectively. Public Citizen, Inc. was founded in 1971 to engage in education and advocacy on a wide range of consumer protection issues. Public Citizen's Litigation Group has long been interested in the First Amendment implications of the IRS's regulation of (c)(3) and (c)(4) organizations. Its lawyers represented (c)(3) organizations that challenged the prohibition against significant lobbying activities as a violation of both the First Amendment and the equal protection guarantee of the Fifth Amendment's Due Process clause, litigation which culminated in the Supreme Court's decision in Regan v. Taxation With Representation of Washington, 461 U.S. 540 (1983). In Regan, the Court upheld the line drawn between (c)(3) and (c)(4) organizations in the IRC, in part because the Court recognized that a (c)(4) organization like Taxation with Representation "can obtain tax-deductible contributions for its non-lobbying activities" by adopting a "dual structure . . . with a § 501(c)(3) organization for nonlobbying activities and a § 501(c)(4) organization for lobbying." Regan, 461 U.S. at 544; see also id. at 553 (Blackmun, J., concurring) (observing that the only IRS requirement pertaining to dual organizations is "that the two groups be separately incorporated and keep records adequate to show that tax-deductible contributions are not used to pay for lobbying"). As Justice Blackmun put it in his concurrence, "[a] § 501(c)(3) organization's right to speak is not infringed, because it is free to make known its views on legislation through its § 501(c)(4) affiliate without losing tax benefits for its nonlobbying activities." Id. at 553. Shortly before the Court's decision in Regan, Public Citizen, Inc. formed Public Citizen Foundation, Inc. to engage in nonlobbying educational activities and to receive tax deductible contributions. Naturally, as anticipated in Regan, there is some overlap in the work of the two organizations. For that reason, we have decided to have a single website that reflects the work of both groups, and it is our understanding that most dual (c)(3) and (c)(4) organizations have made the decision to maintain a single, integrated website. Thus, we have first-hand experience in addressing many of the questions the IRS has raised in its request for information, and we have a direct stake in the outcome of this inquiry.
The internet is a unique communications medium whose very design, openness, and virtually cost-free operation holds great promise for the invigoration of political debate, social discourse and public education. For these reasons, the internet is a democratic institution in the fullest sense. It serves as the modern equivalent of Speakers' Corner in England's Hyde Park, where ordinary people and small organizations may voice their opinions, however silly, profane, or brilliant they may be, to all who choose to listen. As the Supreme Court explained in Reno v. American Civil Liberties Union, 521 U.S. 844, 853, 870 (1997), "From the publisher's point of view, [the internet] constitutes a vast platform from which to address and hear from a worldwide audience of millions of readers, viewers, researchers, and buyers. . . . Through the use of chat rooms, any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox. Through the use of Web pages, . . . the same individual can become a pamphleteer." The Court held, therefore, that full First Amendment protection applies to speech on the internet. Id. Although this general observation about the power of the internet is important, there are several characteristics of the internet that are also of particular significance to the IRS's inquiry: 1. The Internet Is Available To All. The internet's architecture make it a unique medium, available to all individuals and organizations with a computer terminal and modem, regardless of wealth or other resources. Traditional channels of mass communication (newspapers, magazines, radio, television, etc.) are based on limited and costly distribution mechanisms that are in the hands of a relatively small number of entities. In stark contrast to the scarcity and high entry barriers that place traditional media off-limits to most exempt organizations, the internet is decentralized, open to all, and functions without gatekeepers of any sort. As the Supreme Court noted in Reno, "[u]nlike the conditions that prevailed when Congress first authorized regulation of the broadcast spectrum, the internet can hardly be considered a scarce expressive commodity. It provides relatively unlimited, low-cost capacity for communications of all kinds . . .." Id. at 870. Indeed, the Court estimated that 200 million people currently use the internet. Id. 2. Communications Via The Internet Are Cheap. The internet is not simply inexpensive; it offers a way of disseminating a message that is almost devoid of incremental cost.(1) Once an organization incurs the modest start-up expenses of building a website, it costs no more to reach one million individuals than it does to reach one thousand or ten. The internet does not merely take advantage of economies of scale; it obliterates them. With a few thousand dollars worth of computer equipment and software, any organization can be a publisher with virtually an unlimited audience. The use of "email" only underscores this point. By using listserves and other devices, an organization can reach thousands of individuals with a few keystrokes, at no cost beyond the purchase and maintenance of the system. Thus, one issue that the IRS will have to grapple with is whether, given the negligible cost of operating an internet system and the almost cost-free ability to engage in mass communications, it even makes sense for the IRS to try to regulate the internet's use by exempt organizations. 3. With The Internet, The User Selects Content. Again in contrast to other forms of media which give individuals little or no control over the information they receive (except by switching information sources), the internet is user-controlled and interactive -- giving users vast control over the information they receive, even information furnished by a single provider. On the internet, individuals seek out information of interest and disregard the rest. Moreover, there is virtually no marginal cost to the publisher in adding information. Unlike print media, where costs rise with the addition of more material or more copies, and unlike broadcast media, where every second of broadcast time carries a price-tag, the cost of publishing additional information on the internet is nominal, if not non-existent. Thus, internet content providers have every incentive to disseminate more information, not less, and internet users have the ability to pick and choose the information they want to view, which further bolsters the communicative power of the medium. 4. The Internet Encourages Dialogue. Unlike any other form of mass media, the internet has the unique capacity to foster a dialogue between a publisher and its audience. Because the medium is bi-directional, the listener is not forced into passivity, but may respond, challenge, question, or probe the publisher and establish a dialogue, thus enriching the communication and the expressive value of the medium to both the speaker and the listener. For organizations engaged in public education and advocacy, the ability to foster an interchange between the organization and its supporters or those that the organization seeks to influence, at virtually no cost, is a giant leap forward. Other forms of mass communication -- especially mail and telephone -- are both expensive and time-intensive. The internet is neither.
As we said at the outset, the principal lesson that should be drawn from this overview is that, because of the relatively modest expense it takes to operate a website, the virtual absence of cost for any single communicative act taken through the internet, and the internet's extraordinary communicative power, the IRS should be wary of instituting any rules that inhibit the ability of exempt organizations to take advantage of the internet in fulfilling their educational or advocacy missions. We offer several thoughts.
As noted above, the two affiliated Public Citizen organizations share a common website that engages in both public education and advocacy activities. We do so because, on occasion, the educational work of our (c)(3) organization is germane to the advocacy work of our (c)(4) organization, because we see no reason to incur the added expense of maintaining two websites, and because we are concerned that maintaining separate websites would confuse and burden our audience. Like many affiliated organizations, we have come to the view that our efforts, when viewed in combination, are greater than the sum of their parts. Moreover, we believe that presenting the combined work of both entities on a single website strengthens our relationship with Public Citizen's members. We understand that the IRS is concerned about the possibility of a (c)(3) organization engaging in substantial advocacy activities through its website, and in so doing, running afoul of the lobbying limitation set forth in IRC § 501(c)(3). While we address that issue head on below, here we address the special problems that face affiliated organizations like Public Citizen. We recognize, of course, that (c)(3) organizations (even those that have elected under 501(h)) may engage in, at most, modest lobbying activities. On the other hand, (c)(4) organizations are entitled to engage in public advocacy work without limitation. The Supreme Court in Regan gave its blessing to the affiliation arrangement that Public Citizen and many other dual organizations have entered into -- that is, using our (c)(3) organization for nonlobbying activities and our (c)(4) organization for lobbying. What concerns the IRS is whether the internet provides affiliated organizations an opportunity to use (c)(3) assets for forbidden lobbying purposes. Hence the IRS has posed a number of questions about how it should assess the internet activities of affiliated organizations. One question posed is how the organizations should allocate expenses between the (c)(3) and (c)(4) entities, assuming that the organizations maintain a single website. The IRS has asked, for example, "[w]hen allocating expenses for a website, what methodology is appropriate?" We believe that no single yardstick is appropriate for allocation decisions and that the IRS should give organizations substantial freedom to make allocation decisions. After all, consider the basic costs for running a website: the purchase of the hardware and software and the staff time devoted to posting and maintaining the website. If the content placed on websites were static and unchanging over the course of substantial periods of time (months or years), perhaps it would make sense to simply examine the content of the site, as the IRS has suggested, and make an allocation of costs based on the percentage of content for which each organization is responsible. But the conception that the content on a website is fixed for any significant period of time is at odds with the realities of the internet. Our organizations post new material daily and sometimes hourly, and the allocation of content between the (c)(3) and (c)(4) is so fluid that it varies day-by-day. Thus, the IRS' suggestion that perhaps content can be measured and used as a proxy or marker for cost allocation seems out of step with the day-to-day reality of internet use and the constantly changing face of websites like ours.(2) Equally troubling is the assumption, inherent but unexpressed in the question, that allocation of content is a legitimate proxy for the allocation of expenses. Posting content on a website has become a manner of routine; virtually anyone familiar with computers can, with a few keystrokes, take an document that already exists in electronic form and post it on a website. For that reason, the respective proportion of posted content says little or nothing about the proper allocation of expense. Assume for the sake of argument that, however one makes a content-based allocation, for a given year, content generated by the (c)(3) occupied 75% of the website and the (c)(4)'s content occupied the remaining 25%. That information would almost certainly reveal nothing about the relative expenses that were incurred in operating the website or the fair allocations of expenses between the (c)(3) and (c)(4). For these reasons, we believe that the IRS ought to give organizations considerable leeway in making allocation decisions. As we explain below, we believe that this issue is far less important than the IRS request for comment implies, because the costs associated with operating a website and posting new material on the site are typically quite modest. But even if the costs were more substantial, the allocation decisions here cannot be based strictly on content, and hence organizations should be permitted to use other ways of allocating costs. We also urge the IRS explicitly to create a safe harbor for affiliated groups that choose to have the (c)(4) organization pay the expenses associated with building and maintaining the website. As discussed more fully below, given the modest start-up and operational costs involved, it might make sense for affiliated organizations to conclude that the time and expenses entailed in making a supportable allocation of cost are too great, and hence to avoid making any allocation decision, the (c)(4) should bear all associated expenses. While we do not believe that the IRS should either mandate or encourage groups to do so, by making it clear that this course of action resolves the allocation issue, the IRS would provide a strong incentive to affiliated organizations to do just that. We urge the IRS to make clear that such a safe harbor exists. 2. Because Of The Modest Costs Involved In Operating A Website, The IRS' Concerns About Allocation Are Overstated. We recognize that the IRS has a legitimate interest in ensuring that (c)(3) organizations do not use the internet to make an end run around the restrictions on their right to engage in public advocacy. And we recognize the potential problems posed by the internet in terms of the IRS' ability to police those restrictions. But because the restrictions on (c)(3) lobbying are fundamentally expenditure-based, see IRC § 501(h) (referring to "lobbying expenditures"), the relevant question is which web-based activities actually involve expenditures that are worth measuring? We acknowledge that if a (c)(3)'s website contained a significant amount of advocacy and lobbying material, that might be a warning signal that the organization was skirting the lobbying restrictions in IRC § 501(c)(3). But, as we have also said, that warning signal might be a false alarm, because materials can be posted on the web at virtually no cost. Or suppose a (c)(3) organization's website contained no lobbying information at all, but simply a few "links" to websites of other organizations that were engaged in lobbying? The IRS has asked whether those "links" should be treated as "lobbying expenditures" within the meaning of the Act. We say no, and would urge the IRS to use common-sense is evaluating this issue. To be sure, one could say that it "cost" the (c)(3) organization something to add a link from its web page to that of another organization. But in reality that expenditure is so tiny that it is not worth measuring. A link can be added with a dozen or so keystrokes -- an action that is measured in seconds, not minutes. Nor does the addition of a link, or even hundreds of links, require the addition of new hardware or software to operate the website. The cost of these links to the (c)(3) organization is essentially zero, and thus the organization does not necessarily make a "lobbying expenditure" by adding them. But perhaps more importantly, the IRS should take a step back and look at this issue through the lens of the purposes of the lobbying restriction built into IRC § 501(c)(3). The point of that restriction is neither to stifle public discussion of important issues, nor to keep the public from access to lobbying information. Cf. Regan, 461 U.S. at 544. Rather, the purpose of the restriction is to ensure that tax dollars are not used to subsidize organizations engaged in significant lobbying activities. Id. Allowing (c)(3) organizations engaged in public education to refer members of the public interested in lobbying activities to other organizations that may permissibly engage in lobbying does not trench on any of the purposes underlying the (c)(3) lobbying restrictions, but it does serve the broader goal of IRC § 501 of encouraging robust public debate on important societal issues. Thus, we urge the IRS to approach this question with the utmost sensitivity. 3. The IRS Should Also Refrain From Devising Per Se Rules Forbidding Links From Exempt Organizations' Websites To Websites Of Organizations Engaged In Electoral Political Activity.
For example, suppose that a § 501(c)(3) organization was formed to provide the public information about the death penalty. And assume further that during the presidential campaign, the candidate's position on the death penalty became a focal point of the debates. Focusing on the language of the IRC, would the exempt organization "participate in, or intervene in" the campaign simply by posting links between its website and the portions of the candidates' websites that address death penalty questions? We submit that the answer is plainly "no." Providing the public with information about a candidate's point of view is hardly electioneering, as the Service itself has repeatedly recognized. Take a more complicated but equally common example. Suppose that a § 501(c)(4) organization has long engaged in education and lobbying activities aimed at persuading Congress to enact campaign finance reform legislation. And suppose that the organization's website contained information regarding the voting records of every Senator on campaign finance reform issues. The IRS has long taken the position that providing the voting record of candidates does not transgress the line between education and electioneering drawn by the Act. And for that reason, many exempt organizations prepare voter guides and other informational reports that discuss in depth candidates' records. Surely the IRS would not alter its position that preparing and disseminating voter guides is permissible simply because such a voter guide is posted on the internet rather than distributed in print form, and we do not understand the IRS to be contemplating such a shift in position. But if that is the case, why would the IRS take the position that an organization crosses the line between permissible information dissemination and impermissible electioneering simply by posting a link between its voter material on a website and the websites of senatorial candidates that discuss the candidate's position on campaign finance reform? We see no justification for differential treatment. The point of this discussion is not to examine exhaustively each possible instance in which an exempt organization might want to link its website to that of a political candidate for a purpose wholly unrelated to electioneering, but integral to the organization's purpose. Our submission here is narrower: namely, that it is clear that there is no shortage of such examples, and hence any per se rule forbidding links between the websites of exempt organizations and candidates for office would be substantially overbroad and would ensnare perfectly justifiable contacts along with those that can properly be forbidden. We therefore urge the IRS to approach this question with the sensitivity demanded by the First Amendment. 4. The IRS Should Consider Adopting A De Minimis Rule To Avoid Untoward
As much of the preceding discussion has suggested, many of the internet-related activities in which exempt organizations engage come at little or no cost to the organization. We agree that the capital costs involved in purchasing equipment to set up a website are not trivial; nor are the costs associated with designing a web page and web maintenance (e.g., the salary for a full or part-time "webmaster" or the few hundred dollars a month that it costs to maintain a high-speed and broad bandwidth connection to the internet) insignificant. Exempt organizations undoubtedly have an obligation to account for these costs, and, as suggested above, make reasonable allocations to apportion properly the costs between the (c)(3) and (c)(4). But apart from these costs, virtually all of the other expenses incurred in operating a website -- and especially the expenses of posting content and setting up links -- are modest, if not trivial or so small to be beyond meaningful calculation. In Alabama Power Co. v. Costle, 636 F.2d 323, 360 (D.C. Cir. 1979), the court recognized that "the law does not concern itself with trifling matters." The court accordingly explained that an administrative agency has an implied de minimis authority to create even certain categorical exceptions to a statute "when the burdens of regulation yield a gain of trivial or no value." Id. The Service should consider making certain categorical exclusions here, especially those concerning the posting of content and the addition of links to other websites. While one can say that these activities are expenses, and that adding content or links to lobbying activities are lobbying expenditures within the meaning of the IRC, the actual expenditures incurred in these activities are in most cases so small that they are not worth measuring, and any measurement of them would be so artificial as to have no real meaning. We urge the IRS to give this matter the closest attention. * * * We hope that these comments are useful to the Service as it embarks upon its inquiry into the appropriate scope of its regulation of the internet. We look forward to working with the Service as it continues its examination of these difficult questions. 1. The cost of maintaining a website on the internet is remarkably low. Anyone with the resources to pay $21 a month for an account with America Online can establish and maintain a website for free. The internet provider supplies the hardware, including hard disk space for a 2 to 20 megabytes website -- which carries with it a capacity to upload far more information than is contained in a book. Thus, virtually any individual or organization, if it so chooses, can maintain a website. 2. The notice also inquires about whether the IRS should consider requiring organizations to "maintain the information from prior versions of the organization's website." The premise of this question is troubling. Because of the electronic features of a website, organizations can and do "archive" their web material, although our understanding is that there is considerable variation in the length of time that organizations retain archival material. But to the extent that the IRS might be considering using archival material as the basis for allocation decisions, we strongly urge the Service to avoid that approach. Making allocation decisions based solely on content would require not simply a day-by-day examination of the material on the site, but rather, given the frequency with which new material is posted and old material is archived, an hour-by-hour or minute-by-minute examination. Even putting aside the expense that making such an allocation would entail, we question whether any after-the-fact allocation of that sort can produce meaningful results, for the reasons discussed above. Making matters worse, serious questions would arise about how to factor in links to material on other websites; would such a link be counted as only one line of content? Or would it be given greater weight? We urge the IRS not to throw exempt organizations into that briar patch.
more resources
Because Public Citizen does not accept funds from corporations, professional associations or government agencies, we can remain independent and follow the truth wherever it may lead. But that means we depend on the generosity of concerned citizens like you for the resources to fight on behalf of the public interest. If you would like to help us in our fight, click here. |
|
Join | Contact PC | Contribute | Site Map | Careers/Internships| Privacy Statement | |||