In February, President Trump vowed to get rid of and totally destroy the provision preventing 501(c)(3) organizations from engaging in partisan politics. Currently, organizations exempt from taxation under IRC §501(c)(3) are prohibited from supporting or opposing candidates or spending resources to support or oppose candidates. This prohibition is occasionally referred to as the Johnson Amendment as it was introduced by Senate Minority Leader Johnson in 1954.
The Johnson Amendment ensures that 501(c)(3) organizations remain above the political fray by withholding exempt status (or revoking it) from organizations that engage in any amount of political activity. Requiring 501(c)(3) organizations to abstain from involvement in political activity ensures that they are able to remain dedicated to their missions without the distraction and divisiveness that partisan politics creates. Rather than squabbling over partisan issues, these organizations (regardless of their social missions) are able to devote their time and efforts to furthering their exempt purposes and bettering the community. Allowing exempt organizations to engage in political activity would open the door for politicians and others seeking endorsements and financial contributions to disrupt the missions and charitable purposes these organizations seek to fulfill with partisan politicking. The focus would be drawn away from the substance of the issues to which these organizations currently devote their resources and towards political parties and partisanship. These organizations would no longer be a place for people to come together to solve community problems, but rather would become yet another institution subject to the caustic partisanship that is dividing our country.
While Mr. Trump frames the issue as involving religious freedom, the implications of abolishing this restriction are far more widespread than that. When an individual donates to a charity, the general public is subsidizing that individual’s preference in causes in the form of a tax break. Each dollar an individual is able to deduct in taxable income is money that the government does not get to collect and use for government programs. However, this reduced revenue is tolerated because of the benefit the community receives through the work of these exempt organizations. The tradeoff for subsidizing a taxpayer’s choice of where to spend her charitable dollars is that these exempt organizations are prohibited from using these funds to benefit insiders, engage in more than an insubstantial amount of lobbying, or participate or intervene in political campaigns.
By eliminating the Johnson Amendment and allowing exempt organizations to participate in political campaigns, donors would essentially be able to deduct the cost of funding political campaigns. Because the contributions would be deducted by the individuals making them, the general public would effectively be subsidizing donations to political campaigns. Additionally, a repeal of the Johnson Amendment would result in even more anonymous (and now tax deductible) money flowing into political campaigns. Further, individuals may stop supporting charitable organizations in an effort to prevent their donations from being redirected to a political campaign. Thus, charitable organizations and the communities they serve may be harmed by an influx of charitable donations intended for political campaigns rather than the charitable mission and a reduction in contributions from donors wary of supporting partisan politics.
Regardless of one’s political affiliation, a nonprofit sector devoted to partisan politics rather than fulfilling the exempt purposes for which it was established is not one that is worthy of the preferred status it currently enjoys.
Make sure your voice is heard – sign the Community Letter in Support of Nonpartisanship and share with others to let your Senators and Representatives know that you oppose efforts to politicize charities.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations. Ellis is licensed to practice in Washington and Arizona and advises nonprofits on federal tax and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.