When the battle between Church and State spills over into the tax domain things start to get interesting. Earlier this month President Trump invited representatives of major faiths to join him on the White House lawn for the signing of a new executive order on religious freedom. It was designed to convey a simple message: notwithstanding the threat of Congressional intransigence, Trump will follow through on his election promises to bolster religious freedom.
The order directs the U.S. Treasury ‘to the greatest extent practicable and to the extent permitted by law, respect and protect the freedom of persons and organizations to engage in religious and political speech.’ It prohibits Treasury from taking ‘adverse action’ and makes its target the Treasury’s powers to remove tax exemption from churches.
The order flows from the Republican Party’s July 2016 commitment to repeal the U.S. Internal Revenue Code’s requirement that tax-exempt charities refrain from making comment on matters of politics. Similar limitations can also be found in English law, which we Australians hold with Americans as the common progenitor of our respective charity laws. However, like the GOP, the highest Court in Australia, exercising somewhat of a revolutionary spirit, has recently seen the wisdom of throwing off such authoritarian encumbrances on associational freedoms.
When visiting my university in 2014 for the Brisbane G20, President Obama referred to the ‘incredible commonality between Australia and the United States’ which he attributed in part to a shared ‘frontier culture’. It is these ‘settler-society’ origins that have engrained associationalist proclivities deep within in our respective constitutional DNA. In the New World and the Antipodes you didn’t call upon the government to clear your remote patch of turf, you got out there and, willed on by John Locke, combined your newfound hearthland with your labour in order to survive. When fashioning life beyond the plot, you called your ‘mates’ together and created the institutions necessary to sustain life in far-flung places.
The nineteenth-century French diplomat and observer of American society, Alexis de Tocqueville displayed great insight into the radical potential of this new way of ordering society when he wrote:
In no country in the world has the principle of association been more successfully used or applied to a greater multitude of objects than in America…There is no end which the human will despairs of attaining through the combined power of individuals united into a society.
Unlike Obama, Tocqueville never had the benefit of travelling to Australia, but he might well have reached similar conclusions had he witnessed our fledgeling society of free-settlers and post-convicts. Our two leaders met earlier this month to reaffirm the depth of the U.S. Australia relationship (notwithstanding ‘fake news’ reports of an earlier heated phone call). While we’re in the mood for celebrating our commonalities, it is perhaps the question of associational freedoms that provides us with one of the best litmus tests for calibrating just how true we remain to the shared egalitarian origins underpinning our two nations.
From the English common law, both Australia and the United States draw the concept that charities, being for the public good, should be exempt from government taxation. Section 501(c)(3) of the U.S. Internal Revenue Code contains the additional condition that charities must ‘not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.’ The particular wording has its genesis in realpolitik. The amendment was introduced in 1954 by President Johnson in an attempt to silence tax-exempt non-profit groups that were campaigning against him in Texas.
The condition has received much attention, particularly from religious charities who have seen in it an insidious State attempt to silence church critique. Of it, Yale Professor Stephen L Carter writes ‘if the state is able to manipulate the content of religious doctrine through its power to extend or deny the favoured tax treatment, then religions are already well down the road to compromising their autonomy.’ But the restriction is not limited to religious charities. It operates to silence the whole charitable sector, a particularly egregious consequence, given the sector’s raison d’etre in the advancement of the common good. Referring to other tax conditions, Professor Evelyn Brody gives us an insight into the possible dynamics at play when she theorises that ‘underlying some of the more perplexing rules limiting the scope of exemption is an unarticulated vestigial fear of a too-powerful non-profit sector, traceable to earlier periods when the most powerful charity was the church.’
In a landmark 2011 decision the Australian High Court threw off the English common law position, which similarly disqualifies any charity from advocating for a change in the law. The Court drew upon the constitutionally protected ‘freedom of political communication’ to hold that charities could critique government policy where such is done in furtherance of their charitable purpose. Rather than being novel, the High Court’s reasoning is consistent with a long line of pluralist, inclusive practice that is characteristic of Australian democracy from its earliest days.
To illustrate, here’s a simple example that might sound foreign to American anti-establishment ears. In 1802 in England Cary v Abbott affirmed the common law doctrine that Catholic trusts were void. Around the same time in the burgeoning colony of New South Wales, where the Anglican minister ominously known as ‘the flogging parson’ doubled-up as a magistrate, the Roman Catholic priest could be directly funded from State coffers. In part, this nascent pluralism may be attributed to our very early recognition that sectarian differences in the ‘Old Country’ were to be put aside in the combined effort of forging a nation. This spirit of inclusiveness and welcome to new entrants has been characteristic of the uniquely Australian vision of a nation.
Some of the commentary since Trump’s recent announcement has raised concern about the politicisation, and thus delegitimisation, of charities. In enacting the Charities Act in 2013 the Commonwealth Parliament adopted the reasoning of the High Court and permitted charities to advance their purposes through the pursuit of law reform. The Act, recognising that a balance is to be maintained, sets the boundary of charity at the adoption of an organisational ‘purpose of promoting or opposing a political party or a candidate for political office’. Purpose here means the ends to which the charity’s efforts are consistently directed in all its undertakings. This boundary line is being enforced. Earlier this year Catch the Fire Ministries became the first Australian charity to suffer deregistration for adopting such a purpose in the eyes of the new Australian Charities and Not-for-profits Commission.
Trump’s newly issued executive order, by contrast, sets the permissible standard as being ‘where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office by the Department of the Treasury.’ This convoluted wording requires a comparison to a seemingly nebulous normative standard. What does the Treasury consider to be intervention in a political campaign ‘on behalf of’ a candidate? Again, ultimately the standard for acceptable speech is made on opaque scales weighed by Treasury.
Observing American democracy, Tocqueville considered that in the absence of a nobility, associations would be an essential bulwark against government tyranny. Once associated, individuals ‘from then on, … are no longer isolated men, but a power one sees from afar, whose actions serve as an example; a power that speaks, and to which one listens.’
It is for this reason that the section 501(c)(3) limitation, as it has been interpreted by the Courts, strikes me as completely misplaced – it silences the voice of those associations from whom we most desperately need to hear, charities formed for the public good who are at the coal-face of meeting local need. It does so not at the high standard of an organisational purpose, but instead, for single acts of critique. That the tiger has teeth was discovered by Branch Ministries when it lost its charitable status for critiquing Bill Clinton’s policy during the 1992 Presidential campaign in two paper advertisements. How curious that the nation born of the revolution against non-representative state autocracy, what Tocqueville called the ‘most democratic country on earth’, should limit its civil society through such a strict mechanism.
By contrast to both the approach in Branch Ministries and in the new executive order, setting the boundary at an organisational purpose of supporting or opposing a political party more adequately walks the line between inviting charities’ contribution on policy and protecting their legitimacy as independent, non-partisan players in a democratic polity.
Tax exemption sends the message to charities that your contribution to our common weal is sought, and (on certain economists’ accounts) so much so that we are willing to subsidise it. Conversely by tying exemption to a strict ‘no political comment condition’ the State discloses that not only does it not want the comment of charities as to what comprises the common good, it will wield the threat of financial impost against any such offering. Chief Justice Marshall’s claim in McCulloch v. Maryland (1819) that ‘the power to tax is the power to destroy’ comes to mind, to the extent he might be channelling that quintessential American (and distinctly Bostonian) loathing of tea.
Associations are prior in existence to the State. They are essential to the cultivation of talent and virtue in their members. In a community of communities, they offer these as gifts to wider society. Their role in pursuing the vision of the common good forged by their members, and in permitting the articulation of their shared concerns, is fundamental to the great contest of ideas that is a flourishing democracy. The formation of citizenry requires competing visions, and at times, challenges to the State. A society in which the State labours under the misassumption that it has the exclusive ability to define individual and community conceptions of the good is a very sick, pallid society indeed.
Professor Michael McConnell has argued that the ‘great promise of [American] civil society is that it provides a means for inculcation of public virtue without direct imposition of a public orthodoxy.’ He argues that the founding fathers’ ‘great solution to the republican problem was to promote public virtue indirectly, by protecting freedom of speech, association, and religion’. Indeed, if one accepts this analysis, removal of the s 501(c)(3) condition on free speech would abolish a deeply concerning divergence from the original American republican vision.
Mark Fowler is Chair of CLEAR International Australia Ltd, a charity that unites State-based Christian lawyers societies around Australia. He was a member of the Queensland Law Society Human Rights Working Group and is a PhD candidate at the University of Queensland. His comments are his own.
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