Benjamin M. Leff (American; Google Scholar), Challenging the Johnson Amendment: What SAFE SPACE Gets Right—and Wrong, 185 Tax Notes Fed. 51 (Oct. 7, 2024):

In this article, Leff argues that the IRS’s interpretation of section 501(c)(3)’s prohibition on campaign intervention (the Johnson Amendment) is unconstitutional, as claimed in a recent Tax Court petition, but that the petitioner in that case unnecessarily asserts a dangerously broad strategy for vindicating charities’ free speech rights.

There has long been a scholarly debate about the so-called Johnson Amendment, which is the statutory provision that prohibits charities from “intervening” in campaigns for public office. Some scholars argue that the Johnson Amendment, or at least the IRS’s interpretation of it, unconstitutionally prevents charities from exercising their fundamental rights to speech or religious liberty. Activists have tried to provoke IRS enforcement of the prohibition so they could argue their interpretation of the Constitution in court, but the IRS appeared to be avoiding litigation on the issue. On March 18, Students and Academics for Free Expression, Speech, and Political Action in Campus Education Inc. (SAFE SPACE) sued the IRS in Tax Court after the agency failed to act on the organization’s application for tax-exempt status, which described SAFE SPACE’s plan to endorse candidates for public office on its website. This lawsuit represents the first time in decades that there is pending litigation about the constitutionality of the IRS’s interpretation of the Johnson Amendment. 

This article argues that the IRS’s current interpretation of the Johnson Amendment is unconstitutional but that narrow changes to that interpretation would fix it. SAFE SPACE is right that the Constitution protects a charity’s right to endorse a candidate, but the way SAFE SPACE plans to endorse candidates (directly on its website) goes well beyond what is necessary to fix the constitutional infirmity and could open the floodgates to vast amounts of tax-subsidized campaign spending, with disastrous results. Because SAFE SPACE has a plausibly compelling case that the IRS’s interpretation of the law prevents charities from exercising their constitutionally protected speech rights, the Tax Court might be persuaded to side with it. But because SAFE SPACE’s strategy for vindicating its rights goes well beyond what the Constitution protects, there is a risk that the Tax Court will open the door too wide for charities seeking to influence elections, permitting them to use substantial amounts of tax-deductible contributions to fund their efforts. This article explains how the Tax Court (or the IRS) could modify the IRS’s interpretation of the Johnson Amendment without opening the door to the use of tax-subsidized funds, such as tax-deductible donations.

This position — that the Constitution protects a charity’s right to endorse a candidate, but only if it obeys very strict rules about how — is counterintuitive to both the supporters of the Johnson Amendment and its detractors. Because this position is so counterintuitive, I decided that it would be best to create my own section 501(c)(3) organization to illustrate the right way to endorse a candidate. I sought to enlist two friends to create a 501(c)(3) organization, the Nonprofit Education Project, to use the correct method for charities to vindicate their constitutionally protected right to communicate their views on candidates — the “alternate means” method. SAFE SPACE is right that the Constitution protects a charity’s right to form an opinion about candidates and some means of communicating that opinion. But SAFE SPACE is wrong that the Constitution requires that the 501(c)(3) organization be allowed to pay for the means of communicating its views, even if the cost of doing so is low or inextricably mixed with the cost of engaging in charitable or educational speech.

The difference between SAFE SPACE’s approach and mine boils down to who pays for the website that is used for the organization’s endorsement. It is that simple. I believe that the difference, while appearing trivial in this case, is actually extremely important and that the consequences if the Tax Court misses that distinction would be disastrous, creating a massive loophole in the tax treatment of campaign spending and effectively repealing the Johnson Amendment altogether. However, my friends persuaded me that illustrating the flaws in SAFE SPACE’s case did not justify creating our own organization, so this article describes not what we actually did, but what we might have done.

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