Originally published on Forbes.com.
In February at the National Prayer Breakfast, President Trump made a solemn promise to “get rid of, and totally destroy, the Johnson Amendment”.
The Johnson Amendment, named after Lyndon Johnson, prohibits 501(c)(3) organizations, including churches, but it is sometimes implied especially churches, from engaging in political activity.
President Trump made a down payment on his promise with an executive order. Unless you apply the “truthful hyperbole” standard that then developer Trump recommended in the Art of the Deal, the executive order did not destroy the Johnson amendment. Arguably it did not do anything at all to it. Section 5201 of the House version of the Tax Cuts and Jobs Act is much more robust.
Under the provision, this language, known as the Johnson amendment, is qualified so that an organization exempt from tax under Code section 501(c)(3) would not fail to be treated as organized and operated exclusively for its respective non-profit purpose for engaging in political speech, assuming such political speech is made in the ordinary course of the organization’s business and the associated expenses of that speech are de minimis
That hardly puts the Johnson amendment on the eve of destruction, but it does address the concern that generated the fairly silly protest known as Pulpit Freedom Sunday which fell on October 2 this year. The idea is that preachers would give politically oriented sermons, record them and send them to the IRS – daring, nay double daring the IRS to come after them. Given all the attention given to Pulpit Freedom Sunday, it probably worked up to a triple dawg dare. H
What Could Be
So if we imagine a preacher who had read Think Big And Kick Ass and was disturbed by a [candidate for high office boasting about seducing married women and recommending vengeance whenever you feel wronged, sharing her concerns with her congregations from the pulpit, this change would reassure her. Consider the guidance the IRS put in Revenue Ruling 2007-41.
Situation 9. Minister F is the minister of Church O, a section 501(c)(3) organization. The Sunday before the November election, Minister F invites Senate Candidate X to preach to her congregation during worship services. During his remarks, Candidate X states, “I am asking not only for your votes, but for your enthusiasm and dedication, for your willingness to go the extra mile to get a very large turnout on Tuesday.” Minister F invites no other candidate to address her congregation during the Senatorial campaign. Because these activities take place during official church services, they are attributed to Church O. By selectively providing church facilities to allow Candidate X to speak in support of his campaign, Church O’s actions constitute political campaign intervention.
Since the speech was at a regular service (i.e. ordinary course) and did not involve any expenditure, it would be OK, if the bill passes.
I count five other situations described in the ruling that would probably transform to permissible under the proposed legislation
Situation 4. President B is the president of University K, a section 501(c)(3) organization. University K publishes a monthly alumni newsletter that is distributed to all alumni of the university. In each issue, President B has a column titled “My Views.” The month before the election, President B states in the “My Views” column, “It is my personal opinion that Candidate U should be reelected.” For that one issue, President B pays from his personal funds the portion of the cost of the newsletter attributable to the “My Views” column. Even though he paid part of the cost of the newsletter, the newsletter is an official publication of the university. Because the endorsement appeared in an official publication of University K, it constitutes campaign intervention by University K.
Situation 6. Chairman D is the chairman of the Board of Directors of M, a section 501(c)(3) organization that educates the public on conservation issues. During a regular meeting of M shortly before the election, Chairman D spoke on a number of issues, including the importance of voting in the upcoming election, and concluded by stating, “It is important that you all do your duty in the election and vote for Candidate W.” Because Chairman D’s remarks indicating support for Candidate W were made during an official organization meeting, they constitute political campaign intervention by M.
Situation 13. Mayor G attends a concert performed by Symphony S, a section 501(c)(3) organization, in City Park. The concert is free and open to the public. Mayor G is a candidate for reelection, and the concert takes place after the primary and before the general election. During the concert, the chairman of S’s board addresses the crowd and says, “I am pleased to see Mayor G here tonight. Without his support, these free concerts in City Park would not be
possible. We will need his help if we want these concerts to continue next year so please support Mayor G in November as he has supported us.” As a result of these remarks, Symphony S has engaged in political campaign intervention.Situation 16. Candidate A and Candidate B are candidates for the state senate in District W of State X. The issue of State X funding for a new mass transit project in District W is a prominent issue in the campaign. Both candidates have spoken out on the issue. Candidate A supports funding the new mass transit project. Candidate B opposes the project and supports State X funding for highway improvements instead. P is the executive director of C, a section 501(c)(3) organization that promotes community development in District W. At C’s annual fundraising dinner in District W, which takes place in the month before the election in State X, P gives a lengthy speech about community development issues including the transportation issues. P does not mention the name of any candidate or any political party. However, at the conclusion of the speech, P makes the following statement, “For those of you who care about quality of life in District W and the growing traffic congestion, there is a very important choice coming up next month. We need new mass transit. More highway funding will not make a difference. You have the power to relieve the congestion and improve your quality of life in District W. Use that power when you go to the polls and cast your vote in the election for your state senator.” C has violated the political campaign intervention as a result of P’s remarks at C’s official function shortly before the election, in which P referred to the upcoming election after stating a position on an issue that is a prominent issue in a campaign that distinguishes the candidates.
Situation 21. Church P, a section 501(c)(3) organization, maintains a web site that includes such information as biographies of its ministers, times of services, details of community outreach programs, and activities of members of its congregation. B, a member of the congregation of Church P, is running for a seat on the town council. Shortly before the election, Church P posts the following message on its web site, “Lend your support to B, your fellow parishioner, in Tuesday’s election for town council.” Church P has intervened in a political campaign on behalf of B.
The Punchline
In some ways, repeal of the Johnson amendment codifies actual IRS practice All those sermons that they have been getting have not resulted in any action by IRS. This is a perfectly reasonable response. The number of IRS personnel actually involved in enforcement (revenue agents, tax examiners, revenue officers, and special agents) is about 25,000. With over 240 million returns to worry about, putting some of them onto listening to taped sermons does not seem like a good use of their time. Of course, it is more the effect that the change would have on the behavior of not for profits than any change in IRS enforcement that is of concern.
How Does This Score?
An earlier version of the bill that applied the relaxation only to churches was scored as costing $2.1 billion in revenue by the staff of the Joint Committee on Taxation. This had me puzzled, because I had a hard time seeing how the provision could cost anything, I was not alone. Professor Samuel Brunson had similar thoughts. He wrote me:
I thought the same thing. The IRS doesn’t really enforce it against anybody (and especially not against churches), so it doesn’t currently raise any revenue to be lost. Moreover, according to the court in Branch Ministries, a church that lost its exemption for campaigning could instantly turn around and be exempt again. I’m not sure that the court was right there, but at the very least, I’d assume a church that lost its exemption would stop doing taxable stuff until it got its exemption back. So under current law, the best-case scenario, revenue-wise, is the occasional day’s income to a church.
Professor Adam Chodorow wrote me:
The IRS could save a few dollars on enforcement, but that would be very small because they spend very little time and effort providing guidance or enforcing the rule. Perhaps the number presumes that there are churches willingly paying taxes so that they can endorse from the pulpit that would now be able to endorse without losing their tax-exempt status. My guess is that it is a very small set, if not an empty one.
Scoring Mystery Solved Maybe
Last week I had the pleasure of attending an event at the Benjamin Cardozo Law School of Yeshiva University. It was a panel discussion of Professor Edward Zelinsky’s new book Taxing The Church. My full report on it has been deferred as I plow through interesting provisions in the Tax Cuts and Jobs Act. I asked the panel about the scoring and Professor Brian Galle of Georgetown commented that at the hearings the rationale was put out that the change would cause people to donate deductible dollars to churches rather than 501(c)(4) or 527 organizations. It sounded rather silly to me, but when I started thinking about it a light-bulb went on in my head.
If This Goes On
An endorsement from a prominent evangelist could be worth quite a bit to a political campaign. And successful politicians are good at fundraising. You are a mega-pastor of a megachurch. You endorse candidate A, seduction of married women and advocacy of revenge to the contrary notwithstanding. Candidate A talks about what a great church you have, but how much greater it would be if the capital campaign to expand it were a big success. Of course, there is no quid pro quo going on here.
And donations to 501(c)(3) organizations are not disclosed and churches don’t even have to file Form 990. So the money might pour into the not for profits as a reward for political endorsements even though the not for profits would not be overtly spending any of it on politics.
Roger Colinvaux writing in the Chronicle of Philanthropy – The House Bill Could Be the End of Charities as We Know Them – argues the threat is dire.
The Johnson Amendment protects charities from political pressure applied by donors and from partisan capture. Without it, charities, which are always in the fundraising business, could be bought for political purposes. The result would be taxpayer subsidies of phony charitable contributions made for political reasons, something the sponsors of this measure say they want to avoid.
And if you thought the last IRS scandal was troubling, be prepared for the scandal to end all tax collection.
Further, as recent history has shown, when the IRS attempts to regulate political speech, it does not go well for the agency or the country. The political reality is that the underfunded IRS would not seriously attempt to enforce these already weak limits, especially in the face of a hostile Congress.
The optimist in me would say that maybe this is not so bad. The charities cannot spend their bribe money on politics, so perhaps some money that would otherwise go to attack ads would instead go to feeding the hungry, giving drink to the thirsty and other corporal works of mercy, but my sense is that Roger Colinvaux is right and this will not end well for existing charities.
On the other hand, the change in the standard deduction will increase the number of people who don’t care about whether their deductions are deductible. There might be more of an impetus to grass roots heavily volunteer groups and dollars now going to big philanthropy might shift in that direction. That would not be such a bad thing.
A Stylistic Note
There was something that bothered me about the President’s prayer breakfast speech that I would like to share with my readers, who might set me straight. Leading up to his Johnson amendment destruction promise, he invokes “the great Thomas Jefferson”. Thomas Jefferson wrote the Declaration of Independence and collaborated with Lafayette on the Declaration of the Rights of Man and of The Citizen. Really, you just have to say “Thomas Jefferson”. “The great” is redundant