[Eugene Volokh] No, the IRS may not deny tax exemptions on the grounds that a group is a supposed ‘hate group’

The Chronicle of Philanthropy writes:

The federal government has granted tax-exempt status to more than 60 controversial nonprofits branded by critics as “hate groups,” including anti-immigrant and anti-gay-rights organizations, white nationalists, and Holocaust deniers, according to a Chronicle of Philanthropy analysis.

The issue is a thorny one for the Internal Revenue Service, which must balance First Amendment rights against concerns that it is essentially granting government subsidies to groups holding views that millions of Americans may find abhorrent….

Though tax exemption is intended to be available to groups espousing a wide range of views, [Prof. Frances] Hill worries that the concept of a nonprofit organization has become too malleable. “The idea of tax-exempt organizations devoted to hate speech is just corrosive of everything that the tax-exempt sector says it stands for.”

Yet the IRS is in an impossible position, she said. Still shaken by the revelation that agency leaders had singled out conservative advocacy groups’ applications for tax-exempt status for extra scrutiny, the IRS has little incentive to investigate organizations based on the content of their messages.

Salon likewise writes:

Samuel Brunson, a tax law professor at Loyola University in Chicago, noted the nonprofit status gives these groups a veneer of legitimacy and respectability.

“It should make people uncomfortable that the government is subsidizing groups that espouse values that are incompatible with most Americans,” he said.

But the IRS can’t deny tax exemptions on the grounds that a group “hold[s] views that millions of Americans may find abhorrent” — or “espouse[s] values that are incompatible with most Americans” — whether those views are socialist, Islamist, pro-abortion, antiabortion, pro-illegal-immigrant, anti-immigrant, pro-gay-rights, anti-gay-rights, white nationalist, black nationalist or anti-nationalist. It can’t deny exemptions to groups that engage in “hate speech” against blacks, gays, evangelical Christians or Donald Trump supporters, while allowing exemptions to groups that praise blacks, gays, evangelical Christians or Donald Trump supporters.

Indeed, the Supreme Court has made this clear: The government may not discriminate against groups based on the viewpoint of their speech. See Rosenberger v. Rector (1994) (discussing Regan v. Taxation With Representation (1983)). As the D.C. Circuit put it in Z Street v. Koskinen (2015) (itself a 501(c)(3) tax exemption case), “in administering the tax code, the IRS may not discriminate on the basis of viewpoint.”

There may be some confusion about this among some observers, because the government may limit certain tax exemptions based on the subject matter of groups’ speech; for instance, it may deny 501(c)(3) status, which allows tax-deductible contributions to various educational groups but not ones that support or oppose candidates for office, or engage in a substantial amount of advocacy for or against legislation. Likewise, groups can be denied benefits, including tax exemptions, because of their conduct (such as discrimination against members, students and the like), precisely because this discrimination is based on what the groups actually do, rather than based on what the groups advocate. See Bob Jones Univ. v. United States (1983); Christian Legal Society v. Martinez (2010) (upholding university’s denial of certain benefits to student groups that discriminate in certain ways, though reaffirming groups’ rights to communicate whatever viewpoints they want).

The D.C. Circuit, in National Alliance v. United States (1983), also upheld IRS guidelines that deny the educational tax exemption to groups that simply present “strong emotional feelings,” without an attempt to support their viewpoints with “a relevant factual basis”; I’m troubled by such a standard, which can easily be applied in biased ways. But even that decision defended the factual-support requirement on the grounds that it was a “criteri[on] neutral with regard to viewpoint.” And the decision noted that the requirement avoided a judgment on whether the factual argument was indeed accurate:

One of the concerns in this area, because of First Amendment considerations, is that the government must shun being the arbiter of “truth.” Material supporting a particular point of view may well be “educational” although a particular public officer may strongly disagree with the proposition advocated. Accordingly IRS has attempted to test the method by which the advocate proceeds from the premises he furnishes to the conclusion he advocates rather than the truth or accuracy or general acceptance of the conclusion.

So viewpoint disc