WASHINGTON, DC - NOVEMBER 29: The U.S. Capitol cast a reflection on November 29, 2017 in Washington, DC. This week the Republican led Senate is trying gain enough votes to pass a U.S. tax reform bill.  (Photo by Mark Wilson/Getty Images)
Anonymous political donations could soon be tax deductible
05:34 - Source: CNNMoney

Story highlights

President Trump and the GOP want to end a law blocking churches from operating directly in politics

A final version is being negotiated behind closed doors

CNN  — 

As Congress debates a provision that critics warn could allow for tax deductible secret political donations, a key Republican senator at the center of the negotiations told CNN he does not want taxpayers “subsidizing” political speech.

The debate weighs around a proposed rule change to the Johnson Amendment, a law that currently prevents nonprofit 501(c)(3) groups from directly participating in politics.

The House tax plan included a rollback of the amendment, a change that non-profit and campaign finance experts warn could lead to an explosion of tax deductible “dark money” political donations funneled through charities. The Senate bill did not include the rule change, which means the matter will be on the agenda of the conference committee this week.

RELATED: Tax bill could make ‘dark money’ political contributions tax deductible

Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee and one of the lawmakers working on the final bill, said the “voice of the nation’s faithful” should not be “censored.”

“Our religious organizations play a central role in American civic life and, in my view, it’s vital the voice of the nation’s faithful are not censored. At the same time, we need to make sure American taxpayers are not forced to subsidize political speech,” Hatch said in a statement to CNN. “While the Senate-passed tax bill did not address the Johnson amendment, the House bill does. As we work to resolve our differences in conference, this is an issue that we will be examining closely.”

Hatch did not specify if he believed the rule proposed by the House would allow for tax subsidized political donations.

Congress’ non-partisan Joint Tax Committee estimates that the rule change would cost taxpayers billions of dollars. They estimate that the US treasury would see an approximate $2.1 billion loss of revenue over the next decade, assuming billions of dollars of political donations would be funneled through newly tax-deductible nonprofits

Another key Republican senator reiterated his support for a rollback of the Johnson Amendment.

A spokesman for Sen. James Lankford, R-Oklahoma, told CNN “this is about free speech and IRS control, not political campaign activity. Senator Lankford doesn’t believe houses of worship should make endorsements, however, he doesn’t want the federal government, through the IRS, to tell them not to.”

Lankford has previously been one of Congress’ loudest voice in denouncing the Johnson Amendment. In February, he introduced a bill to the Senate to rollback the Johnson Amendment, and the provision that was added to the House bill used the same language.

Democrats decry changes

But Democrats and experts in campaign finance warn that the rule change is vague and could be exploited by political donors.

“The law’s claim to apply very narrowly is effectively meaningless because the terms in the law are ambiguous and we know that the IRS is not going to enforce the law against political operatives that push the envelope,” Brendan Fischer of the Campaign Legal Center told CNN.  

Sen. Dianne Feinstein, D-California, told CNN that the rule change “is a bad provision that would allow charities and religious organizations to influence elections with partisan actions and money. It would allow campaigning from the pulpit and make it tax-free.”

Sen. Ben Cardin, D-Maryland, said that freeing non-profits to participate in politics “to give big-money donors a tax break on their political contributions when homeowners, seniors and low-income Americans are going to see tax increases, is absurd.”

Sen. Tom Udall, D-New Mexico, author of a proposed Constitutional amendment to overturn the Citizens United Supreme Court decision, also slammed the rule change.

“What Trump and the Republican leaders are trying to do would turn churches and nonprofits into tax havens for billionaires who want to make unlimited secret donations to influence our elections,” the senator told CNN.