Divestiture Strains Legality

Mitchell Langbert

Emeritus Kings Borough Community College professor Sharad Karkhanis just sent me an e-mail concerning an effort to encourage TIAA-CREF to divest from Israel.  Kakhanis's e-mail links to the website of a group called Scholars for Peace in the Middle East and urges a response to TIAA-CREF's board of trustees. One question I've wondered about is whether political activity by not-for-profits breaches section 501 (c) (3), the section of the Internal Revenue code that governs tax exemption. TIAA-CREF is tax-exempt. One of the fundamental requirements for tax exemption is avoidance of political lobbying and advocacy. In the 1980s a number of university pension funds divested from South Africa.  This was an issue that few might contest. Divestiture from Israel is more controversial and likely to raise questions whether the public ought to be subsidizing political action. Universities, of course, frequently breach section 501 (c) (3), for instance when professors advocate for the election of specific presidential candidates or require classes to lobby for specific issues. As well, universities have taken stances on political issues that violate 501(c)(3)'s ban on political action. I have thought about whether it would be possible to establish a clearing house that would ferret out information about political action in universities and have an IRS reporting system. I called the IRS a couple of years ago and there are several numbers and addresses where complaints can be filed.

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