US judge rejects IRS pact allowing churches to endorse political candidates

By Nate Raymond

March 31 (Reuters) - A federal judge on Tuesday declined to approve a Trump administration-crafted settlement that would have allowed churches and other houses of worship to endorse political candidates to their congregations without risking losing their status as tax-exempt nonprofits.

U.S. District Judge J. Campbell Barker in Tyler, Texas, ruled he lacked jurisdiction to hear the case and sign off on a consent judgment that the U.S. Internal Revenue Service had entered into with two Texas churches and the National Religious Broadcasters.

Under the IRS' proposed pact, traditional religious communications would be deemed exempt from a decades-old provision in the U.S. tax code that bars nonprofits, religious and secular, from endorsing political candidates.

It entered into that agreement in July to resolve a lawsuit that NRB, an association of Christian broadcasters, filed ahead of the 2024 presidential election to challenge the 1954 tax code provision known as the Johnson Amendment, which was named for then-Senator Lyndon Johnson, who went on to become president.

But Barker, who was appointed by Trump during his first administration, sided with opponents of the agreement from the Americans United for Separation of Church and State in finding the Tax Anti-Injunction Act barred him from approving the deal.

That law broadly prohibits lawsuits that seek to block the collection of taxes. And Barker said that declaring the Johnson Amendment does not apply to specific conduct "would thus directly bear on the amount of tax that could be collected."

Rachel Laser, the president of the Americans United for Separation of Church and State, in a statement applauded Barker's decision to dismiss the case, saying it means "the Johnson Amendment will remain a strong bulwark to stop religious extremists from exploiting houses of worship."

Michael Farris, NRB's general counsel, said his organization plans to appeal, saying Barker's ruling ignored an exemption to the Anti-Injunction Act that would allow the case to proceed.

The IRS did not respond to a request for comment.

The U.S. Department of Justice under Democratic President Joe Biden had defended the law's constitutionality in court before shifting course under Republican President Donald Trump, who has called for the Johnson Amendment to be repealed.

The IRS in proposing the settlement last year said that interpreting the Johnson Amendment to include communications between a house of worship and its congregation would create "serious tension" with the religious rights protections of the U.S. Constitution's First Amendment.