The Johnson Amendment: What its Repeal Would Mean to your Nonprofit Organization

What is the Johnson Amendment

In 1954, then Senator Lyndon Johnson sponsored legislation that applied to organizations recognized as tax-exempt under Section 501(c)(3) of the Internal Revenue Code. The legislation prohibited tax-exempt organizations, largely churches, from “directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.”

Tax-exempt organizations that violate this provision by collecting contributions on behalf of political campaigns, having clergy endorse a candidate from the pulpit, or making any statement for Preor against any candidate risk losing their tax-exempt status. In recent years, thousands of pastors have deliberately challenged the Johnson Amendment but only one church was ever actually audited by the IRS. This is largely due to the fact that the Johnson Amendment is actually fairly narrow in scope. Churches are allowed to organize nonpartisan voter education and registration events. Pastors can preach on any social or political issues and even are permitted to distribute “issue guides” to voters in their congregation.

President Trump has vowed to “destroy” the Johnson Amendment.  Its destruction, however, cannot be done by executive order.   The Johnson Amendment, like almost all of the laws, rules and regulations that govern tax-exempt organizations is woven into Section 501(c)(3) of the Internal Revenue Code.

What Would a Repeal Mean for Churches?

Repealing the Johnson Amendment would allow pastors and churches to explicitly express their political views through endorsing specific candidates and engaging directly in campaigns. Many organizations would celebrate this as a restoration of full freedom of speech for religious institutions.

Many worry, however, that there could be unintended consequences from repealing the Johnson Amendment. Currently, the maze of complicated campaign finance laws does not allow for tax deductible political campaign contributions. Repealing the Johnson Amendment could potentially allow churches to act as backdoors for tax-deductible contributions to finance campaigns.

Unlike most other organizations exempt under Section 501(c)(3), churches are not required to file annual informational returns with the IRS.  Churches benefit from this reprieve from filing but it does  limits governmental oversight on the financial activities of churches. Absent the Johnson Amendment and without an obligation to file Form 990s a clear opportunity exists to misuse these tax-exempt organizations for tax-deductible campaign contributions. Tax-exempt religious organizations are currently allowed to engage in “insubstantial activities” for non-charitable purposes, which presumably precludes electioneering.  Assuming this stays in place, there could be some protection in a post-Johnson Amendment era from attempts to turn churches into tax-deductible campaign funding vehicles.

This article was written by attorney Kim Lowe.