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.
Branching Out: Of Group Tax Exemptions and Other Section 501(c)(3) Organizational Structures for Related Organizations
Many nonprofit leaders start additional organizations for visionary or other reasons, such as to pursue a new tax-exempt mission, to develop regional chapters or groups, to appeal to a broader donor base, or to better address risk management issues. Various organizational constellations may result, such as group tax exemption, integrated auxiliaries of a religious parent organization, or other related organizations that function within a range of accountability and responsiveness. Each option carries certain tax and governance implications, as follows
The holiday season provides a prime opportunity for many church congregations and other worshipping groups to show their appreciation through financial gifts for the pastors, rabbis, priests or imams (collectively “ministers”) who faithfully serve their constituents. Often known as “love offerings,” the gifts are typically collected from the members and may be several hundred or even thousands of dollars. Do such love offerings amount to taxable income for the ministers, or are they nontaxable gifts?