UPDATE: On May 4, 2017, President Trump signed the Presidential Executive Order Promoting Free Speech and Religious Liberty. The signed Executive Order contains different language than the draft Executive Order mentioned below. Section 2 of the Executive Order provides (in part):
Sec. 2. Respecting Religious and Political Speech. All executive departments and agencies (agencies) shall, to the greatest extent practicable and to the extent permitted by law, respect and protect the freedom of persons and organizations to engage in religious and political speech. In particular, the Secretary of the Treasury shall ensure, to the extent permitted by law, that the Department of the Treasury does not take any adverse action against any individual, house of worship, or other religious organization on the basis that such individual or organization speaks or has spoken about moral or political issues from a religious perspective, where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office by the Department of the Treasury.
Much like the draft Executive Order, the language in this Order is unclear. However, in announcing the Executive Order, President Trump indicated that this Order originated from his campaign promise to destroy the Johnson Amendment. Therefore, it seems that this Executive Order will have the effect of allowing §501(c)(3) organizations to participate and intervene in political campaigns.
On February 2, 2017, President Trump participated in the 2017 National Prayer Breakfast where he reiterated his campaign promise by stating, “I will get rid of and totally destroy” the so-called Johnson Amendment. Shortly thereafter, Bloomberg BNA published a “leaked” copy of a draft Executive Order. The relevant language of the Executive Order is contained in §4(e)(1) and reads as follows:
(e) The Secretary of the Treasury shall ensure that the Department of the Treasury shall not impose any tax or tax penalty, delay or deny tax-exempt status, or disallow tax deductions for contributions made under 26 U.S.C. 501(c)(3), or otherwise make unavailable or deny any tax benefit to any person, church, synagogue, house of worship or other religious organization,
(1) on the basis of such person or organization speaking on moral or political issues from a religious perspective where religious speech of similar character has, consistent with law, not ordinarily been treated as an intervention in a political campaign by the Department of the Treasury, or
(2) on the basis that such person or organization believes, speaks, or acts (or declines to act) in accordance with the belief that marriage is or should be recognized as the union of one man and one woman, sexual relations are properly reserved for such a marriage, male and female and their equivalents refer to an individual’s immutable biological sex as objectively determined by anatomy, physiology, or genetics at or before birth, and that human life begins at conception and merits protection at all stages of life. (Emphasis added.)
Like many of President Trump’s recent Executive Orders, this language is very much open to interpretation. Does it achieve its goal to “get rid of and totally destroy” the Johnson Amendment? Does it go too far in destroying the Johnson Amendment? To answer those questions, it’s important to understand what the Johnson Amendment is and what it does.
In 1954, powerful Texas Senator Lyndon Johnson narrowly defeated his opponent in his senatorial reelection campaign. In the midst of his campaign, Johnson discovered that two nonprofit organizations had been actively involved in supporting his opponent. He investigated the two nonprofits to determine whether they were violating any laws. To Johnson’s dismay, they were not. Therefore, he looked for other ways to silence these groups. To do so, he devised a plan to stealthily revise the Internal Revenue Code.
At the time, §501(c)(3) generally disallowed certain tax-exempt organizations from engaging in lobbying-type activities. The Johnson Amendment added the last clause to §501(c)(3), which then read, “and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
Therefore, the Johnson Amendment merely had the effect of disallowing §501(c)(3) organizations from participating in political campaigns, as they were already prohibited from lobbying prior to the amendment. As most reading this blog realize, §501(c) grants tax-exempt status to several different types of organizations. Just because an organization is tax-exempt does not mean that deductions to that organization will be tax deductible. For instance, §501(c)(4) organizations are allowed to engage in a greater amount of political activity than §501(c)(3) organizations. While §501(c)(4) organizations are tax-exempt and their donor lists (at least for federal purposes) are not disclosed, contributions to most types of §501(c)(4) organizations are not tax deductible. To have tax deductibility, an organization generally must qualify as a §501(c)(3) organization. There are certain types of organizations that are “de facto” §501(c)(3) organizations and churches and religious organizations typically qualify.
As noted above, Trump’s Executive Order would provide that the IRS cannot deny tax-exemption or a tax deduction “on the basis of such person or organization speaking on moral or political issues from a religious perspective where religious speech of similar character has, consistent with law, not ordinarily been treated as an intervention in a political campaign by the Department of Treasury.”
Now, I emphasize the “NOT” language. As I read the language of the Executive Order, I’m not sure that the Executive Order would change the current law with respect to campaign intervention, which is the subject of the Johnson Amendment. Namely, the Executive Order would still seem to prohibit §501(c)(3)s from participating in specific political campaigns. On the other hand, perhaps this is just putting the IRS on notice to not enforce the prohibition against intervention in political campaigns. Right now, it’s unclear.
However, if the Executive Order is interpreted to allow §501(c)(3)s to participate in specific political campaigns, this Order will open up a whole can of worms that I’m not sure the Trump Administration has thoroughly thought through.
To be clear, this is not entirely a Republican versus Democrat controversy as a recent Pew Research Center poll indicates. The Pew Study found that while evangelical Protestants have been pushing for the repeal of the Johnson Amendment, other religious groups (often groups that promote Democrats) are more likely to test its limits. According to the study, black Protestants have been more likely than other Christian groups to report having heard their clergy speak out clearly on the merits or faults of a particular candidate. In fact, 28% of black Protestants heard their clergy speak in support of Hillary Clinton during the 2016 campaign and about 20% heard their ministers denounce Donald Trump. By comparison, just 4% of white evangelicals heard their clergy speak in favor of a presidential candidate – 2% for Trump and 2% for Clinton.
So, don’t be surprised if you have some Democrats in favor of a bill to repeal the Johnson Amendment.
So, where do we go from here?
If the IRS carries out the intent of the Executive Order to “totally destroy” the Johnson Amendment, or if legislation passes to repeal it, we may have a whole new paradigm in campaign finance. Right now, political contributions are typically made to Political Action Committees (PACs) or Super PACs under §527. Additionally, these organizations might have a §501(c)(4) affiliate that “educates” on specific issues – especially on issues where the nondisclosure of donor lists is important. Currently, donations to these organizations are completely nondeductible.
If the Johnson Amendment is repealed through legislation or not enforced through Executive Order, the use of PACs, Super PACs or §501(c)(4) organizations for this purpose may become a thing of the past. Instead, it would seem that the preferred method of making political contributions would be through “politically friendly” religious organizations that will actually endorse and work on behalf of individual candidates. And, soliciting these donations would be much easier as donors would not only be able to keep their donations confidential, but they would also get a tax deduction for their troubles – something I doubt President Trump intends in his Executive Order.
 For a comprehensive history and discussion of the Johnson Amendment, see Erik W. Stanley, LBJ, The IRS and Churches: The Unconstitutionality of the Johnson Amendment in Light of Recent Supreme Court Precedent, 24 Regents L. Rev. 237 (2011-2012).
 A 1997 amendment added the phrase “(or in opposition to)” the Johnson Amendment so that the clause now reads, “and which does 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.” (Emphasis added.)
 Gregory A. Smith, Most Americans Oppose Churches Choosing Sides in Elections, Pew Research Cener (Feb. 3, 2017).
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