Welcome back! We hope all of our readers had a wonderful 4th of July holiday weekend.
As Congress breaks at the end of the month for August recess, we know many of our readers will want to connect with their elected officials as they spend time back in their districts. To assist you in scheduling local meetings with Members of Congress and district staff, the Council Public Policy team is putting together an online, interactive advocacy toolkit.
Resources will include a template meeting request letter (or e-mail), talking points and frequently asked questions to use to prepare you for your meeting, contact information for your lawmakers, and information on how your lawmakers have supported philanthropy in recent months so you can go into your meetings confident and fully-informed.
Stay tuned—we’ll announce the toolkit and share the link with you the week of July 21st!
Charitable Extender Vote on House Floor
As we reported previously, a bill that would make the charitable tax extenders permanent was passed out of the House Ways and Means Committee on May 29. We are now hearing that the bill will go to the House floor for a vote next week. We encourage all of our readers to contact their representatives to ask them to support the bill (not yet numbered). As a reminder to our readers, here is the full list of the charitable bills that will be considered on the House floor:
- H.R. 4619, “To amend the Internal Revenue Code of 1986 to make permanent the rule allowing certain tax-free distributions from individual retirement accounts for charitable purposes.”
- H.R. 4691, “To amend the Internal Revenue Code of 1986 to modify the tax rate for excise tax on investment income of private foundations.”
- H.R. 4719, “To amend the Internal Revenue Code of 1986 to permanently extend and expand the charitable deduction for contributions of food inventory.”
- H.R. 3134, “Charitable Giving Extension Act.”
- H.R. 2807, “Conservation Easement Incentive Act of 2013.”
A simple email note to your representatives, such as the following, is really all that’s needed:
“I’m writing to ask you to support the package of tax provisions that impact charitable organizations. We are encouraged that the House of Representatives has decided to consider this important bill soon. This bill will help [our foundation/our members] better provide meaningful resources for their community. We look forward to the package moving to the House floor. Please let us know how we can further support these charitable tax provisions.”
Private foundations can weigh in on this issue within the “self-defense” lobbying exception. Under this exception, a private foundation can attempt to influence legislation that impacts its existence, its powers and duties, its tax-exempt status, or the deductibility of contributions.
Tax Policy Center Analyzes Camp Proposal
On Wednesday, the Tax Policy Center at Urban Institute and the Brookings Institution released a “Description and Analysis of the Camp Tax Reform Plan.” Our policy team is diving into the report and will provide our readers with a summary next week.
In the meantime, it is worth noting that a key finding on the combined impact of the changes to individual giving incentives is that “[f]or all income groups, the cost of giving to charity would increase under the Camp plan, with the largest increases in the top quintile.” This means that for each $1 contributed to charity, those taxpayers who continue to itemize their deductions would receive less of a tax incentive for their contributions. Yet, the report also states that top earners who would experience tax cuts under the Camp plan “would have more after-tax income, which would encourage contributions.”
Hill Activity Centers on Highway Trust Fund
The Highway Trust Fund, a pot of federal dollars set aside for federally-funded transportation projects all over the country – is in danger of running out of funds to pay its obligations on August 1st if Congress does not act to renew its funding. Both the Senate Finance Committee and the House Ways and Means Committee were busy coming up with their own fixes yesterday—with the Senate seeking a few-month solution and the House looking to pay for the Fund through May of 2015.
On the Senate side, Chairman Ron Wyden (D-OR) and Orrin Hatch (R-UT) reached a verbal agreement on provisions to include in a compromise bill. The New York Times reports that the negotiated plan would pay for the Fund fix with big solutions similar to what the House Ways and Means Committee voted on yesterday: extending custom fees on importers, taking money from a separate trust fund for fixing underground storage tanks, and changing rules on private pension contributions. Yet, House Republicans oppose some of the smaller revenue pots in the agreement, like extending penalties on tax preparers who do not comply with child tax credit reporting obligations.
The House Ways and Means Committee marked up its own bill yesterday, authorizing nearly $11 billion in revenue achieved primarily through the same revenue sources that the Senate is considering. The bill is expected to go to the full House floor for a vote next week.
With time running out, the Senate bill will now need to pass the full Senate and be reconciled with the version of the House plan that emerges from the House floor before any of the proposed solutions can become law.
Form 1023-EZ Goes Live
The IRS’s Form 1023-EZ along with its instructions became available for public use last week. As we’ve reported, the form is intended to serve as a streamlined application for 501(c)(3) tax-exempt status.
The new form is only two pages long and is available to organizations who meet the criteria of an accompanying eligibility worksheet. In general, to qualify an organization must not have projected annual gross receipts expected to exceed $200,000 in any of the next three years or had annual gross receipts exceed $200,000 in either of the past two years, and not have total assets in excess of $500,000. The IRS estimates that 17 percent of 501(c)(3) applicants will be eligible to use the 1023-EZ.
On the form, the organization must certify that it has met the organizational test, the operational test and the public support test. There are no requirements to submit financial data or organizing documents, or to describe the organization's activities beyond selecting an appropriate NTEE code. However, we note for our readers that there are 22 organizations on the eligibility worksheet that are disqualified from using this form, including limited liability corporations, churches or associations of churches, HMOs, and previously revoked tax-exempt organizations.
As we’ve noted in our past coverage, state charity regulators and some nonprofits groups like the National Council of Nonprofits have spoken out to oppose the new form on the grounds that it could make it easier for bad actors to operate and hinder enforcement efforts.
If you have any questions about the new form, please feel free to contact our Legal team at firstname.lastname@example.org.
PA Nonprofits Can't Ease Local Budget Woes
Throughout the past couple of decades, cities across the country – in an effort to balance their budgets – have tried to supplement their tax revenue by identifying ways to impose new fees and taxes on nonprofit organizations traditionally excluded from the tax base. For example, Pennsylvania localities have tried implementing payments in lieu of taxes (PILOTs), Nonprofit Quarterly reports. The program is intended to get nonprofits that hold a large amount of property (such as universities and hospitals), which do not pay property taxes as a result of their 501(c)(3) tax-exempt status, to agree to contribute substantial sums of money to the municipality in which they are located to help support community upkeep.
Despite the relative willingness of many of the largest organizations to make these payments, they have proven to be less than adequate for balancing city budgets. In an attempt to address this issue, some cities like Hazelton, Pennsylvania have pursued other methods of broadening their revenue base to include nonprofits organizations. Hazelton’s example is a mandatory fee for the city’s storm water system – a fee that is assessed on all properties, including: nonprofits, schools and churches.
Growth of Nonprofit Watchdog Groups
The recent proliferation of watchdog groups has been met with mixed reactions by the nonprofit sector, The Chronicle of Philanthropy reports. These groups, which broadly call for more transparency of the operations of nonprofit organizations, often obtain their information from reports they produce by collecting information from volunteers, board members, clients, and donors of the organizations they target. Recently, some of these groups have started to direct more of their efforts toward think tanks and foundations in particular.
Some organizations welcome this push for transparency, but others question the way in which these evaluations are being conducted. For instance, some organizations are concerned about the way organizations are being targeted for scrutiny, whether or not the level of analysis is deep enough to capture the unique facets of each organization being evaluated, and the sheer amount of time and resources that it takes to ensure that information about evaluated organizations is available and correct on the many websites that these watchdog groups may pinpoint for inspection.
It is still uncertain how the increasing number of reports from watchdog groups may impact how foundations and other nonprofit organizations conduct business.
Giving Circles and the Community
A recent report released by Jumpstart, Connected to Give: Community Circles, finds that existence of giving circles can help strengthen community identity and amplify the impact of philanthropy. The study found that one in every eight American donors has been involved in a giving circle, and that they serve not only as a vehicle for the collection and disbursement of charitable dollars, but also as a means of connecting with others and exposing members to the shared values surrounding philanthropy of that particular group.
Sarah Bunin Benor, lead researcher and co-author of the report, noted the observance of a “virtuous circle” effect, stating that giving circles “connect people to like-minded individuals and lead to more meaningful, intentional, and hands-on charitable giving, as well as increased communal engagement.”
Upcoming NASCO Conference
The National Association of Attorneys General/National Association of State Charity Officials' Annual Conference, “The Evolving Role of Charitable Regulation in the 21st Century,” will take place on October 6, 2014 at the Hyatt Regency Capitol Hill in Washington, D.C.
This year’s conference discussions will focus on how charitable regulation is evolving and adapting to the ever-changing nonprofit landscape. Topics will include emerging issues under UPMIFA, regulator-sector opportunities for collaboration in addressing disaster relief, examining the way charities are evaluated by watchdog agencies, and questioning whether charities are, in the traditional sense, still charitable.
More details coming soon!