       LOREN E. PARKS, PETITIONER v. COMMISSIONER
            OF INTERNAL REVENUE, RESPONDENT
      PARKS FOUNDATION, PETITIONER v. COMMISSIONER
            OF INTERNAL REVENUE, RESPONDENT

      Docket Nos. 7043–07, 7093–07.        Filed November 17, 2015.

        PF is a corporation exempt from income tax under I.R.C.
      sec. 501(c)(3) and classified as a private foundation under
      I.R.C. sec. 509(a). P is a foundation manager of PF as defined
      in I.R.C. sec. 4946(b). During its taxable years ended Nov. 30,
      1997 through 2000, PF made cumulative expenditures of
      $639,073 to produce and broadcast 30- and 60-second radio
      messages. As a foundation manager, P agreed to the making
      of the expenditures. R determined that the foregoing expendi-
      tures were ‘‘attempts to influence legislation and/or the
      opinion of the general public’’ and therefore taxable expendi-
      tures, rendering PF and P liable for excise taxes under I.R.C.
      sec. 4945(a)(1) and (2), respectively. R further determined that
      because the taxable expenditures were not timely corrected,
      PF and P were also liable for excise taxes under I.R.C. sec.
      4945(b)(1) and (2), respectively. Held: Pursuant to the regula-

278
(278)                    PARKS v. COMMISSIONER                                   279


        tions interpreting I.R.C. sec. 4945(e), a communication refers
        to a ballot measure if it either refers to the measure by name
        or, without naming it, employs terms widely used in connec-
        tion with the measure or describes the content or effect of the
        measure. Held, further, PF’s expenditures for the radio mes-
        sages were taxable expenditures under I.R.C. sec. 4945(d)(1)
        or (5) to the extent redetermined herein; consequently PF is
        liable for excise taxes under I.R.C. sec. 4945(a)(1) to the
        extent redetermined herein. Held, further, P is liable for
        excise taxes under I.R.C. sec. 4945(a)(2) to the extent redeter-
        mined herein. Held, further, PF and P are liable for excise
        taxes under I.R.C. sec. 4945(b)(1) and (2), respectively, to the
        extent redetermined herein. Held, further, the application of
        I.R.C. sec. 4945 and the regulations thereunder to PF and P
        does not violate the First Amendment to the U.S. Constitu-
        tion, and the regulations are not unconstitutionally vague.

  Kevin O’Connell, Steven B. Hval, and Tara Lawrence, for
petitioners.
  Mark Alan Weiner, for respondent.

                                  OPINION

  GALE, Judge: These cases were consolidated for trial,
briefing, and opinion. Respondent determined excise tax defi-
ciencies for petitioner Loren E. Parks and petitioner Parks
Foundation (Foundation) as summarized in the following
tables. 1
Mr. Parks, Docket No. 7043–07
                                                  Excise tax

           Year                 Sec. 4945(a)(2)                Sec. 4945(b)(2)

           1997                     $1,625                        $10,000
           1998                      5,000                         10,000
           1999                        825                         10,000
           2000                      5,000                         10,000




   1 All section references are to the Internal Revenue Code of 1986 as in

effect for the years at issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure. All dollar amounts are rounded to the
nearest dollar.
280            145 UNITED STATES TAX COURT REPORTS                      (278)


Foundation, Docket No. 7093–07
                                             Excise tax

      TYE 11/30         Sec. 4940(a)      Sec. 4945(a)(1)    Sec. 4945(b)(1)

        1997                 ---              $6,500            $65,000
        1998               $1,979             20,000            200,000
        1999                 ---               3,301             33,012
        2000                 ---              34,106            341,062

  The issues for decision 2 are: (1) whether expenditures by
Foundation during its years at issue for the production and
broadcast of 30- and 60-second radio messages were taxable
expenditures within the meaning of section 4945(d), making
Foundation liable for excise taxes imposed by section
4945(a)(1); and, if so, (2) whether Foundation is liable for
additional excise taxes imposed by section 4945(b)(1) for
failing to timely correct the expenditures; (3) whether Mr.
Parks is liable for excise taxes imposed by section 4945(a)(2)
because he knowingly agreed to the making of the expendi-
tures; (4) whether Mr. Parks is liable for additional excise
taxes imposed by section 4945(b)(2) for refusing to agree to
correction of the expenditures; and (5) whether section 4945
and the regulations thereunder as applied to petitioners vio-
late the First Amendment to the Constitution.

                              Background
  These cases were submitted for decision without trial
under Rule 122. The stipulation of facts and the accom-
panying exhibits are incorporated herein by this reference.
At the time the petitions were filed Mr. Parks resided in
Nevada and Foundation had its principal place of business in
Nevada.
Foundation’s Status, Organization, Support, and Expenditures
  Foundation’s predecessor was incorporated in Oregon in
1977. 3 In 1979 the Internal Revenue Service (IRS) recog-
   2 The parties stipulated that the $1,979 excise tax deficiency determined

under sec. 4940 for Foundation’s taxable year ended November 30, 1998,
is a computational adjustment dependent on our resolution of certain other
issues in these cases.
   3 The predecessor’s name was changed to Parks Foundation in 1987 and

the Oregon-chartered entity was merged into a newly created Nevada non-
profit corporation in 2003.
(278)                   PARKS v. COMMISSIONER                             281


nized Foundation as a tax-exempt organization described in
section 501(c)(3) and further classified it as a private founda-
tion as defined in section 509(a), a classification it retained
throughout the years at issue. Mr. Parks has been the sole
contributor to Foundation since its incorporation. 4 During
the years at issue Foundation was governed by a board of
directors consisting of Mr. Parks and two of his adult sons.
The primary purposes of Foundation, as set out in its
restated bylaws, include: (1) enhancing and promoting sport
fishing and sport hunting; (2) promoting education by
researching and presenting to the public issues of general
interest or concern and by supporting alternative educational
programs and institutions; and (3) supporting charitable
organizations and activities, the goals of which Foundation
wished to encourage and promote.
   In its taxable years ended November 30, 1997 through
2000, 5 Foundation expended $65,000, $200,000, $33,011, and
$341,062, respectively, to produce 30- and 60-second radio
messages 6 and broadcast them on commercial radio stations
in Oregon (radio messages). Mr. Parks approved all the fore-
going expenditures. All were made to Gregg K. Clapper, the
Clapper Agency, or radio stations as Mr. Clapper directed. 7
Mr. Clapper or the Clapper Agency produced the radio mes-
sages and arranged for their broadcast. The parties have
stipulated that Mr. Clapper has a long history of involvement
with Oregon politics and that the Clapper Agency produces
and arranges for the broadcast of political advertisements.
  4 Mr.  Parks contributed $1 million to Foundation in its taxable year
ended November 30, 1999, and $200,000 in its taxable year ended Novem-
ber 30, 2000.
   5 For Federal tax purposes, Foundation used a taxable year ending No-

vember 30. Hereinafter, references to a specified year or taxable year of
Foundation mean the 12-month period ended November 30 for the speci-
fied year. In the case of Mr. Parks, references to a specified year or taxable
year are to the calendar year.
   6 Some portion of the 1999 expenditure was also for newspaper adver-

tisements, as discussed infra.
   7 Foundation made the $65,000 expenditure in 1997 by means of a check

made out to the ‘‘Are you having Trouble Hearing What We’re Saying
Committee’’. As the parties have stipulated that this $65,000 was used by
Mr. Clapper or the Clapper Agency to produce the radio message and to
purchase broadcasting air time from radio stations during 1997, the fact
that a conduit was apparently employed to effect payment is not material.
282           145 UNITED STATES TAX COURT REPORTS                      (278)


Oregon Ballot Measure Procedures
   The Oregon Constitution confers upon Oregon citizens the
power of initiative, entitling them to propose statutes or
amendments to their constitution (referred to as ‘‘measures’’)
by petition, and to enact or reject them in elections, inde-
pendent of the Oregon Legislative Assembly. Or. Const. art.
IV, sec. 1. Amendments to the Oregon Constitution can also
be proposed by the Legislative Assembly and referred to
Oregon citizens for their approval or rejection at the next
election. Id. art. XVII, sec. 1. Thus, measures come before
Oregon citizens for approval or rejection in elections by ‘‘ini-
tiative’’ when originating from citizens’ petitions and by
‘‘referral’’ when originating in the Legislative Assembly. See
Or. Rev. Stat. Ann. sec. 250.005(3) (West 2015). Nine of the
ten radio messages at issue in these cases were broadcast in
the weeks or months preceding a statewide election in which
Oregonians voted on measures proposed by initiative or
referral.
   During the years at issue the Oregon secretary of state
was required to prepare a voters pamphlet 8 for every general
and statewide special election and mail it to each mailing
address in Oregon no later than 15, and subsequently 20,
days before an election. 9 Id. secs. 251.026, 251.175(1). With
  8 The  parties have stipulated various excerpts from the voters pamphlets
prepared with respect to the ballot measures that respondent contends
were the subject of the radio messages at issue. The parties’ stipulations
do not provide an explanation, however, of the statutorily prescribed proce-
dures under which the contents of the voters pamphlets were prepared. In
the Court’s judgment, knowledge of these procedures is indispensable to
determining the relevance and probative weight to be given the voters
pamphlet excerpts that have been stipulated. Consequently, we have taken
judicial notice of the Oregon statutes that governed the ballot measures at
issue, including the statutorily prescribed procedures for developing the in-
formation that appeared in the voters pamphlets. The findings in this sec-
tion are based on such judicial notice in addition to the parties’ stipula-
tions.
   9 For the elections at issue which occurred during 1997, 1998, and 1999,

the secretary of state was required to mail the voters pamphlets no less
than 15 days before the election. Or. Rev. Stat. sec. 251.175 (1995). For
the election at issue which occurred during 2000, the Oregon secretary of
state was required to mail the voters pamphlets no less than 20 days be-
fore the election. Id. (1999) (applicable for elections held after January 2,
2000).
(278)                   PARKS v. COMMISSIONER                              283


respect to each initiative and referred measure on the ballot
in a given election, the voters pamphlet was required to con-
tain, inter alia, the ballot title of the measure, 10 an explana-
tory statement for the measure, and a statement estimating
the direct financial impact on the State and local govern-
ments if the measure were enacted. 11 Or. Rev. Stat. sec.
251.185 (1993); id. sec. 251.185(1) (1999). 12
   A committee of five citizens was tasked with preparing the
explanatory statement for a measure, Or. Rev. Stat. sec.
251.205(1) (1995); id. sec. 251.205(2) (1999), 13 which was
required to be ‘‘impartial, simple and understandable’’ and
‘‘not exceed 500 words.’’ Or. Rev. Stat. Ann. sec. 251.215(1)
(West 2015). The proponents of a measure—the chief peti-
tioners in the case of an initiative measure and the president
of the senate and the speaker of the house of representatives
in the case of a referred measure—were entitled to appoint

  10 A  ballot title consisted of a caption that reasonably identified the sub-
ject matter of the measure; simple and understandable statements that de-
scribed, respectively, the result if the measure were approved or rejected;
and a concise and impartial summary of the measure and its major effect.
Or. Rev. Stat. Ann. sec. 250.035(2) (West 2015). The attorney general was
required to prepare the ballot title for initiative measures. Id. sec. 250.065.
The Legislative Assembly had the option of preparing the ballot title for
referred measures; and if it did not, the attorney general was required to
do so. Id. sec. 250.075.
   11 During the years in issue, the financial impact statement was required

to be jointly prepared by the Oregon secretary of state, the state treasurer,
the director of the Oregon Department of Administrative Services, and the
director of the Department of Revenue. Or. Rev. Stat. sec. 250.125(1)
(1993); id. (1999). (The current statute is found at Or. Rev. Stat. Ann. sec.
250.125 (West 2015).) The Oregon secretary of state must also have con-
ducted a hearing (with reasonable notice) to receive suggested changes or
other information concerning a proposed financial impact statement, and
the Oregon secretary of state, the state treasurer, the director of the Or-
egon Department of Administrative Services, and the director of the De-
partment of Revenue must have considered the suggested changes or other
information submitted. Or. Rev. Stat. sec. 250.127(2) and (3) (1995); id.
(1999). (The current statute is found at Or. Rev. Stat. Ann. sec. 250.127(2)
and (3) (West 2015).)
   12 The current statute is found at Or. Rev. Stat. Ann. sec. 251.185(1)(a)–

(c) (West 2015).
   13 The current statute is found at Or. Rev. Stat. Ann. sec. 251.205(2)

(West 2015).
284          145 UNITED STATES TAX COURT REPORTS                      (278)


the first two members to the committee; 14 the secretary of
state appointed the next two members of the committee from
among the opponents of the measure; and the four appointed
committee members were to agree on the fifth member. Or.
Rev. Stat. sec. 251.205(2)–(4) and (6) (1995); id. sec.
251.205(1)–(5) (1999). 15 In the absence of agreement, the sec-
retary of state was authorized to appoint the fifth member.
Or. Rev. Stat. sec. 251.205(4) (1995); id. sec. 251.205(5)
(1999). 16
  The committee was required to file the explanatory state-
ment with the secretary of state, who then was charged with
holding a hearing to receive suggested changes and other
information relating to the explanatory statement. Or. Rev.
Stat. Ann. sec. 251.215(1) and (2) (West 2015). The com-
mittee was required to consider the suggestions and other
information submitted at the hearing and could file a revised
statement with the secretary of state. 17 Id. sec. 251.215(3).
Any person dissatisfied with an explanatory statement for
which suggestions were offered at the secretary of state’s
hearing could petition the Oregon Supreme Court seeking a
different statement. 18 Id. sec. 251.235; see, e.g., Novick v.
Bradbury, 10 P.3d 254 (Or. 2000).
Content and Context of the Radio Messages
  The content and context of each radio message at issue are
described below, arranged by the year in which the expendi-
tures for the messages were made.


  14 The president of the senate was required to appoint a senator, and the

speaker of the house, a representative. Or. Rev. Stat. sec. 251.205(6)(b)
(1995); id. sec. 251.205(1)(b) (1999). (The current statute is found at Or.
Rev. Stat. Ann. sec. 251.205(1)(b) (West 2015).)
  15 The current statute is found at Or. Rev. Stat. Ann. sec. 251.205(1)–

(5) (West 2015).
  16 The current statute is found at Or. Rev. Stat. Ann. sec. 251.205(5).

  17 The original and any revised explanatory statement was required to

be approved by at least three members of the committee. Or. Rev. Stat.
Ann. sec. 251.215(4) (West 2015). The explanatory statement was also re-
quired to indicate any dissenting member. Id.
  18 Draft ballot titles were subject to similar procedures. Or. Rev. Stat.

Ann. secs. 250.067, 250.085 (West 2015).
(278)                    PARKS v. COMMISSIONER                           285


  1997
  On the ballot in a May 20, 1997, statewide special election
was Measure 49. The explanatory statement for Measure
49 19 described it as follows:
  EXPLANATORY STATEMENT
     In 1994, voters approved an amendment to the Oregon Constitution
  establishing requirements for work programs for state prison inmates.
  These provisions in the Oregon Constitution require state corrections
  officials to establish and operate work and on-the-job training programs
  so that all eligible inmates are engaged in these programs 40 hours per
  week. Due to a conflict between Oregon constitutional provisions and
  federal law, the Department of Corrections has shut down some of its
  most successful and productive prison industries programs.
     This measure modifies existing state prison work program require-
  ments in the Oregon Constitution. The measure does the following:
  •       Permits the state to continue to operate and expand Oregon’s most
          successful prison industries in compliance with federal law. Allows
          development of additional prison industries programs.

  On March 10, 1997, Foundation paid $65,000 for the
production and broadcast on Oregon radio stations from
March 12 through 14, 1997, of a radio message which pre-
sented the following script in narrative format: 20
  I’ll bet you thought Oregon prisoners would be working 40 hours a week
  by now. Back in 1994, that’s what voters overwhelmingly told the politi-
  cians to do.
  But the governor and attorney general have said, NO, we’re not gonna
  do it.
  Attorney General Hardy Myers says the federal government doesn’t like
  the way Oregon pays it’s [sic] prisoners. And so, he and the Governor
  have decided to shut down the program entirely.
  Some people just don’t think criminals should spend much time in jail.
  They think they can be rehabilitated.
  If they really wanted prisoners to work, they’d just change the way we
  to [sic] pay them.

  19 Incontrast to the explanatory statements for the other measures con-
sidered in this Opinion, which were prepared by five-citizen committees
pursuant to Or. Rev. Stat. Ann. sec. 251.215 (West 2015), the explanatory
statement for Measure 49 was drafted and enacted by the legislature.
  20 The scripts of all radio messages have been reproduced herein as pre-

sented in the parties’ stipulations, with apparent errors noted.
286          145 UNITED STATES TAX COURT REPORTS                      (278)


 When Hardy Myers was Speaker of the House, he took credit for
 changing Oregon’s criminal statutes. Those changes resulted in the aver-
 age convicted murderer spending less than 7 years in jail.
 That’s why Oregon Voters had to step in and take control.
 We said it loudly and clearly, ‘‘Put criminals in jail. Make ‘em do their
 time, and work ‘em while they’re there.’’
 What Oregon voters didn’t say was, ‘‘Make a bunch of whiney excuses
 why you can’t do what we want done.’’

  Foundation’s tax counsel was not asked to review or
approve the content of this radio message.
  1998
  On September 25, 1998, Foundation paid $200,000 for the
production and broadcast of four radio messages (in two sets
of two) which aired on Oregon radio stations in October 1998.
The first set of two radio messages expressly referred to
Measure 61, a citizen-initiated measure on the ballot in
Oregon’s November 3, 1998, general election. The explana-
tory statement for Measure 61 described it as follows:
 EXPLANATORY STATEMENT
    This measure creates a statute that sets minimum sentences for
 ‘‘major crimes,’’ as defined in this measure. In addition, the measure
 requires the imposition of an additional sentence of one to three years
 of imprisonment for any offender who is convicted of a ‘‘major crime’’ and
 who was convicted of one or more ‘‘major crimes’’ within the previous 10
 years.
    The measure requires that a presumed sentence of at least 14 months
 imprisonment be imposed for ‘‘major crimes’’ committed on or after
 January 1, 1999. * * *

                       *   *    *   *    *   *    *
 The mandatory additional sentence is one year if the offender has one
 previous conviction for one of the specified crimes within that period, two
 years if the offender has two previous convictions for the specified crimes
 within that period and three years if the offender has three or more pre-
 vious convictions for the specified crimes within that period.
   The mandatory additional sentence for previous convictions may not
 be reduced for any reason. * * *

The financial impact statement for Measure 61 reported:
 ESTIMATE OF FINANCIAL IMPACT: The mandatory and presumptive
 sentences imposed under this measure are estimated to require 4,300
 new prison beds by 2006, with direct state expenditures for prison
 construction and start-up of $470 million by 2006.
(278)                   PARKS v. COMMISSIONER                            287


  Direct state expenditures for prison operating costs and debt service are
  estimated at $21 million in 1999–2000 and $40 million in 2000–2001,
  growing to $125 million in 2005–2006. * * *

  The first radio message referring to Measure 61, broadcast
in October 1998, presented the following script in narrative
format:
  Back when John Kitzhaber was Senate President Legislation was passed
  that resulted in a convicted murderer, given a life sentence, actually
  serving less than 7 years in jail...
  They said they didn’t have enough jail space.
  But then came Measure 11.[21]
  It required mandatory sentences for violent criminals with no possibility
  of early release...and...it required the state to build enough jail space.
  They said it would cost billions of dollars. But it didn’t.
  And since Measure 11, violent crime in Oregon has gone down.
  And now Measure 61’s on the ballot.
  It requires mandatory sentences for criminals convicted of property
  crimes.
  You live in Portland. You get your car stolen or your house burglarized
  there won’t be jail...just probation.
  If Measure 61 passes, that criminal goes to jail. And they’ll have to build
  enough jail space to keep ‘em... There’ll be no early release.
  It’s Measure 61.
  Paid for in the public interest by the Parks Foundation.

The second radio message referring to Measure 61, also
broadcast in October 1998, presented the following script in
narrative format:
  The citizens, not the politicians, passed Measure 11 putting violent
  criminals in jail.
  Up ’till then, a convicted murderer with a life sentence served less than
  7 years.
  They said it would cost billions. But, it didn’t. And the crime rate went
  down.
  And now ... Measure 61.
  You live in Portland, you get your car stolen ... your house burglarized
  ... there won’t be jail ... just probation.

  21 Measure 11 was passed by Oregon voters in 1994. It established man-

datory minimum prison sentences for violent crimes.
288         145 UNITED STATES TAX COURT REPORTS                      (278)


 With Measure 61, that criminal absolutely goes to jail ... and no early
 release.
 (Measure 61.)
 Pd for by the Parks Foundation.

  Mr. Clapper provided drafts of the two Measure 61 radio
messages to Foundation’s tax counsel for his review and
approval before their broadcast. With respect to the first
message, the tax counsel sent Mr. Clapper a memorandum
stating:
 We have reviewed the text of radio spot M61#1. The Foundation is not
 permitted to support or oppose any political candidate or any ballot
 measures. Its role is to ‘‘educate’’ the public about issues of the can-
 didates and the ballot measures. The conclusion of this radio spot is
 close to an endorsement of the ballot measure, but we do not think it
 goes too far. Nevertheless, you should try to maintain an unbiased pos-
 ture even though the thrust of the information emphasizes the ‘‘positive’’
 aspects of the ballot measure. Let us know if there is any other informa-
 tion you need.

There is no evidence that Foundation’s tax counsel provided
any written response with respect to the content of the
second message addressing Measure 61.
   The remaining two Foundation-funded radio messages
broadcast in October 1998 both referred to ‘‘administrative
rules’’. Also on the ballot for approval in the November 3,
1998, general election was Measure 65, a citizen-initiated
measure that would have amended the Oregon Constitution
to establish a procedure under which certain administrative
rules promulgated by State agencies would be required to be
reviewed and approved by the State legislature.
   The explanatory statement for Measure 65 described it as
follows:
 EXPLANATORY STATEMENT
    This measure would amend the Oregon Constitution to create a review
 and approval process of state agency administrative rules by the Legisla-
 tive Assembly. Currently, no such process exists. This process is trig-
 gered when a petition signed by a specified number of qualified voters
 is filed with the Secretary of State.
    Administrative rules are rules and regulations adopted by state agen-
 cies, boards and commissions that generally have the full force and effect
 of law.
    The number of qualified voters who must sign the petition is equal to
 two percent of the total number of votes cast for all candidates for Gov-
(278)                  PARKS v. COMMISSIONER                              289


  ernor at the last gubernatorial election. The petition must specify the
  administrative rule or rules that the Legislative Assembly is required to
  review.
    Upon being notified by the Secretary of State that a petition meeting
  the requirements of the measure has been filed, the President of the
  Senate must prepare a bill that would approve the administrative rule
  or rules specified in the petition. The President of the Senate must then
  introduce that bill at the next following regular session of the Legislative
  Assembly. If the petition is filed with the Secretary of State during a
  regular session, the bill must be introduced at the next following regular
  session.
    After the introduction of the bill, the Legislative Assembly may amend
  the bill to approve only part of a specified rule. If the petition specifies
  more than one rule, the bill may be amended to approve fewer than all
  of the specified rules. Any rule or part of a rule that is not approved by
  the passage of a bill has no further force or effect after the session is
  adjourned.

  The first radio message referring to ‘‘administrative rules’’
presented the following script in narrative format:
  Right now, without even knowing it, you’re being forced to live under
  laws created not by elected officials but by non-elected government
  bureaucrats.
  They’re called administrative rules.
  Here’s what happens:
  The legislature passes a law to keep a watchful eye on growth and tells
  its hired workforce to carry out that law.
  So Jack and Bev Stewart turn 90 acres of Polk County brush piles into
  a horse farm. Because horses are expensive and easily stolen, they want
  to build a farmhouse so they can be there. But the government bureau-
  crats say no, we’re not gonna let you until you earn $80,00 [sic] off the
  property. The Stewarts say. We can’t do that until we get more
  horses...the bureaucrats say tough, that’s your problem, not ours.
  When a legislator’s asked how government can get away with this he
  says we never intended for this to happen.
  So the Stewarts are stuck...all they did was turn 90 acres of noxious
  weeds into income producing, taxpaying farm acreage.
  It’s called administrative rules...and you’re gonna hear a lot more about
  ‘em in the weeks to come.

The second radio message referring to ‘‘administrative rules’’
presented the following script in narrative format:
  Right now, without even knowing it, you’re being forced to live under
  laws created not by elected officials but by non-elected government
  bureaucrats.
290          145 UNITED STATES TAX COURT REPORTS                      (278)


 They’re called administrative rules.
 Here’s what happens:
 The Good Sheppard [sic] Church of Clackamas County purchased the
 only available piece of land in the area to build a new church. It’s zoned
 for farm use. But even though the elected legislature passed a state law
 allowing churches to build on farmland, the nonelected bureaucrats
 made up an administrative rule saying, we’re not going to let you do it.
 And it doesn’t matter whether the land is any good or not.
 So in the mean time [sic], the Good Shepherd Church has been denied
 a building permit on their own land even though state law says it’s OK.
 It’s called administrative rules ... and you’re gonna hear a lot more about
 ‘em in the weeks to come.

   Mr. Clapper also provided drafts of the two radio messages
referring to ‘‘administrative rules’’ to Foundation’s tax
counsel for his review and approval before their broadcast. In
response, the tax counsel sent Mr. Clapper a memorandum
which in full stated as follows: ‘‘We have reviewed the texts
of spots labeled M65–1 and M65–2. They appear to comply
with the ‘public education’ purpose of the Parks Foundation.
If you have further questions, please contact us.’’
  1999
   In the November 5, 1996, general election, Oregon voters
approved Measure 40, which granted victims of crime a
variety of constitutional rights with respect to the prosecu-
tion of criminal defendants. In 1998, however, the Oregon
Supreme Court found Measure 40 void in its entirety because
it was not passed in compliance with article XVII, section 1
of the Oregon Constitution, which requires a separate vote
for each distinct constitutional amendment. See Armatta v.
Kitzhaber, 959 P.2d 49 (Or. 1998). In response, the elements
of Measure 40 were divided by the Oregon Legislative
Assembly into separate measures for referral to the voters
for reapproval. Measures 69 through 75 were seven of the
constituent parts of Measure 40 so referred, and they
appeared on the ballot in Oregon’s November 2, 1999, state-
wide special election.
   The measures sought to make the following amendments
to the Oregon Constitution: Measure 69 granted victims con-
stitutional rights in criminal prosecutions and juvenile court
delinquency proceedings; Measure 70 gave the public,
through the prosecutor, the right to demand a jury trial in
(278)                  PARKS v. COMMISSIONER                            291


criminal cases; Measure 71 limited pretrial release of accused
persons to protect victims and the public; Measure 72
allowed murder convictions by 11 to 1 jury votes; Measure 73
limited immunity from criminal prosecutions for persons
ordered to testify about their conduct; Measure 74 required
that the terms of imprisonment announced in court be fully
served, with certain exceptions; and Measure 75 banned per-
sons convicted of certain crimes from serving on grand juries
and criminal trial juries.
   On June 2, 1999, Foundation paid $10,963 for the produc-
tion and broadcast of two radio messages and the production
and publication of a print advertisement in two newspapers.
Combined, the radio messages aired 222 times on Oregon
radio stations. The first radio message presented the fol-
lowing script in narrative format:
  District 5 State Representative Jim Hill is one of the very few Repub-
  licans in the state house fighting against the victims of crime.
  2 years ago, a wide majority of Oregonians voted to get tough on crimi-
  nals by passing Measure 40.
  But the liberal state Supreme Court threw it out saying it contained too
  many subjects. The state house has just voted to split Measure 40 into
  8 separate amendments to be reapproved by the voters.
  Who would be against this?
  The liberals and criminal defense lawyers.
  Some Democrats joined with most of the Republicans to support victims’
  rights . . . very few Republicans didn’t.
  Your district 5 State Representative Jim Hill is one of them.
  Many victims of crime urged the passage of Measure 40 because they
  wanted the victims to be treated at least as well as the criminals.
  But Jim Hill fought us all the way.
  The Parks Foundation paid for this message because we want you to
  know what your elected officials really do once they get to Salem.

The second radio message was identical to the first except
that it substituted District 34 State Representative Lane
Shetterly for Representative Hill. 22
  22 A copy of the print advertisement is not in the record, but the parties
stipulated that it was similar to the radio messages. Consequently our
findings with respect to the expenditure for the radio messages apply
equally to any portion devoted to the print advertisements.
292           145 UNITED STATES TAX COURT REPORTS                       (278)


  In addition, on July 23, 1999, Foundation paid $22,048 for
the production and broadcast of a third radio message
(Communication #8 23) which referred by name to Measure
11, a ballot measure that had been passed in 1994 enacting
a statute setting mandatory minimum sentences for certain
violent crimes. Several bills which sought to amend the
Measure 11 statute were introduced during the regular ses-
sion of the Oregon Legislative Assembly in the spring and
summer of 1999. The Communication #8 radio message pre-
sented the following script in narrative format:
  Portland Police have just arrested 32-year-old Todd Reed for the grue-
  some serial murders of 3 women.
  But what about Todd Reed’s criminal history? In ’81 he was convicted
  of burglary. In ’82, burglary. In ’87 convicted of 3 more burglaries. In ’92
  he was arrested for 3 counts of rape, 2 counts of sodomy, 5 counts of kid-
  naping, I [sic] count each sex abused [sic] and menacing.
  After plea-bargaining he got a 17-year sentence. But this was Oregon
  before Measure 11. He spent 2 years in jail. But if he was under
  Measure 11, there’d be no early release; he’d still be in jail.
  The State Senate just voted to allow some violent Measure 11 convicts
  a 15% reduction in prison time.
  Now, who would do that?
  From the Portland area, Senators Kate Brown, Ginny Burdick and
  Frank Shields.
  And the one most responsible, Neil Bryant of Bend.
  The Parks Foundation paid for this because we want you to know what
  the politicians really do once they get to Salem.

  Drafts of the three radio messages Foundation funded in
1999 were provided to Foundation’s tax counsel for his
review and approval, but there is no evidence that he pro-
vided any written response with respect to the content of the
messages.
  Foundation’s tax counsel sent Mr. Parks a letter dated
October 14, 1999. At that time, Foundation was the subject
of an investigation by the Oregon attorney general con-
cerning, inter alia, its expenditures for the broadcast of radio
advertisements. The investigation had commenced sometime

  23 The parties refer to this radio message as Communication #8, and we

shall as well.
(278)                   PARKS v. COMMISSIONER                               293


before March 12, 1998. 24 The letter referenced the Oregon
attorney general’s investigation and the poor prospects of
reaching any mutually agreeable settlement with that office.
The letter went on to specifically address Foundation’s prac-
tice of sponsoring ‘‘information ads on radio and in news-
papers’’ in the excerpts which follow.
    Sponsoring your own public information ads has produced the most
  ardent response from the Attorney General * * * . The law prohibits a
  private foundation form engaging in any activities intended to ‘‘affect the
  outcome of an election,’’ in other words, from lobbying. There are two
  forms of political activity that meet the test. They should be clearly
  distinguished in your mind when the ads are being produced and cir-
  culated because each has a slightly difference compliance standard.
    The two forms of lobbying are called ‘‘direct lobbying’’ and ‘‘grass roots
  lobbying’’.

After explaining the difference between direct and grass
roots lobbying, the letter turned specifically to ballot measure
initiatives, in the following excerpt.
     Until this year [1999], most of your activities have focused on the ini-
  tiative process. The law takes the view that the voters are the legisla-
  ture when deciding a [sic] initiative ballot issue. Thus, communicating
  with the voters about an initiative issue is direct lobbying, rather than
  grass roots lobbying. The requirement for urging a particular vote or to
  contact a legislator is not required. This is why the Attorney General is
  so adamant about condemning your activities; they believe you are
  engaging in direct lobbying: you refer to a specific bill or act (even when
  you don’t), and you are expressing a point of view. * * * a simple excep-
  tion to these lobbying rules [exists] which permits the expression of a
  point of view if the message is ‘‘educational’’. This is where the ‘‘gray
  area’’ comes in, and it is the arena in which the main battle with the
  Attorney General will be waged.
     It is not possible to express a ‘‘general rule’’ for you to follow in your
  political efforts. Instead, we urge you to simply stay focused on the facts.
  Do not succumb to emotion or generalizations of ‘‘good’’ or ‘‘bad’’ or
  ‘‘conservative’’ or ‘‘liberal.’’ It is certainly acceptable to use humor, sar-
  casm and imagery as long as they do not obscure the factual basis of
  your message.

  24 March   12, 1998, is the date of the earliest email in the record from
a financial investigator from the Oregon Department of Justice to Founda-
tion’s tax counsel. The subject of the email concerned the investigator’s ef-
forts to obtain the scripts of radio and newspaper advertisements prepared
for Foundation by Mr. Clapper, and the email reflected efforts to obtain
the scripts that had preceded the date of the email.
294          145 UNITED STATES TAX COURT REPORTS                      (278)


  2000
  In 2000 Foundation expended $341,062 to produce and
broadcast two radio messages. The messages were broadcast
before the Oregon general election held on November 7, 2000.
Appearing on the ballot of that election was Measure 8, an
initiative measure. The explanatory statement for Measure 8
described it as follows:
 EXPLANATORY STATEMENT
    Ballot Measure 8 would amend the Oregon Constitution by linking the
 rate of growth of state government spending to the rate of growth of per-
 sonal income in the state. The measure would limit all state spending,
 regardless of the source of the funds, to no more than 15 percent of total
 personal income of Oregonians earned in the two calendar years imme-
 diately preceding the budget period (biennium).
    If the state collects revenues in excess of the limit, the measure would
 require that those excess revenues be distributed to Oregon taxpayers in
 proportion to the income taxes they paid in the biennium. Excluded from
 this distribution are earnings from dedicated investment funds, such as
 retirement funds or the Common School Fund.
    The Legislature could vote to increase spending beyond the limit, but
 only if the Governor specifically declares an emergency, and three-
 fourths of the elected members of both the House and the Senate vote
 for the increased level of spending.
    The limit covers state spending from all sources of funds, such as
 taxes, fees, federal funds, and investment earnings. The measure would
 exclude from the limit proceeds from state-issued bonds, although it does
 include the funds appropriated to repay those bonds.
    For comparison, the state has recently experienced a spending level of
 about 18 percent of personal income. The estimated impact of the
 measure on the 2001–2003 state budget would be to limit expenditures
 to an amount $5.7 billion less than the projected spending of $32.4 bil-
 lion.
    The measure limits state spending. The measure does not cut state
 taxes, nor does it direct the Legislature or Governor how state funds are
 spent within the new limit.

  The first of the two radio messages, broadcast sometime
before late August 2000, presented the following script in
narrative format:
 Is Oregon State government really growing nearly 3 times faster than
 the personal income of those who pay its bills?
 Oregonians will soon be asked if they want to slow down the growth of
 their State government.
 Here are the facts. From 1989 to 91 State government grew by 21%, cit-
 izen income grew less than 9%. In 93 State income up 20%, citizens’
(278)                   PARKS v. COMMISSIONER                              295


  income just 11%. In 95 State incomes up another 23%, private pay up
  less than 11%. And in 97 the State income was up 14% and private pay
  just 8%.
  So what all this means is that over the last 10 years the State increased
  its income by more than 130%, while private pay increased less than
  50%.
  Our Tax dollars to State government have increased nearly 3 times
  faster than the personal income of its own citizens. And those are the
  State’s own figures.
  Paid for by the Parks Foundation.

   On August 25, 2000, Oregon’s largest newspaper (by cir-
culation) published an article addressing the claims made in
the radio message. See James Mayer, ‘‘Ad’s View of State
Budget Disputed as Incomplete’’, Oregonian, August 25,
2000, at C1. 25 The article reported on the radio message as
follows:
  Summary: A radio spot paid for by the Parks Foundation says the state
  tax has grown 3 times faster than residents’ personal income.[26]
  Conservative businessman Loren Parks has thrown the first punch in
  this year’s ballot fight about taxes and government spending, launching
  a statewide radio ad that claims Oregon’s budget has grown three times
  faster than personal income in the past decade.
  But the 60-second spot, paid for by the Parks Foundation, fails to
  account for inflation, population growth or the decade-long shift in school
  finance from local property taxes to the state budget.

  25 The newspaper article is a stipulated exhibit, and the parties stipu-

lated its authenticity. The parties stipulated that either had the right to
object to the admission of any stipulated exhibit ‘‘on the grounds of rel-
evancy and materiality, but not on other grounds unless expressly reserved
herein.’’ In the stipulations, petitioners reserved an objection to the article
on the basis of ‘‘evidentiary relevance’’ alone.
  While statements in the article are hearsay, petitioners have not ob-
jected on that ground and have therefore waived any such objection. See
Fed. R. Evid. 103(a)(1); United States v. Jamerson, 549 F.2d 1263, 1266–
1267 (9th Cir. 1977); Feder v. Commissioner, T.C. Memo. 2012–10; Estate
of Smith v. Commissioner, T.C. Memo. 2001–303, aff ’d, 54 F. App’x 413
(5th Cir. 2002). Statements in newspaper articles that have been admitted
without a hearsay objection may be considered for their probative value.
Garcia v. Commissioner, T.C. Memo. 1989–106; Kenerly v. Commissioner,
T.C. Memo. 1984–117. We overrule petitioners’ relevancy objection.
  26 The article also reported that Mr. Clapper had advised in an interview

that the figures used in the radio message for State revenue and personal
income were from Oregon Tax Research, a think tank.
296         145 UNITED STATES TAX COURT REPORTS                      (278)


 Considering those factors, growth in state spending has actually been
 slower than personal income growth in the 1990s.

  Specifically, with respect to the radio message’s claim that
over the past 10 years Oregon State revenues had risen by
more than 130% while personal income had risen by only
50%, the article states:
 The comparison is flawed, however, because one figure—personal
 income—is adjusted for population, while the other—spending—is not.
 Without adjusting for population, personal income grew by 87 percent in
 the same period, which is closer to the 130 percent rise in the budget.
 And by focusing on the general fund, the ad gives voters a misleading
 picture of * * * [Measure 8], which limits total state spending, not just
 the general fund. The state’s ‘‘all funds’’ budget, which includes federal
 funds, the gas tax and licenses and other user fees, increased 108 per-
 cent in the past 10 years.

The article further explains that much of the increase in
State spending over the past 10 years was attributable to a
1990 citizen-initiated measure that limited local property
taxes, thereby shifting primary responsibility for financing
public schools from localities to the State. The article con-
cluded:
 Accounting for the shift in school funding by adding in all school prop-
 erty taxes, adjusting for population growth and factoring in inflation
 turns the claim in the Parks’ radio ad on its head.
 Adjusted figures show that per capita state spending increased only 4
 percent over the last decade, far less than the 18 percent increase in per
 capita personal income.

   On August 24, 2000, the Oregon Department of Justice,
Charitable Activities Section, filed a lawsuit against Founda-
tion, alleging that Foundation had made expenditures from
1993 through 2000 that constituted taxable expenditures
under section 4945, thereby violating Oregon’s Nonprofit Cor-
poration Act, Or. Rev. Stat. sec. 65.036(5) (1999). The Oregon
attorney general’s audit of Foundation, a principal focus of
which      was    Foundation’s     expenditures     for   radio
advertisements, had been ongoing since at least March 1998,
and Foundation’s tax counsel and the Oregon attorney gen-
eral’s office had made efforts to settle the matter in 1999. In
October 1999, Foundation’s tax counsel advised Mr. Parks in
a letter that reaching a mutually agreeable settlement with
(278)                  PARKS v. COMMISSIONER                           297


the attorney general’s office concerning the issues raised in
the audit was unlikely.
   After the filing of the foregoing lawsuit, Foundation
arranged for the production and broadcast of the second
radio message at issue for 2000. The message presented the
following script in narrative format:
  A few weeks ago, the Parks Foundation revealed that, over the last 10
  years, Oregon government income has grown by 130%, nearly 3 times
  faster than the personal income of citizen’s who pay for it.
  The state government didn’t like what we said. They filed a lawsuit
  against us.
  But, like it or not, the general fund budget has gone from $4 to $10 bil-
  lion.
  And where’s that money gone?
  A big part of it goes to the Oregon Health plan that just paid a quarter
  million dollars for a convicted child molester from Mexico to receive a
  bone marrow transplant ... .
  And 2 brain surgeries for an out of state man...
  Gall bladder surgery for an out of state woman...And 2 knee replace-
  ments for a skier who lives off a trust fund but said he had no income.
  The state government is using taxpayers’ money to intimidate us from
  revealing this kind of information.
  Isn’t that what Richard Nixon did when he used the IRS to go after his
  political enemies?
  Paid for by the Parks Foundation.

   Drafts of both radio messages were provided to Founda-
tion’s tax counsel for his review and approval, but there is
no evidence that he provided a written response with respect
to the content of the messages.
Examination and Request for Correction
  Neither Foundation nor Mr. Parks filed a Form 4720,
Return of Certain Excise Taxes Under Chapters 41 and 42
of the Internal Revenue Code, for any of the years at issue.
Respondent conducted an examination of Foundation’s Forms
990–PF, Return of Private Foundation, for the years at issue,
and on October 16, 2002, respondent’s revenue agent sent a
letter to Foundation’s tax counsel advising of her conclusion
that Foundation’s expenditures for the radio messages were
taxable expenditures within the meaning of section 4945(d)
and of her intention to propose liabilities under section
298           145 UNITED STATES TAX COURT REPORTS                       (278)


4945(a)(1) for Foundation and under section 4945(a)(2) for
Mr. Parks as a foundation manager. The letter further
advised that the agent intended to propose liabilities under
section 4945(b)(1) for Foundation and under section
4945(b)(2) for Mr. Parks as foundation manager. Citing
Thorne v. Commissioner, 99 T.C. 67 (1992), the revenue
agent formally requested that Mr. Parks correct the expendi-
tures. 27 By letter dated November 11, 2002, Foundation’s tax
counsel advised the revenue agent that Mr. Parks refused to
make the requested correction.
Deficiency Determinations
   In a notice of deficiency issued to Foundation on December
22, 2006, respondent determined that Foundation’s expendi-
tures for radio messages of $65,000, $200,000, $33,011, and
$341,062 for its 1997–2000 taxable years, respectively, were
taxable expenditures under section 4945, resulting in
liability for excise tax deficiencies under section 4945(a)(1)
and, because the taxable expenditures had not been cor-
rected, under section 4945(b)(1) for each year. 28 In a notice
of deficiency issued to Mr. Parks that same day, respondent
determined that as a result of the foregoing expenditures,
Mr. Parks was liable for excise tax deficiencies under section
4945(a)(2) and, because the taxable expenditures had not
been corrected, under section 4945(b)(2) for each of the fore-
going years. Both petitioners timely petitioned for redeter-
mination, and their cases were consolidated.

                                Discussion

I. Private Foundations and Excise Tax Enforcement
  Provisions exempting charitable organizations from tax-
ation have been included in every income tax act since the
adoption of the Sixteenth Amendment, 29 see Revenue Act of
  27 The  revenue agent proposed that, under the circumstances, correction
could be accomplished by Mr. Parks’ reimbursing Foundation for the tax-
able expenditures.
   28 The notice of deficiency determined that Foundation’s excise tax liabil-

ity under sec. 4945(b)(1) for 1999 is $33,012, a figure that is $1 more than
the amount the parties have stipulated was Foundation’s total expenditure
for radio messages in that year.
   29 The Act of August 27, 1894, ch. 349, sec. 32, 28 Stat. at 556–557, also
(278)                  PARKS v. COMMISSIONER                             299


1913, ch. 16, sec. II(G), 38 Stat. at 172; see also Bob Jones
Univ. v. United States, 461 U.S. 574, 589 n.14 (1983), and
since 1917 individual taxpayers have been allowed a deduc-
tion for contributions to certain charitable organizations, 30
see War Revenue Act of 1917, ch. 63, sec. 1201(2), 40 Stat.
at 330. However, in the Tax Reform Act of 1969 (1969 Act),
Pub. L. No. 91–172, 83 Stat. 487, Congress enacted a new
statutory regime for a subset of section 501(c)(3) organiza-
tions, designated ‘‘private foundations’’ and defined for the
first time in that legislation as, generally speaking, all
organizations exempt from tax under section 501(c)(3) except
churches, schools, hospitals and medical research organiza-
tions, or other charitable organizations receiving a substan-
tial portion of their support from the general public or
governmental sources (public charities). Sec. 509(a). Congress
concluded that private foundations, typically subject to the
control of a single individual, family, or small group of per-
sons, were especially susceptible to having their resources
diverted to serve private rather than charitable purposes,
thereby subverting the rationale for according them tax-
exempt status and the benefits of being eligible to receive
tax-deductible contributions. See S. Rept. No. 91–552, at 57
(1969), 1969–3 C.B. 423, 460.
   Consequently, in subchapter A of chapter 42 of the
Internal Revenue Code, Congress imposed stricter rules on
private foundations as compared to public charities generally,
including excise taxes on self-dealing transactions and on
failures to distribute income. See secs. 4941 and 4942. Of
particular relevance to these cases, in contrast to public char-
ities—which are allowed to engage in ‘‘carrying on propa-
ganda, or otherwise attempting, to influence legislation’’ so
long as the foregoing is not ‘‘a substantial part of the activi-
ties’’ of the organization, see sec. 501(c)(3), a private founda-
tion is subject to excise taxes if it expends ‘‘any amount
* * * to carry on propaganda, or otherwise to attempt, to
included a provision exempting charitable organizations from tax, but the
income tax system provided for in the Act was declared unconstitutional.
Pollock v. Farmers’ Loan & Tr. Co., 158 U.S. 601 (1895).
   30 During the years at issue (and currently), sec. 170(a) allowed a deduc-

tion, subject to certain limitations and verification requirements, for con-
tributions to domestic sec. 501(c)(3) organizations (except organizations
testing for public safety) paid during the taxable year.
300           145 UNITED STATES TAX COURT REPORTS                      (278)


influence legislation’’, sec. 4945(d)(1); 31 see sec. 4945(a) and
(b). Of further relevance to these cases, these excise taxes
also apply if a private foundation expends any amount for
‘‘any purpose other than one specified in section 170(c)(2)(B)’’;
namely, ‘‘religious, charitable, scientific, literary, or edu-
cational purposes, or to foster national or international ama-
teur sports competition * * * or for the prevention of cruelty
to children or animals’’. Sec. 4945(d)(5).
   Congress also concluded that a different enforcement
mechanism—the aforementioned excise taxes—was appro-
priate for private foundations. Whereas the principal enforce-
ment mechanism for tax-exempt organizations at the time of
enactment of the 1969 Act had been revocation of tax-exempt
status (and the attendant forfeiture of eligibility to receive
tax-deductible contributions), Congress believed that loss of
exemption was an ineffective sanction in the case of private
foundations. Instead, Congress chose to impose excise taxes
on expenditures by private foundations that it determined
should be proscribed, reasoning that such an approach would
be both more effective and more proportionate to the infrac-
tion than loss of tax-exempt status. With respect to the
excise taxes, the Finance Committee report states:
    The committee has concluded that more effective limitations [than loss
  of tax exemption and denial of charitable contribution deduction status]
  must be placed on the extent to which tax-deductible and tax-exempt
  funds can be dispensed by private persons and that these limitations
  must involve more effective sanctions. Accordingly, the committee has
  determined that a tax should be imposed upon expenditures by private
  foundations for activities that should not be carried on by exempt
  organizations (such as lobbying, electioneering, and ‘‘grass roots’’ cam-
  paigning). * * * [S. Rept. No. 91–552, supra at 48, 1969–3 C.B. at 455.]

The Ways and Means Committee report contains substan-
tially identical language and further observes that ‘‘the
[excise tax] sanction will in most cases be far more propor-
tional to the impropriety than is the case under present law
[providing only the sanction of loss of tax-exempt status].’’
H.R. Rept. No. 91–413, at 31–36 (1969), 1969–3 C.B. 200,
221–223. 32 Public charities were excepted from the stricter
  31 As will be discussed in greater depth hereinafter, the provisions appli-
cable to private foundations further define what constitutes an ‘‘attempt to
influence legislation’’. See sec. 4945(e).
  32 The House version of the legislation would have imposed an excise tax
(278)                  PARKS v. COMMISSIONER                            301


rules and excise taxes ‘‘on the theory that their exposure to
public scrutiny and their dependence on public support would
keep them from the abuses to which private foundations
were subject.’’ Quarrie Charitable Fund v. Commissioner, 603
F.2d 1274, 1277 (7th Cir. 1979), aff ’g 70 T.C. 182 (1978); see
also H.R. Rept. No. 91–413, supra at 39–42, 1969–3 C.B. at
226–227.
II. Petitioners’ Liability for Excise Taxes Under Section 4945
  Section 4945 imposes four distinct excise taxes on ‘‘taxable
expenditures’’ of private foundations. A ‘‘taxable expenditure’’
is any amount paid or incurred by a private foundation for
any of the prohibited purposes listed in paragraphs (1)
through (5) of section 4945(d). Those purposes include: ‘‘to
carry on propaganda, or otherwise to attempt, to influence
legislation’’ and ‘‘for any purpose other than one specified in
section 170(c)(2)(B)’’. Sec. 4945(d)(1), (5).
  Section 4945(a)(1) imposes a tax on the foundation itself
equal to 10% 33 of the amount of each taxable expenditure
made by the foundation. Section 4945(a)(2) imposes a tax
equal to 2.5% of a taxable expenditure on any ‘‘foundation
manager’’ who agrees ‘‘to the making of an expenditure,
knowing that it is a taxable expenditure * * * unless such
agreement is not willful and is due to reasonable cause.’’ 34
A ‘‘foundation manager’’ for this purpose includes an officer,
director, or trustee of the foundation (or an individual having
powers or responsibilities similar to those of the foregoing).
Sec. 4946(b). The subsection (a)(1) and (2) taxes are des-
ignated as ‘‘first tier’’ taxes. Sec. 4963(a).
  More severe ‘‘second tier’’ taxes are imposed by section
4945(b)(1) and (2) when taxable expenditures are not timely
on a private foundation equal to 100% of the prohibited expenditure and
an excise tax equal to 50% of the prohibited expenditure on the foundation
manager. The two-tiered excise taxes in current law originated in the Sen-
ate version and were adopted in the conference version of the legislation.
See H.R. Conf. Rept. No. 91–782, at 286 (1969), 1969–3 C.B. 644, 649.
  33 The rate of tax imposed by sec. 4945(a)(1) increased to 20% for taxable

expenditures in years beginning after August 17, 2006. Pension Protection
Act of 2006 (PPA), Pub. L. No. 109–280, sec. 1212(e)(1)(A), (f), 120 Stat.
at 1074–1075.
  34 The rate of tax imposed by sec. 4945(a)(2) increased to 5% for expendi-

tures in taxable years beginning after August 17, 2006. PPA sec.
1212(e)(1)(B), (f), 120 Stat. at 1074–1075.
302           145 UNITED STATES TAX COURT REPORTS                       (278)


‘‘corrected’’. 35 The second tier tax on the private foundation
is equal to 100% of the amount of the taxable expenditure.
Sec. 4945(b)(1). When a second tier tax is imposed on the
foundation, a second tier tax, equal to 50% of the taxable
expenditure, is likewise imposed on any foundation manager
who ‘‘refused to agree to part or all of the correction’’. Sec.
4945(b)(2).
   Respondent determined that Foundation’s payments for
the production and broadcast of the radio messages were tax-
able expenditures. 36 He further determined that Foundation
and Mr. Parks were both liable for first and second tier
excise taxes on the expenditures. Petitioners argue that they
are not liable for excise taxes because the expenditures for
the radio messages were not taxable expenditures. They also
argue that section 4945 and the regulations thereunder, as
applied to them, are unconstitutionally vague and violate
their First Amendment rights.
   We begin by considering the application of each excise tax.


   35 ‘‘Correction’’ for this purpose means recovery of the expenditure to the

extent possible or, where recovery is not possible, such additional correc-
tive action as is prescribed by regulations. Sec. 4945(i). A correction will
prevent the imposition of the second tier tax if it is made before the earlier
of the date on which a notice of deficiency determining the first tier tax
is mailed or the first tier tax is assessed. Sec. 4945(b)(1) and (2), (i)(2).
   If the second tier tax is imposed, a correction may still be made during
a correction period that in general runs from the date of the taxable ex-
penditure until 90 days after the date of mailing of a notice of deficiency,
extended by any period during which the deficiency cannot be assessed
under sec. 6213(a). See secs. 4961(a), 4963(e). If correction occurs within
the correction period, then the second tier tax shall not be assessed; if it
is assessed, the assessment shall be abated, and if collected shall be cred-
ited or refunded as an overpayment. Sec. 4961(a). The correction period
provided in sec. 4963(e) enables a taxpayer to obtain Tax Court review of
the determination to impose the first and second tier taxes before making
the correction (and thereby avoiding liability for the second tier tax). See
Thorne v. Commissioner, 99 T.C. 67, 95 (1992).
   36 On brief respondent explains that because Foundation’s records did

not permit him to segregate the costs attributable to the individual radio
messages in years when multiple messages were produced, he treated
Foundation’s aggregate payments for the messages in each year as a single
expenditure. Accordingly, respondent determined Foundation made four
taxable expenditures, one in each of its taxable years at issue.
(278)                  PARKS v. COMMISSIONER                           303


  A. Section 4945(a)(1)
   Respondent determined excise tax deficiencies under sec-
tion 4945(a)(1) for Foundation of $6,500, $20,000, $3,301, and
$34,106 for its 1997, 1998, 1999, and 2000 taxable years,
respectively. Respondent argues first that Foundation’s
expenditures for the radio messages (except Communication
#8) were taxable expenditures under section 4945(d)(1)
because the messages were attempts to influence legislation.
He further argues in the alternative that all of the expendi-
tures for the radio messages (including Communication #8)
were taxable expenditures under section 4945(d)(5) because
the expenditures were for nonexempt purposes.
   Foundation bears the burden of proving the expenditures
were not taxable expenditures. See Thorne v. Commissioner,
99 T.C. at 87; Larchmont Found., Inc. v. Commissioner, 72
T.C. 131, 136 (1979), vacated and remanded on other
grounds, 659 F.2d 1085 (7th Cir. 1981).
  1. Attempts To Influence Legislation
   Under section 4945(d)(1) any amount paid by a private
foundation ‘‘to carry on propaganda, or otherwise to attempt,
to influence legislation, within the meaning of subsection (e)’’
is a taxable expenditure. Section 4945(e) provides:
    SEC. 4945(e). ACTIVITIES WITHIN SUBSECTION (d)(1).—For purposes of
  subsection (d)(1), the term ‘‘taxable expenditure’’ means any amount
  paid or incurred by a private foundation for—
       (1) any attempt to influence any legislation through an attempt to
    affect the opinion of the general public or any segment thereof, and
       (2) any attempt to influence legislation through communication with
    any member or employee of a legislative body, or with any other
    government official or employee who may participate in the formula-
    tion of the legislation (except technical advice or assistance provided
    to a governmental body or to a committee or other subdivision thereof
    in response to a written request by such body or subdivision, as the
    case may be),
  other than through making available the results of nonpartisan analysis,
  study, or research. * * *

Section 53.4945–2(a)(1), Foundation Excise Tax Regs., fur-
ther defines attempts to influence legislation for purposes of
the section 4945 excise taxes by incorporating provisions of
the regulations interpreting that phrase as used in section
4911(d), applicable to certain electing public charities. See
304            145 UNITED STATES TAX COURT REPORTS                          (278)


secs. 501(h), 4911. 37 Section 53.4945–2(a)(1), Foundation
Excise Tax Regs., generally provides that an expenditure is
an attempt to influence legislation if it is for a ‘‘direct or
grass roots lobbying communication, as defined in § 56.4911–
2 (without reference to §§ 56.4911–2(b)(3) and 56.4911–2(c))
and § 56.4911–3’’, unless it constitutes nonpartisan analysis,
study, or research, or technical advice given to a govern-
mental body in response to a written request.
  A ‘‘direct lobbying communication’’ is any attempt to influ-
ence any legislation through communication with:
     (A) Any member or employee of a legislative body; or
     (B) Any government official or employee (other than a member or
  employee of a legislative body) who may participate in the formulation
  of the legislation, but only if the principal purpose of the communication
  is to influence legislation.
     [Sec. 56.4911–2(b)(1)(i), Pub. Charity Excise Tax Regs.]

Such a communication will be treated as an attempt to influ-
ence legislation only if it ‘‘refers to specific legislation’’ and
‘‘reflects a view on such legislation’’. Id. subdiv. (ii). 38 ‘‘Legis-
lation’’ is defined in the regulations as including ‘‘action by
* * * any state legislature * * * or by the public in a ref-
erendum, ballot initiative, constitutional amendment, or
similar procedure.’’ 39 Id. para. (d)(1)(i). For this purpose,
‘‘ ‘specific legislation’ includes both legislation that has
already been introduced * * * and a specific legislative pro-
posal that the organization either supports or opposes.’’ Id.
  37 The   regulatory definitions of expenditures that are attempts to influ-
ence legislation—so-called lobbying expenditures—were made the same for
public charities electing under sec. 501(h) and private foundations subject
to excise taxes under sec. 4945 because of ‘‘the similarity of the statutory
schemes’’ governing lobbying by each. T.D. 8308, 1990–2 C.B. 112, 114; cf.
secs. 4945(e), 4911(d).
   38 A ‘‘grass roots lobbying communication’’ is ‘‘any attempt to influence

any legislation through an attempt to affect the opinions of the general
public or any segment thereof.’’ Sec. 56.4911–2(b)(2)(i), Pub. Charity Excise
Tax Regs. A communication will be considered a grass roots lobbying com-
munication only if it refers to and reflects a view on specific legislation or
a specific legislative proposal and in addition encourages the recipient of
the communication to take action with respect to such legislation. Id.
paras. (b)(2)(ii), (d)(1)(ii).
   39 The term ‘‘action’’ in para. (d)(1)(i) of the regulation ‘‘is limited to the

introduction, amendment, enactment, defeat or repeal of acts, bills, resolu-
tions, or similar items.’’ Sec. 56.4911–2(d)(2), Pub. Charity Excise Tax
Regs.
(278)                   PARKS v. COMMISSIONER                              305


subdiv. (ii). Thus, as the regulations clarify, a ‘‘specific legis-
lative proposal’’ may be ‘‘specific legislation’’ for this purpose
even though it has not actually been introduced in the legis-
lative body for the jurisdiction where the communication is
made. 40
  The regulations treat communications with the general
public regarding ballot measures as ‘‘direct lobbying commu-
nications’’.
     (iii) Special rule for referenda, ballot initiatives or similar proce-
  dures.—Solely for purposes of this section 4911 [of the regulations],
  where a communication refers to and reflects a view on a measure that
  is the subject of a referendum, ballot initiative or similar procedure, the
  general public in the state or locality where the vote will take place con-
  stitutes the legislative body, and individual members of the general
  public are, for purposes of this paragraph (b)(1), legislators. Accordingly,
  if such a communication is made to one or more members of the general
  public in that state or locality, the communication is a direct lobbying
  communication (unless it is nonpartisan analysis, study or research
  * * * ). [Sec. 56.4911–2(b)(1)(iii), Pub. Charity Excise Tax Regs.]

However, such a ballot measure does not become ‘‘specific
legislation’’ under the regulations until the petition seeking
its placement on the ballot is first circulated.
  In the case of a referendum, ballot initiative, constitutional amendment,
  or other measure that is placed on the ballot by petitions signed by a
  required number or percentage of voters, an item becomes ‘‘specific legis-
  lation’’ when the petition is first circulated among voters for signature.
  [Id. para. (d)(1)(ii).]

This special rule governing when ballot measures become
‘‘specific legislation’’ applies to measures ‘‘that * * * [are]
placed on the ballot by petitions signed by a required number
or percentage of voters’’. Id. The regulations are silent with
  40 A regulatory example illustrates that a ‘‘specific legislation proposal’’
can be ‘‘specific legislation’’, capable of being influenced by a lobbying com-
munication, notwithstanding that it has not been introduced in the legisla-
tive body where the communication is made.
  An organization based in State A notes in its newsletter that State Z has
  passed a bill to accomplish a stated purpose and then says that State
  A should pass such a bill. The organization urges readers to write their
  legislators in favor of such a bill. No such bill has been introduced into
  the State A legislature. The organization has referred to and reflected
  a view on a specific legislative proposal and has also encouraged readers
  to take action thereon. [Sec. 56.4911–2(d)(1)(iii), Example (2), Pub. Char-
  ity Excise Tax Regs.]
306           145 UNITED STATES TAX COURT REPORTS                          (278)


respect to a referendum, ballot initiative, constitutional
amendment, or similar measure that is placed on the ballot
by action of a legislature. 41
   41 The regulations’ treatment of a petition-initiated ballot measure as be-

coming ‘‘specific legislation’’ when the petition is first circulated is thus a
temporal standard. In finalizing these same regulations, however, the Sec-
retary expressly rejected a temporal standard for determining when legis-
lation (other than petition-initiated ballot measures) becomes ‘‘specific leg-
islation’’, finding that such a standard would be underinclusive by failing
to cover legislation not yet introduced. See T.D. 8308, 1990–2 C.B. at 114.
Given the regulations’ silence concerning the standard to be applied in de-
termining when ballot measures initiated by a legislature become ‘‘specific
legislation’’, difficult questions of interpretation could arise.
   The radio messages at issue for 1998 and 2000 were (according to re-
spondent’s position) addressed to petition-initiated ballot measures; name-
ly, Measures 61 and 65 in 1998 and Measure 8 in 2000. On the stipulated
facts, it is beyond dispute that the expenditures at issue were made, and
the radio messages were broadcast, after petitions were first circulated to
place the ballot measures on the ballot. Thus, the ballot measures were
‘‘specific legislation’’ within the meaning of the regulations at that time.
(With respect to Measure 61 in 1998, the radio messages referred to it by
name, which obviously meant the petition effort had not only started by
then but had been successful. Similarly, correspondence between Founda-
tion and its tax counsel before broadcast of the second set of radio mes-
sages in 1998 referred to them as ‘‘M65–1’’ and ‘‘M65–2’’, which persuades
us that successful petitions to place Measure 65 on the ballot had already
circulated at that time. With respect to Measure 8 in 2000, the contem-
poraneous newspaper account in the record persuades us that Measure 8
had been placed on the ballot at the time the 2000 radio messages were
paid for and broadcast, demonstrating that the petitions to place Measure
8 on the ballot had already been circulated at that time.)
   The radio message at issue for 1997 and two of them for 1999 were (ac-
cording to respondent’s position) addressed to legislatively initiated ballot
measures; namely, Measure 49 in 1997 and Measures 69 through 75 in
1999. Determining these ballot measures’ status as ‘‘specific legislation’’ is
less clear under the regulations. However, petitioners have not argued that
these ballot measures (or the petition-initiated ones) were not ‘‘specific leg-
islation’’ within the meaning of the regulations at the time the expendi-
tures were made or the radio messages were broadcast. They have also not
challenged the validity of the regulation that defines members of the gen-
eral public as ‘‘legislators’’ in the case of a referendum, ballot initiative, or
similar measures. Consequently, petitioners have waived any such argu-
ments, and we assume for purposes of deciding these cases that the ballot
measures at issue were ‘‘specific legislation’’ within the meaning of sec.
56.4911–2(d)(1), Pub. Charity Excise Tax Regs., when the radio messages
were broadcast.
(278)                   PARKS v. COMMISSIONER                             307


  Under the regulations, a communication is not a ‘‘direct
lobbying communication’’ if it constitutes ‘‘engaging in non-
partisan analysis, study or research and making available to
the general public or a segment or members thereof or to
governmental bodies, officials, or employees the results of
such work.’’ Sec. 53.4945–2(d)(1)(i), Foundation Excise Tax
Regs. The regulations define ‘‘nonpartisan analysis, study, or
research’’ as follows:
  For purposes of section 4945(e), ‘‘nonpartisan analysis, study, or
  research’’ means an independent and objective exposition of a particular
  subject matter, including any activity that is ‘‘educational’’ within the
  meaning of § 1.501(c)(3)-1(d)(3). Thus, ‘‘nonpartisan analysis, study, or
  research’’ may advocate a particular position or viewpoint so long as
  there is a sufficiently full and fair exposition of the pertinent facts to
  enable the public or an individual to form an independent opinion or
  conclusion. On the other hand, the mere presentation of unsupported
  opinion does not qualify as ‘‘nonpartisan analysis, study, or research’’.
  [Id. subdiv. (ii).]

Thus, a communication to the general public which refers to
a ballot measure that has become ‘‘specific legislation’’ and
reflects a view on the measure is an attempt to influence
legislation under section 4945(d)(1) and (e) unless it makes
available the results of ‘‘nonpartisan analysis, study, or
research’’ as defined in the regulations.
  Petitioners argue that, except for the two radio messages
that specifically refer to Measure 61 by name, the radio mes-
sages are not direct lobbying communications because they
do not ‘‘refer to’’ the ballot measures—in that they do not
mention any ballot measure by name. 42 Respondent argues
that a communication can ‘‘refer to’’ a ballot measure without
identifying it by name. We agree with respondent.
   42 Petitioners also argue that the radio messages ‘‘do not encourage the

recipient to take action in any of the ways described in Treasury Regula-
tion § 56.4911–2(d)(1)(ii).’’ However, the regulation petitioners cite makes
no reference to any encouragement to take action. Petitioners are appar-
ently referring to the regulations’ definition of a grass roots lobbying com-
munication, which requires that the communication encourage the recipi-
ent to take action with respect to the legislation at issue. See sec. 56.4911–
2(b)(2)(ii)(C), Pub. Charity Excise Tax Regs. But respondent does not con-
tend that the radio messages are grass roots lobbying communications; he
contends that they are direct lobbying communications for which there is
no requirement that the recipient be encouraged to take action.
308            145 UNITED STATES TAX COURT REPORTS                           (278)


   The regulations do not provide a definition of the term
‘‘refers to’’ but instead elucidate its meaning through illus-
trative examples. See T.D. 8308, 1990–2 C.B. at 14. The
pertinent examples address grass roots lobbying but are
equally applicable in the case of direct lobbying. 43 Section
56.4911–2(b)(4)(ii)(B), Example (1), Pub. Charity Excise Tax
Regs., explains:
  A pamphlet distributed by organization Y states that the ‘‘President’s
  plan for a drug-free America,’’ which will establish a drug control pro-
  gram, should be passed. The pamphlet encourages readers to ‘‘write or
  call your senators and representatives and tell them to vote for the
  President’s plan.’’ No legislative proposal formally bears the name
  ‘‘President’s plan for a drug-free America,’’ but that and similar terms
  have been widely used in connection with specific legislation pending in
  Congress that was initially proposed by the President. Thus, the pam-
  phlet refers to specific legislation, reflects a view on the legislation, and
  encourages readers to take action with respect to the legislation. The
  pamphlet is a grass roots lobbying communication.

By contrast, section 56.4911–2(b)(4)(ii)(A), Example (4), Pub.
Charity Excise Tax Regs., explains:
  A pamphlet distributed by organization Z discusses the dangers of drugs
  and encourages the public to send their legislators a coupon, printed
  with the statement ‘‘I support a drug-free America.’’ The term ‘‘drug-free
  America’’ is not widely identified with any of the many specific pending
  legislative proposals regarding drug issues. The pamphlet does not refer
  to any of the numerous pending legislative proposals, nor does the
  organization support or oppose a specific legislative proposal. The pam-
  phlet is not a grass roots lobbying communication.

Finally, section 56.4911–2(d)(1)(iii),                Example        (1),   Pub.
Charity Excise Tax Regs., explains:
  A nonmembership organization includes in its newsletter an article
  about problems with the use of pesticide X that states in part: ‘‘Legisla-
  tion that is pending in Congress would prohibit the use of this very dan-
  gerous pesticide. Fortunately, the legislation will probably be passed.
  Write your congressional representatives about this important issue.’’
  This is a grass roots lobbying communication that refers to and reflects
  a view on specific legislation and that encourages recipients to take
  action with respect to that legislation.

   43 Under the regulations, a required element of both a direct lobbying

communication and a grass roots lobbying communication is that each ‘‘re-
fers to specific legislation’’. Sec. 56.4911–2(b)(1)(ii)(A), (2)(ii)(A), Pub. Char-
ity Excise Tax Regs.
(278)              PARKS v. COMMISSIONER                    309


  On the basis of the principles illustrated in the regulatory
examples, we hold that a communication ‘‘refers to’’ a ballot
measure within the meaning of the regulations if it either
refers to the measure by name or, without naming it,
employs terms widely used in connection with the measure
or describes the content or effect of the measure.
  a. 1997
   The lone radio message Parks Foundation funded in 1997
refers to Oregon voters having told ‘‘the politicians’’ in 1994
that prisoners ought to be working 40 hours a week and then
describes Oregon’s Governor and attorney general as having
disregarded the voters’ intent by shutting down the prisoner
work program. The message reiterates that Oregon voters
had insisted that prison inmates should work, by virtue of
the earlier vote.
   In referring to prisoners working and the shutdown of pris-
oner work programs, the message employed terms ‘‘widely
used in connection with’’ Measure 49. Id. para. (b)(4)(ii)(B),
Example (1). As the explanatory statement for Measure 49
makes clear, the reinstatement of prisoner work programs
that had been shut down was the central purpose of the
measure. On this record, we are persuaded that the use of
various iterations of the term ‘‘prison inmate work program’’
in the explanatory statement for Measure 49 demonstrates
that those and similar terms had been widely used in connec-
tion with Measure 49 at the time the radio message was
broadcast. Petitioners have offered no evidence to support a
contrary conclusion. In addition, we are persuaded that a
comparison of the radio message and the explanatory state-
ment demonstrates that the radio message described the gen-
eral content of Measure 49. Consequently, the radio message
‘‘refers to’’ Measure 49 within the meaning of the regulations.
Sec. 56.4911–2(b)(1)(ii)(A), Pub. Charity Excise Tax Regs.
Moreover, considered in the context of the pendency of
Measure 49—which according to the explanatory statement
was designed to make reinstatement of prisoner work pro-
grams possible—the radio message’s emphatic endorsement
of the desirability of prisoner work programs means that the
message also ‘‘reflects a view on’’ Measure 49 within the
meaning of the regulations. Id. subdiv. (ii)(B). Accordingly,
the 1997 radio message is a ‘‘direct lobbying communication’’
310         145 UNITED STATES TAX COURT REPORTS           (278)


under section 56.4911–2(b)(1), Pub. Charity Excise Tax Regs.
unless it constitutes ‘‘nonpartisan analysis, study, or
research’’ as defined in section 53.4945–2(d)(1)(ii), Founda-
tion Excise Tax Regs., discussed infra.
  b. 1998
   Measures 61 and 65 were on the ballot in Oregon’s
November 3, 1998, general election. Measure 61 would have
enacted statutory provisions imposing minimum sentences
for certain ‘‘major crimes’’ and mandatory additional sen-
tences for certain repeat offenders. Measure 65 would have
amended the Oregon Constitution to require Oregon Legisla-
tive Assembly approval of administrative rules adopted by
State agencies when those rules are challenged in a petition
signed by a specified number of qualified voters.
   Foundation funded two radio messages that referred to
Measure 61 by name and were broadcast in the month before
the election. Each message ‘‘reflects a view on’’ Measure 61
because each posited that mandatory prison sentences for the
crimes covered by Measure 61 would result in a reduction in
crime in the same manner as had occurred after passage of
an earlier measure (Measure 11) that established mandatory
prison sentences for violent crimes. Accordingly, each of
these radio messages ‘‘refers to’’ and ‘‘reflects a view on’’
Measure 61 within the meaning of the regulations. Each is
thus a ‘‘direct lobbying communication’’ unless it constitutes
‘‘nonpartisan analysis, study, or research’’.
   Foundation also paid for the production and broadcast of
two additional radio messages in 1998, which also aired
during the month before the November 3, 1998, general elec-
tion, the subject of which was ‘‘administrative rules’’. Each
message cites an example of a seemingly arbitrary and
nonsensical government requirement imposed by ‘‘non-elected
government bureaucrats’’ and equates it with ‘‘administrative
rules’’ which—each message goes on to say—‘‘you’re gonna
hear a lot more about * * * in the weeks to come.’’ As noted,
the radio messages were broadcast just weeks before the
election where Measure 65 was on the ballot, and the
explanatory statement for it referred extensively to adminis-
trative rules as the focus of the measure. On this record, we
are persuaded that the use of the term ‘‘administrative rules’’
in the explanatory statement for Measure 65 demonstrates
(278)              PARKS v. COMMISSIONER                    311


that the term had been widely used in connection with
Measure 65 at the time the radio messages were broadcast.
Petitioners have offered no evidence to support a contrary
conclusion. Consequently, we find that the term ‘‘administra-
tive rules’’ was ‘‘widely used in connection with’’ Measure 65.
Therefore each message ‘‘refers to’’ Measure 65 within the
meaning of the regulations. Moreover, each message ‘‘reflects
a view on’’ Measure 65 because each alleges an instance
where an administrative rule was both unwarranted and con-
trary to legislative intent, strongly suggesting the desir-
ability of the greater legislative oversight provided for in
Measure 65. Therefore each radio message is a ‘‘direct lob-
bying communication’’ unless it constitutes ‘‘nonpartisan
analysis, study, or research’’.
  c. 1999
   Measures 69 through 75 were on the ballot in Oregon’s
November 2, 1999, statewide special election. The measures
were placed on the ballot by action of the Oregon Legislative
Assembly after a previously approved ballot measure—
Measure 40, which proposed a panoply of changes to the
Oregon Constitution affecting the criminal justice system,
including constitutional rights for victims of crime—was
found invalid by the Oregon Supreme Court because the bal-
lot measure included multiple constitutional amendments.
The Oregon Legislative Assembly responded by proposing the
contents of Measure 40 as separate constitutional amend-
ments, seven of which were denominated Measures 69
through 75, and referring them to the voters for reapproval.
   On June 2, 1999, Foundation funded the production and
broadcast of two radio messages. The messages were iden-
tical except in their reference to a specific member of the
Oregon legislature. They described the passage of Measure
40, its invalidation by the Oregon Supreme Court, and the
legislature’s subsequent splitting of Measure 40 into separate
ballot measures to be reapproved by the electorate. Because
the foregoing describes the content and effect of Measures 69
through 75 (albeit without naming them), each radio mes-
sage ‘‘refers to’’ Measures 69 through 75 within the meaning
of the regulations. See sec. 56.4911–2(d)(1)(iii), Example (1),
Pub. Charity Excise Tax Regs. Moreover, after describing the
content and effect of Measures 69 through 75, each message
312          145 UNITED STATES TAX COURT REPORTS                      (278)


posed the rhetorical question ‘‘Who would be against this?’’
and suggested that only ‘‘The liberals and criminal defense
lawyers’’ would be. Consequently, we conclude that each
radio message ‘‘reflects a view on’’ Measures 69 through 75
within the meaning of the regulations. Thus, each is a ‘‘direct
lobbying communication’’ unless it constitutes ‘‘nonpartisan
analysis, study, or research’’.
  d. 2000
  On the ballot for Oregon’s general election on November 7,
2000, was Measure 8, which sought to amend the Oregon
Constitution by limiting biennial State appropriations to no
more than 15% of total personal income for the State in the
two calendar years immediately preceding the budget period.
During 2000, before the vote Foundation paid $341,062 for
the production and broadcast of two radio messages.
  The first message stated:
  Is Oregon State government really growing nearly 3 times faster than
  the personal income of those who pay its bills?
  Oregonians will soon be asked if they want to slow down the growth of
  their State government.

The message then provided data purporting to support the
assertion that State government (as measured by its
‘‘income’’, or revenues) had grown nearly three times faster
than personal income over the past decade.
   The explanatory statement for Measure 8 described the
measure as ‘‘linking the rate of growth of state government
spending to the rate of growth of personal income in the
state.’’ Given the radio message’s reference to the rate of
growth of Oregon State government revenues as compared to
the rate of growth of personal income, coupled with its ref-
erence to the fact that Oregonians would ‘‘soon be asked’’
whether they wanted to slow down the growth of their State
government, we conclude that it ‘‘refers to’’ Measure 8 within
the meaning of the regulations. 44 It both employs terms
   44 We are mindful of that fact that the radio message equates State gov-

ernment growth with revenue growth, whereas Measure 8 would have lim-
ited State government growth by limiting spending growth. However, be-
cause Measure 8 directed that any revenue collected above its mandated
spending limit be refunded to Oregon taxpayers, we are persuaded on this
record that spending growth and revenue growth were treated inter-
(278)                   PARKS v. COMMISSIONER                             313


‘‘widely used in connection with’’ 45 Measure 8 and describes
its effect.
   The message’s contention that State revenues had been
growing at nearly three times the rate of growth of personal
income over the past decade—a growth rate that any reason-
able observer would likely think unsustainable—constitutes
near-explicit support for the idea that the growth of State
expenditures needed to be reigned in by some effective cap,
as Measure 8 would have done. Consequently, we find that
the message also ‘‘reflects a view on’’ Measure 8 within the
meaning of the regulations. It is therefore a ‘‘direct lobbying
communication’’ unless it constitutes ‘‘nonpartisan analysis,
study, or research’’.
   The second radio message also asserted, like the first, that
Oregon State government had grown three times faster than
personal income over the past 10 years. But it otherwise dif-
fers from the first radio message in three respects. First, the
message asserts that the State government had filed a law-
suit against Foundation in retaliation for its broadcast of the
disclosures about State government growth in the first radio
message. Second, it cited several examples of the seemingly
inappropriate expenditure of State funds for the health care
of nonresidents and wealthy individuals and cited as another
example the lawsuit, characterized as the State’s use of tax-
payer money ‘‘to intimidate us from revealing this kind of
information.’’ Finally, in contrast to the first radio message,
the second did not state that Oregon voters ‘‘will soon be
asked’’ whether they wanted to slow down the growth of
their State government.
   The absence of the ‘‘will soon be asked’’ language tips the
balance against a finding that the second radio message is a
‘‘direct lobbying communication’’ within the meaning of the

changeably as equivalent indicators of government growth in discussions
of Measure 8.
   45 Consistent with our analysis of the previous radio messages, we are

persuaded that the explanatory statement’s use of terms that linked the
‘‘rate of growth of state government’’ to the ‘‘rate of growth of personal in-
come’’ demonstrates that those terms were widely used in connection with
Measure 8 at the time the radio messages were broadcast. Petitioners have
offered no evidence to support a contrary conclusion.
314           145 UNITED STATES TAX COURT REPORTS                      (278)


regulations. 46 While the second message, in comparing the
rates of growth of State revenues and personal income,
employs ‘‘terms widely used in connection with’’ Measure 8,
the message is more accurately characterized as direct criti-
cism of the Oregon State government without a suggestion of
a remedy. The message’s central thrust is no longer advocacy
for Measure 8 but instead an attack on the Oregon State
government as wasteful and as retaliatory with respect to its
critics. Section 56.4911–2(b)(4)(ii)(B), Example (1), Pub. Char-
ities Excise Tax Regs., describes a scenario where a pamphlet
employs terms widely used in connection with a piece of
legislation (without naming it) but the pamphlet also states
that the legislation ‘‘should be passed’’. Against that bench-
mark, the second radio message falls short of ‘‘reflect[ing] a
view on’’ Measure 8. It is therefore not a ‘‘direct lobbying
communication’’.
  2. Nonpartisan Analysis, Study, or Research
   Foundation argues that even if the radio messages refer to
and reflect a view on the various ballot measures, its
expenditures for the messages were not ‘‘direct lobbying
communications’’ or attempts to influence legislation under
section 4945(d)(1) and the regulations because the radio mes-
sages qualify as ‘‘nonpartisan analysis, study, or research’’.
   The exception for ‘‘nonpartisan analysis, study, or
research’’ requires in the first instance that there have been
engagement in nonpartisan analysis, study, or research that
is made available to others. Sec. 53.4945–2(d)(1)(i), Founda-
tion Excise Tax Regs. With the exception of the first radio
message broadcast in 2000, 47 Foundation presented no evi-
  46 Respondent   argues on brief that the second radio message’s reference
to the first effectively incorporates the ‘‘will soon be asked’’ language. We
disagree.
   47 The first 2000 radio message satisfies one element of the regulatory

requirements for the ‘‘nonpartisan analysis, study, or research’’ exception;
namely, making available to the public the results of research. Sec.
53.4945–2(d)(1)(vii), Example (4), Foundation Excise Tax Regs., illustrating
the requirements of the ‘‘nonpartisan analysis, study, or research’’ excep-
tion, makes clear that the analysis, study, or research being made avail-
able to the general public may be the private foundation’s own work or re-
search and the like collected from others and disseminated. The record es-
tablishes that some of the statistics reported in the first 2000 radio mes-
sage were obtained from Oregon Tax Research.
(278)                   PARKS v. COMMISSIONER                             315


dence that the information contained in any of the radio mes-
sages was the result of any study or research it conducted or
collected from others, which gives rise to the presumption
that Foundation did not conduct or collect any such study or
research. See Wichita Terminal Elevator Co. v. Commis-
sioner, 6 T.C. 1158 (1946), aff ’d, 162 F.2d 513 (10th Cir.
1947). Moreover, the parties have stipulated that the radio
messages were all produced at an agency that ‘‘produces and
arranges for the broadcast of political advertisements’’, sug-
gesting a source that was not nonpartisan.
   More fundamentally, ‘‘nonpartisan analysis, study, or
research’’ must be an independent and objective exposition of
a particular subject matter. For purposes of section 4945(e),
‘‘nonpartisan analysis, study, or research’’ means ‘‘an inde-
pendent and objective exposition of a particular subject
matter, including any activity that is ‘educational’ within the
meaning of § 1.501(c)(3)–1(d)(3).’’ Sec. 53.4945–2(d)(1)(ii),
Foundation Excise Tax Regs. While such an analysis may
advocate a particular viewpoint, it must nonetheless present
‘‘a sufficiently full and fair exposition of the pertinent facts
to enable the public or an individual to form an independent
opinion or conclusion.’’ Id.
   As noted, the regulations provide that ‘‘nonpartisan anal-
ysis, study, or research’’ includes ‘‘any activity that is ‘edu-
cational’ within the meaning of § 1.501(c)(3)–1(d)(3).’’ Peti-
tioners contend that the radio messages qualify both as ‘‘non-
partisan analysis, study, or research’’ and as ‘‘educational’’ as
used in the statute and the regulations. The definitions of
‘‘educational’’ in section 1.501(c)(3)–1(d)(3), Income Tax Regs.,
and ‘‘nonpartisan analysis, study, or research’’ in section
53.4945–2(d)(1)(ii), Foundation Excise Tax Regs., both
employ the same requirement that any communication which
advocates a particular position or viewpoint must present a
sufficiently ‘‘full and fair exposition’’ of the pertinent facts to
enable the public or an individual to form an independent
opinion or conclusion. 48
  48 The  requirement is stated in sec. 53.4945–2(d)(1)(ii), Foundation Ex-
cise Tax Regs., as allowing advocacy of ‘‘a particular position or viewpoint
so long as there is a sufficiently full and fair exposition of the pertinent
facts to enable the public or an individual to form an independent opinion
or conclusion.’’ The requirement is stated in sec. 1.501(c)(3)–1(d)(3), Income
                                                 Continued
316           145 UNITED STATES TAX COURT REPORTS                        (278)


  The Commissioner has published the criteria he uses for
determining whether the ‘‘full and fair exposition’’ require-
ment is satisfied such that advocacy will be treated as ‘‘edu-
cational’’ within the meaning of section 501(c)(3) and section
1.501(c)(3)–1(d)(3), Income Tax Regs., in Rev. Proc. 86–43,
1986–2 C.B. 729. 49 The criteria focus on the method an
organization uses to communicate its viewpoint rather than
the viewpoint itself. See Nationalist Movement v. Commis-
sioner, 102 T.C. 558, 581–583 (1994), aff ’d on other grounds,
37 F.3d 216 (5th Cir. 1994). A method is not considered edu-
cational ‘‘if it fails to provide a factual foundation for the
viewpoint or position being advocated, or if it fails to provide
a development from the relevant facts that would materially
aid a listener or reader in a learning process.’’ Rev. Proc. 86–
43, sec. 3.02, 1986–2 C.B. at 729–730.
  Rev. Proc. 86–43, sec. 3.03, 1986–2 C.B. at 730, provides
that the presence of any of the following factors indicates an
organization’s method of presenting its viewpoint is not edu-
cational:
  1 The presentation of viewpoints or positions unsupported by facts is a
  significant portion of the organization’s communications.
  2 The facts that purport to support the viewpoints or positions are dis-
  torted.
  3 The organization’s presentations make substantial use of inflam-
  matory and disparaging terms and express conclusions more on the basis
  of strong emotional feelings than of objective evaluations.
  4 The approach used in the organization’s presentations is not aimed at
  developing an understanding on the part of the intended audience or

Tax Regs., as allowing advocacy of ‘‘a particular position or viewpoint so
long as it presents a sufficiently full and fair exposition of the pertinent
facts as to permit an individual or the public to form an independent opin-
ion or conclusion.’’ The differences are solely stylistic.
  49 Rev. Proc. 86–43, 1986–2 C.B. 729, was issued in response to the deci-

sion of the Court of Appeals for the D.C. Circuit holding that the definition
of ‘‘educational’’ in sec. 1.501(c)(3)–1(d)(3), Income Tax Regs., was unconsti-
tutionally vague in articulating the substantive requirements of the ‘‘full
and fair exposition’’ standard because it allowed ‘‘subjective application’’ by
IRS officials. See Big Mama Rag, Inc. v. United States, 631 F.2d 1030,
1037 (D.C. Cir. 1980). Petitioners have not challenged the sec. 1.501(c)(3)–
1(d)(3), Income Tax Regs., definition of ‘‘educational’’ as unconstitutionally
vague. They instead argue that the radio messages satisfy the criteria
identified in Rev. Proc. 86–43, supra, and are therefore ‘‘educational’’.
(278)                  PARKS v. COMMISSIONER                             317


  readership because it does not consider their background or training in
  the subject matter.

  Petitioners contend that the radio messages satisfy the cri-
teria of Rev. Proc. 86–43, supra, and are therefore ‘‘edu-
cational’’—making them ‘‘nonpartisan analysis, study, or
research’’. We therefore must decide whether the radio mes-
sages we have found are ‘‘direct lobbying communications’’
are nonetheless ‘‘educational’’ and therefore ‘‘nonpartisan
analysis, study, or research’’. In determining whether the
radio messages contain factual distortions, we rely (except in
the case of the radio messages broadcast in 2000) upon the
explanatory statements for the relevant measures as a
benchmark for impartial, objective analysis of the measures.
Because the explanatory statements were, with one
exception, 50 prepared pursuant to statutory requirements
designed to ensure that they were impartial—most notably
that the five-person drafting committee consist of two pro-
ponents, two opponents, and a fifth member agreed upon by
the preceding four—we are satisfied that the explanatory
statements provide a benchmark of impartiality against
which the radio messages can be measured to assess whether
they contain distortions. The financial impact statements
published in the voters pamphlets are prepared under
similar statutorily prescribed procedures designed to ensure
their impartiality.
  a. 1997
  The 1997 radio message contains multiple factors that
under Rev. Proc. 86–43, supra, are indicative that the
   50 The one exception is the explanatory statement for Measure 49. In

that instance, the Oregon legislature overrode the ordinarily applicable
statutory provisions (Or. Rev. Stat. Ann. secs. 251.205 and 251.215 (West
2015) providing for the five-person drafting committee) and statutorily pre-
scribed the wording of the explanatory statement. Nonetheless, we con-
clude that the explanatory statement for Measure 49 likewise provides a
reasonable benchmark of impartiality in describing Measure 49. That is
because, as discussed infra, the key distortion in the radio message refer-
ring to Measure 49 was the omission of the role played by the conflict be-
tween Federal law and the Oregon provisions for inmate work programs
in causing the cessation of the Oregon inmate work programs. That con-
flict, pointed out in the explanatory statement, is an objective factor. Con-
sequently, we do not believe the explanatory statement itself engaged in
any distortion in pointing out the existence of the conflict.
318         145 UNITED STATES TAX COURT REPORTS          (278)


method used to communicate the position is not educational.
First, the message distorts the facts which led to Oregon’s
shutting down a number of its inmate work programs. See
Rev. Proc. 86–43, sec. 3.03 (factor 2). The message suggests
that Oregon’s Governor and attorney general could have pre-
vented the programs from being shut down but did not
because of their personal views of the criminal justice
system, i.e., they ‘‘just don’t think criminals should spend
much time in jail’’ and ‘‘think * * * [criminals] can be
rehabilitated’’. However, the explanatory statement for
Measure 49 indicates that the department of corrections shut
the programs down because of a conflict with Federal law
and explains further that the constitutional amendments
proposed in Measure 49 were designed in part to make the
constitutionally mandated inmate work programs comply
with Federal law. The radio message’s implication that
Oregon’s Governor and attorney general discontinued the
inmate work programs because of their personal policy views
ignores the role of the Federal law conflict in the shutdown
and the fact that Measure 49 was proposed in part to cure
that conflict. The radio message therefore distorts the facts.
   Second, the message makes substantial use of inflam-
matory language and disparaging terms and reaches its
conclusion on the basis of strong feelings rather than objec-
tive evaluations. See id. sec. 3.03(3). The message indicates
that the Governor and the attorney general responded to the
voters who approved the constitutional amendment creating
inmate work programs by saying ‘‘NO, we’re not gonna do it.’’
Further, it characterizes the State’s failure to have the pro-
grams fully operational as ‘‘a bunch of whiney excuses’’.
These statements are inflammatory, disparaging, and taken
as a whole appear calculated to induce an emotional response
in suggesting (falsely) that certain elected officials dis-
regarded an overwhelming popular vote in favor of their per-
sonal policy preferences. For the foregoing reasons, we con-
clude the message is not ‘‘educational’’ within the meaning of
section 1.501(c)(3)–1(d)(3), Income Tax Regs.
  b. 1998
  We likewise find that the two 1998 radio messages that
refer to Measure 61 are not ‘‘educational’’. Each distorted
facts in suggesting that a statute providing for certain
(278)                   PARKS v. COMMISSIONER                            319


mandatory minimum sentences and certain additional sen-
tences for repeat offenders could be implemented without
significant cost. The first of the two messages contained the
following statement concerning an earlier enactment
(Measure 11) requiring minimum sentences:
  Back when John Kitzhaber was Senate President Legislation was passed
  that resulted in a convicted murderer, given a life sentence, actually
  serving less than 7 years in jail...
  They said they didn’t have enough jail space.
  But then came Measure 11.
  It required mandatory sentences for violent criminals with no possibility
  of early release...and...it required the state to build enough jail space.
  They said it would cost billions of dollars. But it didn’t.

                         *    *   *    *    *   *    *
  And now Measure 61’s on the ballot.
  It requires mandatory sentences for criminals convicted of property
  crimes.

                         *    *   *    *    *   *    *
  If Measure 61 passes, that criminal goes to jail. And they’ll have to build
  enough jail space to keep ‘em... There’ll be no early release.

The second radio message referencing Measure 61 stated in
part:
  The citizens, not the politicians, passed Measure 11 putting violent
  criminals in jail.

                         *    *   *    *    *   *    *
  They said it would cost billions. But, it didn’t. And the crime rate went
  down.
  And now ... Measure 61.

                         *    *   *    *    *   *    *
  With Measure 61, that criminal absolutely goes to jail ... and no early
  release.

  In asserting that past claims about the financial impact of
mandatory minimum prison sentences were unfounded, and
thereby implying that cost is an inconsequential factor in
deciding whether to enact further mandatory minimum sen-
tences, both messages distorted the available facts con-
cerning Measure 61. The financial impact statement for
320        145 UNITED STATES TAX COURT REPORTS            (278)


Measure 61 estimated that the mandatory and presumptive
sentences imposed by the measure would require 4,300 new
prison beds by 2006, with additional direct State expendi-
tures for prison construction and startup of $470 million by
2006. Direct State expenditures for prison operating costs
and debt service were estimated at $21 million in the first
two years after passage and $40 million in the following two
years. By omitting and seeking to discredit these public esti-
mates, the radio messages presented distortions of the facts
in support of the position they advocated. See Rev. Proc. 86–
43, sec. 3.03 (factor 2). They are thus not ‘‘educational’’
within the meaning of section 1.501(c)(3)–1(d)(3), Income Tax
Regs.
   The two radio messages broadcast in 1998 that refer to
Measure 65 also exhibit factors identified in Rev. Proc. 86–
43, supra, as indicative of a presentation method that is not
‘‘educational’’. Both messages make substantial use of dispar-
aging terms. Both characterize the administrative agency
personnel as ‘‘non-elected government bureaucrats’’. The first
goes on to describe them as the legislature’s ‘‘hired
workforce’’ and characterizes their attitude towards land-
owners adversely affected by an administrative rule as
‘‘tough, that’s your problem, not ours.’’ The second character-
izes administrators as having ‘‘made up’’ an administrative
rule. See id. sec. 3.03 (factor 3). Both messages’ description
of the circumstances surrounding the administrative actions
attacked are skeletal and incomplete. They do not identify or
even meaningfully describe the statutes and administrative
rules being criticized. One could surmise from the skeletal
descriptions that both involved zoning disputes, but the mes-
sages do not provide even the most rudimentary description
of the countervailing considerations raised by the particular
land use requests that were apparently denied. Thus, the
radio messages fail to provide ‘‘a sufficiently full and fair
exposition of the pertinent facts as to permit an individual or
the public to form an independent opinion or conclusion.’’ Id.
sec. 2.01. Because neither message provides the listener with
this basic information, the messages present ‘‘positions
unsupported by facts’’, id. sec. 3.03 (factor 1), and are ‘‘not
aimed at developing an understanding on the part of the
intended audience * * * because * * * [they do] not consider
* * * [the audience’s] background or training in the subject
(278)               PARKS v. COMMISSIONER                      321


matter’’, id. (factor 4). These radio messages are thus not
‘‘educational’’ within the meaning of section 1.501(c)(3)–
1(d)(3), Income Tax Regs.
  c. 1999
   The two radio messages broadcast in 1999 that refer to
Measures 69 through 75 are not ‘‘educational’’ because at
least two of the criteria in Rev. Proc. 86–43, supra, are
present. First, the messages offer no facts in support of the
position that Measures 69 through 75 should be approved.
Instead, each message summarily declares: ‘‘Who would be
against this? The liberals and criminal defense lawyers.’’ See
id. sec. 3.03 (factor 1). Second, the messages express conclu-
sions based more on strong feelings than on objective evalua-
tions. The messages portray the two members of the Oregon
legislature who opposed the referral of Measures 69 through
75 as ‘‘fighting against the victims of crime’’ in the victims’
effort ‘‘to be treated at least as well as the criminals.’’ See id.
(factor 3). We conclude on the basis of the methods by which
they presented their viewpoint that the messages were there-
fore not ‘‘educational’’.
  d. 2000
  The first radio message broadcast in 2000 that refers to
Measure 8 asserted that the size of State government (as
measured by revenues) had increased nearly three times
faster than personal income over the preceding 10 years. We
have already concluded that the message’s statement that
Oregon voters ‘‘would soon be asked’’ if they wanted to slow
down the growth of their State government was a reference
to Measure 8, which would have limited State spending to
15% of personal income. A contemporaneous newspaper
article concerning this radio message asserted that the radio
message’s statistics were flawed and misleading, insofar as
they suggested that the Oregon State government was
growing nearly three times faster than personal income. The
article contended that the statistics had at least three short-
comings: (1) the use of personal income figures that were
adjusted for population when the State spending figures were
not; (2) the use of the growth rate of the State’s general fund
spending, rather than that of ‘‘all funds’’ spending, which
rose 108% over the 10-year period as compared to 130% for
322        145 UNITED STATES TAX COURT REPORTS            (278)


the general fund; and (3) a failure to account for the shift in
spending on education from local governments to the State
government resulting from a 1990 citizen-initiated measure
that limited local property taxes. The article concluded by
asserting that when adjustments were made to account for
the foregoing flaws plus inflation, the rate of growth of State
government (as measured by per capita State spending) was
less than that of personal income; specifically, a 4% increase
in State spending as compared to an 18% increase in per-
sonal income over the past decade.
    Relying on the newspaper article, respondent contends that
the radio message contains two of the factors in Rev. Proc.
86–43, supra, that indicate a communication is not edu-
cational. First, respondent argues, the message presents dis-
torted facts, violating factor 2 of the revenue procedure. See
Rev. Proc. 86–43, sec. 3.03 (factor 2).
    Respondent’s reliance on a newspaper article to dem-
onstrate factual distortions in the 2000 radio messages
stands in contrast to the benchmarks used for assessing fac-
tual distortions in the radio messages at issue in earlier
years; namely, the explanatory statements. Those statements
were the consensus product of a committee composed of per-
sons favoring and opposing the ballot measure described. As
previously discussed, we conclude that such a drafting
process provided reasonable assurance of the explanatory
statements’ impartiality. By contrast, the newspaper article
is itself a piece of advocacy—quite clearly making the case
against the conclusions urged by the radio message.
Respondent presents as evidence of the radio message’s dis-
torted facts the newspaper article’s assertion that the radio
message’s comparison of the rate of growth of personal
income with the rate of growth of State spending was
‘‘flawed’’ because the former is adjusted for population and
the latter is not. On this record, we are unable to conclude
that the radio message presented distorted facts. It has not
been shown that the actual figures for the respective growths
of personal income and State spending cited in the radio
message were distorted. Instead, the claim of distortion is
that the straightforward comparison of those two growth
rates is ‘‘flawed’’ and, presumably, misleading because one is
adjusted for population and the other is not. With better evi-
dence to support it, respondent’s contention might raise a
(278)                  PARKS v. COMMISSIONER                           323


close question regarding where to draw the line between
permissible advocacy and factual distortion. However, given
the dubious evidence respondent has proffered—a newspaper
article that is only in the record for lack of a hearsay objec-
tion, the author of which cannot be cross-examined—we are
not persuaded that the radio message presented distorted
facts.
   Second, respondent contends, again relying on the news-
paper article, that the radio message also violates factor 4 of
Rev. Proc. 86–43, sec. 3.03 because ‘‘there is much back-
ground material that is missing from the presentation that
would be necessary for the public to understand and evaluate
the material.’’ In this regard, respondent points to the news-
paper article’s assertion that the radio message’s statistics
failed to account for population growth, inflation, and the
shift in school funding from local to State government.
Respondent makes the further point in support of a factor 4
violation that ‘‘[t]he relationship between state spending and
personal income is too complex to meaningfully be taught in
a single minute as Foundation asserts it has done. Thus, the
communication was not educational.’’
   In Nationalist Movement v. Commissioner, 102 T.C. 558,
we held that Rev. Proc. 86–43, supra, is not unconstitution-
ally vague on its face or as applied to the tax-exempt
organization in that case. In so holding, we observed:
     Petitioner apparently reads the revenue procedure [Rev. Proc. 86–43,
  supra,] to require organizations to present and rebut opposing views
  * * * . * * * The revenue procedure, however, does not by its terms
  require this type of presentation * * * . Because the IRS does not condi-
  tion educational status under the revenue procedure on the presentation
  of opposing views, the IRS is not called upon to evaluate how accurately
  or completely an organization presents such views. [Id. at 586–587.]

Factor 4 in Rev. Proc. 86–43, sec. 3.03 states that advocacy
of a viewpoint may not be considered educational where
‘‘[t]he approach used in the organization’s presentations is
not aimed at developing an understanding on the part of the
intended audience or readership because it does not consider
their background or training in the subject matter.’’
Respondent effectively argues that the radio message’s omis-
sion of ‘‘background material’’—which respondent identifies
as the failure to adjust for population growth, inflation, or
the shift in school funding from local to State government—
324          145 UNITED STATES TAX COURT REPORTS                      (278)


is a violation of factor 4. We disagree. We conclude instead
that respondent’s treatment of the omissions as a violation of
factor 4 interprets Rev. Proc. 86–43, sec. 3.03 too expansively
to require presentation of opposing views. For example,
whether some portion of the sharp increase in State spending
purportedly identified in the radio message could be
accounted for by the shift in school funding responsibility to
the State is a matter about which advocates for and against
limitations on State spending could be expected to take
opposing views. 51 But to require Foundation’s advocacy for
State spending limitations to disclose that argument lest it
violate factor 4 goes too far. We specifically rejected that
interpretation of Rev. Proc. 86–43, supra, in Nationalist
Movement because it would require the IRS ‘‘to evaluate how
accurately or completely an organization presents * * *
[opposing] views.’’ Nationalist Movement v. Commissioner,
102 T.C. at 587. We reject it here as well, and conclude that
the first radio message in 2000 did not violate factor 4 of
Rev. Proc. 86–43, sec. 3.03. Finally, for similar reasons, we
reject respondent’s contention that a factor 4 violation has
occurred because the relationship between State spending
and personal income is too complex to meaningfully be
taught in a single minute. Accepting such an argument
would disqualify most radio and television advertisements
where the IRS deemed the subject matter ‘‘complex’’—raising
again the specter of subjective application that Rev. Proc.
86–43, supra, was intended to mitigate—or it would require
the IRS to evaluate communications for accuracy and
completeness in a manner proscribed by Nationalist Move-
ment.
  Because the first 2000 radio message provided facts and
statistics to support its viewpoint that mandatory limits
should be imposed on State spending, it has ‘‘provide[d] a
factual foundation for the viewpoint or position being advo-
cated’’, Rev. Proc. 86–43, sec. 3.02. The radio message did not
violate factors 2 and 4 of Rev. Proc. 86–43, sec. 3.03 as con-
  51 We cite the school funding shift because the newspaper article does

not explain how inflation should have been accounted for in its critique of
Foundation’s radio message or even whether one or both of the State rev-
enue and personal income figures had been adjusted for inflation. We have
considered the omission of the population growth adjustment in our discus-
sion of whether the radio message presented distorted facts.
(278)               PARKS v. COMMISSIONER                     325


tended by respondent. Consequently, the radio message is
‘‘educational’’ and therefore ‘‘nonpartisan analysis, study, or
research’’.
  3. Nonexempt Purpose
   Respondent argues in the alternative that the expenditures
for the radio messages are taxable expenditures under sec-
tion 4945(d)(5) because they were for a nonexempt purpose.
Any amount paid by a private foundation ‘‘for any purpose
other than one specified in section 170(c)(2)(B)’’ is a taxable
expenditure. Id. The specified purposes are religious, chari-
table, scientific, literary, and educational, as well as fostering
amateur sports competition and preventing cruelty to chil-
dren or animals. Sec. 170(c)(2)(B). Thus, an expenditure for
an activity which, if it were a substantial part of the
organization’s total activities, would cause loss of tax exemp-
tion is a taxable expenditure under section 4945(d)(5). Sec.
53.4945–6(a), Foundation Excise Tax Regs.; see also sec.
1.501(c)(3)–1(c)(1), Income Tax Regs. Petitioners argue that
the expenditures were not taxable expenditures under sec-
tion 4945(d)(5) because they were ‘‘educational’’. Petitioners
offer ‘‘educational’’ as the only exempt purpose of the
expenditures.
   We have already found, in considering petitioners’ claim
that the radio messages were ‘‘nonpartisan analysis, study,
or research’’, that all but three of them were not ‘‘edu-
cational’’ within the meaning of section 1.501(c)(3)–1(d)(3),
Income Tax Regs. They are therefore also taxable expendi-
tures under section 4945(d)(5). We have concluded that the
first 2000 radio message was ‘‘educational’’ within the
meaning of section 501(c)(3) and section 1.501(c)(3)–1(d)(3),
Income Tax Regs. Consequently, the expenditure for that
radio message is not a taxable expenditure under section
4945(d)(5). That leaves two radio messages requiring further
consideration: Communication #8 in 1999, which respondent
has not contended is an attempt to influence legislation
under section 4945(d)(1), and the second radio message in
2000, which we have concluded was not a ‘‘direct lobbying
communication’’ though respondent so contended.
326         145 UNITED STATES TAX COURT REPORTS              (278)


  a. Communication #8
   Communication #8 aired when several bills were before the
Oregon Legislative Assembly in the spring and summer of
1999 that would have amended Measure 11, a citizen-initi-
ated ballot measure passed in 1994 that established manda-
tory minimum sentences for certain crimes.
   Communication #8 described a man recently arrested for
‘‘the gruesome serial murders of 3 women’’, documented his
lengthy criminal history preceding that arrest, and noted the
short prison sentence the man served for his past crimes.
The message then contended that the man would still have
been in jail had the mandatory minimum sentences of
Measure 11 been in effect at the time and noted that the
‘‘State senate just voted to allow some violent Measure 11
convicts a 15% reduction in prison time.’’ Asking rhetorically
‘‘Now, who would do that?’’, it identified four senators who
had so voted.
   Communication #8 contains two factors from Rev. Proc.
86–43, supra, indicating that it is not ‘‘educational’’. First, in
failing to provide information concerning the circumstances
under which the sentence reductions would apply, the radio
message omits critical facts. See id. sec. 3.02 and 3.03(1).
Without these facts, a listener could not evaluate whether
the reductions were justified or whether they would have
reduced the sentence of the accused serial murderer (had he
been sentenced for his earlier convictions when Measure 11
was applicable). Second, in highlighting ‘‘gruesome serial
murders’’ and the extensive criminal background of a single
individual, without disclosing the nature of the reductions in
the legislation supported by the named senators, the presen-
tation expresses a conclusion—namely, that the four named
senators acted reprehensibly—‘‘more on the basis of strong
emotional feelings than of objective evaluations.’’ Id. sec.
3.03(3). Communication #8 is therefore not ‘‘educational’’
within the meaning of section 1.501(c)(3)–1(d)(3), Income Tax
Regs., and Foundation’s expenditure for it is a taxable
expenditure under section 4549(d)(5).
  b. Second Radio Message in 2000
   The second 2000 radio message repeated the claim of the
first that State government revenue had grown nearly three
(278)               PARKS v. COMMISSIONER                    327


times faster than personal income but also made a new and
different assertion; namely, that the State of Oregon had
filed a lawsuit against Foundation in retaliation for its
disclosures in the first 2000 radio message about the growth
rate of State revenue. In making the assertion about retalia-
tion, the radio message did not disclose that Foundation had
been under audit by the Oregon attorney general’s office con-
cerning its expenditures for radio advertisements for (at a
minimum) more than two years before the first 2000 radio
message was broadcast—a material fact of substantial rel-
evance to the claim of retaliation. Petitioners have offered no
additional evidence to support the radio message’s claim
about retaliation, and the evidence in the record—concerning
the length and seriousness of the attorney general’s inves-
tigation and the unlikely prospects of settlement—tends to
rebut the claim of retaliation. We conclude that the failure
to disclose the investigation, given the material nature of
that fact to the claim of retaliation, rendered the radio mes-
sage’s assertion concerning the retaliatory nature of the law-
suit a factual distortion. See Rev. Proc. 86–43, sec. 3.03
(factor 2). Moreover, the radio message went on to charac-
terize the State’s filing of the lawsuit as follows: ‘‘Isn’t that
what Richard Nixon did when he used the IRS to go after his
political enemies?’’ These are obviously inflammatory and
disparaging terms, causing the radio message to violate
factor 3 of Rev. Proc. 86–43, sec. 3.03 as well. Given the pres-
ence of factors 2 and 3, we conclude that the second 2000
radio message’s presentation is not ‘‘educational’’ within the
meaning of section 1.501(c)(3)–1(d)(3), Income Tax Regs., and
Foundation’s expenditure for it is a taxable expenditure
under section 4549(d)(5).
  4. Conclusion
   Foundation’s expenditures for all of the radio messages
during its years at issue, except Communication #8 and the
first and second 2000 radio messages, were taxable expendi-
tures under section 4945(d)(1) because they were attempts to
influence legislation as defined in section 4945(e) and the
regulations thereunder. In addition, all of the expenditures,
except the first 2000 radio message, were taxable expendi-
tures under section 4945(d)(5) because they were not for an
exempt purpose specified in section 170(c)(2)(B). The first
328           145 UNITED STATES TAX COURT REPORTS                     (278)


2000 radio message was ‘‘educational’’ within the meaning of
section 1.501(c)(3)–1(d)(3), Income Tax Regs., as applied in
Rev. Proc. 86–43, supra. Consequently, the amounts Founda-
tion paid 52 for the first 2000 radio message are not a taxable
expenditure under either section 4945(d)(1) or (5), as deter-
mined by respondent. Except with respect to the expenditure
for the first 2000 radio message, we sustain respondent’s
determination of the section 4945(a)(1) excise tax deficiencies
for Foundation for its years at issue.
  B. Section 4945(a)(2)
   Respondent determined excise tax deficiencies under sec-
tion 4945(a)(2) for Mr. Parks of $1,625, $5,000, $825, and
$5,000 for 1997, 1998, 1999, and 2000, respectively. Section
4945(a)(2) imposes a 2.5% tax on ‘‘the agreement of any
foundation manager to the making of an expenditure,
knowing that it is a taxable expenditure, * * * unless such
agreement is not willful and is due to reasonable cause.’’ The
tax is limited to $5,000 per taxable expenditure and payable
by the foundation manager. 53 Sec. 4945(a)(2), (c)(2). The par-
ties stipulated that to the extent Foundation is found liable
for tax under section 4945(a)(1), ‘‘Mr. Parks shall be deemed
liable pursuant to I.R.C. § 4549(a)(2), subject to the $5,000
limitation contained in I.R.C. § 4945(c)(2), unless Mr. Parks
establishes that he agreed to the expenditures based on
advice of counsel as described in Treas. Reg. § 53.4945–
1(a)(2)(vi).’’ 54
  52 As noted, respondent represents on brief that Foundation’s records did
not establish what portion of the $341,062 Foundation spent during its
2000 taxable year was allocable to the first and second radio messages, re-
spectively. Such an allocation now becomes necessary in view of our hold-
ing that the expenditure for the first was not a taxable expenditure while
the expenditure for the second was. We expect the parties to resolve this
issue as part of their computations under Rule 155. We note in this regard
that Foundation bears the burden of establishing that an expenditure is
not a taxable expenditure.
  53 The limit increased to $10,000 per taxable expenditure for taxable

years beginning after August 17, 2006. PPA sec. 1212(e)(2)(A), (f), 120
Stat. at 1075.
  54 We find implicit in this stipulation the proposition that Mr. Parks was

a ‘‘foundation manager’’ within the meaning of sec. 4946(b). The parties
also stipulated that Mr. Parks was a member of the board of directors of
Foundation and that he approved all of the taxable expenditures at issue.
(278)                  PARKS v. COMMISSIONER                            329


   We note as a preliminary matter that section 53.4945–
1(a)(2)(vi), Foundation Excise Tax Regs., provides that ‘‘the
absence of advice of counsel with respect to an expenditure
shall not, by itself, give rise to any inference that a founda-
tion manager agreed to the making of the expenditure know-
ingly, willfully, or without reasonable cause.’’ The parties’
stipulation, however, has narrowed Mr. Parks’ defense to one
of reliance on advice of counsel; pursuant to the stipulation,
Mr. Parks will incur the section 4945(a)(2) excise taxes (to
the extent Foundation is found liable for the related section
4945(a)(1) taxes) unless he affirmatively establishes that he
agreed to the making of the expenditures ‘‘based on the
advice of counsel’’ as that advice is described in the regula-
tion.
   Section 53.4945–1(a)(2)(vi), Foundation Excise Tax Regs.,
provides in part as follows:
    (vi) Advice of counsel.—If a foundation manager, after full disclosure
  of the factual situation to legal counsel * * * , relies on the advice of
  such counsel expressed in a reasoned written legal opinion that an
  expenditure is not a taxable expenditure under section 4945 (or that
  expenditures conforming to certain guidelines are not taxable expendi-
  tures), although such expenditure is subsequently held to be a taxable
  expenditure * * * , the foundation manager’s agreement to such
  expenditure * * * will ordinarily not be considered ‘‘knowing’’ or ‘‘will-
  ful’’ and will ordinarily be considered ‘‘due to reasonable cause’’ within
  the meaning of section 4945(a)(2). * * *

A written legal opinion will be considered ‘‘reasoned’’ even if
it reaches a conclusion that is subsequently determined to be
incorrect so long as it ‘‘addresses itself to the facts and
applicable law.’’ Id. A written legal opinion that ‘‘does
nothing more than recite the facts and express a conclusion’’
is not ‘‘reasoned’’. Id.
   The parties stipulated that drafts of the radio messages
created after November 30, 1997, were provided to Founda-
tion’s tax counsel for his review and approval. However, the
record contains only two written responses from the attorney
that address whether specific radio messages would give rise
to a taxable expenditure, and a letter from him that could be
construed as providing guidelines for taxable expenditures.
   The first written response that opined that a specific radio
message would not give rise to a taxable expenditure con-
cerned the first 1998 radio message that referred to Measure
330           145 UNITED STATES TAX COURT REPORTS                      (278)


61. The response is reproduced in full in our findings. As
pertinent here, the response states:
  We have reviewed the text of radio spot M61#1. The Foundation is not
  permitted to support or oppose any political candidate or any ballot
  measures. * * * The conclusion of this radio spot is close to an endorse-
  ment of the ballot measure, but we do not think it goes too far. * * *

Thus, the conclusion effectively reached is that the radio
message did not ‘‘reflect[ ] a view on’’ Measure 61 as provided
in the regulations. See sec. 56.4911–2(b)(1), Pub. Charity
Excise Tax Regs. However, nowhere does the written
response address the facts of the radio message or the sub-
stance of the applicable law, such as describing how the
statements in the message are similar to, or distinguishable
from, the regulatory examples that delineate what con-
stitutes ‘‘reflect[ing] a view on’’ a ballot measure for purposes
of defining a ‘‘direct lobbying communication’’. Consequently,
this written response provided by Foundation’s tax counsel
does not qualify as a ‘‘reasoned written legal opinion’’ under
the regulations. 55
  The second written response that opined that a specific
radio message would not give rise to a taxable expenditure
concerned the two 1998 radio messages that we have con-
cluded referred to Measure 65. That written response stated
in full: ‘‘We have reviewed the texts of spots labeled M65–1
and M65–2. They appear to comply with the ‘public edu-
cation’ purpose of the Parks Foundation. If you have further
questions, please contact us.’’ This statement ‘‘does nothing
more than recite the facts and express a conclusion’’, sec.
53.4945–1(a)(2)(vi), Foundation Excise Tax Regs., and is
therefore not a ‘‘reasoned written legal opinion’’ under the
regulations.
  Finally, an October 14, 1999, letter from Foundation’s tax
counsel to Mr. Parks advised him of the exception for lob-
bying communications that express a point of view so long as
the message is ‘‘educational’’. As pertinent to the ‘‘edu-
   55 Even if one were to construe the written response’s conclusion that the

radio message ‘‘does not go too far’’ as premised on the proposition that
the message constituted ‘‘nonpartisan research, analysis, or study’’ or was
‘‘educational’’ within the meaning of the regulations, there is likewise no
discussion of the requirements of those regulatory exceptions or how the
message met those requirements.
(278)                   PARKS v. COMMISSIONER                               331


cational’’ exception for lobbying communications, the letter
stated:
     It is not possible to express a ‘‘general rule’’ for you to follow in your
  political efforts. Instead, we urge you to simply stay focused on the facts.
  Do not succumb to emotion or generalizations of ‘‘good’’ or ‘‘bad’’ or
  ‘‘conservative’’ or ‘‘liberal.’’ It is certainly acceptable to use humor, sar-
  casm and imagery as long as they do not obscure the factual basis of
  your message.

   To the extent this October 14, 1999, letter may constitute
guidelines as contemplated in the regulations, it could pro-
vide a basis for relief only with respect to the expenditures
for the two radio messages prepared and broadcast in
2000. 56 The expenditures for the 1999 radio messages were
made in June and July of 1999; thus Mr. Parks could not
have relied on this letter in making those expenditures or
any earlier ones.
   Respondent contends that the letter does not constitute
advisory guidelines for purposes of the regulation because it
does not cite specified language from the regulations and
Rev. Proc. 86–43, supra, and therefore does not ‘‘address
itself to the * * * applicable law’’ concerning what is ‘‘edu-
cational’’. We disagree. The letter explains, as respondent
concedes on brief, that an expenditure for a lobbying commu-
nication that qualifies as ‘‘educational’’ is not a taxable
expenditure. The letter further points out that even where
the communication expresses a point of view, it is not lob-
bying if it ‘‘stay[s] focused on the facts’’ and avoids emotion
and conclusory generalizations. The foregoing material
reasonably approximates the substance of the definition of
‘‘educational’’ in section 53.4945–2(d)(1)(ii), Foundation
Excise Tax Regs., as delineated in Rev. Proc. 86–43, supra.
We note in this regard the letter’s reference to a ‘‘point of
view’’ being allowable and the emphasis on sticking to facts,
which approximate the regulation. 57 In addition, the letter’s
  56 Since we have concluded that Foundation’s expenditure for the first

2000 radio message was not a taxable expenditure, we need not decide
whether Mr. Parks had reasonable cause based on advice of counsel in
agreeing to the expenditure.
  57 As noted, sec. 53.4945–2(d)(1)(ii), Foundation Excise Tax Regs., pro-

vides that a communication is ‘‘educational’’ even though it ‘‘advocate[s] a
particular position or viewpoint so long as there is a sufficiently full and
                                                  Continued
332            145 UNITED STATES TAX COURT REPORTS        (278)


instructions to avoid emotion and generalizations reflect fac-
tors identified in Rev. Proc. 86–43, supra, to be avoided;
namely, ‘‘express[ing] conclusions more on the basis of strong
emotional feelings than of objective evidence’’ and ‘‘view-
points * * * unsupported by facts’’. While the letter’s anal-
ysis is far from a perfect distillation of the applicable law
defining an ‘‘educational’’ communication, we conclude that it
discussed the applicable law with sufficient accuracy to
qualify as a ‘‘reasoned written legal opinion’’ under section
53.4945–1(a)(2)(vi), Foundation Excise Tax Regs.
   The question remains whether Mr. Parks in fact relied on
Foundation’s tax counsel’s advice; that is, whether the second
radio message he approved in 2000 adhered to the letter’s
guidelines so that Mr. Parks’ reliance could be said to have
been based on that adherence.
   As previously noted, the second 2000 radio message
repeated the claim of the first about the growth rate of the
Oregon State government but made the additional claim that
the State government had filed a lawsuit against Foundation
in retaliation for the disclosures about the growth rate that
Foundation made in the first radio message. Mr. Parks nec-
essarily knew when he agreed to the expenditure for the
second message that the assertion about the lawsuit’s having
been filed as retaliation was a factual distortion. At that
time, he knew—by virtue of the October 14, 1999, letter to
him from Foundation’s tax counsel—that Foundation’s
funding of radio advertisements had been under active inves-
tigation by State authorities and was unlikely to be resolved
by settlement, well before the broadcast of the first radio
message in 2000. Thus Mr. Parks knew that the second mes-
sage did not adhere to the letter’s guideline to ‘‘stay focused
on the facts’’; he knew that the second message contained a
significant distortion of fact. Consequently, he did not agree
to the expenditure in reliance on legal counsel’s advice that
conforming the expenditure to stated guidelines would pre-
vent it from being held to be a taxable expenditure. As a
result, Mr. Parks has not established that his agreement to
the expenditure for the second radio message in 2000 was
based on advice of counsel as described in section 53.4549–
1(a)(2)(vi), Foundation Excise Tax Regs.
fair exposition of the pertinent facts’’.
(278)               PARKS v. COMMISSIONER                     333


  Mr. Parks has offered no evidence of any other written
legal opinion addressing the radio messages at issue. There-
fore, he has failed to establish, as stated in the parties’ stipu-
lations, that he agreed to the taxable expenditures on advice
of counsel as described in section 53.4945–1(a)(2)(vi),
Foundation Excise Tax Regs. Accordingly, we sustain
respondent’s determination that Mr. Parks has deficiencies
in excise tax under section 4945(a)(2) for his years at issue,
except with respect to Foundation’s expenditure for the first
2000 radio message.
  C. Section 4945(b)(1)
  Respondent also determined excise tax deficiencies under
section 4945(b)(1) for Foundation of $65,000, $200,000,
$33,012, and $341,062 for its 1997, 1998, 1999, and 2000 tax-
able years, respectively. Section 4945(b)(1) imposes a tax
equal to 100% of the amount of a taxable expenditure, pay-
able by the private foundation, when tax is imposed under
section 4945(a)(1) and the taxable expenditure is ‘‘not cor-
rected within the taxable period’’. The ‘‘taxable period’’ begins
on the date the taxable expenditure is made and ends on the
earlier of: (1) the date a notice of deficiency with respect to
the tax imposed by section 4945(a)(1) is mailed; or (2) the
date on which such tax is assessed. Sec. 4945(i)(2).
  ‘‘Correction’’ of a taxable expenditure occurs when all or
part of the expenditure is recovered and, if full recovery is
not possible, corrective action prescribed by the Secretary is
taken. Sec. 4945(i)(1).
  The ‘‘taxable period’’ for Foundation ended on December
22, 2006, when respondent mailed a notice of deficiency to it
determining deficiencies under section 4945(a)(1). The tax-
able expenditures were not corrected within the taxable
period.
  Petitioners contend that they should not be held liable for
the second tier excise taxes (both Foundation’s under section
4549(b)(1) and Mr. Parks’ under section 4549(b)(2), discussed
below) because they could still correct the taxable expendi-
tures under the ‘‘correction period’’ provided under sections
4961(a) and 4963(e). While it is true that petitioners may
still avoid liability for the second tier excise taxes by cor-
recting the taxable expenditures during the ‘‘correction
period’’ provided in section 4963(e)—which in general extends
334          145 UNITED STATES TAX COURT REPORTS                      (278)


through any period during which the excise tax deficiencies
cannot be assessed under section 6213(a)—sections 4961(a)
and 4963(e) do not impair our jurisdiction to redetermine the
deficiencies as determined by respondent. Indeed, the scheme
of those sections is designed to enable Tax Court jurisdiction
to review section 4549(b) excise tax deficiency determina-
tions. See Thorne v. Commissioner, 99 T.C. at 95–96; H.R.
Rept. No. 96–912, at 1–3 (1980), 1980–2 C.B. 657, 657–658.
   Because Foundation’s taxable expenditures were not cor-
rected within the ‘‘taxable period’’ provided in section
4945(i)(2), we sustain respondent’s determination of defi-
ciencies under section 4945(b)(1) for its taxable years at
issue, except with respect to the failure to correct the
expenditure for the first 2000 radio message, which was not
a taxable expenditure.
  D. Section 4945(b)(2)
   Respondent determined excise tax deficiencies under sec-
tion 4945(b)(2) for Mr. Parks of $10,000 each year for 1997,
1998, 1999, and 2000. When tax is imposed by section
4945(b)(1), section 4945(b)(2) imposes a tax equal to 50% of
the amount of the taxable expenditure on any foundation
manager who ‘‘refused to agree to part or all of the correc-
tion’’. The tax is limited, however, to $10,000 per expendi-
ture. Sec. 4945(c)(2). 58 The Commissioner must formally
request correction in order for the tax to be imposed. Thorne
v. Commissioner, 99 T.C. at 97.
   Respondent’s revenue agent made a formal request that
Mr. Parks correct the taxable expenditures at issue in a
letter sent to Foundation’s tax counsel on October 16, 2002.
Foundation’s tax counsel replied with a letter on November
11, 2002, informing the revenue agent that Mr. Parks
refused to make the requested correction. Accordingly, we
sustain respondent’s deficiency determinations under section
4945(b)(2) for Mr. Parks for his years at issue, except with
respect to the failure to correct the expenditure for the first
2000 radio message, which was not a taxable expenditure.
  58 The limit increased to $20,000 per taxable expenditure for taxable

years beginning after August 17, 2006. See PPA sec. 1212(e)(2)(B), (f), 120
Stat. at 1075.
(278)                  PARKS v. COMMISSIONER                             335


III. Petitioners’ Constitutional Challenges
   Because we find petitioners are liable for excise taxes
pursuant to section 4945, we must address petitioners’ claim
that imposition of the excise taxes at issue is unconstitu-
tional. Petitioners argue that section 4945 and the regula-
tions thereunder, as applied to Foundation’s expenditures for
the radio messages, impermissibly burden their First Amend-
ment right to freedom of speech. Petitioners also argue that
the regulatory provisions that define a direct lobbying
communication are unconstitutionally vague. We will address
these arguments in turn.
  A. First Amendment
   Petitioners, relying on the U.S. Supreme Court’s decision
in Fed. Election Comm’n v. Wis. Right to Life (WRTL), 551
U.S. 449 (2007), contend that to the extent the radio mes-
sages may be found to constitute lobbying, they are ‘‘political
speech’’, and governmental restrictions on the political speech
of nonprofit corporations are subject to strict scrutiny. Under
that well-recognized standard of review, the government
must show that application of the governmental restriction
‘‘furthers a compelling interest and is narrowly tailored to
achieve that interest’’. Id. at 464. Petitioners suggest that the
Supreme Court’s decision in Citizens United v. Fed. Election
Comm’n (Citizens United), 558 U.S. 310 (2010), also sub-
jecting to strict scrutiny a Federal election law prohibition on
a corporation’s use of general treasury funds to make inde-
pendent expenditures for electioneering communications,
reinforces that exacting standard for any restrictions on the
political speech of nonprofit corporations. 59 Respondent, peti-
tioners argue, has failed to make the required showing with
respect to the excise taxes imposed on account of Founda-
tion’s expenditures for the radio messages.
   Petitioners also argue that the implementing regulations
fail to pass muster under WRTL because they depend upon
a ‘‘contextual analysis’’ in determining whether an expendi-
  59 In Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 365 (2010),
the Supreme Court held that the First Amendment prohibits restrictions
on political speech based on the speaker’s identity as a corporation, observ-
ing: ‘‘No sufficient governmental interest justifies limits on the political
speech of nonprofit or for-profit corporations.’’
336           145 UNITED STATES TAX COURT REPORTS                      (278)


ture is a ‘‘direct lobbying communication’’, an approach which
WRTL proscribes. While petitioners’ articulation of this latter
argument is sketchy, they presumably are contending that
the regulations’ use of context 60 to conclude that a commu-
nication refers to a specific ballot measure, even when the
communication does not name the measure, is impermissible
under WRTL. The Supreme Court in WRTL held that the
standard for a restriction on political speech ‘‘must be objec-
tive, focusing on the substance of the communication rather
than amorphous considerations of intent and effect’’, 551 U.S.
at 469, and that ‘‘contextual factors * * * should seldom play
a significant role in the inquiry’’, id. at 473–474.
   Petitioners’ arguments are misplaced. WRTL and Citizens
United involved outright bans on expenditures for certain
political speech of nonprofit (and for-profit) corporations
under Federal election law. In each case the Supreme Court
concluded that strict scrutiny applied. See Citizens United,
558 U.S. at 340; WRTL, 551 U.S. at 464. At issue here is
Congress’ imposition of a tax on an otherwise tax-exempt pri-
vate foundation as a sanction to deter its use of tax-deduct-
ible contributions for lobbying expenditures. The applicable
Supreme Court precedent concerning whether the First
Amendment prohibits restrictions on lobbying by tax-exempt
organizations eligible to receive tax-deductible contributions
is Regan v. Taxation With Representation of Wash. (Regan),
461 U.S. 540 (1983). In that case, the Commissioner had
denied section 501(c)(3) tax-exempt status to Taxation With
Representation of Washington (TWR), a nonprofit corpora-
tion, because it intended to engage in substantial lobbying
activities (i.e., a greater amount than permitted under the
standard in section 501(c)(3) limiting tax exemption to cor-
porations ‘‘no substantial part of the activities of which is
* * * attempting * * * to influence legislation’’). TWR
argued that Congress’ denial of tax-exempt status on the
basis of the corporation’s engagement in greater-than-
insubstantial lobbying activities violated the First Amend-
ment.
  60 As illustrations of this use of context, we have found that the exam-

ples in the regulations demonstrate that a communication ‘‘refers to’’ a bal-
lot measure, notwithstanding a failure to cite it by name, when it employs
terms widely used in connection with the measure or describes its general
content or effect.
(278)                   PARKS v. COMMISSIONER                               337


   The Supreme Court disagreed, reasoning that ‘‘[b]oth tax
exemptions and tax-deductibility are a form of subsidy that
is administered through the tax system’’ and that Congress
may, consistent with the First Amendment, choose not to
subsidize lobbying by prohibiting the expenditure of tax-
deductible contributions for it. Regan, 461 U.S. at 544–545.
The Court rejected TWR’s claim that the prohibition against
substantial lobbying by section 501(c)(3) organizations
imposed an ‘‘unconstitutional condition’’ on the receipt of tax-
deductible contributions—as proscribed by Speiser v. Ran-
dall, 357 U.S. 513 (1958). Instead, the Court reasoned, since
TWR could employ (as it had in the past) a dual structure
of a section 501(c)(4) tax-exempt entity to conduct its lob-
bying activities (without using deductible contributions for
that purpose) and a section 501(c)(3) tax-exempt entity
receiving deductible contributions to conduct nonlobbying
charitable activities, the Internal Revenue Code did not deny
TWR the right to receive deductible contributions to support
its nonlobbying activities, nor deny it any independent ben-
efit on account of its intention to lobby; Congress was merely
refusing to pay for the lobbying out of public moneys. Regan,
461 U.S. at 545. 61 Rejecting TWR’s First Amendment claim
outright, the Court reaffirmed its earlier holding in
Cammarano v. United States, 358 U.S. 498 (1959), that
  Congress is not required by the First Amendment to subsidize lobbying.
  In these cases, as in Cammarano, Congress has not infringed any First
  Amendment rights or regulated any First Amendment activity. Congress
  has simply chosen not to pay for TWR’s lobbying. We again reject the
  ‘‘notion that First Amendment rights are somehow not fully realized
  unless they are subsidized by the State.’’ [Regan, 461 U.S. at 546; cita-
  tions omitted.]

  The Court also rejected the proposition that Congress’ deci-
sion to deny a subsidy for lobbying by section 501(c)(3)
organizations is subject to the strict scrutiny standard of
review. ‘‘We have held in several contexts that a legislature’s
decision not to subsidize the exercise of a fundamental right
does not infringe the right, and thus is not subject to strict
  61 This   aspect of the Supreme Court’s reasoning in Regan concerning a
sec. 501(c)(3) organization’s ability to use an affiliated sec. 501(c)(4) entity
for the conduct of lobbying has become known as the ‘‘alternate channel
doctrine’’. See Miriam Galston, ‘‘Campaign Speech and Contextual Anal-
ysis’’, 6 First Amend. L. Rev. 100 (2007).
338         145 UNITED STATES TAX COURT REPORTS             (278)


scrutiny.’’ Id. at 549. A higher level of scrutiny is appropriate
only if a subsidy-allocating statute ‘‘employ[s] a suspect
classification, such as race’’, id. at 547, or ‘‘discriminate[s]
invidiously in its subsidies in such a way as to ‘[aim] at the
suppression of dangerous ideas’ ’’, id. at 548 (quoting
Cammarano, 358 U.S. at 513). Absent the foregoing, the
government need only show a rational basis for the decision
not to extend a subsidy for speech by allowing tax-deductible
contributions to support it. Id. at 546–551; see also Ysursa v.
Pocatello Educ. Ass’n, 555 U.S. 353 (2009) (reaffirming Regan
holding in finding strict scrutiny inapplicable in assessing
First Amendment restrictions on State’s prohibition on local
government’s withholding of union dues from wages to sup-
port political activities); Am. Soc’y of Ass’n Execs. v. United
States, 195 F.3d 47 (D.C. Cir. 1999) (finding strict scrutiny
review inapplicable in assessing First Amendment restric-
tions on denial of Federal income tax deduction for portion
of dues paid to tax-exempt trade association engaged in lob-
bying, citing Regan).
   It follows that if Congress may, consistent with the First
Amendment, deny outright the tax exemption and eligibility
to receive tax-deductible contributions for a section 501(c)(3)
organization that engages in substantial lobbying—in order
to deprive the organization of any tax subsidy for lobbying—
it may also impose on the subset of section 501(c)(3)
organizations classified as private foundations the less
onerous sanction of excise taxes that are proportionate to the
lobbying expenditures and likewise designed to deter the use
of any tax subsidy for lobbying. Furthermore, because legisla-
tive acts of this nature are treated as the denial of a subsidy
for speech, subject to rational basis rather than strict scru-
tiny review, it is clear that Congress or a State government
can employ a range of methods to reduce or eliminate a
governmental subsidy for speech, such as outright denial of
tax exemption and eligibility to receive tax-deductible con-
tributions (Regan), a proxy tax to recapture the benefit of
tax-deductible contributions (Am. Soc’y of Ass’n Execs.), or a
State prohibition on local governments’ withholding from
wages any union dues to support political activities (Pocatello
Educ. Ass’n). The excise taxes at issue are in this respect
quite similar to the proxy tax upheld in Am. Soc’y of Ass’n
(278)                  PARKS v. COMMISSIONER                             339


Execs.: Both taxes serve to recapture some of the benefit of
the tax-deductible source of the funds.
   Thus, the excise taxes at issue readily pass rational basis
scrutiny. 62 As previously noted, Congress chose to impose
excise taxes on private foundations because it concluded that
such taxes would be a more effective and proportionate sanc-
tion (as compared to revocation of tax-exempt status) for
discouraging private foundation expenditures of tax-exempt
and tax-deductible funds for lobbying or other nonexempt
purposes. See S. Rept. No. 91–552, supra at 48, 1969–3 C.B.
at 455; H.R. Rept. No. 91–413, supra at 31–36, 1969–3 C.B.
at 221–223. Thus, the excise taxes at issue were intended as
a more effective means of limiting the use of the subsidy. As
in Regan, the excise taxes thus bear ‘‘a rational relation to
a legitimate governmental purpose’’ of limiting the tax sub-
sidization of lobbying. Regan, 461 U.S. at 547. 63
   Moreover, as with the taxpayer in Regan, Mr. Parks could
readily avoid the excise taxes for himself and the Foundation
by establishing a separate section 501(c)(4) tax-exempt entity
to make lobbying expenditures, albeit without using tax-
deductible contributions to fund those expenditures. See id.
at 544, 552–553. Thus, consistent with the alternate channel
doctrine espoused in Regan, because Foundation could under-
take lobbying through an affiliated section 501(c)(4) organiza-
tion without incurring these excise taxes, the taxes do not
   62 We note petitioners do not contend that sec. 4945 and the imple-

menting regulations employ any suspect classifications or seek to suppress
any particular idea or ideology such that heightened scrutiny would be
triggered on that basis. See Regan v. Taxation With Representation of
Wash., 461 U.S. 540, 547–548 (1983). Indeed, the excise taxes are triggered
when a communication refers to ‘‘specific legislation’’ and ‘‘reflects a view
on such legislation’’, sec. 56.4911–2(b)(1), Pub. Charity Excise Tax Regs.,
without regard to the content of either.
   63 Indeed, in Regan the Supreme Court expressly endorsed as legitimate

and rational the denial of tax-exempt status as a means of preventing the
subsidization of lobbying that served a private interest.
  It appears that Congress was concerned that exempt organizations
  might use tax-deductible contributions to lobby to promote the private
  interests of their members. It is not irrational for Congress to decide
  that tax exempt charities such as TWR should not further benefit at the
  expense of taxpayers at large by obtaining a further subsidy for lob-
  bying. [Regan, 461 U.S. at 550; citations omitted.]
The excise taxes at issue are a less onerous means towards the same end.
340           145 UNITED STATES TAX COURT REPORTS                     (278)


burden lobbying, but instead only operate to limit its sub-
sidization. In sum, Regan and its progeny make clear that
the First Amendment does not prohibit the imposition of the
excise taxes at issue in these cases.
   Apparently recognizing the difficulties presented by Regan
for their constitutional claims, petitioners contend that the
Supreme Court decision in WRTL, which reflects a greater
degree of First Amendment protection for the political speech
of nonprofit corporations, has superseded Regan. 64 Con-
sequently, petitioners argue, the excise taxes at issue can no
longer pass muster under the heightened First Amendment
protection for corporate speech reflected in the more recent
Supreme Court jurisprudence.
   There are significant distinctions between Regan and these
two more recent Supreme Court decisions. Both WRTL and
Citizens United involved Federal election law and outright
bans on speech, backed by criminal sanctions. See Citizens
United, 558 U.S. at 337; WRTL, 551 U.S. at 457. The excise
taxes at issue here are, in accordance with the Regan anal-
ysis, designed to discourage the use of a tax subsidy and,
where the subsidy has been used in a manner not intended
by Congress, they have the effect of recapturing a portion of
it. In this regard, we also note that the more onerous second
tier excise taxes can be avoided by correction, even after
judicial review that sustains their imposition. Such limita-
tions on a tax subsidy would not trigger strict scrutiny under
Regan. Neither WRTL nor Citizens United discussed or even
cited Regan, which at least suggests that its principle that
the denial of a tax subsidy for speech does not abridge First
Amendment rights is unaffected by those cases. Moreover,
two years after the WRTL decision, the Supreme Court relied
heavily on Regan in holding that a State’s ban on payroll
deductions to support a public employee union’s political
activities did not abridge the union’s First Amendment rights
because the State was merely declining to subsidize such
rights. Pocatello Educ. Ass’n, 555 U.S. at 358–359. Pocatello
Educ. Ass’n would suggest, contrary to petitioners’ conten-
tions, that Regan retains full vitality after WRTL.
  64 Petitioners also cite Citizens United v. Fed. Election Comm’n, 558 U.S.

310 (2000), as reflecting the heightened First Amendment protections ac-
corded to the political speech of incorporated entities.
(278)               PARKS v. COMMISSIONER                     341


   On the other hand, both WRTL and Citizens United
undoubtedly result in a more enhanced level of First Amend-
ment protection for the political speech of incorporated enti-
ties than had existed before those decisions. In particular,
the identity of the speaker as a corporate entity was justifica-
tion for certain restrictions on political speech under Austin
v. Mich. Chamber of Commerce, 494 U.S. 652 (1990), a deci-
sion overruled in Citizens United, 558 U.S. at 365. In so
doing, the Supreme Court reasoned in quite broad terms:
‘‘[T]he government may not suppress political speech on the
basis of the speaker’s corporate identity. No sufficient
government interest justifies limits on the political speech of
nonprofit or for-profit corporations.’’ Id. Citizens United, 558
U.S. at 337–339, also casts some doubt on the alternate
channel doctrine by rejecting the argument that a corpora-
tion’s ability to establish a political action committee for
engaging in electioneering communications alleviated the
First Amendment problem with restrictions on the corpora-
tion’s entitlement to make these communications directly.
   In any event, even if one believed that WRTL or Citizens
United casts some doubt on the reasoning in Regan, the
Supreme Court has made clear that it is not the province of
a lower Federal court to overrule a Supreme Court precedent
that applies to the case before it. ‘‘If a precedent of this Court
has direct application in a case, yet appears to rest on rea-
sons rejected in some other line of decisions, the Court of
Appeals should follow the case which directly controls,
leaving to this Court the prerogative of overruling its own
decisions.’’ Rodriguez de Quijas v. Shearson/Am. Express,
Inc., 490 U.S. 477, 484 (1989). The issue in these cases con-
cerns the constitutionality of Congress’ imposition of an
excise tax to limit the use of tax-deductible funds for lob-
bying by a tax-exempt entity. Because Regan resolved the
same question where Congress used denial of tax-exempt
status to the same end, that case directly controls and we
must follow it, notwithstanding any suggestion that some of
its reasoning may have been undermined in later Supreme
Court decisions in another area—the constitutionality of Fed-
eral election law restrictions on the political speech of cor-
porate entities.
342         145 UNITED STATES TAX COURT REPORTS             (278)


  B. Vagueness
   Petitioners also argue that the regulations defining a direct
lobbying communication as one that ‘‘refers to’’ specific legis-
lation, see sec. 56.4911–2(b)(1)(ii)(A), Pub. Charity Excise Tax
Regs., are unconstitutionally vague because they fail to give
notice of the conduct proscribed and enable discriminatory
enforcement. Petitioners contend that the regulations’ use of
illustrative examples to elucidate the meaning of ‘‘refers to’’,
see, e.g., sec. 56.4911–2(b)(4)(ii)(A) and (B), (d)(1)(iii), Pub.
Charity Excise Tax Regs., fails to give the required notice of
proscribed conduct. Petitioners further contend that the regu-
latory examples’ extension of the meaning of ‘‘refers to’’
beyond communications that make specific reference by name
to legislation constitutes the use of a multifactor test for
distinguishing permissible from impermissible speech that
was proscribed in WRTL, 551 U.S. at 469 (the standard for
distinguishing permissible from impermissible speech ‘‘must
eschew ‘the open-ended rough-and-tumble of factors,’ which
‘invit[es] complex argument in a trial court and a virtually
inevitable appeal.’’ (quoting Jerome B. Grubart, Inc. v. Great
Lakes Dredge & Dock Co., 513 U.S. 527, 547 (1995))).
   The vagueness doctrine is grounded in the Due Process
Clause of the Fifth Amendment. See United States v. Wil-
liams, 553 U.S. 285, 304 (2008). A law is unconstitutionally
vague if it fails to provide a person of ordinary intelligence
fair notice of what is prohibited or if it is so standardless
that it authorizes discriminatory enforcement. Id. ‘‘But ‘per-
fect clarity and precise guidance have never been required
even of regulations that restrict expressive activity.’ ’’ Id.
(quoting Ward v. Rock Against Racism, 491 U.S. 781, 794
(1989)).
   Petitioners’ reliance on WRTL as providing the standard of
specificity that the regulations must meet is again mis-
placed—that standard flows from the strict scrutiny standard
of review, which is not the standard of review we must use
here. As the Supreme Court emphasized in WRTL, the
statute there at issue banned certain political speech out-
right and provided criminal sanctions. WRTL, 551 U.S. at
455, 457. Where instead the government is allocating sub-
sidies, the Supreme Court has indicated that the criteria that
may be used are less exacting than those required when
(278)                  PARKS v. COMMISSIONER                           343


speech is directly regulated or a criminal penalty is at stake.
Citing Regan, the Supreme Court observed in this regard:
  [A]lthough the First Amendment certainly has application in the subsidy
  context, we note that the Government may allocate competitive funding
  according to criteria that would be impermissible were direct regulation
  of speech or a criminal penalty at stake. So long as legislation does not
  infringe on other constitutionally protected rights, Congress has wide
  latitude to set spending priorities. See * * * [Regan, 461 U.S. at 549]
  * * * [Nat’l Endowment for the Arts v. Finley (Finley), 524 U.S. 569,
  587–588 (1998).]

   As we concluded earlier, the regulatory examples cited
above that the Secretary has promulgated to elucidate the
meaning of ‘‘refers to’’ extend the phrase’s reach beyond
communications that actually cite legislation (or a ballot
measure) by name and extend the phrase to cover commu-
nications that employ terms widely used in connection with
the legislation or that reference its general content or effect.
Under Regan, the imposition of the excise taxes at issue con-
stitutes congressional allocation of a tax subsidy, rather than
the direct regulation—indeed, criminal sanctioning—of
speech at issue in WRTL. Consequently, the criteria for
imposing the excise taxes need not meet the standard delin-
eated in WRTL.
   While undoubtedly the regulatory definition of ‘‘refers to’’
at issue here may give rise to more disputes at the mar-
gins 65 than would be the case with a regulation that con-
fined ‘‘refers to’’ to instances where legislation is cited by
name, we conclude that any such imprecision does not raise
constitutional vagueness problems under the lesser standard
for subsidy allocation countenanced in Finley. We note in this
regard that it is ‘‘specific legislation’’—also defined in the
regulations—that a communication must ‘‘refer to’’ in order
to constitute lobbying that could trigger the excise taxes. In
this context, the ‘‘terms widely used’’ and ‘‘general content or
effect’’ criteria are sufficiently objective that they afford fair
notice of the conduct proscribed and are not susceptible of
discriminatory enforcement under the less stringent standard

  65 We note, for example, that reasonable disputes could arise concerning

what constitutes ‘‘terms widely used’’ in connection with given legislation
or what constitutes that legislation’s general content or effect.
344        145 UNITED STATES TAX COURT REPORTS             (278)


in Finley. Consequently, petitioners have not shown that the
regulations at issue are unconstitutionally vague.
IV. Conclusion
   We conclude, and hold, that Foundation’s expenditures for
the production and broadcast of the radio messages at issue,
except Communication #8 and the first and second radio
messages in 2000, were attempts to influence legislation and
thus taxable expenditures under section 4945(d)(1). We fur-
ther conclude that all of Foundation’s expenditures at issue
except the expenditure for the first 2000 radio message were
taxable expenditures under section 4945(d)(5). Accordingly,
Foundation is liable for excise taxes under section 4945(a)(1)
for its years at issue except with respect to the expenditure
for the first 2000 radio message. Because the taxable
expenditures we have sustained were not corrected within
the taxable period, Foundation is liable for additional taxes
under section 4945(b)(1) for its taxable years at issue with
respect to those taxable expenditures. Mr. Parks is liable for
excise taxes under section 4945(a)(2) for his knowing and
willful agreement, as a foundation manager, to the making
of the expenditures sustained as taxable expenditures. Mr.
Parks is also liable for additional taxes under section
4945(b)(2) for his refusal to agree to correction of the sus-
tained taxable expenditures. Finally, section 4945 and the
regulations thereunder are constitutional as applied to peti-
tioners.
   To reflect the foregoing,
                 Decisions will be entered pursuant to Rule 155.

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