## Facts

- Taxation With Representation of Washington (TWR) was a nonprofit advocacy organization seeking to lobby on federal tax issues while also receiving tax-deductible contributions.
- Under the Internal Revenue Code, § 501(c)(3) organizations may receive deductible contributions but may not engage in substantial lobbying; § 501(c)(4) organizations may lobby more freely but donations are not deductible.
- TWR challenged the statutory scheme denying it § 501(c)(3) status (and related deductibility under § 170(c)(2)) because of its desired lobbying activities.
- TWR asserted that the limitations violated the First Amendment and the equal protection component of the Fifth Amendment’s Due Process Clause.
- Lower courts upheld the statute, and the Supreme Court granted review.

## Issues

1. Whether conditioning § 501(c)(3) tax-exempt status and eligibility to receive tax-deductible contributions on limiting substantial lobbying violates the First Amendment.
2. Whether allowing certain veterans’ organizations to receive deductible contributions while engaging in substantial lobbying, while restricting § 501(c)(3) organizations, violates equal protection under the Fifth Amendment.

## Decision

- The Supreme Court affirmed and upheld the statutory scheme.
- The Court held that Congress may condition § 501(c)(3) status and charitable deductibility on an organization’s agreement to limit substantial lobbying.
- The Court concluded the law does not suppress speech; it declines to subsidize lobbying with public funds, while leaving the organization free to lobby without the subsidy.
- The Court found no equal protection violation in Congress’s different tax treatment of veterans’ organizations, applying rational basis review.

## Legal Principles

- A tax exemption and the ability to receive tax-deductible contributions function as a government subsidy administered through the tax system.
- The government generally may choose not to subsidize the exercise of a constitutional right without infringing that right, so long as it does not impose penalties or prohibitions on speech.
- Conditioning a subsidy on limiting lobbying is permissible where the organization remains able to speak (including through a separate § 501(c)(4) affiliate) even if it cannot obtain the same tax benefits for that activity.
- Differential tax classifications that do not target a suspect class or directly burden a fundamental right are evaluated under rational basis review and may be upheld if rationally related to legitimate governmental interests.

## Conclusion

The Court held that Congress may deny § 501(c)(3) status and related deductibility to organizations that engage in substantial lobbying, because the Constitution does not require the government to subsidize lobbying; it also upheld special tax treatment for veterans’ organizations under rational basis review.


Regan v. Tax'n With Representation of Wash., 461 U.S. 540 (1983)