CLOSING SPACE OR OPEN SEASON? WHAT PRESIDENT TRUMP'S LATEST MOVE MEANS FOR THE FUTURE OF CIVIL SOCIETY CAMPAIGNING

23 February 2017

A recent announcement by US President Donald Trump has caused a great deal of concern in the non-profit sector and once again brought the issue of charities getting involved in politics right back into the spotlight. This has become a thorny issue around the world in recent years, including here in the UK (as detailed in our recent Giving Thought paper), so it is worth looking at the details of this story and what they tell us about the challenges of charities operating in the political arena.

THE JOHNSON AMENDMENT

You might well have missed the story itself in amongst the deluge of news coming out of the White House at the moment, so here it is in a nutshell. At this year’s National Prayer Breakfast, President Trump announced that he was going to “get rid of and totally destroy” a thing called the Johnson Amendment. This is a fairly obscure amendment to the US tax code put forward by then-senator Lyndon Johnson in 1954, which prohibits tax-exempt organizations (known as 501c(3) organizations) from taking part in political campaigns for or against a candidate for elected public office.

Some religious groups have been opposed to the Johnson Amendment for a long time, arguing that it is a violation of their right to free speech, and have been campaigning for it to be repealed. This has included a campaign of orchestrated disobedience by a group called the Alliance Defending Freedom, who organise an annual “Pulpit Freedom Sunday” on which they encourage preachers to give openly political sermons in church. It is clear that Trump’s aim in repealing the amendment is to appease these religious groups, and in particular the evangelical organisations that have formed such a powerful part of his base. He said when announcing the new policy that the purpose was “to allow our representatives of faith to speak freely and without fear of retribution.”

WHY ARE CHARITIES WORRIED?

The reason this is extremely pertinent for charities in the US is that the Johnson Amendment does not just apply to churches, but to all tax-exempt 501c(3) organisations, and that includes all public charities.

Very few of these charities are in favour of repealing the amendment, and most are extremely worried about the potential consquences of doing so. The concern is that if the rule is lifted, then suddenly 501c(3)s become another way of making political donations, and one which is likely to prove extremely appealing because it would enable donors not only to remain anonymous, but also to get generous tax breaks on their donations. So it is almost certain that large sums of “dark money” will flood into the charity sector with the aim of funding political campaigns.

We have already seen a similar thing happen in the US with a related tax designation, the 501c (4) organisation. These are “social welfare organisations” which enjoy some tax exemptions, but unlike 501c (3) organisations are not subject to limitations on their lobbying activities. 01c(4)s have become extremely popular as a method of funding political campaigns because they have many of the same features as existing structures such as “Super-PACs”, but with the added bonus that they do not have to disclose the names of donors. The Center for Responsive Politics reported that over $300m dollars in political spending came from 501c(4) organisations during the 2012 election ($265.5m of which came from conservative groups and $33.6m from liberal groups).

As already highlighted, if the Johnson Amendment is repealed then a lot of the political money flowing through 501c(4)s will start being channelled through 501c(3)s instead, because they have the added benefit of enabling tax deductions on donations. Charities and not-for-profits are extremely worried about what this would do to public trust, because if some 501c(3) organisation become overtly aligned with political parties, people will just assume that all tax-exempt organisations (including charities) are partisan.

Tim Delaney, the President and CEO of the National Council on Nonprofits, highlighted these concerns, saying:

Nonpartisanship is vital to the work of charitable nonprofits. It enables organizations to address community challenges, and invites the problem-solving skills of all residents, without the distractions of party labels and the caustic partisanship that is bedeviling our country.

 “Nonprofits are already free to exercise their First Amendment rights to advocate for their missions. Allowing political operatives to push for endorsements would put nonprofits in a position where they become known as Democratic charities or Republican charities and put missions at risk.

“Furthermore, those who donate to nonprofits want those contributions to go toward advancing the mission, not toward advancing the careers of politicians or lining the pockets of political consultants. Getting involved in supporting or opposing candidates will have a chilling effect on contributions on which many nonprofits rely.”

Perhaps the most ridiculous thing about this whole situation is that is not even clear that there is really a problem to be addressed. Many people have pointed out that whilst the law technically prohibits tax-exempt organisations from political campaigning, in reality those that want to (primarily religious groups) have been able to do so with relative impunity for years. The Washington Post reported that of the more than 2,000 clergy who had taken part in “Pulpit Freedom Sunday” since 2008, and deliberately violated the Johnson Amendment, only one had been audited by the IRS and none had been punished.

If that is the case, then the repeal of the amendment only really makes sense if the opening up of 501c(3)s as a channel for political donations is the actual intention, rather than just an unintended consequence. But either way, it is likely to be charities that suffer as a result of the corrosive effect that this will have on public trust.

TOO MUCH FREEDOM: AS BAD AS TOO LITTLE?

Whilst the details of this story are very much specific to the US, it does raise many issues that should resonate more widely. The first thing to note is that the proposal to repeal the Johnson Amendment, and thereby remove restrictions on not-for-profit organisations engaging in political campaigning, run almost directly counter to the prevailing global trend.  Many governments are introducing ever more restrictions on campaigning in a bid to curb the ability of civil society organisations to act as a critical voice, rather than opening up the space for them to engage in politics.

I don’t think for a moment that this is going to prompt a reversal of the “closing space for civil society” phenomenon – rather, I think it illustrates the fact that civil society organisations face threats from two directions when it comes to their right to campaign. In most cases, the primary threat comes from governments seeking to tighten restrictions on campaigning and thereby limit the ability of CSOs to engage in legitimate advocacy work. However, the situation in the US shows that there can be an equal threat from the other direction if restrictions are totally abandoned: although CSOs may be able to engage in advocacy work in this scenario, there is a real danger that the legitimacy of that work will be totally undermined by having to operate in a space in which many organisations are nakedly partisan.

POLITICAL BUT NOT PARTISAN: A DELICATE BALANCE

This highlights the fact that those wishing to protect and preserve the value of charitable campaigning need to maintain a careful balance between, on the one hand, having sufficient regulation and legislation in place to give the public confidence that organisations are not partisan or driven by political aims, and, on the other hand, ensuring that over-zealous rules do not undermine the ability of charities to speak out and advocate in pursuit of their charitable missions.

This balance is one that is reflected in existing law here in the UK, where there is a distinction between an organisation having a political purpose (which is not allowed under charity law) and an organisation engaging in political activities in order to pursue an acceptable charitable purpose (which is allowed, within certain defined limits). However, this should not make us complacent. In recent years, when charity campaigning has come under relatively heavy fire in the UK, there have been many examples of critics either inadvertently or willfully ignoring this distinction and conflating “political” with “party political” in order to make a case that charities are acting inappropriately. It is vital that we continue to challenge this misrepresentation.

GREY AREAS: THINK TANKS AS "EDUCATIONAL CHARITIES"

The other reason we should not be complacent is that history has left us with a broad definition of charitable purpose in the UK. As a result, much like the tax-exempt sector in the US, the UK charity sector contains a wide diversity of organisations with differing and occasionally competing aims. And this applies to political involvement just as much as anything else. Just as some churches in the US want to see the Johnson Amendment repealed, there are charities in the UK who would almost certainly like to see restrictions on political campaigning relaxed because they already skirt the boundaries of being partisan.

I am thinking here particularly of think tanks and others who set themselves up as charities with “educational purposes”, and are able to maintain their charitable status despite clear ideological affiliation with a particular political party on the grounds that they are conducting research and convening events in order to further this educational purpose. Many of these organisations operate at the limits of what constitutes acceptable non-partisan political activity, and as a result they occasionally overstep the mark: there have been multiple cases of think tanks being censured for straying away from impartiality.

The challenge for more mainstream, cause-driven charities who want to defend their ability to engaging in non-partisan campaigning on ‘political’ issues is that they find themselves in a tent with organisations that are constantly testing the boundaries of what is acceptable. The danger is that this damages public trust in the idea of charity, and as a result leads to cynicism and unwillingness to engage. This is unlikely to result the sort of stark downturn in trust that we might see in the US if the Johnson Amendment is repealed, but will still lead to a slow process of erosion of trust over time that we might not notice until it is too late.

 

WHAT ARE THE PRINCIPLES AT STAKE HERE?

 The other crucial thing about the Johnson Amendment story, to my mind, is that it provides yet another example of the lack of clarity in the minds of policymakers when it comes to many of the fundamental questions about philanthropy and the role of charities.

For instance, one of the main arguments against the repeal of the Johnson Amendment is that by allowing organisations that can receive tax-deductible gits to engage in partisan politics,

you are effectively introducing a taxpayer-funded subsidy for political donations. But why is this unacceptable? That is to say, what do you believe the justification for offering tax relief on donations to be, and why do these donations not meet the required criteria? Many policymakers never offer an explicit rationale for why tax relief on charitable giving is desirable, and if pressed will merely offer a series of post hoc justifications that often do not stack up. But the Johnson Amendment story once again shows the importance of having a principled, reasoned answer to this question.

THE ORIGIN OF THE US RULE AGAINST POLITICAL PURPOSES: LBJ'S REVENGE

Similarly if we assume that the distinction between ‘political’ and ‘partisan’, or between ‘political activities’ and ‘political purposes’ is crucial, then we should once again ask why.

Why is it that a charity is prohibited from having a political purpose? In the case of the US, as we have seen, we know precisely when the rule was introduced: 1954, by Lyndon Johnson. However, ‘why’ remains a much more difficult question to answer. The provision was introduced as part of an omnibus bill and there is no record of there having being any debate at the time, so we don’t have evidence of issues of principle being discussed. In fact, it is generally agreed that Johnson’s motivation in putting forward the proposal was to get revenge on a specific conservative non-profit group at the time which had supported a rival candidate for his seat in the US Senate, rather than it having any basis in a principled belief in the need to curb political campaigning by non-profits or religious groups.

 

THE ORIGIN OF THE UK RULE AGAINST POLITICAL PURPOSES: LORD PARKER'S MISTAKE

The situation in the UK is, if anything, even worse. Here, the provision prohibiting political purposes in charity law can essentially be traced back to a mistake (as I detail in my book Public Good by Private Means). In 1917 there was a court case called Bowman vs Secular Society, which concerned the legacy of a man called Charles Bowman, who wanted to leave some of his estate to the Secular Society (which promoted the idea that religion should be removed from public life and replaced with evidence-based secular beliefs). Now, as is often the case, his next of kin weren’t very happy with this and challenged the legacy in the courts, on the grounds that this society was blasphemous.

 

The case ended up being heard by the House of Lords. They didn’t uphold the charge of blasphemy,  but in the course of giving his opinion, one of the judges – Lord Parker of Waddington – made a series of statements that were to have a long-lasting impact on charity law. In particular, he made the assertion that “a trust for the attainment of political objects has always been held invalid”. But that doesn’t appear to have actually been true at the time. Matthew Harding, who explores this issue in detail in his book “Charity Law and the Liberal State” argues that in fact, “it was far from clear that trusts for political purposes had invariably or even mostly regarded by decision makers as invalid”, and that “the history of Victorian Britain reveals a strong tradition of charities pursuing political purposes of different types, with no suggestion that such purposes were impeded or constrained by charity law.”

It seems as though the judge based his view on a single discussion of the issue in a late 19^th century text, which most scholars agree is pretty quirky and doesn’t represent the case law very well. However, despite this, Lord Parker’s assertion stuck, and formed the basis for a large body of case law that has now firmly established the rule prohibiting charities from having political purposes both in the UK and in many other countries around the world whose charity law is based on our own,

THE UPSHOT

Whether you think restrictions on political campaigning by charities are a good thing or a bad thing, one thing seems certain: nobody is quite sure why we actually have those restrictions in the first place. The same holds true for tax relief on donations. And that is why I believe it is important to address some of these fundamental theoretical questions about the role of philanthropy and charities (and have previously argued as much, in my book and elsewhere).

Although for the majority of the time it doesn’t really matter if we don’t have well though-out answers to these questions, the danger is that when something happens to force these issues to the forefront of debate (like the current situation with the Johnson Amendment in the US), we find ourselves unable to offer compelling arguments or evidence and thus end up on the wrong end of damaging policy changes. So now is the time to grapple with these questions.