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Taxing Issues: GOP tax bill, Johnson Amendment reversal bring changes for churches and nonprofits

By: Steve Rabey, Special to The Gazette
December 31, 2017 Updated: January 2, 2018 at 7:05 am
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President Donald Trump speaks during a bill passage event on the South Lawn of the White House in Washington, Wednesday, Dec. 20, 2017, to acknowledge the final passage of tax cut legislation by Congress. (AP Photo/Evan Vucci)

During his first year in office, Donald Trump mostly delivered on two major promises: to give Americans a "big, beautiful" tax cut and to "totally destroy" the Johnson Amendment, which limits political speech by churches and charities.

These two changes will impact what congregations and nonprofits do and how they raise funds.

But religious leaders, as well as financial and legal experts, aren't sure whether these changes will bring blessings or a curse.

The tax bill approved by Congress and signed into law by the president doesn't eliminate itemized deductions, such as charitable donations. But some fear it will lead to a decline in donations because it doubles the standard deduction, making it less likely they can be claimed by many Americans.

The Johnson Amendment is still on the books, but it's not being enforced because of an executive order Trump signed in May.

The move to cripple the Johnson Amendment was hailed by politically conservative Christians such as James Dobson.

The Focus on the Family founder, who now runs Family Talk, endorsed Trump and serves as one of his evangelical advisers.

But others worry about pulpits and nonprofits becoming increasingly politicized.

Tax bill: Deductions and reductions

By nearly doubling the standard deduction for individuals and families, the GOP's Tax Cuts and Job Act makes charitable donations less attractive to the 30 percent of American households which reduced their tax liability by itemizing deductions. That worries some charities and parachurch organizations.

"What does this mean?" asked Dan Busby, president of the Evangelical Council for Financial Accountability, which represents more than 2,000 church and parachurch ministries with about $12 billion in annual income.

"More than 30 million taxpayers will no longer be able to deduct their charitable gifts," Busby said. "Removing any tax incentive to give cannot be good for giving to charities, in general. But giving to churches should continue with little impact."

John Wylie, an attorney with Sherman & Howard, a Colorado law firm that works with many nonprofit clients, cited one recent impact study by Indiana University predicting a 4½ percent decrease in charitable giving. But this prediction was based on an earlier House version of the tax bill, not the final version Trump signed.

Sherman & Howard's Tax Law Practice Group recently sent an advisory to clients highlighting the biggest changes in the new tax bill.

"If a taxpayer's combined itemized deductions do not exceed the new 2018 standard deduction amounts, any charitable contribution in 2018 will not generate a tax benefit," said the advisory.

The advisory recommended that some donors should make larger contributions before the end of this year to maximize itemized deductions. At least one local ministry is asking its donors to do just that.

"How will you be affected by the coming changes to the tax law?" read a recent email to supporters of Magazine Training International, a Springs-based nonprofit that works with writers and editors around the world to improve Christian publications. "Don't wait!" suggested the email. "Get your tax deduction now when you give."

But Sherman & Howard says some larger donors making cash donations might actually benefit more next year, while other donors might need to establish donor-advised funds.

Johnson Amendment: Pulpits and politics

For 63 years, the Johnson Amendment has been little understood, seldom enforced, and hotly debated.

Created to prevent nonprofit organizations from endorsing political candidates, the amendment has been a thorn in the flesh to conservative evangelical churches and parachurch organizations that endorse candidates and promote political activism.

Trump pledged to overturn the Johnson Amendment "for the evangelicals" who were essential to his nomination and election.

One local religious leader is grateful Trump has followed through.

"We view the Johnson Amendment as a potentially unconstitutional infringement of the free speech rights of pastors and religious organizations who desire to comment on the issues of the day from a religious perspective," said Jim Daly, president of Focus on the Family. "The pastor's Sunday sermon should never be subject to an IRS investigation."

Busby agrees.

"The fact remains that the current law is untenable and needs to be fixed," he said.

Busby said the Evangelical Council for Financial Accountability supports the recommendations of its Commission on Accountability and Policy for Religious Organizations: "Members of the clergy should be able to say whatever they want in the context of their religious services or their other regular religious activities without fear of IRS reprisal - even when these communications include content related to political candidates."

At least two bills seek to repeal the Johnson Amendment.

Last year, U.S. Rep. Doug Lamborn, the Colorado Springs Republican, sponsored the Protect Religious Expression Against Censorship and Harassment Act, or PREACH Act.

"My bill will restore the free-speech rights for all religious entities so that they, and not the IRS, get to determine the appropriate content of their sermons, teachings, and communications to their congregations and to the public without the threat of having their tax-exempt status taken away," said Lamborn, on his website. "It is time to restore full freedom to our nation's religious institutions."

Daly of Focus on the Family supports Oklahoma Sen. James Lankford's Free Speech Act of 2017.

"Lankford's bill removes the limits to speech but keeps the existing prohibition against monetary donations to candidate campaigns," Daly said. "We think this is a smart and reasonable way to navigate this issue."

The Johnson Amendment has not been repealed. Nor has the measure been enforced often.

Since 2008, the Christian legal group called The Alliance Defending Freedom has encouraged pastors to participate in its annual Pulpit Freedom Sunday by preaching political sermons that might draw the ire of the Internal Revenue Service.

But nothing has happened to the handful of local churches the Alliance Defending Freedom says have participated in the event: Church For All Nations, Peakview Church of God, and Saint Dominic Catholic Church. (These churches did not respond to requests for comment.)

But not all believers want to open churches and ministries to politics.

Only 19 percent of Americans agreed with the statement, "It is appropriate for pastors to publicly endorse political candidates during a church service," according to a 2016 survey conducted by LifeWay, which is part of the Southern Baptist Convention.

And syndicated Christian writer Cal Thomas warned, "The subtle temptation for evangelicals to engage in partisan politics dilutes their primary message."

Thomas also warns about other religious groups that might seek to combine preaching, religion and terrorism.

"How comfortable would those conservatives now campaigning for repeal of the Johnson law be if some imams began preaching death to America and endorsing Muslim candidates for political office?" Thomas asked.

But Daly doesn't share these concerns.

"We don't believe that the vast majority of churches and religious organizations - including Focus on the Family - want to begin endorsing political candidates for office," Daly said. "But no one in the religious community wants the threat of losing tax-exempt status hanging over every word that proceeds from the pulpit or ministry spokesman."

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