Monday, October 9, 2017

Johnson Amendment: Pros and Cons

The Johnson Amendment--which prohibits 501c3 exempt organizations from engaging in partisan political activity--is under repeated attack this year. In mid-September, the U.S. House of Representatives approved an appropriations bill with a rider that prohibits the IRS from enforcing the Johnson Amendment against any "church" unless "the Commissioner of Internal Revenue consents to such determination" and the IRS provides notice to Congress. Two other bills would weaken the Johnson Amendment by allowing 501c3 nonprofits to engage in an insubstantial amount of politicking (similar to lobbying rules). An earlier Executive Order on the subject turned out to be legally meaningless

Thousands of nonprofits joined the National Council of Nonprofits to call for keeping the Johnson Amendment as a needed tool to preserve the sector's nonpartisanship. Many faith groups have also opposed changes that might lead to politicizing houses of worship. Recently, National Association of State Charities Officials (NASCO) penned a letter, unsurprisingly favoring more regulation over less, and thus opposing any relaxation in federal tax law. 

It's surprisingly difficult to find dispassionate, non-hyperbolic views about the Johnson Amendment and the consequences of its reform-- particularly more modest amendments such as the proposal to allow incidental political activity. I take a closer look at some of the arguments below the fold: 

Arguments AGAINST The Johnson Amendment:

Inconsistent Enforcement:  In recent years, the Johnson Amendment has not been enforced particularly vigorously by the IRS. Indeed, some organizations actively flaunt the restriction with impunity.  Law-abiding organizations limit themselves in ways that lawless organizations do not. Moreover, low levels of enforcement creates the risk of arbitrary and/or political enforcement against unpopular causes or political rivals, which poses a special problem for nonprofits (particularly in the realm of political speech). If we aren't going to enforce the Amendment, there's a compelling reason to get rid of it.

Hampers Charities Ability to Most Effectively Pursue Mission: Some candidates are particularly good or bad for a nonprofit's mission, and a flat rule that keeps nonprofits away from endorsing or opposing candidates can hamper the organization's pursuit of its mission. Businesses can engage in political activity, and nonprofits that are trying to counter political speech of a business are placed at a disadvantage. Moreover, requiring nonprofits should maintain a false veneer of non-partisanship in a political contest where the entire weight of the organization's mission would fall on one side is an artificial barrier to the full pursuit of the mission. 

Confusion About What Nonprofits Can Do: The Johnson Amendment creates a good deal of confusion for nonprofits over what type of activity they can engage in. Some tax-exempt universities, for example, used the Amendment to claim that students couldn't support or oppose political candidates. Although as a flat prohibition the Johnson Amendment reads as a bright-line rule, there is abundant grey area in what falls within the prohibition.

More generally, however, nonprofits are often confused about what they are allowed to do under the Johnson Amendment and the limits on lobbying. For many, a ban on taking political stances is confused to be a ban on policy stances. For example, half of the nonprofits in one survey believed that they were prohibited from any lobbying. Things may be changing, as organizations like Bolder Advocacy have been working hard to educate nonprofits on the law and change perceptions about the propriety of policy advocacy. Yet the ban on political activity (coupled, no doubt, with the limits on lobbying) continue to keep nonprofits from engaging in mission-benefiting (and society-benefiting) advocacy due to confusion over legal limits. 

And, perhaps, the Universe Will Not Collapse: Must of the arguments in favor of the Johnson Amendment exclaim that nonprofits will be corrupted and distracted away from pursuing their missions, eventually leading to the end of civil society as we know it. This is a very real, and commonly-stated, concern. I'm unsure how much empirical evidence supports this risk for existing nonprofits, as I would guess most existing nonprofits have little incentive to turn partisan (thereby alienating half of potential donors), and many missions do not lend themselves to large-scale political activity. In other words, I doubt there is enough data to make the strong, broad claims of negative consequences to existing nonprofits. (That being said, the fears of many nonprofits are themselves one form of evidence that might justify maintaining the status quo. Plus, it could be that some fields lend themselves more to politicization. Finally, as noted below, the creation of NEW nonprofits is highly likely and could crowd out existing organizations.) [Update: One noted scholar argues that I missed a lot of evidence about the risks of entangling churches and politics, and as a result have erroneously understated the basis for the concern. See, e.g., Galle 2012. I've tempered the claims in the paragraph but probably not to their satisfaction. Thanks for the feedback.] 

Arguments IN FAVOR of The Johnson Amendment:

Lots of Options for Nonprofits that Want to Speak Out:  Much of the rhetoric around the Johnson Amendment involves cries of "it violates freedom of speech." Yet the Supreme Court has squarely rejected this argument as a Constitutional principle, and organizations remain free to support and oppose political candidates by a) creating affiliated, non-501c3 entities, or b) giving up their 501c3 status. (To be sure, there's a lot more that could be said on First Amendment values, but it's too much to be put into this post.) 

Shakedowns: If nonprofits are allowed to endorse politicians, politicians may come to expect or demand political favors from community groups. Particularly in cities which distribute large amounts of grants or government funding, nonprofits may feel obliged to support campaigns of local officials to keep in their good graces. 

Politicizing Nonprofits: A very common justification for keeping the Johnson Amendment is the need to preserve a segment of society committed to the nonpartisan search for solution to the problems facing society. As everything becomes more and more hyper-politicized, the need to keep a sector free from politics sounds delightfully charming. Whether the Johnson Amendment actually will do this remains a question, and more and more organizations become politicized as "left-wing" or "right-wing," even if political party labels remain unattached explicitly. Nevertheless, maintaining nonpartisanship is a legitimate goal for a significant portion of the sector.

Subsidizing Political Speech: Ultimately, I think the question comes down to whether we as taxpayers want to subsidize the contributions of the relatively wealthy (people who itemize and can take advantage of the charitable deduction) to political causes. This is less of a concern if nonprofits are allowed to make incidental political expenditures, but if the Johnson Amendment falls, a new breed of 501c3s devoted, in some large part, to partisan political activities will likely rise, able to take tax-deductible donations. The question becomes whether we, as a country, want to subsidize a taxpayer's donation towards a partisan political activity. 

What compelling arguments did I miss? Is there empirical data I overlooked? Should we preserve, get rid of, or amend the Johnson Amendment?

-Joseph Mead

Federal – Legislative | Permalink


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