## Facts

- The aerospace labor market included union-shop workplaces where employees were required, as a condition of employment, to pay union dues and fees to labor unions.
- The unions engaged in partisan political campaigning and took political positions supported by a majority of their members.
- A minority group of union members disagreed with the unions’ political positions and objected to the use of dues-funded money for partisan campaigns.
- The unions were treated as tax-exempt “labor organizations” under Internal Revenue Code § 501(c)(5).
- The dissenting members sued George P. Schultz, Secretary of the Treasury, and other Treasury officials, seeking an injunction to bar Treasury from continuing to grant or recognize § 501(c)(5) tax-exempt status for any labor organization that used dues-funded money for partisan political campaigns (as described in the complaint).
- Plaintiffs alleged (1) the exemption operated as the equivalent of a federal financial subsidy to favored political candidates beyond Congress’s taxing and spending power under Article I, § 8, and (2) the exemption, combined with compulsory dues, compelled them to support political parties and candidates they opposed in violation of the First, Fifth, and Ninth Amendments.
- Plaintiffs also sought convening of a three-judge district court.
- The district court denied the request for a three-judge court and dismissed the complaint; plaintiffs appealed. Labor unions were permitted to intervene on appeal.

## Issues

1. Whether the district court was required to convene a three-judge court to hear plaintiffs’ constitutional challenge seeking to enjoin Treasury’s ongoing recognition of § 501(c)(5) tax-exempt status.
2. Whether Treasury’s recognition of § 501(c)(5) tax exemption for unions that engage in partisan political campaigning constitutes an unconstitutional federal subsidy in violation of Article I, § 8.
3. Whether Treasury’s recognition of § 501(c)(5) status, in the setting of compulsory union-shop dues, violates dissenting members’ First, Fifth, and Ninth Amendment rights by forcing financial support of partisan political activity.

## Decision

- The D.C. Circuit affirmed the district court’s judgment dismissing the complaint and denying a three-judge court.
- The court did not resolve the case on standing, stating it could affirm on the merits without deciding the standing objections.
- On the Article I, § 8 theory, the court rejected the claim that a generally available tax exemption for labor organizations becomes an unconstitutional subsidy merely because exempt unions engage in partisan political activity.
- The court declined to extend the logic of *Green v. Connally* and *McGlotten v. Connally* (involving tax benefits tied to racially discriminatory practices) to invalidate § 501(c)(5) exemptions based on partisan political campaigning.
- On the compelled-support theory, the court held that any compulsion experienced by dissenting members arose from union-shop arrangements and labor law rules requiring dues payments, not from Treasury’s recognition of tax-exempt status under § 501(c)(5).
- Because the constitutional theories did not justify the requested injunction against Treasury, the complaint was properly dismissed, and a three-judge court was not required.

## Legal Principles

- A federal tax exemption that applies by statutory classification to a type of private organization does not become unconstitutional solely because some exempt entities engage in partisan political campaigning.
- Precedents denying tax benefits due to racially discriminatory conduct do not automatically authorize constitutional invalidation of tax exemptions based on political advocacy by the exempt entity.
- For constitutional claims based on compelled political support, the challenged government action must be the source of the alleged coercion; Treasury’s tax classification of a union is not the same as the labor-law mechanisms that require members to pay dues.
- A three-judge court need not be convened where the constitutional attack does not present a substantial basis for enjoining federal officials from applying a federal statute.

## Conclusion

In *Marker v. Schultz*, the D.C. Circuit held that Treasury’s continued recognition of labor unions’ § 501(c)(5) tax-exempt status was not unconstitutional simply because unions used dues-funded money for partisan political campaigning, and it affirmed dismissal of dissenting members’ suit (and the denial of a three-judge court) because the asserted “subsidy” and compelled-support theories did not justify injunctive relief against Treasury.


Marker v. Schultz, 485 F.2d 1003 (1973)