Johnson Amendment: What You Need to Know
An executive order signed last week by President Donald Trump weakens enforcement of the Johnson Amendment for religious organizations.
The president's executive order, Promoting Free Speech and Religious Liberty, requests that the IRS does not enforce tax penalties for religious organizations for political activity and expression.
The Washington Post reports that the order instructs the IRS to not impose tax penalities or denial of tax-exempt status "against churches or religious figures for political speech that has 'not ordinarily been treated as participation or intervention in a political campaign' for or against a candidate for office."
The executive order does not mention nonprofits or other charitable organizations.
The president signed the order on the National Prayer Day, saying it was to ensure freedom for religious organizations that want to be involved in politics.
A rabbi testified on Capitol Hill last week saying that under the current rules, religious organizations may already express their views on political issues and lobby on issues, as funding for those activities are regulated the same as they are for other tax-exempt organizations.
Just last month a coalition of 99 religious organizations petitioned Congress, opposing any effort to weaken the amendment, saying “Current law serves as a valuable safeguard for the integrity of our charitable sector and campaign finance system.”
The Council on Foundations shared a statement following the executive order, saying in part, “It also swings the door wide open for unchecked ‘dark money’ to flow through nonprofit organizations, allowing for unlimited, anonymous, tax-deductible political donations.”
The National Council of Nonprofits immediately reacted to the executive order saying the amendment “has nothing to do with free speech or freedom of religion,” but rather it prevents “organizations from partisan electioneering by participating in any political campaign on behalf of or in opposition to any candidate for public office.”
Johnson Amendment fast facts:
The Johnson Amendment has existed in our tax code since 1954, ensuring nonprofit and charitable organizations, including religious organizations cannot endorse or support political campaigns or candidates.
Under the amendment’s rules, any organization can engage in such political activity, if they give up their tax-exempt status. (This does not relate to advocacy work or lobbying activities for public foundations. All foundations can engage in advocacy work.)
The IRS enforces the Johnson Amendment for tax-exempt nonprofit and charitable organizations.
Since the amendment exists in our tax code, the president’s order does not repeal it, as that would require action by Congress. As CMF has reported, there have been a number of bills that have been introduced that would do just that.
How weakening the amendment affects philanthropy:
Weakening or repealing the Johnson Amendment affects all charitable organizations and nonprofits, including foundations, and could have serious effects on transparency and the public’s trust in the social sector.
Charitable organizations could fundraise for candidates and donors may be inclined to seek out nonprofits that specifically align with their own political interests, instead of a shared interest in a cause.
There are campaign finance implications as tax-free donations could support a political candidate.
Last month, nearly 4,500 nonprofit organizations, including CMF, signed a letter of nonpartisanship urging Congress to oppose weakening the tax law restrictions on nonprofit political activity.
While the executive order deals with religious organizations, legislation has been introduced that directly deals with Johnson Amendment and would impact the entire charitable sector.
CMF encourages its members to talk with their legislators about protecting the Johnson Amendment, its importance to the charitable sector and the trust that communities place in its work.
The Council on Foundations has said since any modification of the Johnson Amendment would directly affect the powers and duties of a tax-exempt organization, private foundations may directly lobby on this issue under a self-defense exemption. However, before engaging in any lobbying on this issue, foundations should consult with their legal counsel.
Check out the Forum's Johnson Amendment resources.
Update: Community Foundation Act
The Community Foundation Act passed through the Legislature and Governor Rick Snyder is expected to sign the bill into law soon. The act consolidates previous legislation that was passed during Governor John Engler’s term.
The House Fiscal Agency’s Legislative Analysis says the act will “foster positive relationships between local units of government, public libraries, school districts, and community foundations that are all working toward shared goals.”
The Community Foundation Act
Allows for the sale of unused assets by local government, public schools and public libraries, such as real estate and closed school buildings.
Invests the income from such a sale in an endowed fund at a community foundation.
The money in the endowed fund can then provide an ongoing source of support for the local donating agency.
“This legislation couples the best of nonprofits and local units of government working together to take care their communities,” Senator Wayne Schmidt told CMF. “It allows local units of government to take advantage of the expertise a community foundation offers, especially when establishing a fund to promote civic good.”
The Capitol Region Community Foundation testified in support of the bill in March. CMF and the Michigan Municipal League also voiced support of the bill through legislation.
“Our community foundation views this as a win-win for communities throughout Michigan,” the Capitol Region Community Foundation shared on social media.
In Lansing, there have been talks of selling a city-owned golf course, and if that happens, the Community Foundation Act could allow for that money to be invested in an endowment with the community foundation.
“This might be a perfect example of an opportunity for the Parks and Recreation Department to benefit from an endowment from the proceeds of a sale,” Dennis Fliehman, president and CEO of the Capitol Region Community Foundation said. “They would get much better long-term returns (from an endowment) that could benefit the city.”
At a time when townships, villages, cities, counties, school systems and libraries are dealing with limited resources, the legislation provides a new optional tool for building partnerships.
“Many partnerships have been created as a result with community foundations across the state,” Rob Collier, president and CEO of the Council of Michigan Foundations said.
Community foundations cover all of Michigan’s 83 counties and continue to grow in both endowed assets and giving with annual grantmaking exceeding $164 million a year.
Under the Community Foundation Act, participating community foundations must have assets of at least $5 million, existed for at least a decade and meet the criteria for Community Foundation National Standards.
UPDATE: Governor Rick Snyder signed the Community Foundation Act on June 13. It will go into effect August 21.
Community Foundation CEOs can connect on this issue with their peers via CMF’s online community.
Questions? Please contact Rob Collier.
Philanthropy in Motion
After more than a decade of planning, the QLine, Detroit’s modern streetcar line, opens to the public this Friday.
The QLine represents a major public-private partnership as the funding was provided by businesses, hospitals, government agencies and philanthropy, with the goal of providing equitable access to transportation and creating a more vibrant and economically thriving urban area.
The streetcar line will provide transportation to riders up and down Detroit’s busiest thoroughfare, Woodward Avenue, covering a 6.6 mile loop. The Woodward corridor has been a major focus of revitalization in the city.
“The QLine will activate the sidewalks throughout the community, encouraging residents and visitors to experience all the neighborhood has to offer, from our cultural institutions, restaurants and small businesses, to Detroit’s entertainment district. The streetcar will create connectivity and serve all who live, work and play in Detroit,” Sommer Woods, vice president of external affairs for M-1 RAIL said.
Crain’s Detroit Business reports since the announcement of the QLine project, $7 billion in investments have been made or are currently in the works.
M-1 Rail officials told the newspaper that the “QLine could create economic benefits of 40 to 60 times the original investment for the area around the line” within the next decade.
As CMF has reported, it’s estimated every $1 invested in public transportation generates about $4 in economic returns.
It’s expected to welcome nearly two million riders in the first year, connecting a growing pipeline of people to support and experience the Woodward corridor.
The first official public ride of the QLine will take place on Friday, marking a major chapter in another public-private partnership commitment to revitalization in Detroit.
"There were times when this project was in real jeopardy," Rip Rapson, president and CEO of The Kresge Foundation said. "That weight is off our shoulders. I think we'll look back in 50 years and of this moment, right now, as a watershed for the metro Detroit."
Consumers Energy Foundation supports launch of Muskegon Food Hub pilot
Content excerpted from MLive. Read the full article.
The Muskegon Food Hub pilot launched last week to provide easy access for local schools, hospitals, restaurants and others to purchase large amounts of locally grown food.
Consumers Energy Foundation provided $40,000 grant to launch the hub. The Muskegon Farmers Market will host the pilot and it’s expected to grow.
“We're really excited to see what the next steps are,” Frank Peterson, city of Muskegon manager said. “We think that the program could have great benefit to our farmers, to our restaurateurs, to all the folks involved in the various types of food businesses that exist in our region, and we're just really excited to see what the future holds for the food hub.”
The food hub lead told MLive the Muskegon Food Hub will “be used as a proof-of-concept for bigger future plans that include the deep-water port, rail and highways.”