Finally, a Johnson Amendment Case in Tax Court!

Well, my fellow bogger reported it on Friday, but I’ve got to say I’m pretty excited that this has finally happened: A 501(c)(3) organization has gotten into court to argue that the Johnson Amendment is unconstitutional. Why am I so excited?

Back in 2016, I wrote a blog post called “If Churches Really Want to Vindicate Their Right to Endorse a Candidate, It’s Easy to Get Their Case into Court,” in which I proposed forming a new 501(c)(3) organization and checking the “wrong” box on Form 1023 that asks whether the organization will “support or oppose candidates in political campaigns in any way?” That wrong box should get the IRS to deny the application, and when it does, or if it does nothing for 270 days, the organization can seek declaratory judgment in the tax court that it qualifies for tax-exempt status under section 501(c)(3). After years of writing that the IRS’s interpretation of the Johnson Amendment is unconstitutional (see here and here), I was planning with Sam Brunson (see here) to create our own organization to test the theory in this election cycle.

But, it turns out that more than 270 days ago, Ilya Shapiro (with Alex Reid’s help) beat us to it, filing a Form 1023 for an organization called SAFE SPACE that plans to endorse candidates on its website. The IRS never acted on their application, and so Presto, they’re in court! (I have been told over the years that some organizations have tried this tactic, but had their exemption applications approved, so the IRS’s inaction in this case is notable.) SAFE SPACE’s constitutional argument is obviously not very fleshed out in the Petition, but the key to it appears to be their claim that, “[t]he unconstitutionality of section 501(c)(3)’s political speech and lobbying restrictions is even more apparent with respect to SAFE SPACE because the low- to no-cost of SAFE SPACE’s political speech and lobbying activities means the government, simply by recognizing SAFE SPACE’s tax exemption, could never be viewed as subsidizing those activities.” This focus on the government subsidy embedded in the deduction for charitable contributions is directly related to the Supreme Court’s leading case on the constitutionality of lobbying restrictions for charities, Taxation with Representation of Washington v. Regan, and the DC Circuit’s leading case on the constitutionality of the Johnson Amendment, Branch Ministries v. Rossotti, both of which relied on the existence of a government subsidy as an essential component of their holdings.

Sam and I were planning a similar approach, but with a slightly more conservative approach to avoiding any cost in our charity’s endorsement. We were going to use an affiliated 501(c)(4) organization to assume all the costs of operating a website that was going to post the 501(c)(3) organization’s endorsement. SAFE SPACE claims that its endorsement costs are “zero” even though it admits that it will pay a flat fee for its website (which will have lots of other content). It then argues that the solution we planned to use, creating an affiliated 501(c)(4) organization, would impose significant administrative burdens,” and that “these administrative burdens are insurmountable.” This may seem like a difference without a distinction, but it is probably quite significant for reasons that are beyond the scope of this post. Whatever the next step in this case, we may be witnessing some interesting times for the Johnson Amendment in the runup to the 2024 presidential election.

-Benjamin Leff