House Ways & Means Committee

Post-Graduation Scholarships

Serena.Jezior@cof.org — Fri, 13 Jul 2018 16:15:44 +0000

Post-Graduation Scholarships Serena.Jezior@… Fri, 07/13/2018 - 12:15

Post-Graduation Scholarships

A post-graduation scholarship is a type of charitable grant that foundations would make to attract individuals with career skills needed in a particular region to make their homes and build their careers in that community. A post-graduation scholarship would be awarded to an individual who has already completed a degree or technical program in a career field that is needed in a particular region, thus paying off a portion of the individual’s student loans. As with traditional scholarships, these programs would establish eligibility requirements, as well as a process to verify that those requirements continue to be met through the duration of the scholarship award agreement.

The Council appreciates the leadership of Sen. Gary Peters (D-MI), Sen. Shelley Moore Capito (R-WV), Rep. Darin LaHood (R-IL), and Rep. Terri Sewell (D-AL), as well as their staff.

The Workforce Development Through Post-Graduation Scholarship Act (S.1757 / H.R. 3582) would:

Define post-graduation scholarship grants as a charitable activity.
Exclude from an individual’s taxable income a post-graduation scholarship grant in the same manner as traditional scholarships.
Ensure that this program is benefiting those communities most in need.
Require the Secretary of the Treasury and Comptroller General to submit to Congress reports on the implementation of this program.

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In addition, the Council worked with a coalition of philanthropic organizations on this legislation:

Michelle Foster, President and CEO, The Greater Kanawha Valley Foundation
"Offering post-graduate scholarships is a wonderful opportunity to attract West Virginians back home, as we work to grow our shrinking population and stimulate economic development.”

Randy Maiers, President & CEO, Community Foundation of St. Clair County
“We’re excited to partner with Senator Peters in supporting post-graduation scholarships like the Come Home program we’ve developed that is bringing the best and brightest workers back to St. Clair County,” said Randy Maiers, President & CEO, Community Foundation of St. Clair County. “These awards are a win-win for our area: they help recipients pay back their student loan debt while putting their training and education to good use.”

Mark Roberts, CEO, Community Foundation of Central Illinois
"Post-graduation scholarships will give community foundations like ours a new tool to attract and retain needed talent for our workforce. These scholarships are an investment in our workforce and communities for years to come. Not only do the recipients benefit, but it is a win for our employers, families, and the entire community."

Brian Wagner, CEO, Muskingum County Community Foundation
"The Muskingum County Community Foundation and the J.W. & M.H. Straker Charitable Foundation developed The 'Make Muskingum Home (MMH)' program with the goal of increasing our local tax base, combating population decline and attracting college graduates to Muskingum County, Ohio following graduation. Our program helps to relieve student loan debt while allowing recent graduates to become an integral part of the community. The Workforce Development Through Post-Graduation Scholarships Act will allow us to continue to develop our program to provide the community with great young talent, while also providing new opportunities for other rural communities."

Kyle Caldwell, President & CEO, Council of Michigan Foundations
“The Council of Michigan Foundations is proud to work with Senator Peters and our community of philanthropy on innovative strategies to retain and attract talent in support of Michigan’s talent agenda and economic growth,” said Kyle Caldwell, President and CEO of the Council of Michigan Foundations. “As an increasing number of students are taking on significant loan debt, the Workforce Development Through Post-Graduation Scholarships Act offers financial relief for graduates looking to come to or return to Michigan. This added resource strengthens the partnership between philanthropy and businesses as we look to create pathways to economic stability for individuals and families that strengthen Michigan’s workforce.”

Grantmakers Council of Rhode Island
"Communities depend on a skilled workforce to provide essential services, like education, healthcare and social services. In the current labor market, it can be difficult to attract the skilled workers necessary to fill critical positions. Post-graduation scholarships are a valuable tool to not support recent graduates and workers providing essential services, but also to ensure that communities have the services they need to grow and thrive."

Monique B. Jones, President & CEO, Forefront
"Forefront is proud to support the Workforce Development Through Post-Graduation Scholarships Act of 2023, and are grateful for the Illinois leadership of Rep. Darin LaHood to advance this legislation. This important change to our tax code would allow for a new and innovative type of charitable giving, that would relieve student loan debt while helping underserved communities recruit talent to meet their workforce needs. The State of Illinois stands ready to take advantage of such a program when this bill passes, and we are excited to be working with foundations across the state to advocate for this change."

Claudia Cummings, President and CEO, Indiana Philanthropy Alliance
“Indiana Philanthropy Alliance strongly supports the Post-Graduation Scholarship Act. It will not only provide much-needed financial relief to the younger workforce burdened by student debt, but also enable philanthropy to partner with policymakers and educators to invest in our workforce development and economic growth. We need to attract and retain the best young talent in our state. This act will help achieve that by creating more opportunities for higher education and career advancement. Indiana Philanthropy Alliance looks forward to working with our partners to support the implementation of this act and contribute to the betterment of our community.”

The Council strongly supports allowing foundations to administer post-graduation scholarship programs by enacting the Workforce Development Post-Graduation Scholarship Act.

More Information on the Workforce Development Through Post-Graduation Scholarships Act:

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Washington Snapshot: Bill to Expand Charitable Deduction Introduced in the House, Ways and Means Adds a New Member

DannyTurkel — Thu, 17 May 2018 18:00:00 +0000

Washington Snapshot: Bill to Expand Charitable Deduction Introduced in the House, Ways and Means Adds a New Member DannyTurkel Thursday, May 17, 2018 - 2:00 pm

Washington Snapshot

Washington Snapshot: Bill to Expand Charitable Deduction Introduced in the House, Ways and Means Adds a New Member

Thursday, May 17, 2018 - 2:00 pm

In This Week's Edition of Snapshot…

Bill to Increase Charitable Giving Introduced in House
IRS Funding to be Considered by Senate Committee
Ways and Means Holds Hearing on Tax Reform's Impact (So Far)
Council Urges Treasury to Delay New UBIT Provisions
In the States: States Respond to Federal Tax Reform Revenue Windfalls, States Work to Limit the UBIT Damage, States Act to Secure Complete Census Count

News from the Hill

Bill to Increase Charitable Giving Introduced in House

Last Thursday, Reps. Chris Smith (R-NJ) and Henry Cuellar (D-TX) introduced the Charitable Giving Tax Deduction Act (H.R.5771) to enact a clean, uncapped, above-the-line charitable deduction—expanding the opportunity to claim the charitable deduction to the many taxpayers who claim the standard deduction. This bill takes a critical step towards mitigating the negative impacts of tax reform on charitable giving.

The Council on Foundations and Independent Sector released a joint statement applauding the introduction of the Charitable Giving Tax Deduction Act. “At its core, our nation’s charitable giving policies should encourage and enable those small- and medium-sized donors who serve as a powerful engine in the sector’s ability to assist communities. This legislation brings those givers back into the fold by expanding the charitable deduction to millions more,” said Vikki Spruill, president and CEO of the Council on Foundations.

The Council has reached out to every congressional office to alert them of this new legislation and to encourage members of Congress to signal their support for philanthropy by cosponsoring this bill. We also urge each of you to take action now by raising your voice and reaching out to your members of Congress on this important issue.

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IRS Funding to be Considered by Senate Committee

During the week of June 18, the Senate Appropriations Committee plans to markup the funding bill that will allocate the fiscal year (FY) 2019 funding levels for the Internal Revenue Service (IRS). According to POLITICO Tax Whiteboard, “The IRS has requested $11.5 billion as part of President Donald Trump’s budget proposal for the coming federal fiscal year. The total IRS request includes a little more than $11.1 billion in base resources as well as $362 million provided through a program integrity cap adjustment, which would be used to fund new and continuing investments in enforcement. For fiscal 2018, the IRS received about $11.4 billion, an overall increase from fiscal 2017 thanks to $320 million included for the IRS to update schedules, forms, and systems consistent with new tax laws adopted in last year’s Tax Cuts and Jobs Act H.R. 1 (115).”

Another important aspect of the outlook for the IRS is the recently passed House bill that would redesign the IRS. The Senate Finance Committee has not yet announced when they will consider the legislation, but Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) are currently reviewing the legislation and hoping to move forward on a bipartisan basis.

Ways and Means Holds Hearing on Tax Reform's Impact (So Far)

Yesterday, the Ways and Means Committee held the first in a series of anticipated hearings to discuss the impact that the 2017 tax code overhaul has had on the American economy. Much of the hearing was spent debating what constitutes the most effective measures of impact, with disagreement splitting largely down party lines. There was no specific mention of how the charitable or philanthropic sectors have been faring post-tax reform.

Also of note is that Rep. Brad Wenstrup (R-OH) was recommended today by the House Republican Steering Committee to become the newest member of the Ways and Means Committee (replacing Rep. Pat Meehan, who resigned from Congress last month). “Dr. Wenstrup is an excellent choice to join our Committee. A decorated war veteran, small business owner, and doctor, Brad brings proven dedication to our country and invaluable experience to the team," Committee Chairman Kevin Brady (R-TX) said in a statement.

Executive & Regulatory News

Council Urges Treasury to Delay New UBIT Provisions

This week, the Council sent a letter to Treasury Secretary Steven Mnuchin and Acting Internal Revenue Service Commissioner David Kautter regarding two new provisions related to unrelated business income tax (UBIT) that were passed into law under the 2017 tax code overhaul. These new provisions require that 1) tax-exempt organizations with more than one unrelated trade or business activity treat each activity separately for the purposes of calculating unrelated business income, and 2) tax-exempt organizations pay UBIT on the value of certain fringe benefits provided to employees—such as transportation benefits and on-premises gyms.

The Council's letter makes three distinct requests:

Delay the implementation of the two new UBIT provisions;
Ensure that such a delay is made retroactive to January 1, 2018; and
Provide official guidance and a transition period for tax-exempt organizations to establish procedures and systems to comply with the new provisions.

The Council will continue to engage with leaders at the Department of Treasury and Internal Revenue Service on this matter to ensure that guidance provided addresses the concerns of Council members. If you have questions, please contact the Council’s Senior Counsel and Vice President of Legal Affairs Suzanne Friday.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

States Respond to Federal Tax Reform Revenue Windfalls

The new federal tax law has created certain windfalls for many states due to the repeal of personal exemptions and other changes that are leading to state taxation of higher levels of adjusted gross income, resulting in increased state tax revenues. In the short term, state and local governments saw tax revenues spike abnormally, by 9.4 percent and 8.9 percent, respectively, in the fourth quarter of 2017. According to two new reports, both increases resulted largely from taxpayers rushing before year end to take advantage of the deductions then-available for state and local taxes (SALT) and mortgage-interest that are now capped under the new federal tax law.

The new federal tax law resulted in increased state taxes because most states use federal definitions of income—leading some states to consider reopening their tax codes for changes. Some states have cut their taxes to avoid higher tax bills on residents. Six states (Georgia, Idaho, Kentucky, Michigan, Minnesota, and Nebraska) passed laws cutting income tax rates, among other provisions. Citing ongoing economic recovery after the failed tax experiment from a few years ago, however, lawmakers in Kansas rejected a bill at the end of session that would have provided an estimated $80 million cut to taxpayers. Iowa Governor Reynolds has indicated support of a tax overhaul to provide $2.16 billion in tax relief over six years by reducing marginal tax rates, collapsing tax brackets, repealing federal deductibility, and decoupling state law from the new federal $10,000 SALT deduction cap. North Carolina is set to begin its legislative session and faces an estimated $600 million surplus to distribute over the biennium. Rather than tax cuts, state employees, teachers, and retirees may be the beneficiaries of the windfall.

States Work to Limit the UBIT Damage

Some states are looking to decouple aspects of state tax law from the federal tax code in order to protect nonprofits from adverse effects of the unrelated business income taxes (UBIT) under the new federal tax law. Section 512(a)(6) of the federal law directs nonprofits “with more than one unrelated trade or business” to compute unrelated business income separately, but the Treasury Department and IRS to date have failed to provide clarification on how to determinate what constitutes a trade or business. A bill in final negotiations in the Minnesota Legislature would retain the prior law for state UBIT purposes and relieve nonprofits of having to calculate profits and losses in individual trades or businesses. New federal Section 512(a)(7) requires nonprofits that provide transportation and parking benefits to employees to pay a 21 percent income tax on these expenses. In response, the North Carolina Center for Nonprofits is asking lawmakers to not automatically follow the new law and instead relieve nonprofits of a state three-percent UBI tax on transportation expenses.

States Act to Secure Complete Census Count

Although the U.S. Constitution places responsibility for a fair, accurate, and complete census count squarely on Congress, several states are taking it upon themselves to step up to the challenge of making sure every person in their states is counted. Maryland has created a Census Grant Program to provide matching funds next year for census promotion and outreach activities by nonprofits and local governments. Georgia, Minnesota, and Oregon have likewise provided funding to support census activities in their states. A Utah House resolution urges Congress to properly fund the 2020 Census, expressing “concern that rural and marginalized communities are at risk of being undercounted." Worried that the controversial citizenship question could stifle participation and reduce accuracy, the Illinois House recently approved a resolution requesting that the U.S. Census Bureau not reinstate the citizenship question to the 2020 Census. Further, governors in several states, including California, Kentucky, and Mississippi, are following the advice of the National Conference of State Legislatures and creating state-level complete count committees or commissions to encourage individuals, communities, civic organizations, faith-based groups, and the media to support the census and promptly complete the census on time.

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Washington Snapshot: House Committee Sets Series of Tax Reform Hearings, White House Sends Rescissions Proposal to Congress

DannyTurkel — Thu, 10 May 2018 15:00:00 +0000

Washington Snapshot: House Committee Sets Series of Tax Reform Hearings, White House Sends Rescissions Proposal to Congress DannyTurkel Thursday, May 10, 2018 - 11:00 am

Washington Snapshot

Washington Snapshot: House Committee Sets Series of Tax Reform Hearings, White House Sends Rescissions Proposal to Congress

Thursday, May 10, 2018 - 11:00 am

In This Week's Edition of Snapshot…

House Committee Sets Series of Tax Reform Hearings
White House Sends Rescissions Proposal to Congress
IRS Debuts New EO Search Tool
Form 990s for Calendar-Year Organizations Due Soon
In the States: Vermont Considers Repeal of Charitable Deduction; Municipal Tax Assessor Targets Nonprofit Property Exemption

News from the Hill

House Committee Sets Series of Tax Reform Hearings

House Ways and Means Chairman Kevin Brady (R-TX) and Tax Policy Subcommittee Chair Vern Buchanan (R-FL) announced yesterday a series of hearings on the recently passed tax reform legislation. The hearings will examine “how tax reform is growing the U.S. economy, creating more jobs here at home, and increasing paychecks for hard-working Americans.”

The first hearing of this series is scheduled to take place next Wednesday, May 16, at 10:00 a.m. ET.

White House Sends Rescissions Proposal to Congress

On Tuesday, President Donald Trump sent Congress a package to rescind $15 billion that had been previously authorized but not yet spent. According to The Wall Street Journal, “President Donald Trump’s proposal to roll back $7 billion from the popular Children’s Health Insurance Program [CHIP] drew immediate bipartisan concern Tuesday, an indication of the hurdles the effort to cut federal spending will face in the Senate. The proposed cuts to the children’s health program quickly emerged as the most contentious element of Mr. Trump’s request…”

The Journal goes on to note that the White House has been exploring ways to cut federal spending since President Trump signed a $1.3 trillion omnibus spending package into law in March. This could be the first of multiple rescissions requests from the administration. Roll Call noted, “The initial request doesn’t include any money from the $1.3 trillion omnibus spending bill President Donald Trump begrudgingly signed into law in March. But, the senior administration official hosting a call with reporters said the White House does plan to send such a request later this year. ‘We plan to follow up with another rescissions package down the line that does address the omnibus bill, but that is not in this package,’ the official said.”

Yesterday, the House took the president’s rescissions package and drafted it into formal bill language. If and when it passes the House, the bill should be fast-tracked in the Senate, bypassing a potential 60-vote threshold to begin and end debate in the upper chamber; however, according to POLITICO, Democrats argue that President Trump's bill would require the full 60 votes because it targets mandatory funding, not solely discretionary funding. See this POLITICO Pro DataPoint for a general explanation of the Congressional rescissions process.

Executive & Regulatory News

IRS Debuts New EO Search Tool

This week, the Internal Revenue Service (IRS) launched a new online tool to help users find information about a tax-exempt organization’s (EO) federal status: the Tax Exempt Organization Search (TEOS). This new tool replaces EO Select Check—which had been in use since 2012—with a more user-friendly tool that offers information on an organization’s tax-exempt status, allows users to check if an organization is eligible to receive tax-deductible contributions, and features images of recently filed Form 990s, including Form 990-Ts filed by charities.

Form 990s for Calendar-Year Organizations Due Soon

On Wednesday, the Internal Revenue Service (IRS) issued a reminder for tax-exempt organizations operating on a calendar-year that their Form 990-series information returns will be due on May 15. Generally speaking, tax-exempt organizations are required to file their Form 990s on the 15th day of the fifth month after their financial-/tax-year ends.

The IRS also reminded organizations to exclude all personally identifiable information about donors (such as social security numbers) from their reporting, given that the IRS and the filing-organization must make Form 990s public accessible.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Vermont Considers Repeal of Charitable Deduction

A tax reform bill in Vermont looks to mitigate the impact of the federal Tax Cuts and Jobs Act, but in doing so threatens charitable giving in the state. The legislation, among other things, would eliminate the itemized deduction for charitable giving and replace it with a five-percent tax credit. The Governor first proposed the repeal-and-replace approach, but the House further restricted the incentive. The House-passed bill would impose a cap on the tax credit at donations of $10,000 (for a maximum $500 credit). Under current law, an upper-income taxpayer who donates $100,000 can reduce state tax liabilities by $9,400 (9.4% tax bracket); under the proposal, the tax incentive would be capped at $500. A nonprofit community letter signed by more than 30 organizations expresses strong opposition to the reduction in the giving incentive during the process. Apparently in response to the advocacy letter, the Senate Finance Committee voted for a revised version of the measure to remove the cap and allow for unlimited contributions to be eligible for the charitable tax credit. The bill now goes to another committee and all changes are expected to be negotiated in conference and with the Governor.

Municipal Tax Assessor Targets Nonprofit Property Exemption

In an move ostensibly to expand the tax base, a Connecticut municipal tax assessor has issued revocations of dozens of property tax exemptions for nonprofit organizations. Norwich Assessor Donna Ralston claims that the organizations’ property “can be considered a tax-exempt use by the state and the feds, and still be a taxable use in the city.” Ralston is refusing any presumption of automatic exemption despite organizations receiving exemption from filings with the state and federal governments for years, sometimes decades. Tax revenues from the revocation pale in comparison to the economic impact nonprofits bring to the area according to a coalition of nonprofit organizations. Local arts and culture nonprofits produced an estimated $168 million in economic impact in the area in 2015. Gian-Carl Casa, president and CEO of the state association of nonprofits, CT Community Nonprofit Alliance, said this may be a broader trend in Connecticut.

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Washington Snapshot: Senate Finance Committee Holds Hearing Ahead of Recess

DannyTurkel — Thu, 26 Apr 2018 14:00:00 +0000

Washington Snapshot: Senate Finance Committee Holds Hearing Ahead of Recess DannyTurkel Thursday, April 26, 2018 - 10:00 am

Washington Snapshot

Washington Snapshot: Senate Finance Committee Holds Hearing Ahead of Recess

Thursday, April 26, 2018 - 10:00 am

In This Week's Edition of Snapshot…

JCT Releases New Estimates in Advance of Senate Finance Hearing
Council Call Highlights Public-Philanthropic Partnerships
Council Raises Concerns About FARA
In the States: Kentucky Preserves Charitable Incentive in Tax Reform, Maryland Passes Law Mirroring the Federal Uniform Guidance Requirement to Pay Indirect Costs

News from the Hill

JCT Releases New Estimates in Advance of Senate Finance Hearing

On Monday, the Joint Committee on Taxation (JCT)—a nonpartisan committee of the U.S. Congress tasked with supporting the House and Senate tax-writing committees by providing expertise and analysis—released a new analysis this week estimating a 61.3% decrease in the number of taxpayers who will choose to itemize their taxes in 2018 versus in 2017. Stemming from a number of changes made under the tax reform bill that passed in late 2017 (including the nearly-doubling of the standard deduction, coupled with the elimination of several itemized deductions), JCT estimates that approximately 18 million taxpayers will itemize their 2018 tax returns, compared to the 46.5 million people who itemized in 2017.

This is important for philanthropy and charitable giving because only taxpayers who itemize will have access to the benefits of the charitable deduction. If only 10% of the 175.8 million taxpayers (as estimated by a JCT analysis from February) are expected to itemize in 2018, then nearly 90% of taxpayers will not receive a tax benefit for their charitable giving.

This was a point of debate at a Senate Finance Committee hearing held on Tuesday to discuss the Early Impressions of the New Tax Law. During the hearing, Republican members of the committee emphasized the economic growth that they expect the new tax law to generate, while Democrats focused on the findings of the JCT report.

On the south side of the Capitol, the House Ways and Means Committee appointed a new staff director. According to a Monday press release from Chairman Kevin Brady (R-TX), “Today, Chairman Kevin Brady (R-TX) announced Gary Andres as the new Majority Staff Director of the Ways and Means Committee: ‘I am thrilled to announce Gary Andres as the new staff director of the Committee. Gary is a seasoned public policy expert with decades of experience at the White House, on Capitol Hill, and in the private sector. His wisdom and leadership will be critical as we work to build off this newfound economic momentum and help American families thrive.’” A POLITICO Pro email noted that Andres will manage a staff of close to 60 people and is replacing his son-in-law, Dave Stewart, who recently left the job.

Executive & Regulatory News

Council Call Highlights Public-Philanthropic Partnerships

This week, the Council, along with the U.S. Department of Housing and Urban Development (HUD), hosted the first learning opportunity for the Excellence in Public-Philanthropic Partnerships Exchange—an online community comprised exclusively of previous HUD Award winners and their public partners. The purpose of the conference call was to hear a foundation and their public sector partners discuss their joint initiatives and answer questions about the dynamics of partnering between government and philanthropy. The panelists were:

Denise Spencer, President and CEO, Community Foundation of the Lowcountry;
David Bennett, Mayor of Hilton Head Island;
Pete Nardi, General Manager of the Hilton Head Public Service District.

During the call, the panelists discussed their winning partnership—including what it took to get it off the ground, how they sustained momentum, and the results they achieved. The call concluded with a question-and-answer portion from the call-in participants. Council members can listen to the audio of the insightful discussion here.

Philanthropy News and Op-Eds

Council Raises Concerns About FARA

The Council has joined with more than 40 civil society organizations in a sign-on letter to Congress, sharing concerns about how proposed changes to the Foreign Agent Registration Act (FARA) may adversely impact the US non-profit sector. “We support Congress’ wish to empower government enforcement of FARA in response to foreign governments efforts to destabilize our democracy. We kindly ask Congress to ensure that it also safeguards an independent non-profit sector.”

Starting in late 2017, several bills drafted in both the House and Senate have proposed to amend FARA in order to increase enforcement resources and mandate within the Department of Justice. These proposed bills, however, do not propose changes to the 1938 language that defines key elements within FARA, like “foreign principals”. Therefore, expanded enforcement capabilities for FARA without clarified definitions within the original 1938 law could have significant unintended impacts on nonprofits and foundations that would be required to register due to relationships with non-U.S. partners. The Council has been working with the International Center for Not-for-Profit Law (ICNL), InterAction, and a number of other partners since late 2017 to raise awareness on these concerns. You can read more about the possible impact of FARA in a recent article from Just Security, The Unintended Foreign Agents.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Kentucky Preserves Charitable Incentive in Tax Reform

After Kentucky Governor Matt Bevin vetoed the state budget and revenue bills earlier this month, Kentucky’s Legislature voted by wide margins to override his actions and thus enact those bills. The new budget law maintains a 6.25 percent cut to most state agencies, yet provides increased funding for education and programs for children, health, behavioral health, disabilities, and aging. The new revenue law, introduced to respond to federal tax reform, overhauls the state tax system by switching to a flat 5 percent tax rate for personal and corporate income taxes, a change from the current brackets ranging from 2-6 percent and 4-6 percent respectively. The new law also expands sales tax to services and labor, plus eliminates all itemized deductions except for social security income, mortgage income, and, most importantly, charitable giving.

Maryland Passes Law Mirroring the Federal Uniform Guidance Requirement to Pay Indirect Costs

Maryland nonprofits are eagerly awaiting Governor Larry Hogan’s signature on a bill that unanimously passed the General Assembly. Maryland Nonprofits worked closely with the bill’s sponsor to ensure passage of SB 1045, which requires state agencies to reimburse nonprofits for indirect costs they incur when performing work under grants/contracts paid with state funds or a combination of state and other nonfederal funds. Like the federal OMB Uniform Guidance requires for federal grants, the new Maryland law will require state agencies to pay a nonprofit’s federally approved indirect cost rate, if one exists. If not, then a nonprofit with an indirect cost rate established with a nonfederal entity using the federal cost principles can use this rate for reimbursements. Nonprofits that have not negotiated a rate based on the federal cost principles will be paid at least 10 percent of modified total direct costs in accordance with the Uniform Guidance. This bill ensures that nonprofits are reimbursed for services closer to their actual costs. In addition, by aligning with the Uniform Guidance, it streamlines and simplifies the process for state agencies to reimburse nonprofits for indirect costs by creating a single standardized set of rules.

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Washington Snapshot: Congress Ends Brief Shutdown, New IRS Commissioner Officially Nominated

DannyTurkel — Thu, 15 Feb 2018 17:00:00 +0000

Washington Snapshot: Congress Ends Brief Shutdown, New IRS Commissioner Officially Nominated DannyTurkel Thursday, February 15, 2018 - 12:00 pm

Washington Snapshot

Washington Snapshot: Congress Ends Brief Shutdown, New IRS Commissioner Officially Nominated

Thursday, February 15, 2018 - 12:00 pm

In This Week's Edition of Snapshot:

Brief Government Shutdown Ended with Passage of Budget Deal
Trump Administration Releases 2018-19 Budget
Repeal of Johnson Amendment Raised at National Prayer Breakfast
President Trump Officially Nominates New IRS Head
FEMA Requests Comments on Natural Hazard Mitigation Strategy
In the States: Estate Taxes on Legislative Agendas, and Maine Governor Issues Renewed Assaults on Nonprofits, Foundations

News from the Hill

Brief Government Shutdown Ended with Passage of Budget Deal

Government funding was set to run out at midnight last Thursday, Feb. 8, if Congress did not vote to pass legislation to fund the federal government. Though a funding deal was reached by Senate leadership on Wednesday, Sen. Rand Paul (R-KY) stalled a vote from happening in the Senate until just after midnight—triggering an, albeit short-lived, shutdown. Senator Paul expressed concern with the increased spending levels under the deal and called for maintaining strict budget caps. Despite the delay, Senate rules compelled a vote at 1 a.m. on Friday morning—which passed by a vote of 71-28.

Given that the deal passed by the Senate was different than what the House had passed earlier that week, it was sent back to the House where it passed with bipartisan support by a vote of 240-186. The legislation was signed into law by President Trump on Friday—pushing the deadline until March 23 for the House and Senate Appropriations Committees to negotiate an omnibus spending bill to fund federal agencies through Sept. 30.

The legislation increases current spending levels for defense and domestic programs by roughly $300 billion—adding approximately $320 billion to the deficit, according to the Congressional Budget Office (CBO). Elements of the deal included four years of funding for the Children’s Health Insurance Program (CHIP), disaster aid for areas affected by hurricanes, and funding to combat the opioid crisis. The measure also raises the government’s borrowing limit (often referred to as the “debt limit”) through March 2019.

Trump Administration Releases 2018-19 Budget

On Monday, the Trump Administration released its budget proposal for fiscal year (FY) 2019. The proposal calls for increased defense spending, as well as for additional funding to combat the opioid crisis. Additionally, the proposal suggests slashing funding for a number of domestic programs—including Medicare. The budget proposal totals $4.4 trillion, and would add $7 trillion to the deficit over the next ten years.

Historically, budget proposals put forward by Administrations have served as a messaging document for laying out a President’s priorities for the upcoming fiscal year, as opposed to an actual starting point for Congress to draft a budget.

This week, the congressional tax-writing committees held several hearings on the president’s FY 2019 budget request. On Wednesday, the Senate Finance Committee held two hearings “to examine the administration’s budget request for the Treasury Department, Internal Revenue Service (IRS), and Department of Health and Human Services (HHS).” The committee heard testimony in the morning from Treasury Secretary Steven Mnuchin and in the afternoon from IRS Acting Commissioner and Assistant Secretary for Tax Policy David Kautter.

Of particular note, Acting Commissioner Kautter testified that “2018 implementation of the tax reform bill is going to consume a lot of energy and effort in the Internal Revenue Service, so we've got to balance the desire to do some restructuring at the Internal Revenue Service while not disrupting the implementation of tax reform.” He also noted, on the topic of charitable deductions to states in lieu of the state and local tax (SALT) deduction, that “Under the general principles for charitable contribution, the primary purpose of the contribution is donative, which is a disinterested and detached interest of generosity.”

Today, the House Ways and Means Committee is holding a hearing to discuss President Trump’s budget request for Treasury. Chairman Kevin Brady (R-TX) said in a press release, “We are excited to welcome Secretary Steven Mnuchin to discuss President Trump’s proposed 2019 budget for the Department of Treasury. Last year—working together with the Secretary and President Trump—we successfully delivered historic tax reform to the American people. Already, we are seeing the positive impacts this new tax law is having for hardworking families and local businesses across the country.”

Repeal of Johnson Amendment Raised at National Prayer Breakfast

During his address at the National Prayer Breakfast last Thursday, House Majority Whip Steve Scalise (R-LA) reiterated his desire to repeal the Johnson Amendment—a long-standing provision in the tax code to ensure that nonprofits and foundations remain nonpartisan in pursuit of their charitable missions.

In his remarks, Majority Whip Scalise expressed his belief that the separation of church and state is an impossible notion, and expressed pride in the fact that the House successfully passed a repeal of the Johnson Amendment (it was included in one of the initial versions of the tax reform bill, but did not make it into the final legislation).

Leaders in the charitable and philanthropic sectors pushed back against Rep. Scalise’s comments, sharing their concerns about how any attempt to weaken or repeal the Johnson Amendment would threaten the fundamental integrity of our sector. In the statement released by the National Council of Nonprofits, Council President and CEO Vikki Spruill is quoted saying how important it is that “the public trust [charitable foundations] have earned over the years is not diminished by partisan labels or influence.”

Executive & Regulatory News

President Trump Officially Nominates New IRS Head

While POLITICO first reported last month that President Trump would nominate tax lawyer Charles “Chuck” Rettig to be the next IRS commissioner, his nomination was not made official by the White House until last week. According to POLITICO, “Rettig, a specialist in handling tax disputes who is a partner in a Beverly Hills, CA, law firm, has for more than three decades represented clients before the IRS, the Justice Department, state tax authorities and other jurisdictions.”

House Ways and Means Committee Chairman Kevin Brady (R-TX) applauded the move, saying, “I am pleased to see President Trump moving forward with a new leader at the IRS who is focused on serving taxpayers and administering our new tax code fairly, effectively, and with integrity. With a long history of helping families and job creators navigate the tax code and stand up to the IRS when the agency is wrong, Chuck Rettig as the new IRS commissioner is just the partner we need as we work to overhaul our nation’s tax administrator.” Rettig’s nomination will need to be approved by the Senate before he can begin serving as the new IRS commissioner.

FEMA Requests Comments on Natural Hazard Mitigation Strategy

The Federal Emergency Management Agency (FEMA) is pushing for better investments in natural hazard mitigation and is asking for public comments that will help develop strategies to do so. According to a recent FEMA email, “For our nation to become more resilient, we must develop a more effective and efficient way to invest in mitigation. The U.S. Department of Homeland Security tasked the Mitigation Framework Leadership Group (MitFLG) to develop a National Mitigation Investment Strategy (Investment Strategy). As of Jan. 11, the public is encouraged to review the draft Investment Strategy and provide comment. The draft Investment Strategy makes a series of recommendations, organized by six desired outcomes which, if met, could result in a nation better equipped for, and less vulnerable to, natural hazards. The draft Investment Strategy provides a national approach to investments in mitigation activities and risk management across federal, state, local, and territorial and tribal government and the private and non-profit sectors.”

FEMA will be accepting public comments on the draft investment strategy thought March 11, 2018.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Estate Taxes on Legislative Agendas

Some state legislatures are considering bills affecting estate taxes, seemingly in response to the changes in the new federal tax law that doubled the federal threshold to nearly $11 million for individuals and $22 million for couples. A newly introduced bill in Rhode Island would increase the state estate tax threshold from $64,400 to $99,600. Legislation in New York that has passed the Senate would repeal the state estate tax. A bipartisan bill in Pennsylvania repeals provisions of the state inheritance tax and exempts certain transfers between family members. Connecticut lawmakers have introduced separate measures would align the state threshold with the new federal level, and another that would phase out the estate tax completely over a five-year period. Policymakers in Hawaii and Maine are attempting to extend estate taxes by increasing the tax rate and lowering the threshold, respectively.

The estate tax is an important source of revenue for charitable nonprofits and foundations, and increases in threshold amounts inversely affect charitable giving. The doubling of the federal amount is projected to reduce federal revenues by nearly $100 billion over ten years and lower charitable giving by $4 billion per year.

Maine Governor Issues Renewed Assaults on Nonprofits, Foundations

During his last State-of the-State address, Maine Governor Paul LePage continued his seven-year assault on nonprofits. Directly targeting charitable nonprofits and foundations exempt from property taxation under the law, LePage stated that nonprofits are the “real culprit” for rising property taxes. In an effort to reduce those property taxes, LePage reiterated his call to allow “municipalities to collect property taxes or fees from large [nonprofit] entities,” but lamented that he has “been met with staunch resistance.” Last year alone saw seven legislative bills in the state focused on nonprofit property tax exemption. They ranged from passing a new requirement that conservation property owners register with the state, which the Governor touted during his speech, to charging nonprofits service fees not connected to services provided.

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Washington Snapshot: New Members of Tax-Writing Committees

DannyTurkel — Thu, 11 Jan 2018 19:25:00 +0000

Washington Snapshot: New Members of Tax-Writing Committees DannyTurkel Thursday, January 11, 2018 - 2:25 pm

Washington Snapshot

Washington Snapshot: New Members of Tax-Writing Committees

Thursday, January 11, 2018 - 2:25 pm

In This Week's Edition of Snapshot…

Democrats Throw Cold Water on Immediate Fixes to Tax Reform
Tax-Writing Committees Add New Members, New Budget Chair Announced
The Intersection of SALT and Charitable Contributions
Immigration Agreement Could Unlock Funding Compromise
IRS Estimates What it Will Take to Implement Tax Changes
Administration Seeks to Expand Broadband in Rural America
In the States: States Responding to New Federal Limit on State, Local Tax Deductions; Government-Nonprofit Contracting Reform Update

News from the Hill

Democrats Throw Cold Water on Immediate Fixes to Tax Reform

Yesterday, Democrats on the House Ways and Means Committee sent a letter to their Republican colleagues urging them to slow down efforts to pass legislation that would correct technical errors in tax code overhaul.

"It would be a mistake, at this time, to rush to introduce legislation to change H.R. 1 given all the uncertainty surrounding the law and its implementation," the letter says. It continues, in part, “For this reason, we will refrain from offering at this time any legislative fixes until the Ways and Means Committee has had an opportunity to hold hearings, with witnesses from the Administration, on proposed changes…”

Tax-Writing Committees Add New Members, New Budget Chair Announced

After the recent election of Sen. Doug Jones (D-AL), which increased the number of senators caucusing with the Democrats by one (Republicans now have control of the chamber 51-49), Senate Leaders huddled to discuss changing committee ratios to match the slimmer Republican majority. As a result, Sen. Sheldon Whitehouse (D-RI) was appointed to the Senate Finance Committee as its newest member. Republicans now hold a 14-13 edge in committee.

Across the Capitol, the House’s tax-writing committee also saw an addition. Rep. Darin LaHood (R-IL) was selected to fill the spot on the House Ways and Means Committee vacated by Rep. Pat Tiberi (R-OH), who is retiring from Congress this month. According to POLITICO Morning Tax, “LaHood is the son of Ray LaHood, himself a former GOP congressman and Transportation Secretary under President Barack Obama. Darin LaHood replaced former Rep. Aaron Schock (R-IL) in 2015, meaning that the 18th District of Illinois went a couple years without a seat at the Ways and Means table.”

Tiberi’s retirement also created the need to shuffle the chairmanships of the Ways and Means subcommittees. Rep. Vern Buchanan (R-FL) took over the chairmanship of the Tax Policy Subcommittee. He replaced Rep. Pete Roskam (R-IL) who will now chair the Health Subcommittee (vacated by Tiberi). Finally, Rep. Lynn Jenkins (R-KS) will take over Buchanan’s previous role as the chair of the Oversight Subcommittee.

Also in the House, the Budget Committee will have a new chairman, with Rep. Diane Black (R-TN) leaving the post as she is running for governor in Tennessee. On Tuesday, Rep. Steve Womack (R-AR) won the endorsement of the Republican Steering Committee—the body that recommends members for committee assignments and leadership roles. He will need to be confirmed in a vote by the full House GOP Conference before he assumes the gavel. Womack beat back bids by Reps. Rob Woodall (R-GA) and Bill Johnson (R-OH) to secure the Steering Committee’s recommendation.

The Intersection of SALT and Charitable Contributions

As part of the tax code overhaul that passed late last year, Congress made changes to limit the deduction of state and local taxes (SALT)—capping this itemized deduction at $10,000 for the aggregate of state/local property taxes and, either, state/local income or sales taxes. This quickly caused an uproar from lawmakers in states with high property tax rates. A vocal opponent of this change, New York Governor Andrew Cuomo, has gone so far as to call the provision “unconstitutional” and stated his intent to sue the federal government in his State of the State address this week.

Other critics of the new SALT limitations have suggested a different approach: allowing taxpayers to make charitable contributions to their state (equal to the amount owed in state taxes) instead of paying state income/property taxes—therefore, allowing them to claim a charitable deduction on their federal taxes.

There is debate about whether this type of workaround would be allowed by the IRS. An analysis authored by eight law professors suggests that this approach would be allowed by the IRS. An analysis from the Tax Foundation, on the other hand, suggests that this type of approach would not be allowed under current law. It is unclear at this point how the IRS will handle this issue if states proceed to pass such legislation.

Immigration Agreement Could Unlock Funding Compromise

As the deadline to fund the government approaches, Congress has yet to reach an agreement that will keep the government open when current funding expires on Jan. 19. House and Senate leaders have been discussing proposals, but looming in the foreground is a debate about immigration—specifically legal protections for undocumented children who were brought into the U.S. and had been protected under the Deferred Action for Childhood Arrivals program (DACA). Democrats have been looking to couple an agreement on protections for these children (Dreamers) with the must-pass government funding bill.

According to The New York Times, “Reaching an immigration pact is key to unlocking a broader agreement on Capitol Hill on a slew of issues, including federal spending levels, disaster aid and a children’s health insurance program. Democrats and Republicans have yet to strike a two-year budget agreement that has eluded them for months, largely because Democrats want to use their leverage on spending bills to seek protections for Dreamers.”

There was some increased optimism that an agreement could be reached after President Donald Trump hosted an on-camera, bipartisan meeting on Tuesday with Members of Congress on this issue.

Executive & Regulatory News

IRS Estimates What it Will Take to Implement Tax Changes

Republicans in Congress have long been committed to “busting up” the IRS, as Ways and Means Chairman Kevin Brady (R-TX) often says. Even as Congress was working to overhaul the tax code late last year, the Ways and Means Committee was simultaneously holding hearings on how to improve the IRS. More recently, though, tax practitioners have begun raising concerns about making significant changes to the agency during a time when it will need to implement the biggest rewrite of the tax code since the 1980s.

POLITICO reports that several groups that have voiced concerns, including the National Conference of CPA Practitioners and National Taxpayer Advocate. The agency has predicted that it will need an additional $495 million in funding to implement this law, but Chairman Brady has not backed down from his promise to address this issue in 2018, stating that we are “going to see action this year on this issue.”

Administration Seeks to Expand Broadband in Rural America

On Monday, President Donald Trump attended the American Farm Bureau Federation's Annual Convention in Nashville, TN, to announce the recommendations of the interagency Task Force on Agriculture and Rural Prosperity.

According to an email from the Department of Commerce, “The cornerstone of the Task Force’s report is ensuring that rural America can connect to reliable and affordable broadband internet service. More than 24 million Americans live in rural communities that lack the infrastructure needed for high-speed connections, according to an analysis by the National Telecommunications and Information Administration (NTIA). Building out wired and wireless broadband infrastructure in these communities would promote economic development and job growth, extend the reach of health care and allow for smart agriculture applications that could increase productivity and profitability for U.S. farmers. It would also allow these communities to attract businesses, especially in the fast-growing advanced manufacturing industry.”

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

States Responding to New Federal Limit on State, Local Tax Deductions

Governors and lawmakers in many so-called “high-tax states” have already started proposing state tax-law changes to work around the new federal tax law, which limits the tax deduction for state and local income and property taxes to $10,000. New York Governor Cuomo, in his 2018 State of the State address, said "we will explore the feasibility of a major shift in tax policy, and are developing a plan to restructure the current income and payroll tax system." He also said he is looking at creating “new opportunities for charitable contributions to support public programs.” Governor-Elect Murphy of New Jersey announced last week that he is working on a plan that would essentially convert payments for property taxes into tax-deductible charitable donations, a move that could enable taxpayers to take much larger charitable deductions from their federal income taxes than otherwise available under the new tax law. The proposal is similar to a bill introduced last week by the California Senate President that would permit charitable contributions to the California Excellence Fund in lieu of state taxes. State policymakers reportedly are relying in part on a 2011 memo from the Internal Revenue Service that appears to support full or partial tax credits for donations that fund tuition vouchers for charter, religious, and other private schools. The Tax Foundation predicts that these proposals may face legal hurdles.

Government-Nonprofit Contracting Reform Update: Proof Positive that Government Grantmaking Reforms Work

As state and local governments and nonprofits continue to struggle with declining resources, Illinois' 2017 Annual Report on the Grants Accountability and Transparency Act (GATA) identifies millions of dollars in savings and cost avoidance realized through grant/contracting reform efforts. For 2017, Illinois reports estimated savings or cost avoidance of more than $236 million. The most significant savings came from adopting a unified audit approach ($183 million) and following the unique Illinois process of centralizing the negotiation of indirect cost rates (saving $35 million).

Other important savings or avoidance of costs came in the areas of a centralized framework for risk assessments ($8.5 million), online grantee pre-qualifications ($4.4 million), and automated notice awards ($2 million). Many of the reforms were made possible because Illinois, through GATA, adopted the federal grants reforms from OMB Uniform Guidance, enabling the state to streamline operations into one set of policies and procedures for grants and contracts with nonprofits, regardless of their funding source. The grantmaking reforms adopted by Illinois provide a roadmap for other states, and the new report shows that governments can reduce costs while maintaining and even improving essential services through the work of charitable nonprofits.

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Washington Snapshot: Senate Advances Tax Bill, Moving Full Speed Toward Passage

DannyTurkel — Thu, 30 Nov 2017 18:50:00 +0000

Washington Snapshot: Senate Advances Tax Bill, Moving Full Speed Toward Passage DannyTurkel Thursday, November 30, 2017 - 1:50 pm

Washington Snapshot

Washington Snapshot: Senate Advances Tax Bill, Moving Full Speed Toward Passage

Thursday, November 30, 2017 - 1:50 pm

In This Week's Edition of Snapshot

Tax reform: The Senate begins debate on tax reform, advancing tax reform ever closer to the President’s desk
In the States: Michigan nonprofits and philanthropic groups promote Census 2020, a year in review of the charitable deduction challenges and expansion, and Kansas state lawmakers honored for their work on tax policy

News from the Hill

Finally, We Know What’s up with Tax Reform

What’s Going on with the Senate Tax Bill?

Yesterday evening, the Senate voted to begin debate on its version of the Tax Cuts and Jobs Act (S. 1)—kicking off 20 hours of debate on the bill, and eventually, a process that is often referred to as “vote-a-rama.” (As a reminder, you can see our analysis of the S. 1 on our website.) During this process, the Senate will vote on amendments offered by fifteen or more members to alter the bill as introduced on the floor. A number of senators filed amendments, and are expected to raise them on the Senate floor for consideration throughout the day until wrapping things up for a final vote later today or tomorrow.

Many of these amendments have served primarily as a strategy for individual members to signal their desired priorities for tax reform rather than a means of actually augmenting the proposed bill (as was the case in the Senate Finance Committee markup). However, it is worth noting that a number of signaling efforts have been made on behalf of preserving charitable giving under this bill. In the Committee markup, Sen. Debbie Stabenow (D-MI) and Committee Ranking Member Ron Wyden (D-OR) offered an amendment that would have created a universal charitable deduction, allowing all taxpayers to claim the charitable deduction, regardless of itemizing status. The amendment failed on a straight party-line vote of 12-14. When the bill came to the Senate floor yesterday, Sen. Wyden again made an attempt to block the bill and argued that it would be detrimental to charities. This effort also included a universal charitable deduction, but again, it failed on a 48-51 party-line vote. Sen. James Lankford (R-OK) also filed an amendment to extend the charitable deduction to all taxpayers, up to one-third of the standard deduction for those who would claim it in addition to the standard deduction. Sen. John Thune (R-SD) also filed an amendment to incorporate the CHARITY Act into S.1—which includes provisions to expand the IRA charitable rollover, simplify the private foundation excise tax, and other provisions in support of charitable giving. It is possible that these amendments could come up for a vote today, but with no offset offered for either, they are not likely to get enough support to be incorporated into the final bill.

Even beyond this amendment process, there are still a number of GOP senators who have yet to confirm themselves as a “YES” vote for the bill—leaving Majority Leader Mitch McConnell (R-KY) with the challenge of converting enough of those individuals with declared concerns to “YES” votes to pass the bill. Under the rules of reconciliation (and assuming that all Democrats vote against the bill, as expected), Republicans can only afford to lose two votes from within their party. Sens. Ron Johnson (R-WI), Bob Corker (R-TN), Susan Collins (R-ME), and Jeff Flake (R-AZ) are considered undecided. (See also the Washington Post’s whip list for the S. 1.) One other key vote that may be back in-play is that of Sen. Lisa Murkowski (R-AK). Yesterday, the Senate parliamentarian informed members and staff that parts of the tax bill that would authorize drilling in the Arctic National Wildlife Refuge—an addition to the bill meant to secure Sen. Murkowski’s “YES” vote on the bill—are not allowed under the rules of reconciliation. Senate Republicans have reworked the language in hopes that the changes will be enough to permit the provision, but it is not yet clear whether the changes will be sufficient. Sen. Murkowksi has not shared whether a bill without this provision would be enough to lose her current support.

If this bill passes, it is expected that there will be a conference to negotiate a single version of the bill that reconciles the differences between the House and Senate versions. At this point, it is unclear whether this would be a formal conference according to legislative procedure, or if it would be an informal conference between Majority Leader McConnell and House Speaker Paul Ryan (R-WI).

What Does the Bill Mean for Philanthropy?

Regardless of which provisions from each bill make it into the final, conferenced version of the legislation, the data shows that it will be harmful to charities. In addition to the existing research on the severely damaging impact the House bill would have on philanthropy, new data continues to come out with findings on how the Senate bill would have consistent negative effects on charitable giving. This Tuesday, two separate entities reported new findings that demonstrate this: one by the Joint Economic Committee, and two more by the Tax Policy Center.

The Council remains committed in our opposition to this bill and will continue our efforts to lobby against the passage of the Senate bill. Yesterday, we sent a joint letter with our colleagues at Independent Sector and the National Council of Nonprofits to every Senate office urging members to vote “NO” on S. 1. The letter states, in part, “The charitable nonprofit and foundation communities stand united in opposition to the Tax Cuts and Jobs Act and, in the strongest possible terms, urge a “NO” vote on the bill. The current legislation damages the civic infrastructure upon which our communities depend, and hurts the people that we serve.”

Others in the sector have also spoken out against the tax bill, including the Minnesota Council on Foundations, the Silicon Valley Community Foundation, National Council of Nonprofits, and many more.

Why the Rush?

If the Senate cannot get a vote out this week, it might push them until next week. However, Congress has five legislative days before funding for the government expires on Dec. 8. Other factors to take into consideration are Deferred Action for Childhood Arrivals (DACA) and the Children’s Health Insurance program (CHIP). As reported by the Wall Street Journal, “Democrats may use their leverage in the spending bill to demand that the protections [for DACA recipients] be included.” CHIP expired back on Sept. 30 and Congress has not come to an agreement to keep funding the program for approximately nine million children.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Michigan Nonprofits, Philanthropic Groups Promote Census 2020

Michigan nonprofits and foundations are gearing up for a three-year campaign for accurate counting of all Michiganders in the 2020 Census. The campaign will work to support the count through outreach and other guidance with special focus on hard-to-count groups such as immigrants, minorities, children, and low-income populations. The state is second in the nation for reliance on federal funding with forty-three percent of the state budget coming from the federal government. An accurate count under the Census is essential for reallocation of federal funding as well as representation in Congress, another concern being addressed by the campaign. “One thing we’ve learned is that nonprofits are trusted in their communities,” said Joan Bowman, external affairs officer with the Michigan Nonprofit Association. She continued, “They have established relationships and speak the community’s language and because of the role nonprofits play, they’re going to be most successful in counting those hard-to-count populations.” The campaign seeks to raise $4 million, which will be distributed via grants to nonprofits supporting field work of the campaign, and is led by the Michigan Nonprofit Association, the Council of Michigan Foundations, and the W.K. Kellogg Foundation.

Year in Review: Charitable Deduction Challenges and Expansion

Whether states consider the charitable giving tax incentive a lifeline to communities or a costly tax expenditure depends on many factors, including a culture of giving, economic vitality, and looming deficits. Many states steadfastly encourage charitable giving through their tax codes, and several this year acted to reinstate or establish new incentives. Legislators in six states (Connecticut, Illinois, Massachusetts, Michigan, Oregon, and Utah) all introduced bills this year that would have provided some tax relief for charitable donations. Illinois enacted an income tax checkoff for certain youth services while Utah established a non-refundable tax credit for certain projects in an enterprise zone.

Other states continued a troubling trend over the past seven years of taking up proposals to cap or eliminate these giving incentives. Some policymakers in Delaware and Oklahoma this year saw curbing the giving incentive as a means to fill budget deficits, but met strong opposition by champions in the nonprofit sector of both states. The Speaker of the Oklahoma House pulled a bill to impose a $17,000 cap on all itemized deductions, including charitable deductions, in the face of growing opposition of nonprofits. Delaware’s Governor included the repeal of giving incentives as part of broader personal income tax reform, which was defeated by concerted collaboration by nonprofit leaders. Also this year, Arkansas repealed a law that provided sales tax abatements to nonprofits locating or expanding in the state, and New York permanently extended a cap on the deductibility of charitable donations for those with incomes of more than $1 million.

Kansas State Lawmakers Honored for Their Work on Tax Policy

Kansas lawmakers struggled for five years dealing with the consequences of the historic tax cut experiment, but it took a supermajority in each chamber to override the veto by the Republican Governor protecting his policy agenda. The Governor’s plan called for cutting individual income taxes by 25 percent and eliminating the income tax for pass-through businesses, based on a theory that the cuts would jump-start the State’s economy relative to neighboring states. The results, instead, were significant revenue losses and spending cuts. Addressing the economic reality and intransigence of the Governor, various Republican party factions and Democrats worked together to pull the State back from “taking on water,” as one Senator put it. The conservative Senate majority leader, conceding that the tax reform package had gone too far, admitted, “I knew we needed to do something to get Kansas back on sound financial footing.” As a result of their efforts, Kansas Senate Majority Leader Jim Denning and House Minority Leader Jim Ward are 2017 Honorees for the Governing Public Officials of the Year Award.

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Washington Snapshot: BREAKING NEWS: House Passes H.R. 1

DannyTurkel — Thu, 16 Nov 2017 19:00:00 +0000

Washington Snapshot: BREAKING NEWS: House Passes H.R. 1 DannyTurkel Thursday, November 16, 2017 - 2:00 pm

Washington Snapshot

Washington Snapshot: BREAKING NEWS: House Passes H.R. 1

Thursday, November 16, 2017 - 2:00 pm

In This Week's Edition of Snapshot

Tax reform: House passes tax reform package; Senate continues committee markup.
IRS notices rule for charitable giving for wildfire damages.
In the States: The Cuts are Coming, Montana Continues its Strict Campaign Finance Tradition

News from the Hill

Finally, We Know What’s up with Tax Reform

Today, the Council on Foundations released the following statement from President and CEO Vikki Spruill about the House passing H.R. 1:

“Just minutes ago, the House of Representatives passed H.R. 1, the Tax Cuts and Jobs Act. A once-in-a-generation opportunity for tax reform has been missed. The negative impacts of this bill on the charitable sector will be felt for many years to come.”

Read the full statement.

Following the markup process last week, where the Ways and Means Committee ultimately voted on a 16-24 party-line vote to pass the bill out of committee, the House voted 227-205 to pass H.R. 1 (see here for our analysis). The bill passed with relatively little resistance—despite outcry from the charitable sector, citing research from the Tax Policy Center, the Joint Committee on Taxation (JCT), and Indiana University, about how this would negatively impact charitable giving and philanthropy.

Having cleared the House, the burden of maintaining momentum on tax reform shifts to the Senate.

On Nov. 9, Republican leaders in the Senate—led by Majority Leader Mitch McConnell (R-KY) and Senate Finance Committee Chairman Orrin Hatch (R-UT)—introduced a bill to reform the United States tax code: The Tax Cuts and Jobs Act. See the Council’s analysis of the Senate tax bill.

Chairman Hatch and the Senate Finance Committee (SFC) began marking-up the bill on Monday; however, late in the day on Tuesday, Senator Hatch included some major changes in a modified version of the bill. According to The Hill, “[Hatch] released a modified version of the Senate tax bill late Tuesday that includes two key changes: the previously announced elimination of the Obamacare individual insurance mandate and a sunsetting of individual tax rates in 2025. The sunset clause in Hatch's ‘modified mark’ would mean the new individual rates in the Senate bill would end 10 years after their creation. This would solve a key problem in the Senate, which would have to prevent the overall tax bill from adding to the deficit after 10 years to make the new individual tax rates permanent—and use special budgetary rules to pass the package with a simple-majority vote and prevent Democrats from using a filibuster.”

The individual mandate repeal inclusion could complicate overall passage for tax reform, given the problems Republicans had earlier this year unifying their caucus to repeal and replace Obamacare. The Senate Finance Committee will continue the consideration of amendments today and are expected to wrap up the markup later today or tomorrow by voting the bill out of committee—likely along party lines.

The Council opposes the Senate bill as currently written (it is subject to change through the amendment process), given that it does a number of things that would restrict and decrease the charitable giving that our communities rely on.

The Council will continue to engage both our members, as well as policymakers in Congress, to push for the final version of this bill to include provisions that support and strengthen philanthropy rather than hinder it.

Executive & Regulatory News

IRS notices rule for charitable giving for wildfire damages.

The Internal Revenue Service (IRS) released Notice 2017-70 explaining that employees will not be taxed when they “forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to a charitable organization” providing relieve to victims of California Wildfire that began on October 8, 2017. Employers may subtract the amount as a business expense if the donation is made before January 1, 2019. Under similar situations in the past, the IRS has provided guidance for these types of donations.

According to Thomson Reuters, “leave-based donation programs is an employer-sponsored program whereby employees agree to not use their accumulated leave (e.g., vacation, sick or PTO hours) in exchange for the employer making a cash donation equal to the gross value of the accumulated leave to a charitable organization.” The amounts donated will be free of income and payroll tax withholding.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

The Cuts are Coming

Even before anticipated federal spending cuts are enacted, states–which on average receive more than 30 percent of their revenue from the federal government–continue to struggle paying their obligations. States have already racked up more than $2 trillion in unfunded liabilities for employee pensions and other benefits, making them that much less resilient to fewer revenues coming from Washington. West Virginia recently announced that people who apply for Temporary Assistance for Needy Families (TANF) must submit to drug screening. The move is touted as an effort to reduce substance abuse, but could reduce the number of recipients by five to ten percent, who invariably will turn to nonprofits for more help. Earlier this year, Missouri approved cuts in health care services to an estimated 8,000 elderly and disabled people. A hoped-for special session to restore the cuts did not materialize this month.

Montana Continues its Strict Campaign Finance Tradition

Montana has a long history of enacting strong laws to regulate campaign contributions, dating back to a U.S. Senate bribery scandal in 1899. Since then, Montana voters have approved two laws restricting corporate spending in state elections and limiting the amount given to candidates from donors. The Corrupt Practices Act from 1912 stood for nearly 100 years and prohibited corporate donations to political candidates, until it was struck down by the U.S. Supreme Court in 2012 based on the Citizens United decision. However, contribution caps approved by voters in 1994 have so far survived federal court scrutiny. A federal district court judge has twice found the limits unconstitutional as violations of free speech rights. Last month the Ninth Circuit Court of Appeals once again overturned the judge, keeping the voter-approved limitations in place. A three-judge panel held that Montana’s campaign finance limits were both justified by and adequately tailored to the state’s interest in combating quid pro quo corruption or its appearances.

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Washington Snapshot: TAKE ACTION NOW to Protect Charitable Giving

DannyTurkel — Thu, 09 Nov 2017 17:25:00 +0000

Washington Snapshot: TAKE ACTION NOW to Protect Charitable Giving DannyTurkel Thursday, November 9, 2017 - 12:25 pm

Washington Snapshot

Washington Snapshot: TAKE ACTION NOW to Protect Charitable Giving

Thursday, November 9, 2017 - 12:25 pm

In This Week's Edition of Snapshot

House marks up tax reform bill; Action in the Senate imminent
New Report Details Recommendations for Combatting the Opioid Crisis
In the States: Election Day 2017 results, New Mexico alleges solicitation violations on behalf of nonprofits

News from the Hill

Finally, We Know What’s up with Tax Reform

It was a whirlwind of a week for tax reform! First things first: the Council has made available a summary of the provisions in the Tax Cuts and Jobs Act (H.R. 1) that would impact philanthropy. We will update this analysis as proceedings continue, but if you have any questions, please reach out to the government relations team at govt@cof.org.

Also this week, the Joint Committee on Taxation (JCT)—a nonpartisan committee of the United States Congress that supports the tax-writing committees in the House and Senate—released an analysis of the impact of H.R. 1 on charitable deductions for fiscal year (FY) 2018. Under current law, JCT estimates that 40.7 million taxpayers will claim a total of $241.1 billion in charitable deductions in 2018. Under the Tax Cuts and Jobs Act, only 9.4 million taxpayers will claim a total of just $146.3 billion—a decrease of approximately 40%, or $95 billion.

In response to the release of the JCT report, the Council’s President and CEO Vikki Spruill issued a statement that said, in part, “The Joint Committee on Taxation has released an analysis of the impact of the recently introduced tax reform bill on charitable deductions for fiscal year 2018, and it confirms our biggest fears. The analysis finds that charitable deductions would be decimated under the Tax Cuts and Jobs Act (H.R. 1).” The Council continues to work with legislators in hopes of improving the bill so that the charitable sector is protected and expanded in any tax reform bill.

The Council sent an email to every Member of Congress yesterday to share the JCT analysis and state our opposition to H.R. 1—but we need YOU to amplify that message and contact your Members of Congress today! This is the moment where it will be decided whether to sacrifice charitable giving and deductions in exchange for the other proposed tax cuts in the bill. Your Representatives need to know how devastating that would be for your community. And you, as a foundation and community leader, are in the best position to tell them that.

TAKE ACTION NOW

In the House, the Ways and Means Committee began marking-up the H.R. 1 on Monday, and proceedings continued through the week. Yesterday, during the third day of markup for H.R. 1, Rep. John Lewis (D-GA) offered to an amendment to strike Section 5201 from the Tax Cuts and Jobs Act. This section would weaken the "Johnson Amendment" by allowing churches, church auxiliaries, and church conventions to endorse candidates for public office in certain circumstances. Republican Reps. Peter Roskam (IL-6), Pat Meehan (PA-7), and Kenny Marchant (TX-24) spoke against the amendment, while Democrat Reps. Lewis (GA-5), Richard Neal (MA-1), Ron Kind (WI-3), and Danny Davis (IL-7) spoke in support of the amendment. The amendment failed 16 to 23 on a straight party line vote.

According to NPR, “the House Ways and Means Committee is expected to approve that tax bill within the next several days, paving the way for a full House vote as early as next week.” This would allow for the House to pass H.R. 1 before the week of Thanksgiving.

Amid conflicting reports, Senate Finance Committee Republicans are set to unveil their version of comprehensive tax reform later today. While that had been the plan since last week, Axios reported on Wednesday that the Senate was planning to delay the release of the legislation until after the House Ways and Means Committee had finished marking up H.R. 1. However, BGov later reported that the Committee was on track to unveil the bill today as planned.

While this is good news for those wishing to see tax reform completed by the end of the year, significant hurdles still remain. According to POLITICO, "Senate Republicans plan to unveil a bill to rewrite the tax code that sharply diverges from the House GOP's plan, including by not fully repealing the estate tax. GOP leaders will brief the conference on the details of their long-awaited tax overhaul legislation on Thursday morning at 11:30 a.m. in the Strom Thurmond room at the Capitol, according to two sources.” After releasing the bill to other Republicans not on the Finance Committee, the bill is expected to be released to the public.

The article further notes that the initial Republican conference meeting aims to walk non-Committee members through the details of the plan, which will significantly differ from the House version. It is expected that the Finance Committee will begin their markup of the legislation on Monday and it will likely last several days. Once the bill is approved by the committee—which is not necessarily assured—it will be considered on the Senate floor. If the House and Senate bills end up being as different as some reports are suggesting, there will likely need to go to conference in order to settle the differences before sending the bill to President Trump’s desk for his signature.

Executive & Regulatory News

New Report Details Recommendations for Combatting the Opioid Crisis

The President’s Commission on Combating Drug Addiction and the Opioid Crisis has released its report of 56 recommendations to address the national crisis which the President declared an epidemic on Oct. 26. The bipartisan Commission, led by New Jersey Governor Chris Christie, held a series of hearings over the past months and the report contains its conclusions and recommendations to combat a deadly addiction epidemic that range from creating more drug courts to vastly expanding access to medications that treat addiction, including in jails.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Election Day 2017 Results

Two gubernatorial races, more than a dozen big city mayoral races, special-election state races, city and county council races, local school board races, and ballot measures were all taken up this Election Day 2017, reminding the country that local and state elections happen every year and hit close to home. The most watched race for Virginia Governor went to Democrat Ralph Northam, and New Jersey elected Democrat Phil Murphy. There are 36 races for governor in 2018.

State legislative races also went to democratic contenders in Georgia, New Jersey, Virginia, Washington, giving Democrats complete control of nine states. However, Republicans still control the majority of states and chambers nationwide. Most incumbent mayors retained their jobs in big cities, but Charlotte, North Carolina elected its seventh mayor in eight years. As for ballot measures, Maine became the first state to expand Medicaid via the populous, and Tucson, Arizona voters rejected proposals to hike sales taxes to fund early childhood education and the local zoo.

New Mexico Alleges Solicitation Violations on Behalf of Nonprofits

The New Mexico Attorney General recently filed two lawsuits against two nonprofits purporting to serve veterans and Social Security benefit recipients. The action alleges 28 counts of illegal activity, including mail fraud and money laundering. Federal criminal charges may also be pending after a yearlong investigation by the Internal Revenue Service. The New Mexico Attorney General also plans to seek additional funding from the Legislature for oversight and law enforcement against charitable nonprofits and those pretending to be nonprofits.

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Washington Snapshot: BREAKING NEWS - House Unveils Long-Awaited Tax Reform Bill

danny.turkel@cof.org — Thu, 02 Nov 2017 21:00:45 +0000

Washington Snapshot: BREAKING NEWS - House Unveils Long-Awaited Tax Reform Bill danny.turkel@cof.org Thursday, November 2, 2017 - 5:00 pm

Washington Snapshot

Washington Snapshot: BREAKING NEWS - House Unveils Long-Awaited Tax Reform Bill

Thursday, November 2, 2017 - 5:00 pm

In This Week's Edition of Snapshot

House GOP Leaders Release Tax Reform Bill
Treasury Assistant Secretary for Tax Policy Named Acting Commissioner of IRS
Congress Must Raise Debt Limit by January 2018
In the States: Locals Focus on Supporting Community Nonprofits and Volunteers, North Carolina Considers Two-Year Judicial Terms

News from the Hill

Finally, We Know What’s up with Tax Reform

Earlier today, GOP leaders in the House—led by Speaker Paul Ryan (R-WI) and Ways and Means Chairman Kevin Brady (R-TX)—released the long-awaited text of their tax reform bill, the Tax Cuts and Jobs Act. In a press conference this morning, Chairman Brady stated that the bill is “focused entirely on growing our economy, bringing jobs back to our local communities, increasing paychecks for our workers, and making sure Americans are able to keep more of the money they earn.”

The bill follows relatively closely to the signaling documents that have been released over the past year. Some of the key provisions included in this bill are:

Consolidates the number of individual tax brackets from seven to four, with rates of 12%, 25%, 35%, and 39.6%;
Increases the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples;
Doubles the threshold for income that is subject to the estate tax from $5 million to $10 million, and phases-out the estate tax, entirely, over a period of six years;
Repeals the state and local tax (SALT) deduction for income and sales taxes, but retains a deduction for state and local property taxes up to $10,000;
Expands the Child Tax Credit from $1,000 to $1,600.

The provisions that directly impact tax-exempt charities include:

Preserving the charitable deduction in its current form;
Simplifing the private foundation excise tax to a flat rate of 1.4 %;
Weakening the “Johnson Amendment”—which prohibits 501 (c)(3) organizations from participating in, or intervening in (including the publishing and distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office—specifically, for organizations that operate exclusively for religious purposes to allow political speech that is in the ordinary course of the organization’s business and its expenses are de minimus.
Subjecting private colleges and universities that have at least 500 students and an endowment of at least $100,000 per student at the close of the preceding tax year to an excise tax of 1.4% on net investment income.
Eliminating the “Pease limitation,” which places a limit on the total amount of allowable itemized deductions;
Increasing the adjusted gross income (AGI) limitation for cash contributions from 50% to 60%;
Eliminating the alternative gift substantiation exception, where the donee organization files separate documentation rather than provide a gift receipt to donors for contributions exceeding $250;
Treating “fringe benefits” for employees of tax-exempt organizations (i.e. on-premises gyms and other athletic facilities) as unrelated business taxable income (UBTI);
Requiring that an art museum claiming the status of a private operating foundation be open to the public for at least 1,000 hours every year to be recognized as such;
Exempting Private foundations from the excess business-holdings tax if they own a for-profit business under these conditions: (1) the foundation owns all of the for-profit business’ voting stock, (2) the private foundation acquired all of its interests in the for-profit business other than by purchasing it, (3) the for-profit business distributes all of its net operating income for any given tax year to the private foundation within 120 days of the close of that tax year, and (4) the for-profit business’ directors and executives are not substantial contributors to the private foundation nor make up a majority of the private foundation’s board of directors. **Donor Advised Funds (DAFs) are explicitly excluded from this provision.
Requiring DAFs to disclose annually their policies on donor advised funds as well as the average amount of grants made.

The Council released a statement from President & CEO Vikki Spruill, which says, in part:

For nearly 70 years, the Council on Foundations has worked to inspire and expand a culture of charitable giving and enhance philanthropy’s ability to contribute to vibrant, healthy and thriving communities across the globe. Today’s legislation introduced in the House of Representatives fails to enhance those efforts in a number of significant ways. … The Council will continue to analyze the bill and work with House and Senate leaders on legislation that empowers our nation’s decades-long tradition of charitable giving. The Council also looks forward to galvanizing our members, who live in every congressional district, to work with their elected representatives to improve this legislation. For years, philanthropy has worked hand in hand with citizens to play a critical role in improving our communities. We hope to see legislation that enables this rich tradition.

Our government relations and legal team is working on a more thorough analysis of this bill and its impact on philanthropy and charitable organizations. We will be sure to share this as soon as it is available.

A markup of this bill by the Ways and Means Committee is expected to begin next Monday.

The Senate is expected to introduce their version of tax reform as early at Nov. 8, however, their timing remains fluid. According to POLITICO, “[Sen. Orrin] Hatch [R-UT] said he is ‘not particularly’ committed to rolling out a Senate bill on Nov. 8, which Sen. Bob Corker (R-TN) on Tuesday said was the target date.” While many of the details remain in the dark, BGov notes that, “Senate Finance Committee aides are mulling a limit on the amount of life insurance reserves that can be deducted, a 2 percent excise tax on the investment income of certain colleges, and changes to reporting and new withholding rules for the on-demand economy, according to a document obtained today by Bloomberg Tax. … One provision would levy a 25 percent excise tax on nonprofits for compensation in excess of $1 million paid to any of its five highest paid employees, a reflection of the existing limit on deductibility of executive compensation at corporations.”

Now that the House bill is out, the Senate will likely be taking clues from the reactions of various stakeholders as they finish crafting their version of the tax code overhaul. Earlier estimates of timing had the Senate passing tax reform sometime after Thanksgiving and Congress sending a bill to President Trump’s desk before the end of the year.

Executive & Regulatory News

Treasury Assistant Secretary for Tax Policy Named Acting Commissioner of IRS

Last week, the White House named David Kautter—currently the assistant secretary for tax policy at the U.S. Department of Treasury (Treasury)—as the acting IRS commissioner. Kautter will begin serving in both roles on Nov. 13, when John Koskinen’s (the current acting IRS commissioner) term expires. According to Bloomberg, “It was expected that Koskinen wouldn’t be reappointed, since he was hired by President Barack Obama and is loathed by congressional Republicans, some of whom tried to impeach him in 2016.” The White House is continuing to search for a permanent commissioner.

Congress Must Raise Debt Limit by January 2018

This week, the U.S. Department of Treasury released an updated estimate for when Congress will need to raise the federal debt limit. “The debt limit is a limitation on the total amount of money that the United States is authorized to borrow to meet its existing legal obligations,” the statement says, in part. It continues, “If Congress fails to increase or further suspend the debt limit by December 8, Treasury, as it has in the past, can take certain extraordinary measures to continue to finance the government on a temporary basis.” Congress raised the debt ceiling in September as part of the continuing resolution to fund the federal government.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Locals Focus on Supporting Community Nonprofits and Volunteers

Voters in Tucson, Arizona will cast ballots November 7 to decide two local ballot measures that propose increasing sales taxes to benefit the local zoo and fund early childhood education. Earlier this year, the community voted to approve new taxes to fund local roads and public safety. Polling suggests that the zoo-funding measure will pass, but there appears to be organized opposition to the early childhood education initiative from outside groups, including Americans for Prosperity, an anti-tax lobby. Elsewhere, states and localities are considering tax incentives, including tax breaks, for rural community volunteers. The Borough Council of Morton, Pennsylvania provides volunteer emergency first responders a 20 percent property tax break. The local measure may be copied in other neighboring localities because of a 2016 Pennsylvania statute that enabled localities to provide such relief. This approach, however, does not go as far as Connecticut’s benefits for emergency service volunteers (such as volunteer firefighters and ambulance drivers) that allow municipalities to provide property tax relief, group health insurance, tuition waivers, protections against discrimination, and worker’s compensation coverage.

North Carolina Considers Two-Year Judicial Terms

A new bill in the North Carolina Senate would place a constitutional amendment on the 2018 primary ballot to shorten the terms in office for state judges to two years. Currently, District Court judges serve for four-year terms, and Supreme Court justices, Court of Appeals judges, and Superior Court judges serve for eight-year terms. If the General Assembly approves this change and it receives a majority vote on the ballot in spring 2018, all state court judges would be up for election in November 2018. The General Assembly could take up this bill, along with other potential state constitutional amendments, when it returns for a special session in January. The North Carolina Center for Nonprofits is very concerned that the bill, if approved, would politicize the courts, disadvantage North Carolinians, nonprofits, and foundations in judicial matters, and undermine the separation of powers in the state.

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