One highlight amid the chaos emanating from Washington, D.C. last week was the president’s butchering of the National Prayer Breakfast. That’s right, he managed to ruin breakfast, especially for leaders of non-profits.
During the meal’s customary address, rather than just be humble and mutter a quick “rub-a-dub-dub, thanks for the grub,” he vowed to “totally destroy” the Johnson Amendment, which prohibits tax-exempt organizations from endorsing political candidates.
Before I explain why this could be dire news for nonprofit leaders, let’s review the significance of the Johnson Amendment.
Enacted in 1954, it’s named for its main sponsor, then-Senator Lyndon B. Johnson. As it’s written on the IRS site:
…all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.
So no matter what type of non-profit you operate, should not use any of its funds to endorse a candidate running for public office. It’s a classic conflict of interest. If you are a CEO and want to make a private donation, that’s fine. Just don’t double-dip, because:
Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
You don’t want that.
Ultimately, a president would need Congress to repeal the Johnson Amendment, so he can’t just snap his fingers and make it happen. He probably only said this to pander to his audience. There are undoubtedly some groups who have made campaign contributions and have gotten away with it. Now that the president has brought it to the public attention, the IRS may look to make an example of a group.
Don’t let it be yours.
Even if he could get the amendment repealed, it would appeal to a limited number of groups and people. Making political donations can affect your bottom line. Once it’s revealed that you took donations and put it toward a political endorsement, you may have a lot of upset donors. They may express their discontent by cutting off your funding or voting you out of your position. Your group might also lose its membership base.
On the flip side, it could attract some new donors, but given the present state of polarization in this country, you’d be taking your chances. Even if you have the best of intentions, you might not like where that new money comes from.
Contact Brinen & Associates to ensure that your nonprofit uses its funds in an ethical way that is also within the limits of the law.