On Totally Destroying the Johnson Amendment

Yesterday at the National Prayer Breakfast, Donald Trump (among other things) reiterated his campaign promise to “get rid of and totally destroy the Johnson Amendment.”

The phrase “Johnson Amendment” may well be meaningless to you. It’s kind of a stupid name for a broadly-misunderstood provision of the tax law. So, to get us all on the same page, a quick explainer:

What Is the Johnson Amendment?

Section 501(c)(3) of the Internal Revenue Code provides that a number of public charities can qualify for exemption from tax. Broadly speaking, the categories include religious, charitable, and educational institutions (though there are more than just those).

To qualify under section 501(c)(3), though, an organization must meet a number of requirements. One—the Johnson Amendment—is a blanket prohibition on endorsing or opposing candidates for office.[fn1] (Note that this is a prohibition on any entity exempt under section 501(c)(3), not just churches.)

The Johnson Amendment is pretty commonly misunderstood to prohibit tax-exempt organizations from doing anything political at all. It doesn’t. While there are some limitations, tax-exempt organizations can lobby and otherwise speak to politics. (More on that later.)

So Why Is It Called the “Johnson Amendment”?

On one level, I don’t know. I’ve never researched the provenance of the name. It’s been popularized, as best as I can tell, by religious opponents of the prohibition, especially the Alliance Defending Freedom.

But if we ignore when people started using the phrase, it technically refers to the fact that the prohibition was added when Senator Lyndon Johnson proposed a change to section 501(c)(3) of the Internal Revenue Code in 1954.

And Why Does the Prohibition Exist?

It’s not completely clear. There’s no extant legislative history explaining why it was proposed or why it passed. People who have looked at the history believe it was probably proposed because Sen. Johnson believed that a conservative tax-exempt foundation had opposed his reelection bid and supported his opponent, and he wanted to enact revenge against it.

Two things to note: first, if this is true, churches weren’t a primary target of the legislation. (In fact, I’ve read that some churches actually supported his reelection bid, so he probably wasn’t aiming at churches.) Second, even if the origin story is true, it doesn’t explain why Congress agreed to pass it.

What Do People Think of Its Repeal?

There are two main camps.[fn2] The first camp has been advocate the elimination of the Johnson Amendment for years. The second sees its elimination as catastrophic.

The first camp largely includes a coalition of mostly- (though not entirely-) conservative religious leaders. They believe they have a religious obligation to speak to moral issues, including candidates for office, and that any limitation on their speech infringes on their religious liberties and duties.

The second camp sees an almost-apocalyptic future in which tax-exempt organizations basically begin to launder political donations, probably at the expense of their charitable missions. Why? Because donors can deduct their donations to charitable organizations, but they cannot deduct their political donations. If they could donate to charitable organizations that could then either pass that money on to candidates or advertise for or against candidates, the value of their donations increases.[fn3]

So Which Camp Is Right?

We don’t really know. On the one hand, the prohibition is almost entirely unenforced. (Like, one church has ever lost its exemption for supporting or opposing a candidate for office. And even non-church charities by and large don’t lose their exemptions.) Why isn’t it enforced better? I’ve speculated that the IRS is hesitant to enforce it because it seems draconian (basically, removing the exemption is a death sentence for many charities), and because they would face widespread condemnation with little, if any, benefit.

So maybe eliminating it wouldn’t change anything. Any tax-exempt organization that wants to endorse or oppose a candidate can effectively do so now at very little cost.

At the same time, though, even though it’s almost never enforced, a risk-averse public charity, seeing the extreme costs if the prohibition is enforced, may choose not to, even though it wants to. Without the Johnson Amendment, it may decide to endorse or oppose. And frankly, I don’t have any sense of how many public charities fit into this space.

Either way, though, it’s unlikely the the most apocalyptic vision would happen. Even without the Johnson Amendment, tax-exempt organizations face a significant limitation on their ability to participate in politics. Specifically, no substantial part of their activities can involve politicking.

Right now, it’s not clear exactly what “no substantial part” means; a couple courts have given a range (between 5 and 15% of its activities, maybe?). Without the Johnson Amendment, we get more pressure on this, and courts will probably have to define it better. But the no-substantial-part limitation should prevent tax-exempt organizations from becoming conduits.

Is There Any Mormon Angle to This?

I’m not sure. The first line of the church’s Political Neutrality statement basically comes straight from the Johnson Amendment. If it goes away, will the church start endorsing candidates? I really don’t know; I doubt it would, but I could totally be wrong.

In fact, this is one interesting thing: not all pastors want to get rid of the Johnson Amendment. For those who don’t want to endorse candidates, the rule that they can’t gives them a backstop. They can respond to congregants or politicians who wants them to endorse specific candidates by saying, Sorry, the tax law prevents me from doing it.

So Should I Support or Oppose This Change?

Yeah, probably.

Anything Else?

I wrote a piece about the possible consequences to newspapers over at The Surly Subgroup.

And if you want this more summary, but in an oral form, I spoke with Doug Wright on KSL Radio yesterday. (When and if they post my interview, I’ll update the post with the link.)


[fn1] The precise language: to qualify as tax-exempt, a public charity must 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.”

[fn2] Three, actually: there’s undoubtedly a broad collection of people who don’t especially care.

[fn3] The math really quickly: if I’m in the 25% tax bracket, I have to earn $100 to make a $75 donation (because I have $75 after taxes). If that same donation were deductible, though, I could donate the full $100 (because I effectively wouldn’t pay taxes on that donation). As a result, a deductible donation is more valuable to me than a non-deductible one.

Comments

  1. Donations to organizations that are primarily in the business of providing intangible religious benefits to their members should not be tax-exempt, because they are not charity. Huntsman père is dead on with this point.

    Of course, this would just lead many churches to declare themselves to be nonprofit educational institutions for the purpose of keeping their tax exemptions.

  2. Calm educated common sense. Thanks, Sam. I agree (at a gut check level) that unless 501(c)(3) became a way to make tax deductible poilitical contributions, the net effect is likely to be marginal. In that regard, it’s worth noting that disallowing a “charitable” contribution deduction can and does happen, and because it can be done one donor at a time is less public and less draconian.

  3. APM, the question of whether churches should be tax-exempt is not even remotely the topic here, and I’m not going to engage on it, except to say that “charity” (however you define it) is not a condition precedent to being tax exempt. So whether you define religions as charitable or not has no bearing on whether they qualify for the tax exemption.

  4. Also, thanks, Chris. I agree—eliminating deductions at the donor level is more work, but is probably also a better check (if another is needed) on tax-exempts becoming conduits for political money.

  5. really glad to see this — was going to post on it myself but you beat me to it!

  6. John, don’t let that stop you! I’ve tried to make this mostly a neutral analysis, but there’s plenty more that could (and should) be said!

  7. Thanks Sam. My initial impression is that mainstream faith groups (in which I include the LDS church) should be reluctant for the Johnson Amendment to die because (i) repeal wouldn’t really open up any new opportunities since mainstream faiths are unlikely to endorse candidates and they already can speak on “moral” policies like SSM, and (ii) there is a risk that nut-job faiths (think Westboro) would push the new powers to create some parade of horribles that would serve to increase the public’s growing skepticism of granting exempting faith groups from taxation.

  8. Kevin Barney says:

    Very helpful overview, Sam, thanks.

  9. On a national level, I see this as a small net positive for the LDS church. As Dave K says, they are unlikely to endorse candidates and will still try to be non-political in official doctrine and practice. Over time, they will look more serious about religion than many other churches that get overtly political.
    There may be some local elections that get messy with a semi-endorsement from a local bishop or SP in church. Outside the Mormon corridor, there may be some invitations to a church fireside or something like that for candidates to speak at. Of course, in some areas, this invitation could be held against the candidate.

  10. The Johnson Amendment is ignored by many religious groups. Predominantly black churches in the past have and remain today involved in politics where pastors/ministers endorse candidates openly and without fear of reprisal. Traditional main line churches are much more circumspect with political endorsements. Clearly the Johnson Amendment hasn’t been enforced with any sort of uniformity. But I’m indecisive about eliminating it.

  11. “the IRS is hesitant to enforce it because it seems draconian”

    The IRS is 100% strategic from a court perspective. With no plaintiff, there’s no standing. We’d certainly see it’s repeal if it was used. But that would entail ten years or more of costly legal battles, which in itself is chilling.

    The primary purpose of the law then is to serve as chilling effect that certainly prevents many churches from organizing around a particular candidate.

    It doesn’t always accomplish it, but a parent doesn’t actually have to follow through on the threat to “turn this car right around” to achieve the desired result most of the time.

  12. P.L., that’s almost certainly one reason why they IRS underenforces the prohibition. It would be a high-cost, low-reward proposition for the IRS.

    And alternative story (which isn’t incompatible with the first, fwiw): the ADF doesn’t want the prohibition to end. Because, as my friend Ben Leff has pointed out, if it did, the ADF could create standing to challenge the prohibition, but it’s chosen not to. (Why not? From a cynical perspective, the existence of the prohibition seems to be a pretty good rallying cry/fundraising plea for the ADF.) To some extent, then, it’s in the ADF’s favor to have something to expressly rally against.