Nonpartisan Tax-Exempt Status in Question for Nonprofits

Unifying the voice of nonprofits to leverage their power

Nonpartisan Tax-Exempt Status in Question for Nonprofits

Summary Prepared by Hannah Locop, GPNP Program Manager

Update on the House

On Thursday, July 19, 2018, the U.S. House of Representatives passed (H.R.) 6147, approving Congressional funding for the Department of the Interior and the Environmental Protection Agency, among other federal agencies, as well as a measure preventing the Internal Revenue Service (IRS) from revoking churches’ tax-exempt status.

The language of the measure reads:

“None of the funds made available by this Act may be used by the Internal Revenue Service to deny tax exemption under section 501(a) of the Internal Revenue Code of 1986 with respect to a church, an integrated auxiliary of a church, or a convention or association of churches for participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office unless—

(1) the Commissioner of Internal Revenue determines that the exemption should be denied;

(2) not later than 30 days after such determination, the Commissioner notifies the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate of such determination; and

(3) such denial is effective not earlier than 90 days after the date of the notification…”

The measure speaks to the Johnson Amendment, a part of the Federal Tax Code which has preserved the nonpartisanship of 501©(3) nonprofit organizations, including churches, for the past 64 years.

Standing in the Senate

To date, the Johnson Amendment continues to hold 501©(3) organizations to the same standards of nonpartisanship as it did when first signed into law in 1954. However, Congress could undermine its legitimacy if the Senate passes its version of H.R. 6147, S. 3073, and includes the same language protecting the tax-exempt status of churches. The Senate’s bill was introduced to the Senate Appropriations Committee on June 14, 2018.

Policy Background

Nonprofit organizations have been “absolutely prohibited 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.” Many in the local nonprofit community, including the Pittsburgh Foundation, the United Way of Southwestern Pennsylvania, and GPNP, have heralded the amendment for protecting the public’s trust in charitable organizations. The National Council of Nonprofits agrees, “the public’s overall trust in the sector would diminish and thus limit the effectiveness of the nonprofit community if individual 501(c)(3) organizations came to be regarded as Democratic charities or Republican charities instead of the nonpartisan problem solvers that they are.”

In fact, under the Johnson Amendment, churches and other 501©(3) nonprofits are not entirely barred from political participation, distinct from partisanship. As NPR reports, “nonpartisan voter education activities and church-organized voter registration drives are legal. Pastors are free to preach on social and political issues of concern. Churches can publish "issue guides" for voters.”

However, a minority of religious groups, advocacy organizations, the U.S. House of Representatives, and the President, all argue that the amendment curtails freedom of speech, which religious leaders are entitled to. The House passed a bill last year that was similar to 2018’s H.R. 6147, except the bill was later signed into law without language referring to the tax-exempt status of churches.

Proposed Action Item

The National Council of Nonprofits has collected signatures from both the faith and wider nonprofit community in letters addressed to Congress urging for the preservation of nonpartisanship under the Johnson Amendment.

GPNP reaffirms its statement regarding the Johnson Amendment made in 2017 alongside the Pittsburgh Foundation and the United Way of Southwestern Pennsylvania. “We believe tearing down that fire wall [the Johnson Amendment] would be extraordinarily destructive, as would allowing tax-exempt charitable contributions to flow from [nonprofit] organizations into political campaigns."