In this Week’s Edition of Snapshot…
- Tax Reform Update: House Republicans face growing opposition to border adjustability
- Charitable Giving Coalition Spends Day Fighting for the Charitable Deduction on Capitol Hill
- IRS makes 1023-EZ data available online
- In the States: State budgets (in brief), and States consider contracting reform commissions
Congress being in recess this week did not stall the conversation around tax reform. With growing opposition to a foundational element of the House Republican approach to tax reform, border adjustability, there is increasing suspicion that the process of overhauling the tax code will be slowed.
Several Senate Republicans — including Senate Finance Committee Chairman Orrin Hatch (R-UT), Senate Majority Whip John Cornyn (R-TX), Lindsey Graham (R-SC), and Tom Cotton (R-AK) — as well as the prominent conservative advocacy group Americans for Prosperity, have voiced their opposition to this idea over the past week. Chairman Hatch, chief tax-writer in the Senate, stated that he doesn’t “see [it] happening, not the way the House has configured it,” according to BNA.
Despite this groundswell of objection, a group of 16 business leaders from companies belonging to a group known as the American Made Coalition sent a letter to Congressional leaders on Tuesday voicing support for the border adjustment provision.
Speaker of the House Paul Ryan (R-WI) remains adamant about moving the tax reform process forward, insisting that “In our spring budget, that’s where we do tax reform,” according to a BNA report.
With Steven Mnuchin’s recent confirmation as Secretary of the Treasury, and President Trump’s promise for a “phenomenal” forthcoming tax plan, the fate of the House tax plan — and the general viability of a comprehensive overhaul — has yet to be determined. 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 (which presents a separate series of issues that would need to be addressed in order to successfully accomplish tax reform). Others have suggested that tax reform would move forward regardless — but as a highly watered down version of what has been discussed rather than a comprehensive plan.
Last Thursday, Feb. 16, the Council’s government relations team joined the “100 Years of Giving Fly-In” on Capitol Hill to advocate for maintaining the full scope and value of the charitable deduction. Organized by the Charitable Giving Coalition, of which the Council is an active member, “participants from 37 states met with more than 125 House and Senate offices, including 52 meetings with members of Congress who serve on the tax-writing committees.”
As 2017 marks the 100th year of the charitable deduction, and with efforts to overhaul the tax code currently underway in Congress, this was a great opportunity for the Coalition to come together to share our message on the impact the charitable deduction has across the country.
In these meetings with Members and their staff, Council staff highlighted the important work being done by foundations and their grantees and urged legislators not to devalue the deduction — either directly (such as by putting a cap on the charitable deduction) or indirectly (such as by raising the standard deduction thereby incentivizing fewer people to itemize and be able take advantage of the charitable deduction).
After each meeting, talking points were left with legislative staff that presented data reinforcing the popularity and effectiveness of the charitable deduction. This message will certainly carry through into the conversations the Council and foundations from across the country will be having next month during Foundations on the Hill.
As part of the IRS’s efforts to make tax data (including information about exempt organizations) easily accessible to the public, the IRS announced yesterday that information from IRS Form 1023-EZ (the short form application for tax exemption), will now be available and searchable on the IRS website.
For foundations and other organizations that make grants to new and small grantees, this means it can be easier to research these organizations. Data can be found going back to 2014 for applications that have been approved by the IRS.
Exclusive from our colleagues at the National Council of Nonprofits.
State laws affecting the work and operations of foundations and nonprofits often are altered not as freestanding legislation but through the budget process. Here is a sampling of recent budget actions in the states:
- Illinois: The Pay Now Illinois coalition has filed a second lawsuit against Illinois Gov. Bruce Rauner in an attempt to get paid for a wide variety of social services nonprofits provide to people, such as sexual assault victims, senior citizens, and low-income children, after a temporary budget expired in January. The suit contends the lack of a balanced budget violates the Illinois state constitution.
- Kansas: After years of cutting taxes, the Kansas Senate is looking to repeal a tax exemption for limited liability corporations and raise individual income tax rates, estimated to generate $230 million a year.
- Minnesota Governor Dayton’s budget includes several expansions including extending the sales tax exemption to all 501(c)(3), broadening the working family credit, and providing greater access to health care.
- Nebraska legislators voted to give final approval on a budget that would reduce the $900 million budget gap to $760 million through across-the-board cuts, specific cuts, and taking back unspent dollars.
- Pennsylvania Governor Wolf proposes cuts and agency consolidation under a $32.3 billion spending plan for next year.
States Consider Contracting Reform Commissions
Legislators in Kentucky and Massachusetts have recently introduced bills seeking to create commissions designed to improve their respective government-nonprofit contracting systems. Throughout 2016, Kentucky’s legislative Government Nonprofit Contracting Task Force evaluated contracting challenges that nonprofits face when providing services on behalf of the Commonwealth. Following up on the recommendations of that Task Force, legislation would create a government nonprofit contracting advisory commission charged with reviewing and providing periodic reports regarding laws, regulations, and policies that negatively affect nonprofit government contracting.
In Massachusetts, a bill would create a special commission on government-nonprofit partnerships made up of government and nonprofit representatives. The Massachusetts commission would, among other things, identify methods to improve efficiency in grant and contracting systems, seek to eliminate redundant, unreasonable, or unnecessary laws that negatively impact nonprofit-government contracting or funding, and investigate ways to increase the use of data and technology to inform decision-making and oversight.
The progress of commissions like these can be of great benefit to funders and nonprofits alike since data show states consistently fail to reimburse nonprofits for the services they provide on behalf of governments. Reforms provide the opportunity to reduce redundant and unnecessary costs, and limit the underfunding that causes nonprofits to turn to private philanthropy to subsidize.