Part I: The Johnson Amendment’s History and Controversy
The “Johnson Amendment” is the nickname for a provision in the U.S. Tax Code that places limitations on the activities of organizations seeking tax exemption. 26 U.S.C. § 501(a) provides that some organizations shall be exempt from taxation. ((26 U.S.C. § 501(a).)) Section 501(c)(3) provides the general requirements that, to be tax exempt, an organization must be “operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition . . . or for the prevention of cruelty to children or animals.” ((26 U.S.C. § 501(c)(3).)) Organizations with the purposes listed above are limited in the scope of the activities they may undertake by §501(c)(3) if they want to continue to be eligible for tax exemption.
The limitations on tax exemption include the requirements that net earnings may not benefit private individuals, a substantial part of the activities may not involve carrying on “propaganda, or otherwise attempting, to influence legislation”, and the organizations 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. ((Id.))
The Johnson Amendment is no stranger to controversy. The limitations it places on organizations seeking tax exemption have come under fire previously as a limitation on free speech that raises constitutional issues. ((See, e.g., Is the Johnson Amendment Constitutional?, LIBERTY MAG., http://www.libertymagazine.org/discussion/is-the-1954-johnson-amendment-constitutional (last visited Feb. 7, 2017).)) Others suggest that it is not a free speech or constitutional issue, but rather that the provision was a political response to McCarthysim during the 1950s. ((James D. Davidson, Why Churches Cannot Endorse or Oppose Political Candidates, 40 REVIEW OF RELIGIOUS RESEARCH 16 (1998).))
Today, the impact of the Johnson Amendment is most hotly debated in the context of religious organizations, although it affects all non-profit organizations that have tax-exempt status. There is serious opposition to the Johnson Amendment from religious organizations. Religious organizations, such as the conservative Alliance Defending Freedom or the Family Research Council, frequently write about this issue, arguing that the Johnson Amendment suppresses both free speech and religious freedom. ((See, e.g., Church Political & Cultural Involvement, ALLIANCE DEFENDING FREEDOM https://www.adflegal.org/issues/religious-freedom/church/key-issues/protecting-the-church/church-political-involvement (last visited Feb. 8, 2017); Pulpit Freedom Movement, ALLIANCE DEFENDING FREEDOM, http://www.adflegal.org/issues/religious-freedom/church/key-issues/pulpit-freedom-sunday (last visited Feb. 8, 2017); Tony Perkins, Free Pastors from the Johnson Amendment, FAMILY RESEARCH COUNCIL (Feb. 9, 2017), http://www.frc.org/op-eds/free-pastors-from-the-johnson-amendment.))
It is a common misconception that non-profit organizations may not lobby, in fact “even 501(c)(3) organizations, which are the most restricted type of nonprofits, may legally lobby.” ((Nayantara Mehta, Nonprofits and Lobbying, AMERICAN BAR ASSOCIATION (Mar. 2009), https://apps.americanbar.org/buslaw/blt/2009-03-04/index.shtml.)) However, there are limitations on the level of lobbying activity that takes place. “A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.” ((Lobbying, IRS.GOV, (8 Feb. 2017), https://www.irs.gov/charities-non-profits/lobbying.)) Under §501(c)(3) it may not be a “substantial part” of their activities. There is also a limit on the expenditures used for lobbying under §501(h). Furthermore, there is a distinction between lobbying activities and advocacy. ((Nayantara, supra note 6.)) Many forms of advocacy are still permitted for organizations that wish to remain tax exempt.
Another major limitation on nonprofit activity is that they may not participate in partisan political activity—they may not involve themselves in any political campaign. ((26 U.S.C. § 501(c)(3).)) This means that tax exempt organization may not endorse a political candidate. This restriction applies to all tax-exempt non-profits. It has generated the most controversy regarding religious institutions. ((See, e.g., Davidson, supra note 5; see also LIBERTY MAG, supra note 4.))
Part II: The Likelihood and Consequences of Repeal
Donald Trump recently reiterated a campaign promise to “destroy” the Johnson Amendment. ((Elizabeth Landers, Trump: I will ‘destroy’ Johnson amendment, CNN (Feb. 2, 2017), http://www.cnn.com/2017/02/02/politics/johnson-amendment-trump/.)) Some speculate that this promise is based on an understanding with conservative, right-wing Christian groups. In exchange for their support, he promised to help these groups accomplish a long-term goal of shedding the political restrictions on their activity. ((See Jeremy W. Peters, The Johnson Amendment, Which Trump Vows to ‘Destroy,’ Explained, N.Y. TIMES (Feb. 2, 2017), https://www.nytimes.com/2017/02/02/us/politics/johnson-amendment-trump.html.)) Whether or not this is the only motivation for his decision to target the Johnson Amendment, it is clear that Trump’s motivations are highly tied to religion. At the National Prayer Breakfast this year Trump said he would “get rid of and totally destroy the Johnson Amendment and allow our representatives of faith to speak freely and without fear of retribution.” ((Mark Landler & Laurie Goodstein, Trump Vows to ‘Destroy’ Law Banning Political Endorsements by Churches, N.Y.TIMES (Feb. 2, 2017), https://www.nytimes.com/2017/02/02/us/politics/trump-johnson-amendment-political-activity-churches.html.)) His own language makes it clear that he is focused on the religious aspect and the impact it will have on religious institutions, rather than non-profit organizations more generally.
What would the impact be of a change to 501(c)(3)?
Critiques of the proposed change argue that it will fundamentally alter the role of non-profit organizations in the US for the worse. C.R.E.W., a Washington DC based organization of lawyers, researchers, and other dedicated to ethics, argues that “most of the dark money spending currently done by the non-charitable §501(c) groups would almost certainly move to charities, as would at least some of the super-PAC spending.” ((Noah Bookbinder, Push to Repeal the Johnson Amendment Could Open Pandora’s Box for Money in Politics, CREW (Oct. 4, 2016), http://www.citizensforethics.org/push-repeal-johnson-amendment-open-pandoras-box-money-politics/.)) Similarly, others predict that removing the distinction between charity organizations and political organizations would enable “religious groups [to] become much more powerful political forces in American politics.” ((Emma Green, Trump Wants to Make Churches the New Super PACs, THE ATLANTIC (Aug. 2, 2016), https://www.theatlantic.com/politics/archive/2016/08/how-trump-is-trying-to-put-more-money-in-politics/493823/.))
How would changes to the current law come about?
Given the talk about removing the restrictions on non-profit political activity, how would Donald Trump go about implementing this change? There are two potential methods that would likely result in a change to the existing law. The first option would be for Congress to amend the Code. The U.S. Code includes the permanent laws of the United States. ((Frequently Asked Questions, Office of the Law Revision Counsel, UNITED STATES CODE, http://uscode.house.gov/faq.xhtml, (last visited Feb. 8, 2017).)) Congress would need to amend the existing law to change its current application.
Another option is to use the court system. This method involves litigating court cases with the goal of having the provision declared unconstitutional. ((See, e.g., Erik Stanley, IRS to Churches: To Exercise Free Speech, Give Up Your Tax-Exempt Status, CSN NEWS (Oct. 15, 2014), http://www.cnsnews.com/commentary/erik-stanley/irs-churches-exercise-free-speech-give-your-tax-exempt-status.)) The United States Supreme Court has previously address the issue of the impact of §501(c)(3) on non-profits. In Regan v. Taxation with Representation, the court held that “a legislature’s decision not to subsidize the exercise of a fundamental right does not infringe the right.” ((Regan v. Taxation with Representation, 461 U.S. 540, 541 (U.S. 1983).)) Essentially, the court held that the restrictions found in §501(c)(3) do not violate the First Amendment because there is no restriction on the right to free speech. ((Id.)) The organizations in question are in no way prohibited from speech. In the Court’s view, they may say what they like. Additionally, the government is under no obligation to exempt organization from taxes. So, the government can place conditions of exemption because there is no entitlement to exemption to begin with. A non-profit may engage in significant lobbying or endorse political candidates, but if they choose to do so, they are operating outside the government’s pre-determined exemption category.
Given that the Supreme Court has already addressed the issue of §501(c)(3) organizations and political and lobbying activity, this option seems less likely. Furthermore, the time involved in litigating a case all the way to the Supreme Court and the uncertainty of the outcome makes this option less attractive for anyone serious about implementing the proposed changes. Given Donald Trump’s promise that he would ‘destroy the Amendment’, it appears he is contemplating a more direct strategy. Thus, it seems that any proposed attacks on the Amendment will come from legislation rather than court activity.
Repeal of the Johnson Amendment would require approval by Congress. Given the current political climate, this could be difficult. Despite strong opposition from some religious organizations, the Johnson Amendment has many supporters. It is often seen as an important rule facilitating the separation of church and state. ((See LIBERTY MAG. supra note 4.)) As such, it is possible that Republicans as well as Democrats would oppose changes to the existing law. Ultimately, it seems the success or failure of proposed changes to 26 U.S.C. § 501(c)(3) will largely depend on the traditional legislative process.
Latest posts by Arielle Mack (see all)
- The Potential Repeal of the Johnson Amendment - February 13, 2017
- The Investment Modernization Act of 2016, Part 2 of 2 - January 22, 2017
- Investment Modernization Act of 2016: Part 1 of 2 - October 24, 2016