The Johnson Amendment Walls Separating Church, Charity, and State

...are recent, unsavory, and unnecessary, says this Constitutional authority

In 1933, David Reed, a Republican Senator from Pennsylvania, sought legislation to increase veterans’ benefits. His efforts failed, and instead benefits were cut. Reed blamed the activity of the National Economy League, a nonprofit organization that called for balancing the federal budget and cutting appropriations for veterans. The league had significant political influence, counting among its founders and supporters Archibald Roosevelt and former Presidents Calvin Coolidge and Herbert Hoover.

Senator Reed responded to his defeat by persuading the Senate Finance Committee to alter the Internal Revenue Code to restrict future active participation in the legislative process by organizations covered under Sections 5o1c3 and 17oc of the tax code. Although Reed had not intended to apply these restrictions to all religious, charitable, and educational groups, efforts to make any sort of distinctions failed. For the first time, both tax exemption and the deductibility of donations would apply only if “no substantial part” of a nonprofit’s activities involved “carrying on propaganda, or otherwise attempting to influence legislation.”

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Liberal Suppression: Section 501c3 and the Tax on Free Speech by Philip Hamburger

It’s this unnoticed history that Columbia law professor Philip Hamburger reveals in his latest book, Liberal Suppression, where he argues that Reed—and later, Senator Lyndon Johnson—used the tax code to stifle the speech of churches and other “idealistic organizations,” largely to assuage liberal anxieties and advance their own ends. In denying these institutions of civil society the same First Amendment rights as the individuals participating in them, Hamburger warns, the government has “cut off politics from the religious and cultural life that enriches political life and sustains its freedom.”

In the eighteenth and nineteenth centuries, churches and other voluntary associations were vocal participants in political and social movements. Church leaders spoke publicly both for and against the American Revolution, slavery, and secession. They drove the successful passage of Sunday “blue laws” as part of the temperance crusade. When Congress was considering the Nebraska Bill in 1854, thousands of New England clergymen sent the body a signed document “in the name of Almighty God” protesting this attempt to open the territories of Kansas and Nebraska to slavery. Early legislation establishing a federal income tax exempted religious, educational, and charitable organizations without any speech restriction whatsoever, and the 1917 statute creating the charitable deduction followed suit. There were no restrictions on speech.

The regulations started in 1919, when the Bureau of Internal Revenue defined “educational” by declaring that the term did not include “associations formed to disseminate controversial or partisan propaganda.” Hamburger notes that although the definition certainly was influenced by nativist perceptions of Catholicism (and Catholic schools, in particular), its first use in the appellate courts came in a 193o case involving the American Birth Control League. Writing for the U.S. Court of Appeals for the Second Circuit, Judge Learned Hand disallowed several years of charitable deductions for gifts made to the organization because its lobbying efforts to repeal birth-control prohibitions were not covered under the “educational” umbrella. However worthy the league’s goal might be, he concluded, “it is not in our judgment one of those purposes which Congress meant to assist.” What followed soon after was Reed’s 1934 prohibition on lobbying and, in the wake of that action by Congress, the revocation of the National Economy League’s tax-exempt status.

Fast forward to 1954. Congress was already in a stir about suspected “un-American and subversive activities” within tax-exempt organizations, and had established the Cox and Reece Committees to investigate possible communist interference with political and legislative processes. And in this environment, Lyndon Johnson, running for re-election to the Senate, found himself with a Catholic opponent, and vocal opposition from several tax-exempt, conservative, anticommunist organizations. Like Congressman Reed before him, Senator Johnson turned to the government for a solution to his electoral challenges. When the IRS rebuffed him, saying his opposition had not violated current restrictions, Johnson proposed another rule to prohibit 5o1c3 organizations from participating in an election campaign on behalf of any candidate. In 1987, Texas Democrat J. J. Pickle would add to the regulations by amending the campaign prohibition to include not only supporting a political candidate, but also opposing one.

Hamburger’s telling of this history is detailed and complex. He makes clear that the consensus of the time that “nonpublic reasons” should have no place in the political arena fit conveniently with panic about Catholics “resisting” public schools, and a faraway Pontiff “influencing” American elections. And the fear that set these new regulations in place extended beyond just religious organizations. The overarching liberal antipathy was toward any organization that could foster “group think” or “propaganda”—which included, in the minds of the sponsoring legislators, private businesses and industrial associations that delayed or defeated progressive reforms they prized.

Hamburger rejects the claim that speech restraints on churches and other nonprofits are simply part of a consensual bargain struck between the government and those it “subsidizes.” Tax exemption, he says, is not a subsidy—it’s a boundary, and one important to liberty. (See “It’s About Freedom, Not Finances” in Philanthropy Summer 2013.) He notes that the Joint Committee on Taxation does not consider tax exemption a tax expenditure, and insists that even the designation of the charitable deduction as a subsidy fails to justify the suppression of speech. And he bemoans the lack of due process involved in placing this restriction in the lap of the IRS, which can only enforce the restraints on speech “with the severe and truncated administrative process it uses to collect taxes.”

Hamburger dismisses the mitigating options that some nonprofits use as workarounds—like the small exceptions for narrow types of lobbying, and the establishment of parallel 5o1c4 and 527 organizations to regain some speech rights. These alternatives still leave charities and religious groups deprived of “their freedom to speak in their own voices,” he contends. And even those hobbling alternatives are impossible for groups that lack the financial means to “jump through IRS hoops before speaking.” Furthermore, the 5o1c4 and 527 alternatives force into the “narrow channels of political parties” what could be much “broader and perhaps more balanced” contributions to public discourse.

For these reasons, and a multitude of others, the distinguished law professor concludes that Section 5o1c3’s restrictions on campaigning and influencing legislation are unconstitutional. He calls on the courts to rethink the “distorted constitutional doctrines” that suppress free speech by important cultural entities today.

Hamburger notes that while churches and other civil-society organizations should have the right to engage in political speech, there is no guarantee many of them will want to engage in that arena. Many of those groups oppose repeal of the Johnson Amendment precisely because it protects them from donors and politicians who would pressure them to make partisan statements and political contributions.

Nor is Hamburger certain that the contributions of these groups will always be valuable, if they do engage. But given his deep concerns about the suppression of dissenting views and homogenization of public opinion, Hamburger calls for allowing churches and other idealistic associations to participate fully in American political life.

This book has its flaws. While carefully structured and elegantly written, it can nonetheless be a somewhat difficult read. Because the chapters are organized thematically, the chronology can be confusing, and the author’s arguments frequently repeat from one chapter to another. Some readers may resist the author’s description of the 1.5 million educational and charitable organizations in the United States as “idealistic associations.” Like other critics of the Johnson Amendment, Hamburger has not offered a viable, enforceable way to avoid giving charitable deductions for what are inarguably political campaign contributions. And so long as Congress insists on regulating those contributions, repeal of the Johnson Amendment would subject charities—even those not deliberately engaging in electoral politics—to a vast new universe of campaign finance regulation including the threat of mandatory donor disclosure. Even then, their ability to engage in the legislative process would be limited unless they devoted extra resources to the workarounds mentioned above.

These criticisms pale, however, when compared with the deep questions at the core of this book. If public speech is limited only to “plain truths now widely accepted,” what recourse is left to those who espouse unorthodox beliefs? With each restriction on civil-society organizations, are citizens left more and more in thrall to government authority? And what is the cost of untethering government from “the higher ends espoused by idealistic and especially religious organizations”? You can walk away from Liberal Suppression disagreeing with Hamburger’s conclusions, particularly with his call to repeal the Johnson Amendment. But the questions are still yours to ponder.

Contributing editor Joanne Florino is vice president of philanthropic services at 
The Philanthropy Roundtable.