Contributions to charities are deductible; contributions to PACs and section 501(c)(4) social welfare organizations are not. Because charities can have enormous influence on political campaigns with very little expense, many who wish to intervene in political campaigns will shift their contribution from PACs and social welfare organizations to charities. Currently, the House proposal operates for five years, from Jan. 1, 2019, to Dec. 31, 2023. The Joint Committee on Taxation estimates the revenue loss for this five-year period at $2.1 billion. This number probably underestimates the actual cost of the House’s proposed change to the Johnson amendment. Charities that make a decision to electioneer will attract large donations from donors who would like to obtain deductions and influence elections in one fell swoop.
The House proposal also encourages the establishment of new entities to take advantage of the revised rules. These newly created organizations would establish their own norms as to what is “regular and customary.” In short order, organizations would be formed precisely to take advantage of this new electioneering rule.
Under our current campaign finance regime, only dollars that have been subject to income tax can be used for electioneering. A de minimis exception for electioneering by charities will undermine this basic principle. It will harm both the law regulating charities and the law regulating campaign finance. Our country will be far poorer for such changes.