Chronicle of Philanthropy
November 2, 2016
By Roger Colinvaux
With all the focus on the Trump and Clinton foundations’ giving and fundraising, an important and potentially damaging charity policy issue isn’t getting the attention it deserves: an effort by the Trump campaign to repeal the longstanding rule that keeps partisan politics out of the charity world.
The Free Speech Fairness Act, recently introduced in the House, is the latest iteration of this misguided effort, one that would result in the politicization of charities and contribute mightily to the further decay of civil discourse.
Since 1954, charities that are organized under Section 501(c)(3) of the tax code, have been prohibited from getting involved in political campaigns under a rule sometimes known as the Johnson Amendment because it was pushed through by Lyndon Baines Johnson when he was in a tough fight in Texas for his U.S. Senate seat.
In recent years, some charities, especially churches, have challenged the rule. The main argument for change is that the Johnson Amendment is a muzzle on charities, denying them the right to endorse candidates.
Put in the language of free speech, the argument has appeal. Who wants to muzzle a charity? In fact, charities are allowed to speak about issues — just not get involved in partisan politicking — and their workers are free to speak in their personal capacity. Setting that aside, though, the matter is far more complicated than the free-speech arguments suggest.
Do not be deluded: Repealing or even just relaxing the Johnson Amendment would have a disastrous impact. Why? Well for starters, follow the money.
In the campaign-finance world, the past two decades have seen dark money (or anonymous political speech) exploit loophole after loophole, finding any opening. First it was the "527" group in the 1990s, when the term du jour was "stealth PAC." Back then, Congress cared about this issue and responded by amending Section 527 of the Internal Revenue Code to require disclosure of donors. After that, the flow of dark money receded. The door opened again after the Citizens United decision made it possible to use corporate money to engage directly in political activity. Subsequently, the "social welfare" or 501(c)(4) organization became the dark-money vehicle of choice, and millions of dollars poured in.
Make no mistake. If the door to political speech is opened for organizations classified under Section 501(c)(3), dark money will go through that door. As a destination for dark money, 501(c)(3) groups would be the gold standard: They offer not only anonymity for donors but also a tax deduction. With a prize of deductible political contributions for donors, does anyone really believe that there would be no pressure on charities to take a position on candidates? Charitable fundraising would take on a whole new meaning. Religious leaders, university presidents, think tanks, groups of all stripes would feel pressure to intervene in elections to please donors. The current ban on campaign involvement protects charities from that pressure.
Yet it is not just a threat to existing charities but the brave new world that would unfold. Remember that after Citizens United, new groups with partisan intentions (like Crossroads GPS) formed under the 501(c)(4) social-welfare banner, pushing the law to its limits. For the IRS, an agency best suited to collecting revenue, deciding whether a group is mostly "political" or mostly for "social welfare" is a delicate and difficult task that has gotten the IRS into heaps of trouble and severely harmed the agency and the tax system.
The same intractable problem would happen among charities. New groups with partisan intent — including advocacy groups, think tanks, and educational organizations — would form at the national, state, and local levels under the 501(c)(3) label. Just as with social-welfare groups, the IRS would be asked to make a fraught decision: How much "charitable" activity is required as a base activity, from which the political activity may flow. This would put the agency in a very difficult position.
No Turning Back
Some might argue that it is possible to limit the impact. For example, the Free Speech Fairness Act says that only statements "in the ordinary course" of the organization’s activities are allowed and that a charity may not spend more than a small additional amount on political work. But these limits would prove meaningless. Enforcement would be harder than it is now. Instead of asking whether a charity had gotten involved in a campaign, the IRS would have to ask if that activity had occurred in the "ordinary course" of regular activity and if more than an "incremental expense" was involved. These standards have no established meaning in charity law, and with some skill, nonprofits could plan around them.
Once endorsements are allowed, how likely would it be that the IRS would enter a quagmire to conduct an audit? Virtually nil. No, once the door is open, and endorsements and other partisan statements become legitimized as a 501(c)(3) activity, there would be no turning back. The "Charity PAC" would become a reality.
Charities are supposed to be, and traditionally have been, outside of politics. Given the toxic political environment (and even without it), that is a good thing. Do we really want "red" and "blue" charities? Do we want to tinge American’s generosity with political taint? And what about the private foundations and the large pots of money sitting in donor advised funds? With endorsements allowed, the spigots would open for this money to be put to political, not charitable, use.
We have already seen in this election cycle how charity can be used for personal gain. Just imagine how bad it could be if charities, which, remember, can be established with ease by anybody, were allowed to actively participate in campaigns. America’s charities, which draw huge praise from both parties, would suffer greatly.
Efforts to repeal or relax the Johnson Amendment should be strongly resisted, regardless of political view. Let the courts decide the extent to which the Johnson Amendment goes too far. But unless we know of a constitutional imperative to reshape the law, it is better to keep politics out of charity.
Professor Roger Colinvaux's
Areas of Expertise
Political Activities of Nonprofits
For additional information about our professors' areas of speciality, see Professor Colinvaux's faculty page.