We will be taking a break from sending Washington Snapshot through the end of this year, and will resume on January 5, 2017. We wish all of our readers a safe and enjoyable holiday season!
Update on Tax Reform Progression in the Senate
This week, Senate Majority Leader Mitch McConnell indicated his intent to tackle comprehensive tax reform through reconciliation.
Reconciliation refers to a fast-track process where the Senate’s majority party is able to pass legislation from a budget resolution without interference from the minority party. He further indicated that this would happen as part of the second of two budget bills the Senate intends to address—the first of which will be aimed at repealing the Affordable Care Act.
Additionally, Chairman of the Senate Finance Committee, Orrin Hatch (R-UT), shared updates about his corporate integration plan.
“I believe that corporate integration can and should be part of the comprehensive tax reform discussion that appears to be on the horizon,” he stated. “Let me be clear: I am not walking away from the idea of corporate integration.”
Given the concerns of our sector for what corporate integration could mean for philanthropy, he noted that “we’ve heard some concerns from those in the charitable and non-profit community as well as retirement security stakeholders regarding the potential impact of equalizing the treatment of debt and equity. I think my history in the Senate has demonstrated pretty clearly my commitment to both charitable giving and retirement security. So, I want to make clear that my staff and I are prepared to address these types of concerns when this proposal takes legislative form.”
Charitable Giving Coalition Sends Letter to President-elect Trump
This week, the Charitable Giving Coalition (CGC) sent a letter to the President-elect requesting that the charitable deduction be excluded from any cap considered under tax reform.
The letter stated, “As you contemplate caps or restrictions on itemized deductions ($100,000 for individuals and $200,000 for couples/families filing jointly), we encourage you to exempt the charitable deduction from those restrictions. Unlike with other deductions, taxpayers can—and will—adjust their levels of charitable contributions in response to tax code changes.” The letter was also sent to staff members of the House Ways and Means and Senate Finance Committees.
The Council is an active member of CGC—a group of organizations dedicated to preserving the charitable deduction. A press release is available on the Charitable Giving Coalition website.
Final Chinese Overseas NGO Law Guidelines Released
Earlier this month, the Chinese government released the official (final) Guidelines on Organizational Registration and Temporary Activities Reporting. These guidelines provide needed information for compliance with the 2016 Law of the People’s Republic of China on Administration of Activities of Overseas Nongovernmental Organizations in the Mainland of China (Overseas NGO Law). An official English translation of the implementation guidelines is not yet available, but a trusted translation is available from China Law Translate.
Even with these now official implementation guidelines, we await additional information needed for foundations operating in China, including promised lists of acceptable fields of activities, projects and partners (also known as Professional Supervisory Units). MPS is now referencing a 2017 listing of that needed information.
The Council has been tracking the changing regulation of international foundations and non-profits working in China since 2015, when the draft Overseas NGO law was first released. You can see our analysis of the new law and implications for non-profits and foundations on our website.
Exclusive from our colleagues at the National Council of Nonprofits.
States Acting to Address Budget Challenges
States continue reporting budget troubles in the current and next fiscal year as they assess spending obligations in advance of legislative sessions, many of which start in January. Revenue growth in the states slowed considerably in Fiscal Year 2016 as states saw weaker collections from sales, personal income, and corporate income taxes, according to a new report from the National Association of State Budget Officers. As a result, state budget officers are predicting a slowdown in state spending in the coming year. Nonprofits and funders are bracing for cuts that could put pressure on organizations to reduce services in communities or increase pressures on foundations to fill the gaps in revenues.
Governors in West Virginia and Wisconsin are ordering budget cuts to address immediate shortfalls. Mississippi’s Legislature will soon be considering eliminating nearly 2,000 unfilled state government positions and removing most agencies from civil service protection to allow agency directors to reduce staff and positions. In Oregon, the Governor is proposing spending cuts and new taxes to close a $1.7 billion budget shortfall. Likewise, the Governor of Nebraska has announced that he will be proposing an austere biennial budget for 2017-2019 that includes spending cuts due to anticipated sharp declines in state revenue and a projected deficit of nearly $1 billion.
Kansas and Pennsylvania have both just received bad revenue results for November. Louisiana’s midyear budget deficit came in at $313 million, which is likely to require more spending cuts than originally expected.
A surge of fixed costs, namely debt payments and public pension obligations, are at the center of an estimated $1.3 billion shortfall in Connecticut. Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance, is urging legislators to use caution in the cuts they make to human services, noting that “You can’t get philanthropy to fill that hole.”
Princeton Settlement Spawns Copycat Property Tax Exemption Challenge
The settlement by Princeton University of a lawsuit may have ended one challenge to the nonprofit property tax exemption by individual residents, but it did not put the issue to rest. Predictably, a copycat lawsuit has been filed, this time with individual residents challenging the tax-exempt status of a private boarding school in Lawrence, New Jersey.
Legislation is in the works to remove the ability of residents to sue nonprofits challenging their exemptions. The legislation would prohibit a taxpayer from appealing an assessment or exemption that is granted to another taxpayer. The bill also prevents third-party challenges of financial agreements between tax-exempt organizations and local governments, such as negotiated fee arrangements or payments in lieu of taxes (PILOTs). The Center for Non-Profits and others are working to get the bill on the December 19 agenda of the key committee.