How a Nonprofit Can Attract A Regulatory Probe … Fast
06.08.2023 | Linda J. Rosenthal, JD
We may be on the verge of an Emily Litella moment: “Never Mind.”
For readers not old enough to remember Saturday Night Live in the 1970’s, there was a popular sketch character played some 26 times by the late Gilda Radner. She is an “elderly woman with a hearing problem, … attired in a frumpy dress, sweater, and [old-fashioned] glasses.” She would pop up in the Weekend Update segment, “introduced with professional dignity by the news anchors, who could sometimes be seen cringing slightly in anticipation of the malapropisms they knew would follow.”
She would “peer through her reading glasses and, in the character’s trademark high-pitched, warbly voice, would read a prepared statement in opposition to an editorial that the TV station had supposedly broadcast. These sketches were, in part, a parody of the Fairness Doctrine, which at the time required broadcasters in the United States to present opposing viewpoints on public issues. Litella would become increasingly agitated as her statement progressed. Midway in her commentary, it would became apparent that she had misheard and/or misunderstood the subject of the editorial to which she was responding. A typical example:
‘What is all this fuss I hear about the Supreme Court decision on a “deaf” penalty? It’s terrible! Deaf people have enough problems as it is!’
The news anchor would interrupt Litella to point out her error, along the lines,
‘That’s death penalty, Ms. Litella, not deaf … death.’
Litella would wrinkle her nose, say,
‘Oh, that’s very different….’
then meekly turn to the camera and say,
This past summer, we published some 8 blog posts about the absolute prohibition in 501(c)(3) of political campaign activities by 501(c)(3) – because it’s that important! Here they are:
We planned a post-election article about the political ban and social media because elections in the United States seem to be nonstop. As soon as one is over, the next one starts.
But, then, there was November 8th: “Never mind” about all of that political ban stuff – maybe.
The election may have changed all that for two reasons: first, the politics ban was not inserted in 501(c)(3) all that deliberately – 60 years ago – anyway; and second, the GOP has made repealing the so-called Johnson Amendment a part of this year’s platform and it has long been on their gift list.
This brings us back to the first of those posts about the odd history of the 501(c)(3) political ban, and a (presumably smoke-filled) back room in the Senate with Lyndon Johnson. “A prominent Congressional leader already, his influence was about to skyrocket when the Democrats’ fortunes changed in the 1954 election. He became Senate Majority Leader, a post he held until he was inaugurated as Vice-President beginning January 1961.”
A major legislative goal during 1954 was a “comprehensive restructuring of the federal tax code.” That enormous task was achieved.
It included codifying the existing tax exemption provisions into new section 501(c) of the Internal Revenue Code. As we explained, the critical 27 critical words, comprising the politics ban –
“and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
was added to the tail end of the statute in the most casual and non-deliberate manner possible. It was offered by Johnson – hence, the name “Johnson Amendment” – at the last minute as a floor amendment. Under that procedure, there was likely no debate at all. The senators may not have read the new language at all before voting. Astonishingly, that may have been the case with Johnson, himself, because there is a key mistake. He intended the political provisions to mirror the lobbying-limitations language which, of course, does not include a 100% ban.
On top of this offhand way of getting this political-ban language into the final tax bill, there is reasonably well-supported speculation that Johnson’s motive had little to do with thoughtful tax planning. Instead, he wanted to get back at an organization that had supported an opponent.” Another likely motive was to —
offer an alternative to another Senator’s proposal that would have denied tax-exempt status to organizations making grants to organizations or individuals that were deemed to be subversive.”
During these years, of course, fellow Senator Joseph McCarthy was on his ugly, anti-Communist crusade.
Even though religious groups are some of the most vocal opponents of the [Johnson] Amendment today, it was originally about something else: communism. At the time when the measure was passed, McCarthyism was at its peak, and Johnson feared that right-wing groups, parading as charities, would attack his reelection campaign. Although the rule extended to religious groups, the former Purdue University professor James D. Davidson has argued that Johnson never specifically wanted to target religious groups.
What’s the significance of all this? The big, bad, 100% political ban was an afterthought and a mistake, motivated largely by spite and pettiness.
Present day politicians looking to modify or eliminate the politics ban may point to this dicey “legislative history” as support for its change or elimination.
“To a roomful of Christian “values voters” in September, Donald Trump joked that repealing the so-called Johnson Amendment was his only hope for getting into heaven. Nonprofit leaders are about to find out how badly he wants to walk through those pearly gates.”
Indeed, that sentiment was repeated numerous times during the presidential campaign. At the 2016 Values Voters Summit, an annual conservative gathering hosted by the Family Research Council, … the then-candidate said he’d “knock out” the Johnson Amendment. The GOP official platform for election 2016 also includes an express provision calling for its repeal.
“Many conservative church leaders say the law impinges on free expression and should be amended to allow for minimal political speech in the course of normal activities, like sermons.”
Opponents of changing the law say doing so would dramatically alter how nonprofits raise and spend money and lead to a proliferation of churches and 501(c)(3) groups being created with purely political aims.” This sentiment was expressed by an observer during the summer campaign:
If the Johnson Amendment were repealed, pastors would be able to endorse candidates from the pulpit, which they’re currently not allowed to do by law. But it’s also true that a lot more money could possibly flow into politics via donations to churches and other religious organizations. That could mean religious groups would become much more powerful political forces in American politics—and it would almost certainly tee up future court battles.
Some worry that if 501(c)(3) nonprofits and churches are given even a little room to be political, they’ll push boundaries and divert money from their stated missions into partisan campaigning. “If you make de minimis political activity legal, people are likely to push it further in ways that we haven’t yet seen,” says Noah Bookbinder, executive director of the progressive government-accountability group Citizens United for Responsibility and Ethics in Washington.
“Should the Johnson Amendment be altered, … charities and churches would be highly attractive to political donors because their contributions, on top of being anonymous, would also be tax-deductible — a benefit not currently offered for direct campaign contributions. It would be particularly hard to track political spending by churches, … because they do not have to file informational Form 990s to the IRS.”
Still, “Christian leaders insist that limiting political speech to “regular activities” would safeguard nonprofits and churches from becoming havens for ‘dark’ campaign money.”
“Amending the Johnson Amendment in this way, and not simply repealing it entirely, relaxes the speech restrictions on all Section 501(c)(3) nonprofit entities and allows them the breathing room to communicate how candidates have addressed their issues,” Tony Perkins, president of the conservative Christian group the Family Research Council, wrote in a September statement.
“It would be difficult to define what ‘regular’ activities are and the IRS may hesitate to apply subjective standards” on top of the general skittishness by the agency following the fallout from the 501(c)(4) mess a few years ago.
There may be less support in Congress than expected for a full repeal. “A bill entitled the Free Speech Fairness Act, introduced in the House of Representatives in September, would have allowed churches and charities to engage in political speech during “ordinary” activities. Curiously, it attracted few backers.
A repeal – full or partial – may be attempted “through tax reform or other legislation, or by non-enforcement by a Trump Internal Revenue Service.” Who knows?
But as for all of our detailed instructions about the absolute ban in 501(c)(3) – well, (probably) “never mind.”
05.31.2023 | Linda J. Rosenthal, JD