Professor Frances Hill Testifies on Tax-Exempt Organizations Before Congressional Committee

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Professor Frances Hill, an expert on tax-exempt organizations, testified before a Congressional committee for the sixth time in her career.

Her March 2nd appearance focused on tax issues raised by an incident where a university felt that its tax-exempt status under section 501c(3) was in jeopardy because a student at its law school distributed leaflets on campus in support of Senator Bernie Sanders's presidential campaign. The law school said the student’s actions would jeopardize the university’s tax status because relevant tax law prohibits such political campaign activity by a tax-exempt organization.  

Hill is the co-author of a widely used book on taxation of exempt organizations as well as numerous articles on the political activities of charities and other types of exempt organizations. She has taught at the University of Miami School of Law since 1992 and served as the Director of the Law School’s Graduate Program in Taxation from 2001 to 2010. In 2012, she was named a Dean’s Distinguished Scholar for the Profession by the Law School. Hill teaches courses in tax law and constitutional law.

The House Ways and Means Subcommittee on Oversight invited Hill as an expert witness on the tax law that applied to political campaign activities in a university setting. "I was not invited as anyone's lawyer,” she said. "I was there as an expert witness on tax law.”

Hill focused on the idea that the prohibition on political speech applies to the university as a tax-exempt organization but the institution speaks only through individuals who are affiliated with it. If people can bind the organization to a course of action, their speech will be attributed to the university, which could jeopardize the institution’s tax-exempt status. If, however, the people who are speaking or seeking to speak, cannot bind the institution to a course of action then their political speech on campus will not be treated as the speech of the university and will not potentially jeopardize the exempt status of the university, said Hill.

Based on this principle, the Internal Revenue Service has issued guidance for over forty years stating that political speech by students is, in most circumstances, not attributed to the university. For example, the IRS has ruled that a student newspaper can publish editorials endorsing candidates for public office if the students themselves choose the candidate to endorse. Problems would arise only if the faculty advisers chose the favored candidate, which would make the editorial in the student newspaper speech of the university. The mere fact that the institution paid the costs of publishing the student newspaper was not relevant to the tax treatment of the student speech.

In contrast, a column written by a university president in the university’s official magazine endorsing a candidate for public office would be treated as speech of the organization. In one case, a university president used personal funds to pay the share of the magazine’s cost attributable to the column. The IRS ruled that  a university administrator’s political speech in an official university setting will be attributed to the university unless it is   publicly disavowed by the university.

Congressman John Lewis (D-GA), the Ranking Member of the Subcommittee, asked if these issues have serious consequences for a university or other tax-exempt organization. Hill said that the repercussions could be severe for both the school and for its contributors, who will qualify for the charitable contribution deduction only if the recipient school is tax exempt.

Hill said invitations to appear before congressional committees always come with little lead time. In this case, she was invited on Thursday, submitted her written testimony on Monday, and testified on Wednesday morning.

“This is a public service,” she said. “Responding to invitations to testify as an expert witness  before the people’s elected representatives is both a duty and a privilege, an opportunity to play a role, however small, in our constitutional system.”