Effect of the Proposed Repeal of the Johnson Amendment

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One of President Donald Trump’s campaign promises was to repeal the Johnson Amendment, which states that 501(c)(3) organizations must not participate or intervene in (including the publishing or distributing of statements) any political campaign on behalf of (or opposing) any candidate for public office. The Johnson Amendment, drafted by and named after then-Sen. Lyndon Johnson, has been a part of the Internal Revenue Code for more than half a century. Not-for-profits have been divided on this controversial ban. Main arguments include that the Johnson Amendment prevents free speech and freedom of expression or, conversely, allows the organization to focus on its charitable mission while avoiding partisan politics.

Johnson Amendment opponents contend the current law was poorly written. Some not-for-profit leaders go further to allege that Johnson’s motive was to win re-election, not preserve charitable establishments. Other opponents claim the Johnson Amendment—due to its surveillance nature and monitoring of speech in churches—is unconstitutional and violates the Establishment Clause. There’s a general perception within this community that the IRS is either selective or dismissive in enforcing the ban against churches.

Johnson Amendment supporters argue that, within a 501(c)(3) organization, nonpartisanship is a key element that limits distractions brought about by political views and allows for the community to focus on the exempt purpose. Some leaders believe that without this ban, politicians will be granted the power to push endorsement demands onto organizations and selectively fund the ones that agree to these demands. Others believe there’s no need for change since, as the law stands today, individuals have the right to speak on political issues within organizations and are free to personally endorse candidates.

On May 4, 2017, Trump revisited his campaign promise and signed an executive order, Promoting Free Speech and Religious Liberty. The order directs all executive departments and agencies—and the U.S. Treasury Secretary, in particular—to not take any adverse action, e.g., imposition of any tax or tax penalty, delay or denial of tax-exempt status or any other action that makes unavailable or denies any tax deduction, exemption, credit or benefit, against any individual, house of worship or other religious organization that speaks or has spoken about moral or political issues from a religious perspective in accordance with the law. The executive order doesn’t repeal the Johnson Amendment; therefore, it doesn’t permit 501(c)(3) organizations to participate in political campaign activities. Instead, it reaffirms what’s currently in the Internal Revenue Code.

While the debate regarding the Johnson Amendment will be extensive, IRS enforcement of the amendment may continue to face pushback and even be constitutionally challenged. BKD will continue to monitor tax legislation, including the Johnson Amendment.

Contact your BKD advisor if you have questions.

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