A district court has rejected a proposed consent agreement between religious organizations and the IRS that would have gutted the Johnson Amendment – a provision in IRC § 501(c)(3) that prohibits tax-exempt organizations from participating or intervening in political campaigns. The court instead dismissed the lawsuit, ruling that federal law prohibits it from interfering in matters of tax assessment. (National Religious Broadcasters v. Bessent, 2026 WL 884020, 3/31/2026)
IRS Flips in Suit Challenging Johnson Amendment
National Religious Broadcasters, Intercessors for America, and two churches filed suit against the IRS in the U.S. District Court for the Eastern District of Texas, arguing that the Johnson Amendment violates their 1st Amendment rights to freedom of speech and religion, among other claims. The lawsuit was filed in 2024, while former President Biden was in office.
The IRS initially sought to dismiss the suit, countering that § 501(c)(3) does not restrict a constitutionally protected activity; rather it sets eligibility requirements for an organization to receive a government subsidy via the tax system. The IRS noted in a December 2024 brief that “[p]laintiffs remain free to intervene in political campaigns if they so choose even if they cannot receive tax-exempt status and tax-deductible contributions under Section 501(c)(3).”
The IRS also argued that the suit is barred by the Declaratory Judgment Act’s (DJA) federal tax exception – and that because that exception is jurisdictional, the court should dismiss the case.
The Trump administration IRS, however, changed course last summer. The parties filed a joint motion for entry of consent judgment on July 7, aiming to settle the case. The consent judgment provided that the Johnson Amendment does not apply to a house of worship’s speech to its congregation “concerning electoral politics viewed through the lens of religious faith.”
Nonprofit organizations swiftly responded to the proposed settlement. More than 1,800 nonprofits signed on to an opposition letter headed up by the Interfaith Alliance, Americans United for Separation of Church and State, and others.
The nonprofits contend the Johnson Amendment prevents tax-exempt organizations from becoming “conduits for partisan politics.” They feared the settlement would subject houses of worship “to intense political pressure to engage in electoral politics from down ballot races and primaries to the presidency, distracting them from their missions.”
Americans United for Separation of Church and State also sought intervenor-defendant status in the case, which the court rejected. However, the group and several others were permitted to file amicus briefs.
Court Rejects Settlement
In a March 31 decision, Judge J. Campbell Barker ruled that the court is barred from approving the settlement. That bar, he explained, is due to the Tax Anti-Injunction Act (AIA) – a federal law that divests courts of subject-matter jurisdiction over any “suit for the purpose of restraining the assessment or collection of any tax” – as well as “the related tax-suit bar” in the DJA.
“The DJA and AIA apply here because plaintiffs’ claims are ‘in respect to’ taxes and seek to restrain the threat of tax collection or assessment based on certain activity,” wrote Judge Barker. He also cites the Supreme Court’s 1974 decision in Bob Jones University v. Simon, 416 U.S. 725, holding that a lawsuit seeking to prevent the loss of tax-exempt status under § 501(c)(3) is fundamentally a suit to enjoin taxation.
Because the plaintiffs’ lawsuit sought to prevent the IRS from revoking their tax-exempt status, the court concluded it fell directly under the AIA’s prohibition.
Judge Barker also dismissed the government’s argument that its consent to the settlement could create jurisdiction where the statute otherwise denies it. “Subject-matter jurisdiction is determined by the nature of the claims and parties in the operative complaint, not by consent during litigation,” Judge Barker explained. Actions of the parties cannot “confer subject-matter jurisdiction upon a federal court,” he added.
Impacts of the Decision
In dismissing the case for lack of jurisdiction, the court did not rule on the underlying constitutional claims against the Johnson Amendment. Judge Barker also notes in his opinion that other legal avenues may be available for organizations to challenge an IRS action. That includes filing a refund suit after a tax has been collected or, if the IRS makes an adverse determination regarding tax-exempt status, filing a pre-tax declaratory judgment action under IRC § 7428(a).
Nevertheless, Interfaith Alliance’s Guthrie Graves-Fitzsimmons is relieved by the decision, calling it “a victory for houses of worship, for our elections, and for the healthy boundaries between religion and government that have served American democracy for more than 70 years.”
“The proposed settlement would have opened the floodgates to dark money operations, allowing political operatives to funnel resources through churches while benefiting from generous tax exemptions at the expense of ordinary taxpayers and the integrity of our elections,” said Graves-Fitzsimmons. “Faith leaders can and should speak powerfully on the great moral issues of our time,” he explained, “but endorsing political candidates from the pulpit is a different matter entirely. It is corrosive to congregations, to communities, and to democracy itself.”
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