Early Saturday morning, the U.S. Senate passed its version of a major tax bill. Although there are a number of indirect ramifications for religious institutions, the Senate bill keeps the Johnson Amendment intact.
The Johnson Amendment prohibits non-profit organizations from campaigning for or against political candidates or using their funds for political campaign purposes. Supporters of the Amendment, which was passed in 1954, are concerned that if repealed, churches would be targets for political donors who want to claim tax-exemption status for campaign donations that are routed through churches.
In contrast to the Senate version, the House version of tax reform bill introduced on November 30 would eliminate the Johnson Amendment by providing that religious institution would not lose their tax exempt status “solely because of the content of any homily, sermon, teaching, dialectic, or other presentation made during religious services or gatherings.”
Some have expressed concerns that by raising the Alternative Minimum Tax threshold in the Senate version and repealing it in the House Version, taxpayers may be less likely to make charitable contributions. However, the removal of the state and local tax (SALT) deduction in high-tax states may have a more significant impact on the ability of taxpayers in high-tax states to donate to their favorite charities or churches.
Both bills would significantly limit or eliminate the double taxation provisions of inheritance laws so that heirs will not have to pay taxes again on the previously taxed income of their parents, and high-wealth individuals will be less likely to contribute their inheritance to charities if they know that they will be able to pass their wealth directly to their children without negative tax consequences.
This week, members of the Senate and the House will be meeting to attempt to reconcile the differences between the two versions of the tax bill in anticipation of passage of a uniform bill by Friday.
