It’s not all that well known that private citizens can request, and by long tradition OMB’s Office of Information and Regulatory Affairs (OIRA) will normally grant face-to-face meetings to discuss ongoing regulatory projects even before an agency issues regulations in proposed form. Time and resources permitting, I imagine. No kidding. Back in 1993, President Clinton signed Executive Order 12866, one of the goals of which is to encourage early public participation in the administrative process:
With this Executive order, the Federal Government begins a program to reform and make more efficient the regulatory process. The objectives of this Executive order are to enhance planning and coordination with respect to both new and existing regulations; to reaffirm the primacy of Federal agencies in the regulatory decision-making process; to restore the integrity and legitimacy of regulatory review and oversight; and to make the process more accessible and open to the public. In pursuing these objectives, the regulatory process shall be conducted so as to meet applicable statutory requirements and with due regard to the discretion that has been entrusted to the Federal agencies.
According to the executive order, OMB is tasked with undertaking a “coordinated review” prior to issuance of proposed regulations “to ensure that regulations are consistent with applicable law [and] the President’s priorities.” And Section 6(a) states “each agency shall (consistent with its own rules, regulations, or procedures) provide the public with meaningful participation in the regulatory process.” Executive Order 12866 doesn’t exactly require OMB to meet with members of the public who request to talk about a regulatory project, but it clearly contemplates and encourages such meetings. When meetings are granted, OMB must invite representatives from the Agency initiating the regulation project and must forward to those representatives any written communications “regardless of format” regarding the project.
Alexander Reid, an expert on nonprofit law and tax exemption, knew about all of this so he scheduled an “EO 12866 meeting” regarding regulation identifier number (RIN) 1545-BS05, entitled "Guidance on the application of the fundamental public policy against racial discrimination in schools.” It’s all pretty easy. You just go online to an OIRA website, enter the RIN number (you can search for the number if you don’t have it handy) and schedule the meeting.
Reid tells me he ended up meeting two people from OMB and Heidi Cohen, Senior Legal Advisor for Regulatory Affairs at Treasury. None of the three attorneys listed as the primary drafters and reviewers of the proposed (but as of yet unreleased) amendments to Treasury Regulation 1.501(c)(3)-1(d)(2) (regarding the definition of “charitable” for purposes of IRC 501(c)(3)), were present at the July 24th meeting.
Yesterday I asked Alex if he wouldn’t mind sharing with me the meeting highlights. He did not hold back. First, he stated his opinion that the people at IRS and Treasury listed as the primary authors of the proposed fundamental public policy regulation probably didn’t write it and likely have very little to do with it. That makes sense if the regulation is more about politics and racism than logic, tax policy, or anything else. So my mansplaining to those attorneys a few weeks ago was all for naught. Reid told the folks who were there that there isn’t any such thing as a fundamental public policy doctrine and they should scrap the whole damn project:
In my testimony, I encouraged them to drop the project entirely or limit Bob Jones to its facts as a dead letter with no progeny, and to take the opportunity to clarify that THERE IS NO FUNDAMENTAL PUBLIC POLICY DOCTRINE. The very idea that the executive branch can choose from one administration to the next what “fundamental public policy” means and adherence to that constantly shifting definition is a requirement for tax-exempt status is wildly unconstitutional, and certainly fails under this Court’s exacting scrutiny standard for burdens on First Amendment freedom of association and speech. The criminality doctrine is more than sufficient, and even that needs to be narrowly tailored to not overburden freedom of association, peaceful protest, and nonviolent direct action.
Reid also asserted that Loper Bright would make any such fundamental public policy regulations vulnerable to challenge because there is no textual authority in 501(c)(3) regarding fundamental public policy. I should admit that on this point I cannot be objective. I am Black and I want Bob Jones to have been correctly decided even if it has no progeny. Reid thinks it was an example of “bad facts making bad law.” Ouch! He’s intellectually honest enough that I cannot simply discount his views on the matter.
After the meeting, Reid elaborated in a detailed letter.1 Nobody else has requested a meeting, so Reid’s comments are probably the first of a huge avalanche of comments yet to be submitted. The best parts of his comments, the parts I agree with most, state:
A judicial observation in the discrete university-admissions setting is not the settled, cross-branch consensus concerning a particular charitable activity that Bob Jones required [to conclude that a fundamental public policy exists]. Nor did Students for Fair Admissions decide whether private remedial charitable assistance [like those in the Fearless Fund case] conflicts with § 501(c)(3), whether it implicates a separate statutory prohibition, or whether its restriction would survive First Amendment scrutiny.
. . .
Imposition of a fundamental-public-policy condition on schools would be unlikely to survive exacting scrutiny. Such a condition would be indeterminate, would authorize the IRS to impose the severe consequence of loss of exemption based on an asserted policy judgment, and would be poorly tailored where existing statutes already prescribe the relevant legal obligations. Treasury should not use a generalized public-policy condition to require schools to abandon mission-defining choices without identifying the precise governmental interest, the regulated practice, and the narrow connection between that interest and the threatened denial or revocation of exemption.
In conclusion, Treasury should not create an independent, open-ended fundamental-public-policy requirement by regulation. Such a requirement raises serious First Amendment concerns and, if applied to prohibit scholarships for students of color, would likely exceed Treasury’s statutory authority under the reasoning of the recent PSLF vacatur decisions. OIRA should require the agency to clarify these limits before proceeding with an NPRM. Treasury should state expressly that no fundamental-public-policy requirement applies to schools or other charitable organizations beyond section 501(c)(3)’s statutory requirements and that the IRS and future administrations lack authority to deny or revoke exemption based on an indeterminate policy judgment not enacted by Congress.
I do appreciate that there are people interested and sincere enough to honestly advocate even in a world where logic and good policy take a back seat to politics, racism, and power.
