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Johnson Amendment

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The Johnson Amendment is a provision in the U.S. tax code, since 1954, that prohibits all 501(c)(3) non-profit organizations from endorsing or opposing political candidates. Section 501(c)(3) organizations are the most common type of nonprofit organization in the United States, ranging from charitable foundations to universities and churches. The amendment is named for then-Senator Lyndon B. Johnson of Texas, who introduced it in a preliminary draft of the law in July 1954.

Contents

In the early 21st century, many politicians, including President Donald Trump, have sought to repeal the provision, arguing that it restricts the free speech rights of churches and other religious groups. These efforts have been criticized because churches have fewer reporting requirements than other non-profit organizations, and because it would effectively make political contributions tax-deductible. [1] On May 4, 2017, Trump signed an executive order "to defend the freedom of religion and speech" for the purpose of easing the Johnson Amendment's restrictions. [2] [3]

Provisions

Page from the Congressional Record containing a transcript of the passage of the amendment The Johnson Amendment.jpg
Page from the Congressional Record containing a transcript of the passage of the amendment

Paragraph (3) of subsection (c) within section 501 of Title 26 (Internal Revenue Code) of the U.S. Code (U.S.C.) describes organizations which may be exempt from U.S. Federal income tax. 501(c)(3) is written as follows: [4]

(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), 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.[bolding added]

The Johnson Amendment is the emboldened portion of this provision beginning with the words "and which does not participate in, or intervene in ...." [5] The amendment affects nonprofit organizations with 501(c)(3) tax exemptions, [6] which are subject to absolute prohibitions on engaging in political activities and risk loss of tax-exempt status if violated. [7] Specifically, they are prohibited from conducting political campaign activities to intervene in elections to public office. [8] [9] The Johnson Amendment applies to any 501(c)(3) organization, not just religious 501(c)(3) organizations.

The benefit of 501(c)(3) status is that, in addition to the organization itself being exempt from taxes, donors who itemize may also take a tax deduction for their contributions to the organization.

According to the Internal Revenue Service, contributions to political campaign funds, or public statements of position in favor of or in opposition to any candidate for public office, are disallowed. However, certain voter education activities (including presenting public forums and publishing voter education guides), voter registration, and get-out-the-vote drives, if conducted in a non-partisan manner, are not prohibited. [8]

History

Lyndon B. Johnson during his tenure as Senator from Texas and before becoming Vice President Senator Lyndon Johnson.jpg
Lyndon B. Johnson during his tenure as Senator from Texas and before becoming Vice President

The amendment was to a bill in the 83rd Congress, H.R. 8300, which was enacted into law as the Internal Revenue Code of 1954. The amendment was proposed by Senator Lyndon B. Johnson of Texas on July 2, 1954. The amendment was agreed to without any discussion or debate and was included in Internal Revenue Code of 1954 (Aug. 16, 1954, ch. 736). [10] The provision was considered uncontroversial at the time, and continued to be included when the 1954 Code was renamed as the Internal Revenue Code of 1986 during the Ronald Reagan administration. [11]

Repeal efforts

In the 2010s, the Alliance Defending Freedom made attempts to challenge the Johnson Amendment through the Pulpit Freedom Initiative, which urges Protestant ministers to violate the statute in protest. The ADF contends that the amendment violates First Amendment rights. [12]

During his 2016 presidential campaign, Donald Trump called for the repeal of the amendment. [13] On February 2, 2017, after becoming President, Trump vowed at the National Prayer Breakfast to "totally destroy" the Johnson Amendment, [14] White House Press Secretary Sean Spicer announced to the press that Trump "committed to get rid of the Johnson Amendment", "allowing our representatives of faith to speak freely and without retribution", [15] and Republican lawmakers introduced legislation that would allow all 501(c)(3) organizations to support political candidates, as long as any associated spending was minimal. [16] [17]

On May 4, 2017, Trump signed the "Presidential Executive Order Promoting Free Speech and Religious Liberty." [18] The executive order does not (nor can it [19] ) repeal the Johnson Amendment, nor does it allow ministers to endorse from the pulpit, but it does direct the Department of Treasury that "churches should not be found guilty of implied endorsements where secular organizations would not be." Douglas Laycock, speaking to The Washington Post, indicated that he was not aware of any cases where such implied endorsements have caused problems in the past. [20] Walter B. Jones Jr. had been the principal congressional advocate for repealing the speech restriction altogether and had support from the Family Research Council in modifying religious speech language in the Kevin Brady sponsored tax re-write legislation styled, the Tax Cuts and Jobs Act of 2017. [21]

The final version of the major tax rewrite legislation passed in December 2017 does not include the House repeal of the Johnson Amendment because the Senate parliamentarian ruled that it violated the Byrd Rule for reconciliation legislation. [22] [23] [24]

Criticism of repeal efforts

Efforts to repeal the Johnson Amendment have been criticized for a number of reasons. One concern is that political campaign contributions funneled through 501(c)(3) organizations would be tax-deductible for donors, and that such contributions would not be disclosed, since churches are exempt from reporting requirements required of other 501(c)(3) organizations. Under this critique, repeal would have the potential of creating a mechanism where political contributions could be made without regard to other campaign financing laws. [25] [26] [27] This concern was validated by Congressional testimony from Thomas Barthold, Chief of Staff of Congress' nonpartisan Joint Committee on Taxation, saying of a repeal provision later removed from the tax bill passed in late 2017 "it's a diversion of some of the substantial growth in political contributions into a deductible form that is not deductible today." [28]

Other concerns include the potential damage to public trust in nonprofit and religious organizations if they were to begin endorsing candidates. Polls have shown that majorities of both the general public and of clergy oppose churches endorsing political candidates [29] [30] The National Council of Nonprofits, a network of more than 25,000 nonprofit organizations, released a statement opposing the proposed repeal legislation. [31] Independent Sector, a coalition of nonprofits, foundations, and corporations has also stated their opposition to the proposal to repeal the Johnson Amendment. [32] Numerous efforts to preserve the protections of the Johnson Amendment include a letter in support of nonprofit nonpartisanship signed by more than 5,500 organizations, [33] a Faith Voices letter signed by more than 4,300 religious leaders, [34] a letter that more than 100 denominations and major religious organizations signed, [35] and a letter from the National Association of State Charity Officials [36]

There has also been concerns from clergy and lay Christians about the potential that a total repeal would cause churches to transform into partisan super PACs.[ citation needed ]

The Catholic Church does not allow church funds to be spent on behalf of political candidates nor endorsements from the pulpit regardless of the legal permissibility. [37]

See also

Related Research Articles

A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is an organization dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization using its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization's shareholders, leaders, or members. Nonprofits are tax-exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings.

Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Tax-exempt status may provide complete relief from taxes, reduced rates, or tax on only a portion of items. Examples include exemption of charitable organizations from property taxes and income taxes, veterans, and certain cross-border or multi-jurisdictional scenarios.

United States non-profit laws relate to taxation, the special problems of an organization which does not have profit as its primary motivation, and prevention of charitable fraud. Some non-profit organizations can broadly be described as "charities" — like the American Red Cross. Some are strictly for the private benefit of the members — like country clubs, or condominium associations. Others fall somewhere in between — like labor unions, chambers of commerce, or cooperative electric companies. Each presents unique legal issues.

Alliance Defending Freedom is an American conservative Christian nonprofit organization with the stated goal of advocating, training, and funding on the issues of "religious freedom, sanctity of life, and marriage and family." ADF is headquartered in Scottsdale, Arizona and runs the Center for Academic Freedom. It also has four branch offices located in Folsom, California; Washington, D.C.; Lawrenceville, Georgia; and New York.

The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code (USC). It is organized topically, into subtitles and sections, covering income tax in the United States, payroll taxes, estate taxes, gift taxes, and excise taxes; as well as procedure and administration. Its implementing agency is the Internal Revenue Service.

A 501(c) organization is a nonprofit organization in the federal law of the United States according to Section 501(c) and is one of over 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 set out the requirements for obtaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.

A 501(c)(3) organization is a corporation, trust, unincorporated association, or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit organizations in the US.

Evangelical Council for Financial Accountability

The Evangelical Council for Financial Accountability (ECFA) is an American financial standards association representing evangelical Christian organizations which qualify for tax-exempt, nonprofit status and receive tax-deductible contributions. Founded in 1979, ECFA accredits over 2,200 member organizations which have demonstrated compliance with its financial standards. As of 2015, the collective annual revenue of ECFA member organizations is reported to be nearly $25 billion.

Baptist Joint Committee for Religious Liberty

Founded in 1936, BJC is a national faith-based organization whose singular focus is the protection of religious liberty. With a staff of attorneys, scholars, ministers and mobilizers, the Washington D.C.-based nonprofit has a long history of advocating in the U.S. Supreme Court and working with Congress on issues relating to religious freedom and church-state separation.

Form 990 United States Internal Revenue Service form

Form 990 is a United States Internal Revenue Service form that provides the public with financial information about a nonprofit organization. It is often the only source of such information. It is also used by government agencies to prevent organizations from abusing their tax-exempt status. Certain nonprofits have more comprehensive reporting requirements, such as hospitals and other health care organizations.

The Institute for Free Speech (IFS), formerly called the Center for Competitive Politics, is a 501(c)(3) non-profit organization headquartered in Alexandria, Virginia. IFS' mission is to "promote and defend the First Amendment rights to freely speak, assemble, publish, and petition the government through strategic litigation, communication, activism, training, research, and education."

Jody Hice American radio host

Jody Brownlow Hice is an American politician, radio show host, and political activist serving as the U.S. Representative for Georgia's 10th congressional district since 2015. He is a member of the Republican Party.

Regan v. Taxation with Representation of Washington, 461 U.S. 540 (1983), was a case in which the United States Supreme Court upheld lobbying restrictions imposed on tax-exempt non-profit corporations.

Nonpartisanism in the United States is organized under United States Internal Revenue Code that qualifies certain non-profit organizations for tax-exempt status because they refrain from engaging in certain prohibited political activities. The designation "nonpartisan" usually reflects a claim made by organizations about themselves, or by commentators, and not an official category per American law. Rather, certain types of nonprofit organizations are under varying requirements to refrain from election-related political activities, or may be taxed to the extent they engage in electoral politics, so the word affirms a legal requirement. In this context, "nonpartisan" means that the organization, by US tax law, is prohibited from supporting or opposing political candidates, parties, and in some cases other votes like propositions, directly or indirectly, but does not mean that the organization cannot take positions on political issues.

In 2013, the United States Internal Revenue Service (IRS) revealed that it had selected political groups applying for tax-exempt status for intensive scrutiny based on their names or political themes. This led to wide condemnation of the agency and triggered several investigations, including a Federal Bureau of Investigation (FBI) criminal probe ordered by United States Attorney General Eric Holder.

SAVE is a grassroots nonprofit political advocacy organization located in Miami, Florida. Founded in 1993, the organization's stated mission is to "promote, protect and defend equality for people in South Florida who are lesbian, gay, bisexual and transgender."

Form 1023 is a United States IRS tax form, also known as the Application for Recognition of Exemption Under 501(c)(3) of the Internal Revenue Code. It is filed by nonprofits to get exemption status.

A 501(h) election or Conable election is a procedure in United States tax law that allows a 501(c)(3) non-profit organization to participate in lobbying limited only by the financial expenditure on that lobbying, regardless of its overall extent. This allows organizations taking the 501(h) election to potentially perform a large amount of lobbying if it is done using volunteer labor or through inexpensive means. The 501(h) election is available to most types of 501(c)(3) organizations that are not churches or private foundations. It was introduced by Representative Barber Conable as part of the Tax Reform Act of 1976 and codified as 26 U.S.C. § 501(h), and the corresponding Internal Revenue Service (IRS) regulations were finalized in 1990.

Pulpit Freedom Sunday

In the United States of America, Pulpit Freedom Sunday is an annual event which is held in churches. It was founded in 2008 by Alliance Defending Freedom (ADF) to challenge the prohibition on places of worship from endorsing political candidates. According to The New York Times, ADF's campaign has become "perhaps its most aggressive effort."

Amanda Tyler is an American lawyer and executive. She is the executive director of the Baptist Joint Committee for Religious Liberty (BJC) in Washington, D.C., a nonprofit whose focus is defending religious freedom for all people. Tyler is the sixth executive director of the organization since its founding in 1936 and the first woman to hold the post.

References

  1. "Congress Wants to Let Churches Play Partisan Politics and Keep Tax Exempt Status". American Civil Liberties Union. Retrieved 2018-08-31.
  2. Wagner, John; Pulliam Bailey, Sarah. "Trump signs order aimed at allowing churches to engage in more political activity". The Washington Post . Retrieved 4 May 2017.
  3. "President Donald J. Trump signs the Executive Order on Promoting Free Speech and Religious Liberty and participates in the National Day of Prayer event in the Rose Garden". The White House/Facebook. 43:29
  4. See paragraph (3) of subsection (c) of 26 U.S.C.   § 501
  5. The parenthetical phrase "(or in opposition to)" was not part of the original text of the Johnson amendment as enacted in the Internal Revenue Code of 1954, but was added by Congress as a clarification, in 1987. See section 10711(a)(2) of the Revenue Act of 1987, Title X of the Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330, 1330-464 (Dec. 22, 1987).
  6. Stanley, Erik; Lynn, Barry W. (September 25, 2008). "Tax laws and religious speech: what the Constitution says". Los Angeles Times . Retrieved September 14, 2010.
  7. Elacqua, Amelia (2008). "Eyes wide shut: The ambiguous 'political activity' prohibition and its effects on 501(c)(3) organizations". Houston Business and Tax Journal. pp. 119 and 141.
  8. 1 2 "The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations". Internal Revenue Service. 2012-08-14. Archived from the original on 2 December 2010. Retrieved 2012-09-09.
  9. Dorf, Michael C. (6 Oct 2008). "Why the Constitution Neither Protects Nor Forbids Tax Subsidies for Politicking from the Pulpit, And Why Both Liberals and Conservatives May be on the Wrong Side of this Issue". Findlaw.
  10. Congressional Record-Senate, July 2, 1954, p. 9604
  11. Peters, Jeremy W. (February 2, 2017). "The Johnson Amendment, Which Trump Vows to 'Destroy,' Explained". The New York Times .
  12. Berlinerblau, Jacques (2011-10-05). "Where does church end and state begin? – Georgetown/On Faith". The Washington Post. Retrieved 2011-12-26.
  13. Smith, Samuel (September 29, 2016). "New Bill Would Repeal Johnson Amendment, Protect Pastors Rights to Endorse Candidates, Political Positions". The Christian Post . Retrieved October 29, 2016. The bill, also known as H.R. 6195, comes as Republican presidential nominee Donald Trump has drawn the appeal of social conservatives and evangelicals by vowing to repeal the Johnson Amendment, which was passed in 1954. Opponents of the Johnson Amendment assert that this regulation has "allowed the IRS to intimidate and censor churches and other nonprofit organizations."
  14. Phillip, Abby (February 2, 2017). "Trump asks for prayers for Arnold Schwarzenegger's ratings at National Prayer Breakfast". The Washington Post.
  15. "2/2/17: White House Press Briefing". The White House/YouTube. February 2, 2017.
  16. Marcos, Cristina (2017-02-02). "GOP unveils bill to allow political activity by churches". The Hill. Retrieved 2017-02-03.
  17. "H.R. 781 – 115th Congress". Library of Congress, congress.gov. Retrieved 2017-02-02.
  18. "Presidential Executive Order Promoting Free Speech and Religious Liberty". The White House. 4 May 2017. Archived from the original on 6 May 2017. Retrieved 5 May 2017.
  19. Lopez, German (9 February 2017). "Trump's "law and order" executive orders, explained". Vox . Retrieved 5 May 2017.
  20. Pulliam Bailey, Sarah (5 May 2017). "Many religious freedom advocates are actually disappointed with Trump's executive order". The Washington Post.
  21. Douglas, William. (2 November 2017). "GOP plan to ease law on political speech from the pulpit gets lukewarm reception". McClatchy DC website Retrieved 3 November 2017.
  22. Long, Heather. (15 December 2017). "WonkBlog-Analysis: The final GOP tax bill is complete. Here's what is in it." Washington Post website Retrieved 17 December 2017.
  23. McCambridge, Ruth. (15 December 2017). "Dep't. of Small Mercies: Johnson Amendment Repeal Gone from Still-Terrible GOP Tax Bill ". Nonprofit Quarterly website Retrieved 17 December 2017.
  24. Shellnutt, Kate (15 December 2017). "Johnson Amendment Repeal Removed from Final GOP Tax Bill". Christianity Today. Retrieved 2 January 2018.
  25. Tesfaye, Sophia (2017-02-03). "Trump's plan to "totally destroy" the Johnson Amendment creates a huge campaign finance loophole for churches to exploit". Salon . Retrieved 2017-02-04.
  26. Jackson, Elizabeth (2016-10-06). "What Would Repealing the Johnson Amendment Mean?". Church Law & Tax. Retrieved 2017-02-04.
  27. Green, Emma (2016-08-02). "Trump Wants to Make Churches the New Super PACs". The Atlantic . Retrieved 2017-02-04.
  28. Markup of the Tax Cuts and Jobs Act. See 00:54:39 to 00:57:07 , retrieved 2018-06-15
  29. "Pastors Shouldn't Endorse Politicians – National Association of Evangelicals". National Association of Evangelicals. 2017-03-29. Retrieved 2018-02-26.
  30. Lewis, Andrew R. (2017-02-03). "Most People — And Perhaps Most Clergy — Don't Want Political Endorsements In Church". FiveThirtyEight . Retrieved 2017-02-04.
  31. "Last-Minute Change to Tax Reform Bill Hardens Nonprofit Opposition". National Council of Nonprofits. 2017-11-09. Retrieved 2017-11-10.
  32. "Statement on Johnson Amendment and Political Activity by Charities". Independent Sector. 2017-02-02. Retrieved 2017-02-04.
  33. "Community Letter in Support of Nonpartisanship" (PDF). Give Voice.
  34. "Keep Our Houses Of Worship Independent & Nonpartisan – Sign The Letter Today!". Faith Voices. Retrieved 2018-02-26.
  35. "Letter from Faith Groups" (PDF).
  36. "NASCO Letter to Congressional Leaders re: Johnson Amendment" (PDF).
  37. http://www.usccb.org/about/general-counsel/political-activity-guidelines.cfm

Further reading