Hamill: Johnson amendment settlement offer clouds limits of church speech

In four days, Christians celebrate one of the two most significant events in their faith life. In the Eastern District of Texas, another faith-based drama plays out. 

These are seemingly unrelated events. A birth event recorded in the New Testament gospels of Matthew and Luke. A battle for speech in a district court.

So, what brings these events together? A 70-year-old statutory rule best known as the “Johnson Amendment.”

In 1954, Lyndon Baines Johnson had just become Senate majority leader. Johnson introduced an amendment to the tax code affecting tax-exempt organizations.

There are about 1.5 million section 501(c) tax-exempt organizations. They are named after a section of the tax code.

In addition to being exempt from income taxes, contributions to section 501(c)(3) organizations are tax-deductible. 

The tax benefits are considered justified because section 501(c)(3) organizations benefit the public at large. 

The Johnson amendment prohibits these organizations from participating in “any political campaign on behalf of (or in opposition to) any candidate for public office.”

The Catholic Church prohibits endorsement of candidates. Most of the Protestant Churches (those arising from the 16th century reformation) also prohibit endorsements.

The rule does not prohibit speech related to moral issues. The theology following the teachings of Jesus related to behavior can be preached without consequence. 

The Johnson amendment concerns have been raised by faith-based practices that require adherence to the endorsement of political candidates.

The Eastern District of Texas case is National Religious Broadcasters v. Bessent. Scott Bessent is the current Treasury Department secretary.

The plaintiffs in this case are four in number: two Texas churches and two religious nonprofits. The government is the defendant.

Americans United for Separation of Church and State (AU) has also participated in this suit. 

It has been argued that the plaintiffs lack standing to sue the government — there has been no challenge to their tax exemption.

The “no standing” crowd argues that the court should simply dismiss the case. No harm has been done to the plaintiffs. 

The plaintiffs respond that the language of the Johnson amendment creates a “chilling environment” to faith-based speech.

That is, the fear of loss of the tax exemption and the ability of congregants to deduct donations creates an environment of fear that limits protected speech.

The other side believes that this suit has been brought now to take advantage of a more favorable administration and the IRS. 

Since 2008, there have been campaigns organized for churches to notify the IRS of political endorsements. These churches are looking for a court fight.

The most recent tax bill tried to revoke the anti-endorsement rule. The attempt failed because it could not satisfy the Senate’s reconciliation rule.

The law that still exists is clear as it relates to endorsements — or opposition — of candidates. The statute does not prohibit preaching on moral issues.

The current law also allows nonpartisan activities such as hosting candidate forums. The plaintiffs want to be able to endorse candidates. 

The hot-button issue is that the current administration is willing to enter into a consent decree to settle the lawsuit.

The settlement would say that the IRS could not enforce the political endorsement prohibition against the four plaintiffs.

The AU group argues that the law is clear. AU opposes the settlement because it would cut off an appeal to the Fifth Circuit.

The settlement would purportedly apply only to the four plaintiffs. However, the plaintiffs told the court that the settlement should be applied to every organization.

Applying this settlement to only four organizations of the 1.5 million would seem to create equal protection issues. 

The IRS says no worries; this settlement really doesn’t deal with the Johnson amendment violations anyway. 

The settlement, says the IRS, is tailored very narrowly. It applies only to speech through “customary channels” to a congregation in connection with a religious service. 

In 1954 America, it would be the pastor making an endorsement to the congregation from the pulpit. 

What about now? If a service is live-streamed and available as a recording, if views are expressed on a public website, is the speech to “the congregation?”

Will the IRS apply this settlement to all organizations? Will the IRS change policy in a new administration? 

Whatever your views on this are, this settlement approach is an odd way to handle the issue. 

Congressional action in a statute is a much better way to ensure equal protection and stability in the enforcement of the laws.

Jim Hamill is the director of tax practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.