The U.S. Supreme Court's decision in Citizens United v. FEC1 entered the national consciousness amid more than its fair share of controversy. During his 2010 State of the Union Address, with many of the robe-clad justices of the Supreme Court sitting front and center in the House Chambers, President Obama castigated the Court for "reversing] a century of law that [he] believefd] [would] open the floodgates for special interests - including foreign corporations- to spend without limit in our elections."2
The President's criticism, warranted or not, prompted immediate standing applause from many members of the House and Senate and a very surprising reaction from one member of the Supreme Court. Although the Justices have historically remained silent and unresponsive during the State of the Union Address, Justice Alito could not restrain himself from reacting to what he viewed as the President's misstatement of the key holding and potential ramifications of Citizens United. Shaking his head and mouthing what appeared to be the words "not true," Justice Alito made his disagreement with the President clear to a world authence. This controversial exchange, which provided enough fodder to fill several days of twenty-four hour news channel programming, demonstrated how impassioned individuals can become when money and political speech are at issue. It also made clear that even after over 200 years of constitutional interpretation, significant First Amendment questions remain in flux.
The central holding in Citizens United is that, under the First Amendment, "the Government cannot restrict political speech based on the speaker's corporate identity."3 With that question answered, at least for the time being, it is now left to the legal world to consider what the broader impact of this decision will be moving forward. Many serious questions remain as to how this holding will affect free speech rights and political campaigns. For instance, it remains unclear how this decision will affect the involvement of foreign corporations in American politics or the exact nature of Political Action Committees ("PACs") under the new framework. Additionally, there is significant uncertainty regarding the impact Citizens United will have on tax-exempt religious organizations that are restricted from engaging in political activities under § 501(c)(3) of the Internal Revenue Code.4 Although each of these questions is worth serious review in light of Citizens United, this Note will focus specifically on the last question - how the decision in Citizens United affects tax-exempt religious organizations under § 501(c)(3).
Under § 501(c)(3) certain organizations, including those "organized and operated exclusively for religious [or] charitable . . . purposes," are exempt from paying federal taxes as long as they adhere to certain restrictions.5 These restrictions include limits on lobbying activities and participation in political campaigns.6 Over the years there have been a number of legal challenges to this political activities restriction, yet all have failed to overturn the prohibition.7 It is likely, however, that in light of the holding in Citizens United, new challenges to this restriction will arise.8 As such, it is helpful to anticipate the issues that may arise with these potential challenges, including whether or not Citizens United even applies to tax-exempt religious organizations and, if so, how that holding affects their rights under § 501(c)(3). With a new emphasis on First Amendment political speech rights under the Citizens United decision, it is likely that any challenge to the § 501(c)(3) restrictions would be based on the doctrine of unconstitutional conditions, which limits the types of conditions government can place on the benefits it provides.9 Although this doctrine has been used to make similar arguments in the past,10 the new First Amendment paradigm established by the Citizens United holding has changed the legal landscape on this issue. …