## Facts

- National Right to Work Legal Defense and Education Foundation, Inc. (the Foundation) was organized primarily to defend and protect, free of charge, the rights of workers who alleged discrimination arising from compulsory unionism arrangements.
- The Foundation’s articles stated purposes including: taking lawful action to defend workers harmed by compulsory unionism; assisting workers in protecting rights guaranteed by the Constitution and federal law without fee; preparing educational materials on employment discrimination under compulsory unionism; and conducting studies and research on the effects of compulsory unionism.
- The Foundation was originally incorporated in the District of Columbia and had been recognized by the IRS as tax-exempt under I.R.C. § 501(c)(3).
- In 1975, the trustees reincorporated the Foundation in North Carolina under identical articles of incorporation, with the same personnel and operations.
- Due to reincorporation, the Foundation was required to reapply for recognition of exemption under § 501(c)(3).
- The Commissioner of Internal Revenue denied the application, taking the position that the regulatory phrase “human and civil rights secured by law” was limited to liberties and privileges specifically guaranteed by the U.S. Constitution or special statutory provisions tied directly to the Thirteenth or Fourteenth Amendments, or rights protected due to long-established common-law recognition.
- The Foundation’s primary activity was providing legal aid to workers who alleged discrimination through compulsory unionism arrangements, selecting matters to establish legal precedent and to help ensure workers could actually obtain rights recognized by law.
- The Foundation’s case-selection standards included the seriousness of the alleged injustice, factual strength, potential for new precedent, and expected cost.
- Roughly 80% of the Foundation’s sponsored cases asserted constitutional claims regarding freedom from alleged union abuses; the remaining matters focused on statutory enforcement along with nonfrivolous constitutional claims.
- The Foundation paid taxes assessed after the denial and filed a refund action under 26 U.S.C. § 7422 seeking a determination that it qualified for exemption.

## Issues

1. Whether the Foundation qualified as a “charitable” organization exempt from federal income tax under I.R.C. § 501(c)(3) because its free litigation and related activities defend human and civil rights secured by law within the meaning of Treasury regulations.
2. Whether the Commissioner’s narrow construction of “human and civil rights secured by law” (limited largely to rights within the Thirteenth or Fourteenth Amendment framework or long-recognized common-law liberties) improperly excluded the Foundation’s right-to-work litigation from charitable status.

## Decision

- The court found for the Foundation in the refund action.
- The court held the Foundation was a charitable organization within the meaning of § 501(c)(3) and therefore entitled to tax-exempt treatment for the period at issue.
- The court rejected the Commissioner’s restrictive interpretation of the “human and civil rights secured by law” category as inconsistent with the regulation’s language and purpose.
- The court treated the Foundation’s litigation program—free legal representation chosen for precedential value and availability of rights—as a permissible method of carrying out an exempt charitable purpose rather than a disqualifying activity.
- The court concluded the Foundation was entitled to the requested tax relief consistent with recognition of exemption.

## Legal Principles

- An organization may qualify as “charitable” under § 501(c)(3) when it advances social welfare by defending human and civil rights secured by law through bona fide public-interest litigation and related educational work.
- The regulatory category “human and civil rights secured by law” is not confined only to rights directly tied to the Thirteenth or Fourteenth Amendments or to a narrow set of historically recognized common-law liberties; it can include other legally secured constitutional rights and closely related statutory rights.
- Providing legal services without charge to individuals who could not otherwise secure representation, and selecting cases for broader precedential effect and availability of rights, supports a finding of public benefit rather than private benefit.
- IRS interpretations of Treasury regulations are not controlling where they conflict with the regulation’s text and the statutory aim of § 501(c)(3).

## Conclusion

The Eastern District of North Carolina held that the National Right to Work Legal Defense and Education Foundation’s free legal representation and related educational and research activities aimed at enforcing workers’ legally secured rights in compulsory unionism matters fit within § 501(c)(3)’s charitable category, and that the IRS erred by applying an overly narrow reading of “human and civil rights secured by law,” entitling the Foundation to exemption and corresponding refund relief.


National Right to Work Legal Defense and Education Foundation v. United States, 487 F. Supp. 801 (1979)