On October 23, 2019, Governor Andrew M. Cuomo signed legislation (S.4347/A.623) codifying the Johnson Amendment into New York law (the “Legislation”).
For those who are unfamiliar, The Johnson Amendment, proposed by past Senator Lyndon B. Johnson, is a federal restriction in the Internal Revenue Code which, since 1954, has prohibited all 501(c)(3) not-for-profit organizations from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. The Johnson Amendment prohibits, for example, activities such as contributing funds to a political campaign or making public statements in favor of or in opposition to any candidate for public office. However, the Johnson Amendment has consistently been criticized in recent years and its enforceability and repeal have become regular subjects of discussion.
The Legislation specifically amended Section 1116 of the New York Tax Law, relating to the non-profit sales tax exemption, which provides an exemption from New York State sales tax to not-for-profit corporations. Section 1116 had already provided pre-Legislation that, in order for not-for-profit corporations to be tax-exempt, such corporations must not intervene in political campaigns. However, the Legislation clarified that this political campaign restriction shall be interpreted in the same manner as the Johnson Amendment as of the date that the Legislation was passed. Thus, the intent of this amendment is to signal that in New York, not-for-profit corporations will continue to be restricted from endorsing or opposing political candidates despite the current political climate. Practically, if the Johnson Amendment were to be repealed or deemed unenforceable, 501(c)(3) organizations would then be permitted to engage in political campaign activities without any federal repercussions; however, non-profits in New York would presumably still refrain from doing so for fear of losing their state tax-exempt status. According to Governor Cuomo, preventing the politization of not-for-profit corporations is an important initiative as it furthers New Yorkers’ right to fair elections, free from unjustified interferences.
When the federal Johnson Amendment will be repealed will be the subject of debate and discussion for years to come. Whatever happens at the federal level, it is now clear that New York will maintain its prohibition on political activity by nonprofits however the winds may shift in Washington.