Beijing Olympics Do Not Justify Stripping IOC of Tax-Exempt Status

The Winter Olympic Games are underway, and it’s hard to say whether we should be excited. What would normally have been a great moment for the United States and the world, the Beijing games have been marred by China’s genocide of the Uyghur people and by many nations’ retaliatory diplomatic boycotts. In response to China’s human rights abuses, a group of bipartisan lawmakers in the House and Senate are seeking to punish the apolitical International Olympic Committee’s (IOC) decision to hold the games in China by stripping the IOC’s nonprofit tax-exempt status. While this bill sounds good on paper, it raises numerous constitutional concerns, could set a dangerous precedent of lawmakers using the tax code to punish their political enemies, and likely would not even force the Swiss based IOC to pay more in US taxes.

Introduced by a group of 10 bipartisan lawmakers in the House and by Rick Scott in the Senate, the IOC Act would strip the tax exempt status of any international sports organization with over $100 million in global revenues over the last three years. The bill is neutrally written to help protect the bill from Equal Protection and First Amendment challenges, but it would only apply to the International Olympic Committee since it is the only international sporting organization that meets this income threshold.

The Act sets a dangerous precedent of lawmakers using the tax code to punish their political enemies. The only reason the bill was introduced was because the lawmakers were unhappy with the IOC’s decision to hold the Olympics in China and the organization’s refusal, as an apolitical organization, to speak out about China’s horrific human rights abuses. Essentially, lawmakers are threatening nonprofits with tax consequences if they do not express the right political ideas. To put it bluntly, the bill is an affront to the First Amendment.

Political speech is protected speech, whether or not the speech is popular. Lawmakers should know better than to use the tax code as a club against the IOC’s decision to remain an apolitical athletic association. Under this bill the IOC would be treated differently from similar sporting nonprofits such as the US Olympic Committee, and all because the IOC did not engage in the lawmakers’ preferred political speech. That’s not just a First Amendment violation, it’s also potentially a violation of the 14th Amendment, which promises equal protection under the law.

Lawmakers cannot justify the bill as a revenue raiser. As a Switzerland-based nonprofit who makes a majority of its revenue through TV deals, the IOC could likely structure its revenue in a way that avoids paying US taxes at all. The bill has no purpose other than to force the IOC to take political positions that align the organization with the US, heightening the bill’s constitutional concerns.

Even if upheld by the courts, this bill would set a dangerous tax precedent of lawmakers using the tax code as a political club. The purpose of the tax code is to raise revenue in the most economically efficient way possible, not to punish our nation’s political enemies.

If this bill passes either as a standalone bill or in a major tax overhaul in 2022, it would create a precedent where lawmakers could revoke the nonprofit status of organizations they do not like. Democrats could begin to tax firearm nonprofits and Republicans could begin to tax nonprofit abortion providers.

The end result would be a more politicized and less stable tax code — a poor result for all Americans. The US should welcome nonprofit organizations, not turn them away by taxing them over political disagreements.

Battles over international human rights should be fought in the foreign policy arena. It is simply not right for lawmakers to force organizations to engage in political speech by threatening to tax them. Lawmakers should think twice before supporting this bill that is an affront to important American values. When watching the Olympics, lawmakers need to focus on the accomplishments of our athletes and less on using the tax code to solve a complex international problem.

Travis Nix is a student of tax law at Georgetown Law.