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BREAKING: House Bill Sunsets Johnson Amendment For All 501(c)(3)s

The House Ways and Means Committee advanced tax reform legislation along a party-line vote this afternoon, including an amendment that would allow political activity not only by houses of worship but extend it to all 501(c)(3) organizations.

The Ways and Means Committee has been marking up The Tax Cuts and Jobs Act (H.R. 1) in recent days after introducing the measure last week. Senate Republicans are expected to release their version of tax reform legislation within hours.

The legislation as introduced only affected houses of worship, weakening the Johnson Amendment. A summary of the amendment released by the committee reads: “This amendment ensures that all 501c3 organizations will not fail to be treated as organized and operated exclusively for their respective non-profit purposes because of engagement in certain political speech, as long as the speech is in the ordinary course of the organization’s business and the organization’s expenses related to such speech are de minimis.”

The provision would take effect in 2019 and sunset after 2023. The five-year window limits the cost since the Joint Committee on Taxation assumes some shift from candidate campaigns to exempt organizations, said David Thompson, vice president for public policy at the National Council of Nonprofits. The original version that affected only houses of workshop estimated a cost to the treasury of $2.1 billion over 10 years because of the charitable deductions.

“Dollars diverted from public good to political ambitions; expansion of corruption in the 501(c)(3) space; exploitation of ‘sanctuaries’ for political gain; public faith undermined. Nonprofits have several concerns with H.R. 1, but the tax reform bill should be defeated based on this one provision alone,” National Council President and CEO Tim Delaney said following testimony by the JCT on Monday.

More than 5,500 organizations around the country signed onto a letter in support of nonpartisanship, urging lawmakers to leave existing law in place for nonprofits and the people they serve. Thompson offered an example of a university president sending an email to alumni endorsing a particular candidate — “that’s a de minimis cost” — and having a donor give them $1 million to do it.