In This Week's Edition of Snapshot…
- Tax Reform Update: Ways and Means Committee holds hearings, Senate gears up for tax reform
- Assistant Secretary for Tax Policy named
- Hearing on IRS reform scheduled for tomorrow
- In the States: state budgets passing but on shaky footing; Mainers seek block grant transparency
With health care behind them, House Republicans have turned their attention to tax reform. Ways and Means Chairman Kevin Brady (R-TX) and Tax Policy Subcommittee Chairman Pete Roskam (R-IL) recently announced two hearings on tax reform. Ways and Means Oversight Subcommittee Chairman Vern Buchanan (R-FL) also announced an upcoming hearing on IRS reform — more on that below.
The first hearing, “How Tax Reform Will Grow Our Economy and Create Jobs,” begins this morning at 10:00 a.m. ET. Council staff will be in attendance and will provide updates on any developments that would impact our sector. The second hearing, “Increasing U.S. Competitiveness and Preventing American Jobs from Moving Overseas,” is scheduled for next Tuesday, May 23, at 10:00 a.m. ET.
Speaker Paul Ryan (R-WI) reiterated his goal of getting tax reform done by the end of this year, but also noted that “We don’t want to put an artificial deadline on tax reform because we really want to get it right.”
The Senate seems less sure about tackling tax reform this year, with Senate Majority Leader Mitch McConnell (R-KY) sharing that they “certainly want to try to complete [tax reform] this Congress” — leaving the door open to working on this through the end of 2018. The top Senate Republican also expressed doubt that the border adjustment tax — a key provision in the House Republicans’ plan — would pass the Senate. In the meantime, members of the Senate Finance Committee are gearing up for more substantive discussions on how to approach tax reform.
Tomorrow the House Ways and Means Subcommittee on Oversight will hold a hearing at 9:00 a.m. ET titled “IRS Reform: Lessons Learned from the National Taxpayer Advocate.” This hearing is part of a larger conversation — stemming in part from the 2012 scandal in which the IRS was accused of targeting conservative groups applying for Exempt Organization (EO) status.
For those of you who love the numbers, we have some interesting data from the IRS regarding EO activity in 2016. According to the 2016 IRS Data Book, the IRS approved 79,545 applications for religious, charitable, and other organizations seeking tax exemption under Section 501(c)(3).
1,690 applications were approved for social welfare organizations (Section 501(c)(4)), 1,596 applications were approved for business leagues (Section 501(c)(6)), 1,185 applications were approved for social and recreation clubs (Section 501(c)(7)), 620 applications were approved for labor and agricultural organizations (Section 501(c)(5)) and 1,170 applications were approved for other types of tax exempt entities.
As a reminder, while there are many types of tax exempt entities under Section 501(c) of the Code, only those approved under Section 501(c)(3) can provide donors with a charitable tax deduction. With respect to audit activity of exempt organizations, audits are steadily declining but there appears to be a current focus on hospitals. The 2016 IRS Data Book reports that the IRS expects to complete more than 1,000 non-contact reviews of tax exempt hospitals and has referred 400 hospitals for examination based on 2016 reviews.
On May 10, Dave Kautter was named to be the Department of Treasury’s Assistant Secretary for Tax Policy.
POLITICO Morning Tax noted that “Kautter…has worked as a Senate GOP aide, in the private sector and in academia…Policymakers working on tax reform could use the help, too, with the administration still having yet to fill a fair share of key policy positions.” No timeline has yet been announced for confirmation hearings.
Exclusive from our colleagues at the National Council of Nonprofits.
Legislatures across the country are cobbling together state budgets for the coming fiscal year, but the challenge remains daunting for at least 29 states that have lowered their current fiscal year revenue estimates. The Connecticut Governor announced a mitigation plan last week to make up for a $390 million deficit for fiscal year 2017. The plan uses reserve funds, revenue transfers, and rescissions of previously appropriated funds to numerous social services programs performed by nonprofits, as well as withholding local aid.
In Wyoming, policymakers are confronting the drop in revenues from oil, gas, and coal by instituting a hard hiring freeze affecting nearly all of its state agencies. Also struggling from lower oil prices, the North Dakota legislature passed a two-year budget to reduce spending to $13.6 billion, an amount close to what it was six years ago. However, some lawmakers are wary that the reduced budget is unstable and may lead to higher property taxes.
The Governor of New Mexico has called a special session of the legislature next week to seek to balance the state’s $6.1 billion budget. The Governor put her tax reform proposal on the agenda for the session, a package includes a provision to partially repeal the nonprofit exemption from gross receipt taxes, and another section that would impose a new sales tax on government contracts for services provided by nonprofits and others.
Finally, the Pennsylvania Department of Revenue is reporting a greater than $1 billion revenue shortfall, the largest in the Commonwealth since the Great Recession, due to timing of corporate tax revenues, weak business taxes, and lower consumer spending. Pennsylvania policymakers may have to reduce spending or increase taxes to achieve a balanced budget.
Mainers Seek Block Grant Transparency
Maine nonprofits are taking proactive steps in advance of anticipated decisions by Congress to “block grant” funding to the states for Medicaid, housing, health care, and training programs, many of which are performed by nonprofits on behalf of state and local governments. The Maine Association of Nonprofits is promoting transparency legislation that would require a key department of state government to annually develop and submit to the legislature for review and approval plans for how it would spend federal block grant dollars. Nonprofits that will ultimately do the work want to make sure that the federal block spending plans are public and subject to review and approval by the appropriate committees of the legislature. The bill is up for review on Friday, May 19.