What the Johnson Amendment Repeal Discussion Means for Nonprofits

Discussions surrounding repealing the Johnson Amendment has been a hot topic in nonprofit news. This story has gained additional traction after Trump mentioned his plans during his Jan. 18th speech at Liberty University. The major concerns of this amendment repeal are that it would put deductions at risk and damage public trust.

The Johnson Amendment was passed in 1954 and it prevents charitable organizations from engaging in politics. It was introduced by then Senator Lyndon B. Johnson and it was suggested he did so because a charity opposed him in a primary race. The passage of this amendment “…[established] a rationale that, in return for not engaging in partisan politics, charities would continue to receive tax-deductible donations because they focus on contributing to the broader public good rather than narrower partisan interests.”

Supporters of the Johnson Amendment argue that 501(c)(3)s are able to concentrate and achieve their missions when they are not engaged in politics. Nonprofits serve the common good and with a repeal, it would erode people’s trust in who and how organizations help.

Opponents claim that the Johnson Amendment is in violation of the First Amendment. Nonprofits too have the freedom of speech and expression.

A repeal would blur the lines of what is a 501(c)(3) in terms of tax-deductions. Other nonprofits, like 501(c)(4), can engage in politics but cannot receive tax donations. It is possible that more entities and/or political groups would seek tax-deductible status to raise funds for political purposes and for potentially undisclosed donors. Also with the repeal, charities could “…lose the ability to receive tax-deductible donations…” and this would inhibit nonprofits from succeeding at their missions.

Repealing the Johnson Amendment is one option in change of federal law. There could be an executive order that would allow the administration to not enforce the law as long as political activities were ancillary. The IRS however could enforce the law if a nonprofit was engaging in more secular activity. From an opinion news piece, Congress seems hesitant to completely repeal the amendment. However, there is a bill at the House that would “amend the Internal Revenue Code to permit a tax-exempt organization to make certain statements related to a political campaign without losing its tax-exempt status.” This bill is the Free Speech Fairness Act.

What is your take on the Johnson Amendment repeal discussion? How would a repeal or executive order effect your charitable organization?

 

Sources:

Clerkin, Richard. “Repealing the Johnson Amendment could lead to reduced donations to churches and charities.” The News and Observer, http://www.newsobserver.com/opinion/op-ed/article134788344.html. Accessed 6 March 2017.

Hackney, Philip and Brian Mittendorf. “Trump may upend nonprofits with vow to ‘destroy’ Johnson Amendment.” Newsweek, http://www.newsweek.com/trump-upend-nonprofits-destroy-johnson-amendment-557716?_cldee=YW5uZS53YWxsZXN0YWRAYm9hcmRzb3VyY2Uub3Jn&recipientid=contact-75cd000f8e99e311956300155d009001-4e6ebff32b1e4064ade9eceac0048d63&esid=3dd07215-cef9-e611-959c-00155d009001. Accessed 6 March 2017.

“H.R.6195 – Free Speech Fairness Act.” Congress.gov, https://www.congress.gov/bill/114th-congress/house-bill/6195. Accessed 6 March 2017.

 

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