Washington Snapshot - January 17, 2014

Philanthropy Week in Washington, March 3-7

Just Announced!

The Council is pleased to announce the first of two free webinars we will offer in preparation for the upcoming “Philanthropy Week in Washington” and “Foundations on the Hill.”

“Creating Effective Stories that Lawmakers Will Remember,” from 2:00-3:00 PM EST on Tuesday, January 28th, will offer tips and tools for crafting an effective message to deliver to your policymakers. We’re pleased to offer this webinar in partnership with the Congressional Management Foundation, which has done extensive research on best practices for influencing lawmakers.

People have trouble remembering facts, but they never forget a good story. Effective constituent stories have proven to be the most valuable tool in educating and influencing your lawmakers. Learn how to organize and present your organization’s story through a variety of tactics. This presentation includes the seven key elements of constituent story-telling, and walks participants through an exercise to develop their own personal story to move the hearts, minds, and votes of lawmakers. Register online today!

For those of you who haven’t heard, "Philanthropy Week in Washington,” hosted by the Council on Foundations, is the new initiative for a week of activities – some very familiar and others new. The week will begin and end with communications activities using both traditional and social media. The main activities in Washington D.C. will be conducted mid-week (March 4th-6th) so that participants can both enjoy a variety of events and make effective use of their time here in the nation’s capital.

Many of you have participated in Foundations on the Hill (FOTH) over the years – and it’s not going away! FOTH, hosted by the Forum of Regional Associations of Grantmakers with strong and ongoing support from the Council, will be the primary, Capitol Hill-focused event during which delegations from across the country visit with their Members of Congress (March 5th and 6th). “Philanthropy Week” offers those participating in FOTH a comprehensive and impactful Washington experience. It will add a unique element of education and relationship-building for leaders of both community and private foundations.

“Philanthropy Week” will also include the Alliance for Charitable Reform Summit for Leaders, the half day informational seminar that has gained in popularity and prominence over the past several years. This year’s Summit will take place on the morning of March 5th.

Also, this year we’ve secured a fabulous hotel in a central, vibrant location. Check out the Philanthropy Week website for registration information. We look forward to seeing you in March!

Tax Policy Happenings

Chairman Baucus: Discussion Draft Bill - Mandatory e-filing

Last year, we covered Senator Baucus’ tax reform discussion drafts, including the tax administration draft which proposes requiring all tax-exempt organizations to electronically file their Form 990s.

As part of the discussion draft process, stakeholders are invited to submit comments. The Council commented on this mandatory e-filing provision. We generally support the proposal, but encourage Senator Baucus and the Senate Finance Committee to further explore the impact of mandatory e-filing on smaller organizations and private foundations with lengthy filing requirements. We also urge the Senator to assess whether the utility of machine-readable 990 data justifies the potential burden on nonprofit organizations. In our comments, the Council’s Senior Vice President for Public Policy and Legal Affairs Sue Santa asks the Committee to “consider an appropriate phase-in period, especially for organizations that may have a more difficult time transitioning to this new protocol.” She also urges them to consider how “new guidance and tools that might be developed in the field to assist smaller organizations, much like the user-friendly tools that have been developed for individual taxpayers.” You can view our full comments on our website.

We hear that Senator Baucus may release a few more discussion drafts before his Senate departure, and our sources tell us that if released, these drafts are likely to cover infrastructure, education, and possibly retirement.

Chairman Baucus: Status of Nomination as Ambassador and Next Steps

As we’ve reported, Senator Baucus was nominated by the Administration as the new Ambassador to China. We understand that the Senate nomination and approval process could conclude before the end of February. Even after his departure, the Baucus tax reform discussion drafts will be key tools in the conversation around tax reform, and will be the starting point for any reforms that the Finance Committee considers in 2014 and beyond.

When Mr. Baucus departs, it is widely anticipated that Senator Ron Wyden (D-OR) will succeed him as Finance Chair. We are encouraged by many signs that Senator Wyden is supportive of the philanthropic sector, including the letter he recently co-signed with Senator John Thune (R-SD) encouraging preservation of the full value of the charitable deduction. That letter is circulating in the Senate for additional co-signers. We will highlight the final letter in coming weeks, as soon as it is delivered to Senate leadership.

Chairman Camp: GOP Annual Retreat

Meanwhile, a House GOP Conference annual retreat this month will help decide the fate of tax reform in the House in 2014. House Ways and Means Committee Chairman Dave Camp (R-MI-4) will take this opportunity to educate the entire conference about the need to reform the tax code, in hopes to revive his effort to pass comprehensive tax reform before his term as Chairman is up this year.

IRS 501(c)(4) political activity regulations

Over the past few months, we’ve been covering the new Internal Revenue Service (IRS) proposed regulations on the political activity of 501(c)(4) organizations. The regulations create a more bright-line rule about what political activities do not qualify as promoting social welfare for 501(c)(4)s. Currently the IRS applies a “facts and circumstances” test to make this determination.

The IRS is soliciting public comments on the proposed regulations. Of particular interest to Council members, the IRS seeks comments on whether similar guidance should be developed to define political activities for other types of tax-exempt organizations. Comments are due by February 27, 2014, and may be submitted electronically via the Federal eRulemaking Portal.

The Council is currently drafting comments on the regulations. We are especially focused on the potential implications for 501(c)(3) organizations. If your organization plans to comment, or if you wish to express your views on the rules for the Council’s consideration, please contact Katherine LaBeau.

In related news, this week, House Ways and Means Chairman Dave Camp (R-MI-4) introduced a bill that would delay the final 501(c)(4) rule implementation for a year after it is finalized. Camp is championing this bill in response to backlash from some congressional Republicans who think it is premature to implement 501(c)(4) policy changes while several congressional investigations into the IRS scandal last spring are still ongoing. We expect that these investigations—in the Senate Finance Committee, the House Ways and Means Committee, and the House Oversight Committee—will wrap-up this spring. Senate Finance Chairman Max Baucus (D-MT) has expressed a strong interest in finishing the Senate’s investigation into the controversy before he departs. The FBI revealed that it has concluded its own investigation and it found no criminal wrongdoing at the IRS in conjunction with the heightened scrutiny of some Tea Party groups.

Omnibus Spending Bill on Track

This week, Congress unveiled a $1.1 trillion appropriations bill (“omnibus bill”) that would fund the federal government for the remainder of fiscal year 2014. The spending bill implements the budget agreement passed in December, which set agreed-upon spending levels for the government for the next two years and repealed part of the across-the-board spending cuts known as “sequester.” The bill passed the House on Wednesday, and a version of it is expected to pass the Senate by Saturday, when current government funding runs out.

Nonprofit Quarterly’s Rick Cohen reports on what is in the omnibus bill that could impact nonprofits. For instance, funding for the Social Innovation Fund (SIF) was increased by 57 percent to $70 million. As many of our readers are likely aware, the SIF makes grant awards to grantmaking intermediaries who then match their federal grants dollar-for-dollar and host competitions to select nonprofits to receive the funds.

The Urban Institute and Brookings Institution Tax Policy Center describes the IRS as “one of the biggest losers in the 2014 budget deal.” IRS funding was cut by $526 million, and there is language included to explicitly prohibit the IRS from spending any money to “to target groups for regulatory scrutiny based on their ideological beliefs.” Rick Cohen aptly describes the likely impact of this funding reduction: “These cuts promise additional weakening of the agency that at the federal level is—or should be—in the forefront of nonprofit sector oversight.”

Other News in Philanthropy

Foundations make pledge to save Detroit art

Nine foundations made national news this week with a generous $330 million pledge to the Detroit Institutes of Art to prevent the city from being forced to sell off its art in its bankruptcy proceedings. The foundations involved include the Community Foundation for Southeast Michigan, William Davidson Foundation, Fred A. and Barbara M. Erb Family Foundation, Ford Foundation, Hudson-Webber Foundation, Kresge Foundation, John S. and James L. Knight Foundation, McGregor Fund and Charles Stewart Mott Foundation.

The Chronicle of Philanthropy’s Suzanne Perry points out that the pledge “raises the stakes in the perennial question about how much philanthropy should step in to cover functions normally undertaken by public bodies. If this effort succeeds, some experts ask, will other cities with financial problems ask foundations to bail them out?”

Chronicle piece on the charitable deduction

Just last night, Chronicle of Philanthropy reporter Alex Daniels published a piece on the prospects for tax reform in 2014. Daniels quotes several nonprofit leaders who believe that tax reform will not happen within the next year. Steve Taylor, Senior Vice President for Public Policy at United Way Worldwide, told Daniels that United Way will be “vigilant” in discussions with lawmakers about maintaining the deduction if it is on the table. Similarly, Candy Hill of Catholic Charities says that her organization remains in a “monitoring position,” ready to represent the interests of nonprofits in any serious tax reform proposals that emerge. Daniels also discusses the IRA charitable rollover that expired at the end of 2013. He shares the perspective of the Children’s Hospital of Philadelphia Foundation, one of many organizations harmed by the “here-today-gone-tomorrow nature” of the rollover.

New Hampshire bill to limit state charitable tax exemption

As we’ve seen in other states over the past few years as states struggle with budget deficits, New Hampshire lawmakers are considering a business tax on some nonprofits in the state. NH State Representative David Hess (R) has introduced a bill to eliminate the tax exemption to a state business tax for hospitals, universities, and other large nonprofit organizations. The bill would extend the Business Enterprise Tax to nonprofits with annual revenue of more than $2 million from programs and services. New Hampshire nonprofits have been vocal opponents of the bill.

New leaders in philanthropy

The Chronicle of Philanthropy’s Doug Donovan recently wrote about a sea change in philanthropy leadership this year. Council President and CEO Vikki Spruill is quoted in the piece. Spruill describes this new wave of leaders as “"an opportunity to lift up the sector” to a broader portion of the public.

Donovan points out that a dozen of the country’s largest foundations have new leaders at the helm—and these chief executives are much more diverse than in the past. “The new executives are very different from the people who held these elite jobs even a decade ago: They are much more likely to be black, gay, or female and to come from modest backgrounds. What’s more, several of them come from the foundation world itself, rather than from outside it,” Donovan writes. Darren Walker, the new CEO of the Ford Foundation, and La June Montgomery Tabron, the W.K. Kellogg Foundation President, are prime examples of this changing of the guard.

Forbes op-ed on the value of independent philanthropy

Howard Husock’s op-ed in Forbes last week was a heartening reminder that wealthy, generous Americans can make a tremendous difference in their communities. Husock points out that the top ten gifts last year totaled $3.4 billion, and that there were more gifts of $100 million or more in 2013 than 2012.

Husock notes that we should all value philanthropy’s independence. “American philanthropy is not just significant for its magnitude. It is also independent—meaning that it is directed in thoughtful, personal ways by individuals with their own interests and enthusiasms, not—at least not yet—directed by government,” he writes. Husock also criticizes the worldview of some from within the sector, such as the National Committee for Responsive Philanthropy’s Aaron Dorfman, who believe charitable dollars should be directed primarily towards social justice problems such as inequality. “[S]uch giving can be laudable and effective—but should not be seen as more valuable than the sorts of imaginative and idiosyncratic giving in which much philanthropy is engaged,” he says.

Speaking out for the charitable deduction

William Daroff, Senior Vice President for Public Policy and Director of the Washington office of Jewish Federations of North America, has an op-ed in Roll Call this week. Following in the footsteps of many of our readers and others throughout the sector who have publicly written on the value of the charitable deduction, Daroff describes it as a “lifeline and not a loophole.” He emphasizes the work that nonprofits around the country can do because of the charitable deduction to “provide shelter to the homeless or feed the hungry, the after-school programs keeping children off the streets and the small businesses giving back to its community by stocking the local food pantries.”

Daroff concludes by urging Congress to preserve the charitable deduction: “If Congress cuts, caps, limits or alters the deduction, the results could be devastating for those who need help the most. Now is the time for reaching out and helping those less fortunate — not to make it more difficult to help those in need.”

Keep in Touch!

Please feel free to reach out to any of us on the public policy team with any comments or concerns, or to share an issue, article, event, or op-ed you’d like to see covered in a future Washington Snapshot.