In this Week's Edition of Snapshot...
- Ways & Means to hold hearing on changes to committee rules
- Senate sets deadline to repeal ACA, move closer to tax reform
- Treasury requests input on guidance for tax-exempt leases
- How Philanthropic is the Trump Cabinet?
- In the States: State legislatures face growing revenue and budget challenges
- Interview: 5 questions with our Executive VP for External Affairs
So, What’s Up with Tax Reform?
In the coming months, we will provide weekly updates with new developments in the tax reform process.
Ways & Means to Hold Hearing on Proposed Rule Changes
The House Ways and Means Committee met today to discuss proposed changes to the committee rules for the 115th Congress. These rules outline the policies and procedures for how this tax-writing committee will operate for the duration of this Congressional session — including how the committee will draft, discuss, and communicate with the public about the drafting of legislation.
Some notable changes to Committee rules include:
- The increased frequency of meetings — which will now occur every week as opposed to once a month; and
- An increase in the number of seats on the Tax Policy Subcommittee from 14 to 15.
- The change from meeting once a month to once a week signals the commitment of this committee to ramp up its activity and move full speed ahead toward tax reform. Additionally, the increase in the number of seats on the Tax Policy Subcommittee accounts for the addition of one democratic seat on the full committee and reflects the shift toward a more proportional composition of this subcommittee — with an increase in the number of democratic seats from 5 to 6.
Bill to Repeal “Johnson Amendment” Re-Introduced in House
A bill to repeal the “Johnson Amendment” — which prohibits political intervention by churches and tax-exempt, charitable organizations — was recently reintroduced for the 115th Congress.
Sponsored by Congressman Walter Jones (R-NC), H.R. 172 would eliminate the provision in Section 501(c)(3) of the Internal Revenue Code which states that charitable organizations, including foundations, may “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”
This policy idea has gained traction over the past several months, following remarks made by then-candidate Trump at the Republican National Convention. As we see tax reform progress, it is likely that this issue will be considered as a part of that conversation rather than a stand-alone bill.
Treasury Requests Input on Tax-Exempt Leases
The U.S. Department of Treasury issued a request for comments to develop guidance for persons executing lease agreements that involve tax-exempt entities.
The Council is considering submitting comments on this issue and would welcome input from our members about their experience with this issues. If you have thoughts or questions, please reach out to our legal team at firstname.lastname@example.org.
How Philanthropic is the Trump Cabinet?
This week, the Foundation Center launched an initiative within its Glass Pockets platform that explores foundation involvement, board service, and giving interests of President-elect Trump’s Cabinet nominees.
Access to an analysis of each cabinet nominee is available on the Foundation Center website.
Exclusive from our colleagues at the National Council of Nonprofits.
Legislatures Convene Facing Growing Revenue, Budget Challenges
The majority of state legislatures convene this month, and weakening revenues will demand the attention of most early in their sessions. At least half the states ended their last fiscal year with budget deficits due to lower than projected tax revenues, and at least 24 states report FY17 general fund revenues below projections. Nineteen of those were forced to consider mid-year reductions in the past six months. These data points lead CQ’s John Haughey to predict, “Plugging budget holes while cutting taxes will be most state legislators’ biggest 2017 issue, pitting supporters of public services, state/municipal workers and educators, among others, against taxpayer advocates and business interests.” The Hill newspaper reports that even in conservative states, legislators are considering a range of ways to boost revenues, including higher gas taxes, sales tax on internet purchases, new fees, and lotteries.
Nebraska, which is facing a nearly $900 million budget deficit, is considering across-the-board spending cuts in many state agencies, dipping into the rainy-day fund, and debating a shift in the tax code, shifting perhaps from the income tax to sales or property taxes. In Alaska, the Governor’s proposal to close a $900 million budget gap includes cuts to state agencies, furloughs for government employees, limiting infrastructure projects, and reducing payouts of oil dividends from the Permanent Fund. Oklahoma likewise is dealing with a near-billion dollar deficit due largely to low oil prices and prior tax cuts. Delaware faces an estimated $350 million gap, the largest gap since 2008, and Iowa and Mississippi are both looking at spending cuts of about $100 million. And despite significant revenue and spending challenges, there is no apparent solution to the partisan gridlock in Illinois, which has not had a state budget for two years, leading to the failure of state departments to pay bills to nonprofits for services provided more than a year ago.
State Supreme Court Upholds Nonprofit Independence
Nonprofits earning money by performing government contracts are not automatically transformed into governmental entities subject to the state’s public records law, the Washington State Supreme Court ruled today. The underlying case concerned a public records demand that an individual made on the nonprofit zoo in Seattle. When the nonprofit refused to provide all of the requested documents, the individual sued, claiming, among other things, that because the zoo used to be run by the city and the nonprofit zoo earned money from a city contract, it should be subject to the public records law. The trial court disagreed, and when the individual appealed, she lost again. She then appealed to the State Supreme Court.
Washington Nonprofits, the state association, and the National Council of Nonprofits filed an amici curiae brief in the case last fall taking a strong position that extension of public records laws to private entities would effectively “insert entirely new terms into existing written agreements that private nonprofit entities have entered with governments across Washington.” The Supreme Court decision officially adopted a test that clarifies the law and limits expansion of open records and meetings laws only to identifiable instance in which entities are truly standing in the place of governmental agencies.
In Focus: Tax Cuts — Heeding the Lessons of the Kansas Tax Experiment
Nonprofits in Arizona heard the warning of the former Kansas budget director, “Don’t do what Kansas did.” Duane Goossen, Director of the Kansas Division of the Budget for 12 years under Democratic and Republican administrations, was speaking about the “Kansas experiment” of cutting the income tax by 25 percent and eliminating income taxes for nearly 200,000 small businesses.
The Arizona Republic quotes Goossen as saying, “It’s a dumpster fire, it’s a real crisis” that has caused significant reductions in state tax revenues in Kansas and forced nine rounds of state spending cuts in the last five years. Asked about comparisons between the two states, Arizona Governor Ducey commented that Kansas is not an appropriate analogy because the state economics are so different, preferring to look for models to Florida, Tennessee, and Texas. Governor Ducey is reportedly likely to propose eliminating the state income tax to trigger economic and job growth.
5 Questions for Council’s Chris Gates
Earlier this week, PhilanTopic — a blog hosted by Philanthropy News Digest — interviewed the Council’s Executive Vice President for External Affairs Chris Gates about the landscape for the Council and philanthropy in general over the next four years.
Gates was asked questions on various topics including: philanthropy’s role in combating income inequality and racial tensions, how certain interests in the sector will cope with seemingly unfriendly rhetoric from the incoming administration (immigration, energy, etc.), and possible changes to the charitable tax deduction. Gates gave nuanced and insightful answers on how the Council is prepared to approach the next four years through listening to policy proposals as well as actively reaching out to policymakers to convey our (and the sector’s) legislative goals and priorities.