We will be taking a break from sending Snapshot next week due to our Annual Conference, but will resume sending on May 4. We look forward to seeing those of you who will be joining us in Dallas!
In This Week's Edition of Snapshot…
- Tax Reform Update: Debate continues as charitable issues receive increasing attention
- Bill seeks to extend charitable contribution carryover for public utilities
- President signs EO to "buy and hire American"
- In the States: Constitutional property tax exemption at risk in Louisiana; New Mexico donor disclosure bill vetoed
In the coming months, we will provide weekly updates with new developments in the tax reform process.
Questions remain about when a tax reform bill will be introduced and what it will look like. As recently as this week, President Trump indicated his renewed preference to tackle healthcare before turning to tax reform. This news comes in conjunction with Treasury Secretary Steven Mnuchin — who still does not have many key members of his staff in place due to the lag in the appointments and confirmations process for agency positions requiring Senate approval — conceding that tax reform is unlikely to happen by the August congressional recess, as had been the goal.
With many competing ideas about what tax reform should look like, some believe that the House Blueprint on tax reform may be losing steam as the prevailing force behind these efforts. The lack of coordination between the administration and Congress was highlighted when White House Office of Management and Budget Director Mick Mulvaney said in an interview with CNBC that “the House can go and do what they want to do. We are going to formulate our own policies.”
Regarding the White House’s tax plan, The Hill reports that the administration is revisiting the idea of capping charitable deductions, citing that “limiting tax deductions for major charitable gifts would be a way to raise revenue by targeting wealthier taxpayers.” The article continues, quoting Council President and CEO Vikki Spruill, who notes that “2017 is the 100th anniversary of Congress creating the charitable deduction, which has enabled the philanthropic sector to support communities all across America. With mounting social problems, we’re hoping the nation’s communities don’t get shortchanged.”
Separately, The Washington Post reported this week that — as promised by President Trump — the “repeal of the ‘Johnson Amendment’ is being written into tax legislation developed in the House of Representatives.” The article goes on to note the widespread opposition to this, as demonstrated in a community letter to lawmakers in support of nonprofit nonpartisanship that the Council and nearly 4,500 organizations from the sector signed.
Chairman of the House Ways and Means Committee Kevin Brady (R-TX) is gearing up to begin holding hearings on tax reform as early as next Thursday, April 27. The first of these hearings is expected to focus on the controversial border adjustment tax (BAT). Additional details about this hearing are expected to be released in the coming days.
Recently, Representatives Erik Paulsen (R-MN) and Mike Thompson (D-CA) introduced H.R. 1686 — a bill that would allow excess charitable contributions by public utility corporations to carry over for 20 years.
Currently, corporations are allowed to deduct up to 10 percent of their adjusted gross income (AGI) per year, and can carry over — use amounts that exceed the 10 percent — in the five subsequent years to lower their tax liability.
This is often not useful for corporations, especially if they are contributing large amounts of money to charities/foundations. Paulsen, who has previously introduced several bills favorable to the nonprofit sector, seeks to extend that carryover to 20 years; however, only regulated public utilities would be able to take advantage of the extended grace period if H.R. 1686 were to become law.
On Tuesday, President Trump signed an executive order (EO) that calls for stricter enforcement of "buy American" and "hire American" policies meant to boost economic growth — effectively impacting federal procurement practices and the current H-1B visa program (which enables companies to hire foreign workers under a nonimmigrant worker visa).
The first part of the order redefines the legal definitions of “Buy American Laws” and “Produced in the United States” in an effort to address claims from the administration that these laws have been diluted over the years and “often are sidestepped with government waivers.” The H-1B visa program element of the EO aims to crack down on what the White House calls "abuses" of government guest worker programs.
The Departments of Commerce, Labor, Homeland Security, and State have been tasked with more strictly monitoring the H-1B visa program. NPR reports that it “also proposes changes, such as awarding H-1B visas to guest workers with the best skills and highest potential wages, rather than through a random lottery as is done now.” Every year, the government issues 85,000 H-1B visas.
Exclusive from our colleagues at the National Council of Nonprofits.
Should local governments be able to tax the property of foundations and charitable nonprofits in Louisiana? That is the question that state lawmakers are currently considering in two constitutional amendments — one would give that power to the government council in New Orleans and another would apply statewide.
As in 17 other states, the Louisiana constitution prohibits state or local government officials from levying taxes on the property owned by nonprofit corporations and used for their charitable purposes. The two constitutional amendments, introduced by the chairman of the House tax committee, would allow local governments to enact ordinances that limit property tax exemptions for nonprofits by as much at 50 percent. Each amendment mandates that the local governments must reduce the property tax rates on other taxpayers in the jurisdiction when imposing the new tax the nonprofits. The two amendments, if approved by the legislature, would be put on the ballot for October 2017.
New Mexico Donor Disclosure Bill Vetoed
The Governor of New Mexico vetoed a bill that would have defined “independent expenditure” and required charitable nonprofits to disclose the names of donors if engaging in certain activities such as advocacy on ballot measures.
The legislation would have required disclosure for most types of political advertising expenditures of more than $1,000. Some groups currently provide this information, but charitable nonprofits are exempt. While framed as promoting transparency and making information available on “dark money,” the measure could have had a chilling effect on nonprofit engagement in advocacy and discouraged charitable donations. In her veto statement, Governor Martinez explained that “the requirements in this bill would likely discourage charities and other groups that are primarily non-political from advocating for their cause and could also discourage individuals from giving to charities.”