Should Free Speech for Nonprofits Include Political Campaign Involvement?

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September 28, 2016; Southern Poverty Law Center

Who doesn’t want informed voters?

With that question by its president, Tony Perkins, the Family Research Council joined the Republican Party in challenging the Johnson Amendment, which prohibits nonprofit organizations from actively campaigning or lobbying.

The Republican Party platform specifically calls for changes in U.S. tax regulations so that 501(c)(3) organizations can openly engage in political activity. Their presidential nominee, Donald Trump, made his thinking clear in a June speech to an audience of Christian leaders.

I think maybe that will be my greatest contribution to Christianity—and other religions—is to allow you, when you talk religious liberty, to go and speak openly, and if you like somebody or want somebody to represent you, you should have the right to do it.

Perkins tried to place the FRC position in a more historical context, as the FRC announced it was launching an active effort to change current law.

Since the birth of our nation, pastors and churches have been at the forefront of shaping public debate and our choice of public servants. For example, Martin Luther King Jr. was a clergyman, and the political involvement of African-American churches was integral to progress in the civil rights movement he helped lead in the 1950s and 1960s. Where would we be now if such pastors had not made their voices heard on the political and social issues of their time?”

The issue dates to 1917, when Congress first established the tax deductibility of donations to nonprofit organizations and left a large grey zone between charitable gifts and political donations. In 1934, the IRS tried to add new language to the tax code to clarify the distinctions: “No substantial part of an organization’s activities” could involve “carrying on propaganda or otherwise attempting to influence legislation.” In 1954, through what has become known as the Johnson Amendment, Congress went further and declared that nonprofits, including religious groups, couldn’t support candidates for political office without losing their tax-exempt status. In 1987, Congress added specific language that nonprofits can’t oppose candidates, either—which is where the law stands today.

It would be nice to know what the legislative intent of Congress was when the Johnson Amendment was included with the major tax law revisions passed in 1954. However, there were no cosponsors, committee hearings, and no Senate debate on the proposal. Then-Sen. Johnson introduced his amendment on the Senate floor and it passed without debate on a voice vote, meaning that Sen. Johnson was the lone senator taking a recorded position on the measure.

The FRC/Trump assertion is that current regulations unfairly restrict speech and silence important parts of our society. Freeing churches and other charitable organizations from these restrictions would improve the process, increase voter participation, and elevate the debate. How could this be bad?

Emma Green, writing for the Atlantic, sees danger in lowering the current barriers.

A broad change to the provision would likely cause minor-level chaos within the U.S. political system: There would no longer be any meaningful difference between charitable groups and lobbying organizations. The government would effectively be subsidizing the political activities of all schools, charities, churches, and scientific-research organizations.

Allowing nonprofits to become active parts of the electoral process would unleash another stream of money to flow in. But unlike contributions to traditional political groups, these donations would be tax deductible and could encourage another escalation in the level of spending and the power of mega-donors to effect electoral outcomes.

Some see the potential for this to distort and harm churches and other nonprofit organizations, aside from any potential impact on democracy. As Erin Bradrick, writing for NPQ shortly after Mr. Trump’s June speech, pointed out:

Americans United for Separation of Church and State released a press release in response to the approval of the Republican Party platform, in which it quoted its executive director, the Rev. Barry W. Lynn, as calling the Republican Party’s proposal to repeal the amendment as “short-sighted, reckless and corrosive to religious life.” […] The National Council of Nonprofits similarly recently reaffirmed its position that “501(c)(3) nonprofits enjoy more power and independence to solve community problems by steering clear of partisanship,” and noted, “If individual organizations came to be regarded as Democratic charities or Republican charities instead of the nonpartisan problem solvers that they are, it would diminish the public’s overall trust in the sector and thus limit the effectiveness of the nonprofit community.”

Is this a move to protect the free speech rights of important moral leaders or a misuse of charitable tax benefits? When this year’s election dust settles and Congress reconvenes, the nonprofit community will have a chance to weigh in.—Martin Levine

  • Frank Monti

    The prohibition against campaign activities for organizations which receive tax-deductible contributions is simple to understand – and we really do not want to change it.
    First, one has to clarify in their mind that there are two types of tax-exempt organizations. Some are exempt from paying income taxes because they are not involved in a business. Rather, they are a group of like-minded individuals who get together for some purpose. The private golf club is a great example. Here two or three hundred people come together, purchase acres of land, build a golf course and all pay to support the endeavor. If they should happen to collect more from the members during a year than they actually spend on the care and maintenance of the course and club, should they have to pay income tax on that excess revenue (called a “profit” in a business enterprise)? Of course not – no more than you should have to be tax because you returned from vacation with money in your pocket because you spent less than anticipated.
    The other type of tax-exempt entity is the public charity that is exempt from income taxes because we citizens want these organizations in our community and have devised tax-exempt status to encourage their creation. The other inducement that we have provided to these entities is that we give the people who provide them with financial support a deduction which reduces their own individual income tax.
    The people in the country club who enjoy tax-exempt status are free to become involved in a political campaign. They can take some of their pooled money and put up signs all over their property in favor or against one candidate or another. It is no different than you and your neighbor chipping in to put a political sign in the space between your two driveways. Note, however, that you and your neighbor (as well as you and your 300 golfing friends) are using “after-tax dollars” for these expenditures. You are using the money you have left from your earnings after paying income taxes.
    When you make a charitable contribution to a tax-exempt charity, however, you are using “pre-tax dollars” because you are able to take a deduction from your otherwise taxable income for the amount of the contribution.
    If your income taxes (federal and state) take about 25% of your income, then your “after-tax dollars” are really only 75 cents of each of your dollars of earnings. In other words, it takes $10,000 of salary to pay $7,500 of country club dues. But it only takes $7,500 of salary to contribute $7,500 to your tax-exempt charity. Big Difference!
    We like to speak about level playing fields in this country. But it would not be a level playing field if the local church could solicit “pre-tax dollars” to fund a campaign for or against a political candidate while the non-charities had to solicit “after-tax dollars” to counter that campaign. In the current system, all dollars going into political campaigns are the same value – “after-tax dollars”. We should not mess with this.

  • Leaders and members of 501(c)(3) organizations are free now to speak their minds on issues without endangering their tax-exempt status. What they can’t do is exist primarily to propagandize or influence legislation. And of course, they can’t get involved as a group in electoral politics. So, this really isn’t a free-speech issue as much as a campaign finance/political influence issue. The “religious freedom” argument is a straw man and misleading because the free exercise of religion has not been abridged.