Bill Easing 501(c)(3) Politics Ban May Make Boundaries Murky

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Colleen Murphy

Oct. 7 — A bill to amend a 62-year-old prohibition on tax code Section 501(c)(3) organizations engaging in political activity is rife with potential problems.

The bill ( H.R. 6195), which House Majority Whip Steve Scalise (R-La.) and Rep. Jody Hice (R-Ga.) introduced Sept. 28, would permit an organization exempt under Section 501(c)(3) to make statements relating to political campaigns as long as the statements “are made in the ordinary course of carrying out its tax-exempt purpose.” But if enacted, the bill might lead to political activity far broader than the occasional endorsement and would place a complicated enforcement burden on the IRS, professors and attorneys in the tax-exempt arena told Bloomberg BNA.

“I think it can raise other issues as a practical matter—it will create a broader exemption,” said Elizabeth J. Kingsley, an attorney at Harmon, Curran, Spielberg & Eisenberg LLP in Washington. “To the extent that you're creating a loophole for people to drive a truck through, there are more places that could happen.”

The bill is seen as a messaging tool and its prospects in the House are far from certain. A Senate companion hasn’t been introduced. But as the presidential election moves closer, the bill hits at a hotly debated piece of tax law.

The so-called Johnson amendment, proposed in 1954 by then-Sen. Lyndon B. Johnson (D-Texas), barred churches and other 501(c)(3) nonprofits from endorsing or opposing political candidates, at the risk of losing their exempt status. Its opponents say it limits free speech—Republican presidential candidate Donald Trump has called for an outright repeal, an idea that also made it into the Republican party platform this summer (155 DTR G-4, 8/11/16).

Important Protection

Protection for churches and nonprofits is necessary, Hice said in an Oct. 7 statement to Bloomberg BNA. It would ensure the organizations “are legally able to make comments about a political candidate or political issues within the scope of their normal activities without the threat of the IRS potentially taking away their tax-exempt status.”

“Simply put, the federal government has no business acting as the speech police,” Hice, who is also a Baptist pastor, said.

The bill isn't the first Republican-led effort to address the area. Rep. Walter B. Jones (R-N.C.) introduced a bill (H.R. 153) in January 2015 to repeal the Johnson amendment, but the matter never came to a vote.

The restriction on political activity “has been used to intimidate” churches and nonprofits, Erik W. Stanley, senior counsel at Alliance Defending Freedom, said in an Oct. 7 statement to Bloomberg BNA. Stanley is a former spokesman for the Alliance Defending Freedom Pulpit Initiative, which organizes an event called Pulpit Freedom Sunday, in which pastors protest the prohibition in their sermons. The bill was introduced as near to Freedom Sunday—which was held on Oct. 2—as possible, Scalise's office said.

“No tax exemption can be based on a requirement that a church or any other non-profit organization give up a constitutionally protected freedom, including free speech. With regard to churches, they can decide for themselves what they should or shouldn’t say from the pulpit,” Stanley said.

Where Is the Line?

But the bill is vaguely worded, and could lead to other kinds of political activity beyond endorsements, like a spurt of political money going to 501(c)(3)s or charity involvement in local elections, professors and attorneys said.

For example, while the bill wouldn't permit a church to hold a fundraiser for a specific candidate, it may lead pastors to urge their congregations to financially support a candidate, said Miriam Galston, an associate law professor at George Washington University Law School. Or, pastors may incorporate the topic into individualized interactions with members of their church, she said.

While the bill says statements are acceptable as part of an organization's “regular and customary activities,” the line defining those activities isn't clear, said Marcus Owens, a partner at Loeb & Loeb LLP in Washington.

“Right now, all political speech is almost by definition almost unusual, and not customary,” Owens, a former director of the Internal Revenue Service's Exempt Organizations Division, said. “If there's political speech, it's hard to say that's going to be an ordinary and customary activity if suddenly it turns into a political rally.”

As a result, the bill creates a gray area for the IRS to enforce that would likely get murkier over time, said Roger Colinvaux, a law professor at the Catholic University of America Columbus School of Law. The head of a hospital or the president of a university may make an endorsement in the course of fundraising—but the activity could expand from there.

“Maybe it starts off with kind of a conservative interpretation, but these things only get broader,” Colinvaux, also the director of the university’s Law and Public Policy Program, said. “Once you've gotten used to a world where charity leaders and officials are allowed to endorse candidates, I think it would shift the meaning of ‘ordinary course.' ”

‘Good Attempt.'

An organization can't incur more than “de minimis incremental expenses” in the process of making a political statement, according to the bill. That shows “the intent is not to open the floodgates for money to be spent,” Kingsley said. For example, organizations couldn't purchase national television ads, she said.

Despite its flaws, the bill does attempt to address a confusing area for many nonprofits, she said.

“I think that this is problematic, but I think it is a good-faith attempt to create a safety valve,” she said. “I do worry it opens up more than it intends, but I think it's a good attempt.”

There isn't currently a clear definition of what is considered participation or intervention in a political campaign, she said. Some churches may offer commentary on social issues that sounds like an implied endorsement, while others may explicitly endorse a candidate.

And the issue becomes especially sensitive in an election year. Kingsley said she talks to some charity clients daily, guiding them through an appropriate response if an issue they focus on becomes a conversation in the presidential race.

“It's still very challenging for them when it’s a candidate that has been raising the issue,” she said. “The vagueness and uncertainty is a real problem.”

To contact the reporter on this story: Colleen Murphy in Washington at

To contact the editor responsible for this story: Meg Shreve at

For More Information

Text of H.R. 6195 is at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.