By Julie Bykowicz
WASHINGTON -- A provision in the tax code overhaul before
Congress could lead to an infusion of new players in elections,
including churches and charities, and prompt a significant shift in
the way political campaigns are financed.
The House tax bill would allow churches and other nonprofits to
advocate for candidates and take political positions without
jeopardizing their tax-exempt status, rolling back what's known as
the Johnson Amendment. The Senate plan doesn't take that step,
meaning it will be one of many items up for debate as lawmakers
work to pass a law that President Donald Trump can sign before the
year's end. The conference committee is set to hold its first
meeting Wednesday.
Some Republican senators have expressed interest in adopting the
House's approach to the Johnson Amendment. Sen. James Lankford, an
Oklahoma Republican who has long advocated for doing away with the
Johnson Amendment, said Vice President Mike Pence in a meeting last
week again "brought it up to me" that the House change should be
included in the final tax legislation.
"The president and vice president speak often about this being
corrected, in public and private settings," Mr. Lankford said in an
interview. The White House has "made it clear, it needs to be in
there," he said.
"If Congress is able to use the tax bill as a vehicle to repeal
the Johnson Amendment, the White House would support it," White
House spokeswoman Lindsay Walters said.
It is unclear if Republican senators will agree to add it to the
final bill, but it they do Democratic senators are preparing to
fight the move by invoking the Byrd rule, which prohibits the
Senate from considering nonrevenue matters as part of any
reconciliation bill. The tax plan is being legislated under the
budget reconciliation process.
William Hoagland, senior vice president of the Bipartisan Policy
Center and a former Republican congressional budget aide said the
fact that the Senate's tax legislation doesn't include the Johnson
Amendment is a clue that it might violate the Byrd rule, which is
named after former West Virginia Sen. Robert Byrd.
"My gut instinct is that it is in violation, and that probably
why it doesn't show up in the Senate version," he said.
To apply a Byrd test, a senator would need to raise an
objection, which can happen at any point in the process. Democrats,
including Sen. Ron Wyden of Oregon, are scouring the tax
legislation for possible Byrd violations.
Then, the Senate's parliamentarian would make the ruling. Being
deemed in violation would mean the Johnson part of the legislation
requires 60 votes. There are only 52 Senate Republicans. Senate
Parliamentarian Elizabeth MacDonough declined to comment.
The 1954 amendment, named after the late President Lyndon
Johnson, provides a hard line against charities endorsing political
candidates, campaigning or participating in political activities.
Crossing it means the Internal Revenue Service can revoke the
valuable tax-exempt status. However, churches and other groups can
engage in voter registration drives, and some have found ways to
make clear their preferred candidate without an outright
endorsement.
Mr. Lankford said he is "optimistic" the Johnson Amendment meets
the standards of the Byrd rule, pointing to it as a clear tax code
issue that applies broadly and does have a fiscal impact. He said
the Senate felt no urgency to include it in their bill since it was
in the House plan.
Nonpartisan tax analysts anticipate that the proposed changes to
the Johnson Amendment would actually cost the U.S. government $2.1
billion in lost tax revenue over five years -- the result of a
billion-dollar-per-year shift in political money to nonprofits.
"It is a diversion of some of the substantial growth in
political contributions into a deductible form that is not
deductible today," Joint Committee on Taxation chief of staff
Thomas Barthold told the House Ways and Means Committee last month,
explaining the fiscal impact of the Johnson Amendment proposal.
The JCT estimates that between $1.2 billion and $1.6 billion of
giving a year would move from traditional political operations such
as campaigns and party committees into newly nontaxable entities
such as churches.
"This is a radical proposal to change campaign finance laws,"
said Tim Delaney, president of the National Council of Nonprofits,
which has been lobbying against changes to the Johnson Amendment.
"Charities and foundations have worked for years, decades and
centuries to build the public's trust, and we don't want to be
dragged down by toxic partisanship."
Mr. Delaney and others who oppose the move say charities would
come under pressure by partisan donors to engage in politics as a
condition of their giving.
The National Association of State Charity Officials, which
opposes the bill, said the "Johnson Amendment helps give donors
confidence that their donations will be used for charitable
purposes and not electioneering or other private, noncharitable
purposes."
Ralph Reed, chairman of the Faith & Freedom Coalition, said
the Johnson Amendment is "draconian" and has had a chilling effect
on speech. "Under current law, spending one dime on politics out of
hundreds of millions of dollars or making one political comment is
the death penalty for that nonprofit," he said.
Mr. Reed said conservative evangelicals have been particularly
wary of the existing rule and argued that opponents overstate the
potential impact of rolling it back.
"We don't want churches to become super PACs, and we don't want
pulpits to become political soap boxes," he said. "That's not the
intention or goal, and we don't believe for one minute that would
happen."
Under the House plan, set forward by Ways and Means Chairman
Kevin Brady, 501(c)(3) nonprofit organizations could engage in
political speech so long as that occurs in the ordinary course of
business and the spending is a "de minimis" amount. The IRS would
interpret those terms.
Richard Rubin contributed to this article.
Write to Julie Bykowicz at julie.bykowicz@wsj.com
(END) Dow Jones Newswires
December 11, 2017 05:44 ET (10:44 GMT)
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