President Trump recently told faith leaders that he would “totally destroy” the Johnson Amendment, referring to then-Representative Lyndon Johnson’s sponsored legislation banning churches’ and other Section 501(c)(3) organizations’ political campaign speech. As W & O attorney Ryan Oberly recently observed in Modern Healthcare’s article, the prohibition is controversial and difficult to enforce, given both the free speech and religious liberty constitutional interests at stake and the IRS’s questionable capability to enforce the law fairly. Many religious organizations have openly flaunted the ban by endorsing or speaking against candidates, leaving others to wonder whether they should follow the letter of the law despite its dubious constitutional legitimacy.
The Trump administration has developed a draft executive order aimed at protecting liberties for religious leaders who wish to speak up about political candidates (as well as with respect to other significant religious freedom areas such as social services, health insurance, and government funding), thereby overturning the ban. Specifically, the proposed order restricts the IRS from denying Section 501(c)(3) tax-exempt status to “any church, house of worship, or other religious organization on the basis of such organization speaking on moral or political issues from a religious perspective.”
Whether churches and their leaders should or should not speak out on political campaigns is an important practical question to be weighed carefully for a host of reasons. But whether their tax-exempt status should be jeopardized for such speech is another matter entirely. Given our country’s strong historical and constitutional deference to religious liberty, the fact that the IRS is inherently ill-suited as a tax revenue collection agency to police such speech-related activity, and the IRS’s extreme reluctance to enforce, repeal of the Johnson Amendment makes sense – at least for religious institutions.
Benevolent Tax Neutrality as a Guiding Principle
As U.S. Supreme Court Justice O’Connor once observed, early American leaders “accorded religious exercise a special constitutional status,” with all agreeing that “government interference in religious practice was not to be lightly countenanced.” Indeed, since the earliest colonial days in our country, religious institutions have been exempt from taxes. Such treatment is consistent with worldwide historical treatment of religious institutions as exempt. As the U.S. Supreme Court observed in the landmark case of Walz v. Tax Commission:
Few concepts are more deeply embedded in the fabric of our national life beginning with pre-revolutionary colonial times, than for the government to exercise at the very least this kind of benevolent neutrality toward churches and religious exercise generally, so long as none was favored over others and none suffered interference.
Two critical tax principles are implicated with the IRS’s tax-related power over religious organizations’ speech-related activities. First as Justice Marshall famously pointed out long ago, “the power to tax involves the power to destroy.” Second, the power to tax is that of a sovereign. Religious institutions may be subject to the sovereign in limited ways (e.g., payroll taxes, health and safety regulations), but all such intrusions must be strictly scrutinized and guarded against overreaching.
Keeping the IRS Away from Churches as a Constitutional Matter
Notably, when Congress first imposed an income tax on corporate entities, the tax law specifically exempted “corporations, companies, or associations organized and conducted solely for charitable, religious, or educational purposes.” This exemption has been maintained in all subsequent tax legislation, with a continuing deference to religious institutions as being autonomous and free from governmental intrusion. For example, when Section 508 to the Internal Revenue Code was added in 1969, churches and other religious institutions were specifically excluded from the requirement that an organization must apply to the IRS for tax-exempt recognition under Section 501(c)(3). Similarly, churches are categorically exempt from Form 990 filing requirements, and heightened IRS procedural requirements exist for church audits.
Given this principled IRS deference to religious organizations as a matter of constitutional religious freedom, they should not be at risk for losing tax-exempt status as an IRS-imposed penalty - even within the oftentimes murky waters of political campaign speech. Compelling arguments may be made under both the First Amendment’s Free Exercise and Establishment Clauses.
First, the Free Exercise Clause is intended to protect religious liberty by prohibiting invasions thereof by the government. Accordingly, even a regulation that is neutral on its face may offend constitutional neutrality in its application, if it unduly burdens the free exercise of religion. The relevant inquiry is thus whether the government has placed a substantial burden on religious belief or practice and, if so, whether a compelling governmental interest justifies the burden. As the U.S. Supreme Court recognized in its Citizens United decision, “[s]peech is an essential mechanism of democracy,” and therefore government is not to unduly interfere in the marketplace of ideas so critical for our democratic system.
Most religious organizations engage in speech as a core part of promoting their religious doctrine, educating their listeners, and expressing their faith. Some speech may tread into political areas, though of course not necessarily. Allowing the IRS to investigate, regulate, and possibly punish such speech imposes too high of a burden on religious organizations and their participants under the Free Exercise Clause.
Second, under the Establishment Clause, a legislative act involving religion must not foster an “excessive government entanglement” with religion. The U.S. Supreme Court has acknowledged that some limited degree of entanglement is inherent, given churches’ day-to-day operations that are affected by numerous areas of government regulation such as building, zoning, and health and safety regulations. But the Court has consistently rejected legislation that calls for a government inquiry into the religious nature of an activity or product. Likewise, legislation involving a “comprehensive, discriminating, and continuing state surveillance” amounts to constitutionally impermissible “excessive entanglement.” On its face and through accompanying IRS regulations, the Johnson Amendment calls for precisely such entanglement. This may help explain why some religious groups have ignored the ban and why the IRS has largely ignored such violations.
Under both constitutional provisions, the current system cannot be legally countenanced within our country’s historical and constitutional framework. As the U.S. Supreme Court observed in Walz: “Governments have not always been tolerant of religious activity, and hostility toward religion has taken many shapes and forms - economic, political, and sometimes harshly oppressive.” The First Amendment anticipates such potential abuse by protecting religious freedom from government overreach. Thanks to the Johnson Amendment, however, the IRS is charged with policing religious organizations’ speech activities and determining whether such speech impermissibly intervenes in favor or against a political campaign. The IRS has regularly demonstrated that it cannot be trusted to carry out such responsibilities in a neutral way that avoids abuse and viewpoint discrimination, and such role is not otherwise constitutionally appropriate.
Several questions remain. For example, should the political campaign prohibition be repealed only for churches and other religious institutions, or for all Section 501(c)(3) organizations? Should such a repeal take place through Trump’s executive order or new legislation? Is another government agency better equipped than the IRS to enforce the ban? For now, it seems clear that the current ban - as applied to churches’ speech activities and with the IRS as its primary enforcer - remains in serious constitutional doubt.
 City of Boerne v. Flores, 521 U.S. 507, 564 (1997) (O’Connor, J., dissenting) (citing A. Adams and C. Emmerich, A Nation Dedicated to Religious Liberty: The Constitutional Heritage of the Religious Clauses, at 31 (1990)).
 397 U.S. 664, 676, 90 S. Ct. 1405, 1415 (1970).
 McCulloch v. Maryland, 17 U.S. 316, 431 (1819). See also Murdock v. Pennsylvania, 319 U.S. 105, 112 (1943) (“The power to tax the exercise of a privilege is the power to control or suppress its enjoyment.”).
 Revenue Act of 1894, Ch. 349, 332, 28 Stat. 509, 556 (declared unconstitutional in Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429, aff’d on rehearing, 158 U.S. 601 (1894)). See also Revenue Act of 1909, 27 Ch. 6, § 38, 36 Stat. 11, 112 (1909).