By Jennifer Hawks, BJC Associate General Counsel
As Congress works on passing a tax bill this year, the protections of the “Johnson Amendment” for houses of worship continue to be on the chopping block. Both the House and Senate passed their versions of tax reform legislation, and one of the significant differences centered around that provision which protects nonpartisanship in the charitable sector by prohibiting 501(c)(3) organizations from endorsing or opposing candidates for political office.
On Nov. 2, Rep. Kevin Brady, R-Texas, who chairs the House Ways and Means Committee, introduced the “Tax Cuts and Jobs Act.” Buried near the end of the 429-page bill was Section 5201, a provision that would permit churches, their integrated auxiliaries and denominations to intervene in partisan political campaigns while retaining their 501(c)(3) status. BJC Executive Director Amanda Tyler said it would harm the tax law that protects houses of worship. “Pastors and people of faith know that there’s nothing free about a pulpit that is bought and paid for by political campaign donations or beholden to partisan interests,” she said.
The Joint Committee on Taxation, a nonpartisan organization which estimates the potential economic impact of certain legislation, stated that this provision would cost taxpayers $2.1 billion over the next 10 years. Testifying before the Ways and Means Committee, JCT’s chief of staff described the basis for this number as “a diversion of some substantial growth in political contributions into a deductible form that is not deductible today.” Because most churches and denominations are 501(c)(3) organizations, contributions to them are tax deductible for the donor. But, political action committees are not 501(c)(3) organizations, so PAC donations are not tax deductible. If religious organizations would be permitted to engage in partisan campaign activity, political donors would have an incentive to funnel their campaign contributions through organizations that could give them the added gift of tax deductibility.
As the House Ways and Means Committee was considering the legislation, Rep. John Lewis, D-Georgia, introduced an amendment to strip Section 5201 from the bill and preserve the status quo. Several lawmakers spoke in favor of how current law protects the independence of churches, including Rep. Lloyd Doggett, D-Texas, who quoted Tyler and CBF Texas Field Coordinator Rick McClatchy in his remarks. Rep. Lewis’ amendment failed in a party line vote.
Although no legislators who spoke in favor of carving out churches from the reach of the Johnson Amendment advocated that the carve-out should go further and apply across-the-board to the entire charitable sector, Rep. Brady unexpectedly amended his own bill to do just that prior to the committee vote. The change was widely criticized by the charitable sector. “[Nonprofit organizations] don’t want to be dragged into the political swamp; we don’t want corrosive partisanship to make us as ineffective as partisan government today,” said Tim Delaney, president and CEO of the National Council of Nonprofits, in response.
The entire House passed the bill with the expanded Section 5201. The bill “limits” this partisan activity by requiring the partisan statements to be in the organization’s ordinary course of its activities and result in not more than a de minimis incremental expense. Further, the ability of these organizations to endorse or oppose candidates is limited to the tax years 2019-2023, but it will still cost taxpayers more than $2 billion.
Especially problematic for churches would be tasking IRS bureaucrats with the duty to determine which of a church’s activities were in (and outside of) its “ordinary course” and which church expenditures were de minimis and incremental, inviting additional scrutiny. Under current law, churches and denominations — unlike all other 501(c)(3) organizations — are exempted from filing annual forms with the IRS that reveal income and expenses.
Unlike the House bill, the Senate’s tax bill did not include language undoing the Johnson Amendment. At press time for Report from the Capital, the process was beginning for the two chambers to work out the differences before a final bill can be sent to President Donald J. Trump’s desk.
Individuals and organizations publicly advocating for repeal of the Johnson Amendment are few and far between, while the opposition to repeal is widespread, diverse and transparent. More than 5,500 religious and secular nonprofit organizations across the country have expressed their opposition, joining more than 4,300 clergy and lay faith leaders and more than 100 denominational and religious organizations. Faith leaders can still add their names to the advocacy effort to keep the Johnson Amendment at Faith-Voices.org, and nonprofit leaders can visit GiveVoice.org to join forces with other groups asking to keep the protections on the books.
For more, visit BJConline.org/Faith-Voices.