It is one of the election promises that Trump could not accomplish in the first 100 days of his administration.
However, the executive order would not make any changes in the existing laws, but for a relaxed enforcement of it, a senior White House official told reporters in a late-night briefing.
"All laws still apply. Anything that would currently be illegal under current law would still be illegal, we're not changing the law," a senior White House official said on the eve of Trump signing the executive order in the presence of a group of religious leaders.
"It directs the Internal Revenue Service (IRS) to exercise maximum enforcement discretion to alleviate the burden of the Johnson Amendment, which prohibits religious leaders from speaking about politics and candidates from the pulpit," the official said.
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Trump frequently complained about the 1954 law known as the Johnson amendment during his campaign for the presidency, bolstering his support among religious conservatives who contend it violates free speech and religious freedom rights.
Under current law, churches are free to promote political candidates but must forgo such activity to obtain tax-exempt status.
The White House Press Secretary, Sean Spicer, however, refused to entertain questions on the executive order.
"Tomorrow is National Day of Prayer. There will be a proclamation the President will sign. We're looking forward to having religious leaders from a multitude of backgrounds come to the White House and celebrate this day with us," he said.
The New York Times said that move is likely to be hailed by some faith leaders who have long complained about ominous - but rarely enforced - threats from the IRS that they could lose their tax-exempt status, costing them millions of dollars in fines.
However there Democratic Senators - Ron Wyden, Bill Nelson and Bob Casey - opposed the Trump administration's move.
"Proposals to weaken the prohibition on political campaign activity by charities will effectively lead to the elimination of our nation's campaign finance laws," the three Senators said in a letter to the Republican leadership.