(Photo by Flickr user Tom Lohdan, used via a Creative Commons license)
As an American citizen, you’re probably already aware that the forthcoming tax reform will affect your personal finances. But if you’re also a nonprofit leader, know that mission changes could be coming soon your organization, too.
The Tax Cuts and Jobs Act passed by a vote of 51-49 in the Senate early on Saturday morning after the House of Representatives’ version was passed last month. The chambers must next draft a unified final version of the bill to be sent to the president’s desk. President Donald Trump is expected to sign it into law this year.
The National Council of Nonprofits has a detailed comparison of the House and Senate bills and their relevance to nonprofits. While both versions contain plans to reduce taxes for the rich, corporations and some members of the middle class, they differ significantly on one sticking point for nonprofits: the Johnson Amendment, the law that keeps nonprofits nonpartisan by preventing them from endorsing political candidates.
Pennsylvania Association of Nonprofit Organizations (PANO) Executive Director Anne Gingerich has publicly protested the proposed repeal, stating in one op-ed: “Nonprofits are tax-exempt for a reason — to do good in their local communities, to increase the quality of life and to ensure that no one is left behind. Tax reform matters — even to tax-exempt organizations.”
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Over 80 percent of nonprofit leaders surveyed by PANO in March opposed repeal of the amendment, offering reasons such as the importance of political neutrality, a maintained separation of church and state, and possible donor influence. Those who supported it named freedom of speech and the desire for more political freedom.
Gingerich refuted the latter argument on Monday morning: “What people who say it promotes freedom of speech usually refer to is that they believe nonprofits are not allowed to lobby,” she said. But nonprofits are legally allowed to designate a small portion of their activities to political lobbying for policies (though not candidates themselves).
And nonprofit staffers are free to vote for whomever they wish, an issue discussed recently in the Philadelphia nonprofit community when controversy arose from the appearance of Congreso ED Carolina Cabrera DiGiorgio at a Trump rally.
“The only limitation we have is from the doors and windows and computers of a particular nonprofit,” Gingerich said.
Furthermore, she said, the Joint Committee on Taxation estimated the total cost to the federal government resulting from the repeal of the Johnson Amendment is $2.1 billion, stemming from the amount of money that would now be able to flow through tax-free 501(c)3 organizations via political donations.
Though mention of the Johnson Amendment was not included in the Senate’s version of the tax bill, its proposed repeal may still be included in the final version likely to be signed into law. The Nonprofit Center at LaSalle University Executive Director Laura Otten said on Monday she thinks it will.
“I think the message [from the federal government] is, this is going to happen,” she said. Nonprofits and individuals “are not going to have any say in it. It’s better to prepare if the worst happens than to fret, ‘What if.’ And to me, the worst thing is if the Johnson Amendment stays in this bill.”
Otten said she doesn’t know of any local or national group that represents nonprofits that supports the repeal of the amendment.
“There’s so much protection [in] being free from having to get involved in the political scene,” she said, including the reduced risk of offending a donor with different political views and of retaliation from a politician your organization publicly opposed.
Otten advises nonprofit boards to begin considering now what their stance will be in the case the Johnson Amendment is repealed — whether they’ll endorse candidates or continue to stay out of the political arena.
“While we’re in this waiting period, it’s important to have this conversation now,” she said. “You have the freedom to get involved or keep your neutrality to stay out of politics. I think they would be well-advised to stay out of politics.”