The threat to all nonprofits in proposed tax overhaul

As Congressional leaders attempt to pass a tax reform bill before the end of the year, an effort purported to expand "free speech” rights of nonprofits and enable them to donate to and endorse political candidates would instead hurt their ability to accomplish their missions.

In the House bill now being reconciled in a House-Senate conference committee, a provision tacked on by House Ways and Means Committee Chairman Kevin Brady (R-Texas) would effectively roll back the Johnson Amendment protections for nonprofits, foundations and faith communities. That would be a disastrous step, which is why it’s opposed by more than 5,500 nonprofits and foundations, more than 4,200 faith leaders, and more than 100 religious and denominational organizations across the country – and 79 percent of the American public.

The Johnson Amendment provision of the U.S. Tax Code, named after then Senator Lyndon B. Johnson, dates back to 1954. It prohibits nonprofits from participating in campaigns on behalf of (or in opposition to) any candidate for elective public office. It means that nonprofit organizations cannot endorse, raise money for, or contribute to candidates. It doesn’t limit individuals’ ability to take part in campaigns; people who work for nonprofits are free to volunteer, endorse, or contribute to campaigns on their own time. Media coverage to this point has focused on houses of worship, but the implications of this proposed rollback would be felt across the entire nonprofit community.

Nonprofits are bound by the Johnson Amendment to focus exclusively on their missions. Those missions must not be compromised, or obliterated, by political campaign activity. When donors contribute to nonprofits, they know their dollars will advance charitable missions, and those contributions are exempt from taxes. If the door is opened to nonprofits becoming involved in partisan politics, the basic compact of nonprofit status protecting and enhancing nonprofits’ ability to advance their charitable missions will be severely compromised.

Think about what would happen if nonprofit organizations were allowed to endorse candidates:

● Many nonprofits would come under pressure to endorse political candidates, especially those nonprofits that receive or seek government funding. These endorsements would threaten the credibility and independence of nonprofits.

● Nonprofits would also come under pressure to make financial contributions to candidates. Political contributions do not square with nonprofits’ fiduciary responsibility to their donors. Donors expect that funds they contribute to nonprofits will go to the organization’s charitable mission, not to political campaigns.

● There would be immense pressure on nonprofits to raise, hold, and distribute campaign contributions, pulling them into the oft-maligned whirlpool of bundling, dark money, and super PACS. The impact on their credibility could be devastating.

In addition to making the traditionally independent nonprofit sector partisan, the House bill would severely reduce charitable giving (by as much as $20 billion annually, according to some estimations) and impose new and unfair taxes on the sector. The Senate’s bill is similar: it would levy taxes on nonprofits under certain conditions, limit the incentive for individuals to give to charities by nearly doubling the standard deduction, and strip valuable resources currently available to the sector to accomplish its missions.

The conference committee in charge of reconciling differences between the House and Senate bills is expected to work quickly. The threat that the House’s rollback of the Johnson Amendment could survive and be included in the conference committee’s bill is very real. Nonprofits of all sizes, and those who support them, must make their voices heard to insure that language weakening the Johnson Amendment is not included in the final bill.

In a time of division, the nonprofit sector is one of the few places where people can come together, put politics aside, and work together on our country’s most pressing challenges. We need to strengthen, not weaken, nonprofits’ ability to focus on their missions and build stronger communities that benefit all of us.

Jim Klocke, of Wellesley, is CEO of the Massachusetts Nonprofit Network, itself a nonprofit supporting and advocating for nonprofit organizations across Massachusetts. MNN has more than 700 nonprofit members in the state - including in Central Massachusetts, youth and education programs, human services, religious, arts, and environmental programs – and more than 100 for-profit members that support nonprofits.