Why Charities Shouldn’t Start Ignoring the Ban on Partisan Politicking

Editor’s Note: On July 13, the House Appropriations Committee is scheduled to consider the fiscal 2018 appropriations bill, which has a provision that would weaken the enforcement of the law against nonprofit politicking, known as the Johnson Amendment.

On May 4, President Trump signed an executive order that grabbed headlines and was billed as an end to the “Johnson Amendment,” which prohibits 501(c)(3) nonprofits from engaging in partisan political activity. Despite this order, the Johnson Amendment is still in effect for the following reasons:

• It cannot be repealed by executive order.
• The language of the executive order is vague (by necessity).
• The president does not have enforcement authority of the Internal Revenue Code.
• It is a crime for the president to interfere with an IRS investigation.

Even if Mr. Trump could repeal it by executive order, the next president could reverse that action.

Then-Senator Lyndon Johnson proposed the amendment to the Internal Revenue Code in 1954. It says that no 501(c)(3) organization — church, hospital, school, and so forth — may “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”

The Johnson Amendment is in Section 501(c)(3) of the IRS Code, which defines such organizations. In other words, an organization that participates in such political-campaign activities does not qualify as a 501(c)(3) organization and would lose its tax-exempt status upon discovery of such activities and enforcement by the IRS. Here are two key things to know about President Trump’s executive order:

It did not repeal the Johnson Amendment.

The president instructed the IRS to exercise “maximum enforcement discretion” with respect to the Johnson Amendment. Furthermore, while the amendment applies to all 501(c)(3) organizations, the executive order is directed just to churches and other religious organizations.

Headlines have indicated, as President Trump desired, that the executive order is an end to the Johnson Amendment, or at least a prohibition on its enforcement. However, this vague executive order is far from the obliteration of the amendment that Trump promised during his campaign. Fundamentally, the Johnson Amendment is an act of legislation, and an act of legislation cannot be changed by an executive order; only Congress can change it.

The president doesn’t have enforcement authority over the IRS code.

The language of the executive order is intentionally vague, because the president does not have enforcement authority over the Internal Revenue Service Code. Code Section 7805(a) states that “[e]xcept where such authority is expressly given by [the Code] to any person other than an officer or employee of the Treasury Department, the Secretary [of the Treasury] shall prescribe all needful rules and regulations for the enforcement of this title, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.”

This provision of the code is likely in place to prevent this very type of politicizing of the code. Therefore, that authority is vested in the secretary of the treasury, and much of it is delegated to the commissioner of the IRS. The code does grant the president the authority to appoint the chief counsel, the secretary, and the commissioner of the IRS.

The language of the executive order had to be vague, because it is a crime, punishable by a fine of up to $5,000 and/or five years imprisonment, for the president to request the IRS to conduct or terminate a tax investigation.”

There is no statute of limitations restricting when the IRS may revoke the tax-exempt status of a 501(c)(3) organization. Therefore, even if the IRS follows President Trump’s intent behind the executive order and does not enforce the Johnson Amendment, the next president could reverse it and revoke the tax-exempt status of organizations that violated the Johnson Amendment during Mr. Trump’s presidency.

Matthew Shell is a tax attorney with the law firm of Dykema Gossett PLLC.