For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
Aug. 10 — Donald Trump's campaign promise to repeal the 1954 Johnson amendment and allow churches to back political candidates would have a much broader impact than simply allowing preachers to speak their minds from the pulpit, experts said.
On Aug. 9, the Republican presidential nominee's running mate, Indiana Gov. Mike Pence, said Trump would sign a full repeal of the Johnson amendment, Bloomberg Politics reported.
The amendment prohibits tax code Section 501(c)(3) exempt organizations from endorsing or opposing political candidates. That includes making donations to a particular campaign, as well as publishing or distributing statements in support of a candidate.
Repealing the Johnson amendment would open “Pandora’s box in terms of what we could see people trying to do with tax-deductible, charitable (c)(3) money,” said Trevor Potter, president of the Campaign Legal Center and a former chairman of the Federal Election Committee.
What people have to remember is that churches are only a small subset of the entities that would be affected by a repeal, he told Bloomberg BNA Aug. 10. Environmental groups, medical groups and educational groups would all be impacted, he said.
Such action could “result in an enormous amount of political activity with tax-deductible, charitable funds so that the government and the taxpayers would be subsidizing political activity through the tax deduction that one gets for making a charitable contribution,” he said.
Additionally, “although the battle cry here is that ministers shouldn’t be regulated by the government and restricted in terms of what they can say, that’s not the fix that most people talk about,” Potter said. They talk about undoing the whole prohibition on 501(c)(3)s intervening in elections, which could conceivably lead to nationwide television ad campaigns, he said.
A repeal would likely lead to an uptick in the creation of new charities and churches that haven't traditionally been bound by social norms that say involvement in political activity is beyond their scope, Potter said.
Marcus Owens, a partner at Loeb & Loeb LLP, agreed. Repealing the Johnson amendment could “encourage the formation of a lot of new charities that would have political activity as an ulterior motive,” he told Bloomberg BNA Aug. 10.
However, he pointed out that groups would still need to be mindful of the extent of their involvement because removal of the amendment doesn't make supporting political parties and candidates a charitable activity under English common law or states' notions of charity.
Such a repeal would “muddy the waters” and create a lot of ambiguity, said Owens, who is a former IRS official from the agency's Exempt Organizations Division. And “it would probably encourage some organizations to become very active in ways that could jeopardize their tax-exempt status,” he said.
Potter said abolishing Johnson may result in 501(c)(3) groups following recent trends of Section 501(c)(4) social welfare organizations, which are permitted to engage in some political activity as long as that isn't their primary purpose.
“If you look at what’s happened to (c)(4)s, the situation without the Johnson amendment would be very similar,” he said. The 501(c)(4) groups “have what is supposed to be a primary purpose, and we’ve all seen that has been stretched, partly by IRS inaction, partly by congressional intervention so that (c)(4)s can exist for what appears to be political purposes and still be tax-exempt,” he said.
“If a (c)(4) can do that, then I think the risk is that (c)(3)s could” also intervene in politics if there wasn't a prohibition on doing so, he said. “They would be able to make the same sorts of arguments that (c)(4)s now make that their political activity is not their primary purpose,” he said.
Political activity of 501(c)(4)s surged after the 2010 landmark Supreme Court decision in Citizens United v. Federal Election Commission. In that case, the court ruled that corporations, including nonprofits, may spend unlimited amounts of money from their general treasuries supporting or opposing political candidates for office, as long as they do so independently of candidates and political parties.
Since the decision, the number of groups applying for 501(c)(4) status has skyrocketed, more than doubling in the years following the ruling. Money spent by those groups has also increased significantly, the Center for Responsive Politics, a research group based in Washington, said on its website.
The group estimated that in the 2012 election, out of the money it can track, 501(c) groups spent at least $333 million. “That's an increase of 53 percent from 2008, the last election before Citizens United, when the same type of groups spent just $159 million,” the group said.
While this growth is occurring, Potter and Owens said it appears that the IRS has been relatively inactive in pursuing cases against tax-exempt groups that become overly engaged in political campaigns.
According to the CRP, that inactivity with respect to 501(c)(4)s could be largely due to a May 2013 scandal where the Treasury Inspector General for Tax Administration “found the IRS used ‘inappropriate criteria'—such as searching for the words ‘patriot' and ‘tea party' in groups' names—to identify applications for tax-exempt status for review.” These efforts, which the IRS used to weed out exempt organizations with significant political involvement, seemed to unfairly target conservative groups.
For 501(c)(3)s such as churches, there is already a lack of IRS oversight, even with Johnson in place, Owens said.
“Right now there’s really no audit activity involving churches, and there’s not much audit activity of other kinds of charities for political campaign intervention either,” he said. “It’s as if the IRS has backed off enforcement of those rules across the board.”
He said the lack of activity is due partly to a provision in the tax code that has complicated church reviews since 2009. That year the IRS lost a lawsuit over the endorsement of former Rep. Michele Bachmann (R-Minn.) by Living Word Christian Center in Brooklyn Park, Minn. In the case, a judge ruled that the agency’s audit was invalid because it hadn’t been approved by a regional IRS commissioner—as required by law—even though that position was eliminated by the agency in the 1998 to 2000 time frame, Owens said.
Dwindling resources have also hindered the IRS's response to excessive politicking, he said.
Congressional funding for the agency is down $900 million since 2010, and the House passed an appropriations bill on July 7 that would cut funding by $236 million for next fiscal year (132 DTR G-2, 7/11/16).
“The IRS across the board is operating under tight budgets, and if you’re the IRS commissioner your job is primarily to raise money for the government,” Owens said.
Overseeing tax-exempt organizations doesn't really generate measurable tax revenue, he added.
Thus, “if you’re the commissioner, it’s a rational decision in tight times to allocate as much money as possible to the revenue-generating functions, and let the non-revenue-generating functions tread water,” he said.
In an Aug. 8 report, Pew Research Center, examined the issue of churches and political speech.
The study found, in general, churchgoers heard more about social and political issues from their clergymen, rather than endorsements of particular candidates.
Owens said those results seem rational because “it’s rare, in this country at least, that a political candidate embodies any particular religious perspective,” he said.
“Donald Trump’s a good example. He’s had three wives and is currently making all sorts of statements that run counter to a lot of religious beliefs of many denominations,” he said.
“So if your job as a religious leader is to promote the faith and encourage behavior in your congregate that adheres to the faith, supporting somebody who doesn’t seem to adhere to the doctrines of your faith is counter-productive,” Owens said.
More telling is the data on which candidate is more consistently endorsed when members of the clergy do decide to back a specific candidate, Owens said.
Among those who heard religious leaders speak out for a candidate, Hillary Clinton is the name that was mentioned most often, with 6 percent of recent churchgoers saying their clergy have spoken out in support of her in the past few months, the Pew report said.
Donald Trump’s name is most commonly mentioned among those who heard clergy speak out against a particular candidate. Seven percent heard him mentioned in that context, the report said.
Those numbers could temper “some of the enthusiasm of the right-of-center politicians in this country,” to repeal the Johnson amendment, Owens said, pointing out that Trump isn't the only Republican who has advocated its repeal.
A bill ( H.R. 153) introduced in the House in January 2015 by Rep. Walter Jones (R-N.C.) sought to achieve that goal but never came to a vote. The legislation has three co-sponsors: Rep. Richard Hudson (R-N.C.), Rep. Jeff Duncan (R-S.C.) and Rep. Daniel Webster (R-Fla.). According to the bill, a repeal would “restore the Free Speech and First Amendment rights of churches and exempt organizations.”
To contact the reporter on this story: Allyson Versprille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Cheryl Saenz at email@example.com
Text of the Bloomberg Politics report is at http://www.bloomberg.com/politics/trackers/2016-08-09/trump-would-back-allowing-church-political-donations-pence-says.
Text of the Pew Research Center report is at http://src.bna.com/hBS.
Text of H.R. 153 is at http://src.bna.com/hBR.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)