While speaking at the National Prayer Breakfast on February 2, 2017, President Trump reaffirmed his commitment to repeal the law that restricts organizations that are tax exempt under Section 501(c)(3) of the Internal Revenue Code (“Code”) from engaging in political campaign activities. This law, enacted in 1954, is commonly known as the Johnson Amendment since it was proposed by then-Senator Lyndon B. Johnson.  During the breakfast, President Trump stated: “I will get rid and totally destroy the Johnson Amendment and allow our representatives of faith to speak freely and without fear of retribution. I will do that.  Remember.”  This statement is in line with President Trump’s campaign promises.  In his acceptance speech at the Republican National Convention, Trump expressed his commitment to repeal the Johnson Amendment to provide freedom of speech to all Americans.

Codified in Code Section 501(c)(3), the Johnson Amendment provides that entities organized for religious or charitable purposes (among others) must “not 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” in order to qualify as tax exempt. According to the Internal Revenue Service (“IRS”), some prohibited activities include contributing funds to a political campaign and making public statements, either oral or written, endorsing or opposing a candidate for public office.  However, the IRS has stated that engaging in non-partisan activities like voter education activities and other activities that encourage individuals’ participation in the electoral process are not prohibited activities.

A draft executive order, which was leaked and published online on February 1, included language prohibiting the Department of Treasury from penalizing, denying tax exempt status or disallowing charitable tax deductions to any person or religious organization for speaking out on moral or political issues from a religious perspective.  The White House has not made a formal announcement regarding the executive order.  In any event, President Trump will have to work with Congress to pass legislation to modify or repeal the law.

In addition, on February 24, 2017, House Ways and Means Committee Chair Kevin Brady (Republican – Texas) stated that the Johnson Amendment would be eliminated under any tax reform supported by the Trump administration. Other members of Congress have already introduced legislation that would repeal or at least alter the Johnson Amendment.  On January 3, 2017, Representative Walter B. Jones (Republican – North Carolina) introduced a bill (H.R. 172) to repeal the Johnson Amendment.  The bill was referred to the House Committee on Ways and Means. Additionally, Representatives Steve Scalise (Republican – Louisiana) and Jody Hice (Republican – Georgia) introduced the Free Speech Fairness Act (H.R. 781) on February 1, 2017, which would permit tax exempt organizations to make certain statements related to a political campaign without losing tax exempt status.  The legislation would require that the political statement: (1) is made in the ordinary course of the organization’s regular and customary activities in carrying out its exempt purpose, and (2) results in the organization incurring not more than de minimis incremental expenses. The bill was referred to the House Committee on Ways and Means.  Also on February 1, 2007, Senator James Lankford (Republican – Oklahoma) introduced the companion bill (S.264) to the Free Speech Fairness Act to the Senate and it has been referred to the Committee on Finance.

It is unclear at this time what further action Congress or President Trump will take in this area. Nevertheless, tax exempt organizations and other interested parties should continue to monitor these developments.

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Photo of Amanda H. Nussbaum Amanda H. Nussbaum

Amanda H. Nussbaum is the chair of the Firm’s Tax Department as well as a member of the Private Funds Group. Her practice concentrates on planning for and the structuring of domestic and international private investment funds, including venture capital, buyout, real estate…

Amanda H. Nussbaum is the chair of the Firm’s Tax Department as well as a member of the Private Funds Group. Her practice concentrates on planning for and the structuring of domestic and international private investment funds, including venture capital, buyout, real estate and hedge funds, as well as advising those funds on investment activities and operational issues. She also represents many types of investors, including tax-exempt and non-U.S. investors, with their investments in private investment funds. Business partners through our clients’ biggest challenges, Amanda is a part of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team helping to shape the guidance and next steps for clients impacted by the pandemic.

Amanda has significant experience structuring taxable and tax-free mergers and acquisitions, real estate transactions and stock and debt offerings. She also counsels both sports teams and sports leagues with a broad range of tax issues.

In addition, Amanda advises not-for-profit clients on matters such as applying for and maintaining exemption from federal income tax, minimizing unrelated business taxable income, structuring joint ventures and partnerships with taxable entities and using exempt and for-profit subsidiaries.

Amanda has co-authored with Howard Lefkowitz and Steven Devaney the New York Limited Liability Company Forms and Practice Manual, which is published by Data Trace Publishing Co.

Photo of Jo Habenicht Jo Habenicht

Yomarie “Jo” Habenicht is an associate in the Firm’s Tax Department, specializing in U.S. federal, corporate, partnership and international tax matters.

Jo focuses her practice on tax structuring and planning for a variety of transactions, including mergers and acquisitions, financings, cross-border transactions, restructurings…

Yomarie “Jo” Habenicht is an associate in the Firm’s Tax Department, specializing in U.S. federal, corporate, partnership and international tax matters.

Jo focuses her practice on tax structuring and planning for a variety of transactions, including mergers and acquisitions, financings, cross-border transactions, restructurings, bankruptcy related transactions and joint ventures.

Her practice also includes providing day-to-day tax advice to domestic and foreign companies on a broad range of tax issues. Jo represents companies before the Internal Revenue Service and local tax authorities on tax examinations.

A co-chair of the Proskauer Women’s Alliance Steering Committee, Jo was selected to be a Protégée for Proskauer’s Women’s Sponsorship Program, an initiative that champions high-performing mid-level and senior lawyers as emerging leaders.

Prior to joining Proskauer, Jo worked in the tax services department of a Big 4 accounting firm. She is fluent in Spanish.