Corporations . . . organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition . . . or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation . . . and which does not participate in, or intervene in . . . any political campaign on behalf of (or in opposition to) any candidate for public office.The ban dates to 1954 when Sen. Lyndon Johnson proposed it in the 83rd Congress without any legislative history. A bill in the 110th Congress, H.R. 2275, seeks to “restore the Free Speech and First Amendment rights of churches and exempt organizations by repealing the 1954 Johnson Amendment”.
There is also an effort, today, September 28, by the Alliance Defense Fund (ADF) called the "Pulpit Initiative" (explained in an ADF Executive Summary) to challenge restrictions on the ability of churches to endorse or oppose political candidates. Pulpit Freedom Sunday directly challenge IRS regulations prohibiting political activity by churches and seeks to “reclaim pastors’ constitutional right to speak freely and truthfully from the pulpit”.
This year, the IRS has published a FAQ on the ban on political activity by 501(c)(3) organizations. The ban was upheld in Branch Ministries v. Rossotti, 211 F.3d 137 (D.C.Cir.2000) where a church in Binghamton, NY published a letter challenging candidate Bill Clinton's stance on abortion, homosexuality and sexual abstinence outside of marriage. After investigating, the IRS revoked the tax-exempt status of the church. The church sued the IRS but the district court ruled that the IRS had the authority to revoke the church's tax-exempt status. The Circuit Court upheld the lower court ruling.
The Pulpit Initiative faces opposition as three former IRS officials have sent a letter calling for an IRS investigation of the ADF attorneys under the professional standards for tax attorneys.
The BLS Library has reading on the topic. See A Voice for Nonprofits by Jeffrey M. Berry (Call # HD2769.2.U6 B47 2003).