Proposed Changes to the Johnson Amendment

March 15, 2017

Last month, President Trump announced his intention to “get rid of and totally destroy” a provision in what is called the “Johnson Amendment.”

At Exponent Philanthropy, we feel a responsibility to provide information on issues pertinent to our members. No matter your political beliefs, we urge you to remain informed.

Proposed Changes 

For more than 60 years, an important provision in the federal tax code has successfully protected charitable nonprofits, foundations, and religious congregations from partisan politics. Since 1954, when then-Senate Minority Leader Johnson offered an amendment to a bill that was then passed by the Republican-controlled Congress and signed by President Eisenhower, the provision has shielded the 501(c)(3) community from politicians seeking campaign contributions, political endorsements, hosting of their fundraisers, and other activities. Then last month President Trump vowed to “get rid of and totally destroy” that longstanding provision, sometimes called the “Johnson Amendment.”

Recently Chairman Kevin Brady (R-TX) of the House Ways & Means Committee announced that he intends to put repeal of the Johnson Amendment into the upcoming tax reform bill. Also, House Majority Whip Steve Scalise (R-LA) and 49 other Representatives have co-sponsored a bill to substantially weaken the longstanding protection against partisanship.

The tax-law provision now being challenged involves the final clause of Section 501(c)(3) of the Internal Revenue Code, which provides that in exchange for tax-exempt status, a charitable nonprofit, foundation, or religious organization may “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” Since 1954, that language has served to protect the integrity and independence of charitable nonprofits and foundations – and the wishes and presumptions of the donating public, that support provided to a charitable organization is not re-routed to promote the partisan political interests of a candidate for public office. Current law helps to ensure that organizations dedicated to the public good in our communities, the communities you fund in, remain above the political fray and do not become polarized, whether internally or externally, for supporting one candidate versus another.

We believe that wherever you stand politically – right, left, or center – you should be aware of the efforts to repeal and/or weaken the protection under which all of us in the 501(c)(3) community have safely operated for over 60 years. You have been able to do this in an environment free of partisanship as you’ve worked tirelessly to solve problems and address needs regardless of anyone’s political persuasions.

Therefore, we are sharing some background with pros and cons regarding this issue.

Background

Congress first exempted from taxation organizations operating “solely for charitable, religious, or educational purposes” in 1894. Since then, Congress has added amendments expanding the list to include several other entities that can qualify for tax exemption. Congress also has added three major conditions to receive the benefits of tax exemptions coupled with the right to receive tax-deductible contributions. Those organizations cannot:

  • pay out profits (no private inurement)
  • spend a substantial part of their activities lobbying
  • engage in partisan politics (This is the provision at issue now).

Organizations can do any of those, of course, but then they lose their tax exempt status and ability to receive tax-deductible contributions.

In Favor of Repeal/Weakening. For more than a decade, an organization called the Alliance Defending Freedom has been working with part of the evangelical community to allow preachers to engage directly in partisan political campaigns.  It has posted a piece on its website explaining why it is in favor of changing existing law:

“The bill does not repeal the Johnson Amendment. Instead, it amends the law to allow for speech that is made “in the ordinary course of the organization’s regular and customary activities.” This means that, as you carry out the mission of your church, you would have the right to speak freely on all matters of life, including candidates and elections. You would not have to fear IRS censorship or punishment for simply exercising your right to free speech and freedom of religion. Put simply, the bill inserts a “relief valve” for speech into the Johnson Amendment and gets the IRS out of the business of policing the speech of America’s pastors and churches.” 

In Favor of Protecting Existing Law. On the other side of the question, the National Council of Nonprofits has posted some “Common Questions and Answers on Protecting Nonprofit Nonpartisanship,” including: 

“Proponents of the legislation, primarily a subsection of the broad religious community, generally focus on perceived restrictions on preachers who say they want to speak out about issues of the day and endorse candidates from the pulpit. Most commentators, however, emphasize the legal reality that charitable nonprofits, including religious congregations, already are free to speak on important matters of the day and advocate on public policy issues and legislation. Private foundations, while barred from most lobbying activities, are free to engage in public debates, promote public education efforts, and fund a wide range of issue-focused activities. Section 501(c)(3) of the federal tax code merely prohibits campaign intervention, defined to include endorsing or opposing candidates for public office, publishing or distributing statements for or against candidates, or using tax-deductible and other resources to support partisan campaign activities.”

In Summary. Through tax policies that incentivize charitable gifts through itemized deductions, the American people have allowed each of us to act as stewards of funds to be used for purposes that benefit society. We each have the freedom to determine how we view that, whether it be supporting the arts, environmental issues, education, health, medical care, research or religious passions.

As those entrusted with this responsibility, we also have the obligation to be aware of changes in the law that may impact how we, and those we fund, operate. No matter what your political beliefs, we urge you to remain informed.