In this Week’s Edition of Snapshot…
- Tax Reform Update: Mnuchin confirmed as Treasury Secretary, Bishop named to Ways & Means, Trump Administration working on a tax overhaul plan, Congress aims to keep the train on track
- IRS seeks to understand how the regulatory ban will impact its work
- Council Hosts Collaborative Meeting with Federal Agencies and Philanthropic Stakeholders
- U.S. nonprofits working abroad face financial difficulties, according to a new study
- In the States: Action Heats Up on Foundation, Nonprofit Property Tax Legislation
- States Consider Expanding Giving Incentives
This Monday, Steve Mnuchin was confirmed by a vote of 53-47 as the next U.S. Secretary of the Treasury after a long confirmation process that was delayed due to Senate Democrats’ concerns over Mnuchin’s past involvement in foreclosures during the housing crisis.
Mnuchin, as the head of Treasury, will play an important role in tax reform. According to Politico, “Mnuchin helped craft Trump’s tax plan during the campaign. He was behind the decision to keep the upper-income tax rate for individuals at 33 percent, rather than going lower as the campaign initially proposed.” However, as the article also notes, it remains to be seen how large his role will be “for a White House that has centralized power early on.”
On a related note, late last week, President Trump shared in a meeting with airline executives that his Administration will be “announcing something… over the next two or three weeks that will be phenomenal in terms of tax.” House Ways and Means Chairman Kevin Brady (R-TX) indicated in an interview with Fox News that he and the President have been “working very closely” on the tax-announcement the President plans to make.
Further reports clarified that the announcement will pertain to the Administration’s forthcoming outline for a tax overhaul, with White House Press Secretary Sean Spicer stating that “we’re looking at, in the next few weeks, rolling out the outline of a comprehensive tax plan that we’ll be working with Congress on that will address both the business side of the ledger as well as the individual rates.”
The Administration (and at least one Republican member of the Senate Finance Committee) has not always seen eye-to-eye with House Republicans on a key provision of the House’s proposed plan: border adjustability. Subsequently, President Trump’s forthcoming plan has the potential to either give significant momentum to tax reform in the House, or to decidedly hinder it from moving forward on the proposed fast-track timeline—which would use the process of reconciliation for fiscal year 2017 to repeal the Affordable Care Act (often referred to as the ACA or Obamacare), and then the fiscal year 2018 budget reconciliation process to accomplish comprehensive tax reform.
Also of note: On Tuesday, Representative Mike Bishop (R-MI) was selected by the House Steering Committee to replace Tom Price (former Representative for Georgia’s 6th district, was recently confirmed as Secretary of Health and Human Services). In response to his selection, Mr. Bishop stated that he is “ready to work with Chairman Brady and the committee to simplify our tax code, create more jobs, and replace Obamacare...” The recommendation by the Steering Committee still requires approval by the House Republican Conference.
Some have suggested, with a concern for the delay in the “repeal and replace” process of the ACA, that tax reform may need to happen as part of the same reconciliation process as the healthcare legislation, or that tax reform will need to happen before the ACA repeal (
The Internal Revenue Service (IRS) has been in discussions with the Department of Treasury over
With tax reform on the horizon, the IRS is working to understand how this executive order will affect its ability, moving forward, to propose tax regulations that provide clarity for the murky provisions in the code.
Last year, researchers from Federal Reserve Banks (the Fed) of Philadelphia and Atlanta explored the geographic distribution of community and economic development grants made by the largest foundations in the U.S. The result of this research culminated in an online mapping tool to disseminate the data.
The research team now plans to build on this work by adding another layer of data—federal grants that support community and economic development—as they believe this will tell a more complete story about metro-to-metro variation in resources available for improving conditions of economic and social distress, and will help illuminate how grants from foundations and federal funding interact. Examples of questions they are looking to answer include: Do federal grants precede, follow, or substitute for grants from foundations? And, do federal grants smooth or exacerbate the geographic unevenness that was uncovered in the original research?
As this new line of inquiry begins, the Fed wanted to discuss their preliminary approach and seek feedback from other federal grantmakers and stakeholders in the area of philanthropic investment in economic development.
Subsequently, the Council co-hosted a listening session with the Fed to examine this new approach. Attendees included: The Fed (Philadelphia and Atlanta), the Department of Housing and Urban Development, the Office of Management and Budget, the Urban Institute, the Center for the Study of Social Policy, the CDFI Fund, the Opportunity Finance Network, the Lincoln Land Institute, and the Council of Development Finance Agencies. Many great ideas were put forth and considered to help the research team expand the next iteration of their tool. The Council was pleased with how productive the meeting was and would be interested in hosting future gatherings of this group.
New research released last week shows that the scope of challenges related to financial access for U.S. nonprofit organizations (NPOs) working internationally are much more significant than previously thought. The Charity & Security Network reports that two-thirds of U.S.-based NPOs working abroad are facing problems accessing financial services. The report, Financial Access for U.S. Nonprofits, was funded in-part by the Bill and Melinda Gates Foundation and is the first-ever empirical study of the concept of bank “derisking,” as it relates to U.S.-based NPOs.
Financial access problems experienced by NPOs could mean delayed wire transfers, account refusals and closures, and unusual requests for additional documentation. Worrying trends for the sector include:
- Transfers to all parts of the globe are impacted and the problem is not limited to conflict zones or fragile and failing states;
- Smaller organizations are almost twice as likely to receive unusual additional documentation requests. The smallest NPOs (those with 10 or fewer employees) face the most trouble opening accounts;
- NPOs, categorically treated as high-risk, are sometimes forced to move money through opaque channels as a result of delays in wire transfers and requests for additional documentation;
- When money cannot be transmitted in a timely manner, 42% of nonprofits report that they sometimes carry cash into other countries to continue their work.
As foundations work with US NPO partners to implement programs internationally, it’s clear that many grantees face serious challenges with accessing needed financial services. The report outlines several suggestions to improve access for NPOs to financial services and the Council, a member of the Charity and Security Network, will continue to work with regulators, funders, and the non-profit sector on this issue.
Exclusive from our colleagues at the National Council of Nonprofits.
Every year, states consider scores of bills designed to adjust, restrict, or even expand property tax exemptions that enable foundations and nonprofits to spend more on their missions and less on taxes. This session of state legislatures is presenting greater diversity of issues and activity. For example, two bills (HB 6675, HB 6934) in Connecticut would permit municipalities to abate property tax for property used for arts or culture, including art galleries, art studios, installation galleries, movie theaters, performance venues and retailers catering to or relating to the arts. These face the challenge of a significant budget deficit in the state, a gap so great that the Governor’s Budget proposes eliminating state reimbursements to localities for general and free standing chronic disease hospitals. That payment from the state is usually made to cover the lost tax revenues from hospitals being exempt from taxation.
Oregon has several bills that propose changes to property tax treatment for nonprofits. One affects limited liability companies owned by nonprofits, two (HB2047, HB2115) deal with expanding the exemption for health clinics, and there are proposals to expand informational filings and to create study on ad valorem property taxation. Virginia legislation would expressly authorize local governments to enter into mutually agreeable terms with entities exempt from real property tax for the payment of service charges.
Finally, a Montana bill sought to remove the property tax exemption for any nonprofit that pays compensation greater than $250,000. The bill sponsor reportedly was concerned about competition between hospitals, which pay higher salaries, and small businesses. The legislation was soundly defeated in the State House of Representatives this week, based on arguments in support of nonprofits pursuing their mission and a desire not to enact legislation that interferes with the free market. The defeat of the bill is significant because the linkage between executive compensation and nonprofit property tax exemption has also been made in legislation in Connecticut and elsewhere.
Despite half the states experiencing budget deficits, a few are considering restoring or expanding incentives for charitable giving. Massachusetts legislation would bring back the charitable deduction that hasn’t been available to Bay State taxpayers for several years because of a restriction in current law related to state revenues. A bill in Oregon would establish a personal income tax credit of $50 (single) or $100 (joint) for contributions to charitable organizations. That credit, if enacted, would only be available to taxpayers with less than $100,000 (single) or $200,00 (joint) in adjusted gross income. Utah legislators are considering a measure that would create a state non-refundable tax credit for certain contributions to a nonprofit related to an approved project in an enterprise zone.