In This Week's Edition of Snapshot…
- Take Action: Extend the Charitable Deduction to All Americans
- Tax Reform Update: Competing legislative priorities complicate tax reform prospects
- State Reliance on Federal Funds
- New York Revitalization Act Amendments Go into Effect
New research shows that the proposed changes to the tax code being considered as part of a tax reform bill would decrease charitable giving by $13.1 billion. The study, conducted by the Indiana University Lilly Family School of Philanthropy and commissioned by Independent Sector, confirms and gives shape to the notion of the "unintended negative consequences" of tax reform that our staff has been discussing with Members of Congress.
The good news is that this research also found a feasible solution to mitigate such a decrease in charitable giving — one that would actually encourage an increase in giving of $4.8 billion.
What is this solution? The answer: a universal charitable deduction — meaning, the charitable deduction would be available to all taxpayers regardless of whether they itemize their taxes or not.
Our team has floated this idea to a number of congressional offices and have received positive responses. But, it’s not enough for them to hear it only from us. They also need to hear it from you — their constituents and partners for improving their communities. They need to understand that the strength of their communities and the vitality of our civil society is at stake in their efforts around tax reform.
*Note: The Council’s legal team has determined that private foundations may engage in lobbying on this issue, as it qualifies under the “self-defense” exception. Read more about this on our website.
In the coming months, we will provide weekly updates with new developments in the tax reform process.
Congress may be in recess this week, but there is no lack of news or activity in Washington.
It’s no secret that, with other major issues taking priority on the legislative agenda (think, passing a bill to repeal the Affordable Care Act in the Senate — and passing spending legislation to fund the government by Sept. 30), the target timeline for tax reform has been slowly slipping beyond 2017.
The newest wrinkle in this process involves a request from the White House to raise the debt limit before Congress leaves for the month-long recess in August. Prior to this request, lawmakers expected to have until September to take action on the debt limit — when they planned to include the contentious vote in a broader spending package to make it more palatable.
The request by the Administration to speed up the timing of the debt limit decision presents a significant challenge for Congress, as this issue faces disagreement within and across both parties. Top Administration officials — including Treasury Secretary Steven Mnuchin and Office of Management and Budget Director Mick Mulvaney — have called for a “clean” increase to the debt limit (meaning that an increase is not contingent upon any deals for spending cuts elsewhere). Conservative members of the Republican party, however, have stated their opposition to raising the debt limit without implementing cuts under a spending legislation package. With Republicans on both ends of the spectrum on this issue, it becomes increasingly tricky for GOP leadership to reach consensus on this issue to prevent a government shutdown on their watch.
Democrats are also divided on this issue, struggling with whether to maintain their preference for a “clean” increase (as they have pushed for in the past) as the President has demanded, or to team up with Republicans, which would in turn make it make it easier for them to then pass “unpaid-for tax cuts,” as Sen. Chris Murphy (D-CT) put it.
Despite the realities of the legislative hurdles Congress faces in the remaining in-session days before the August recess, President Trump maintains that “tax cuts/reform” is moving along ahead of schedule. He also suggested that the Senate activate the “nuclear” option (which would prevent Democrats from using the filibuster to oppose tax legislation, even though the Senate is already tracking toward using the reconciliation process to circumvent Democratic opposition as it is).
Perhaps the most curious part of the President’s tweet is his use of the term “tax cuts.” With the prospect of comprehensive reform hanging in the balance, and given the widespread opposition to key provisions (like, the border adjustment tax) that would help Republicans pay for the major tax cuts they hope to enact, it is becoming less clear just how much of the tax code they will be able to change. Even Speaker Paul Ryan (R-WI) has softened his rhetoric insisting that the border adjustment tax must be included in a tax reform package, following public criticism of the provision from the White House.
There is also an additional outstanding question of whether on not the tax reform plan being pushed by the White House will be “revenue neutral.” At two separate hearings last Thursday, OMB Director Mulvaney and Secretary Mnuchin offered differing assessments on how the cost (or, loss in revenue due to tax cuts) of the Administration’s tax plan would be offset. Director Mulvaney stated that tax plan would pay for itself as a result of increased economic growth (meaning, it would not require finding ways to raise revenue by making changes to other parts of the code). Secretary Mnuchin, on the other hand, stated that economic growth would only pay for part of the tax plan, but that it would also rely on revenue from limiting deductions and other tax breaks.
Congress returns from recess next week, where we expect some of these questions will begin to be answered.
Exclusive from our colleagues at the National Council of Nonprofits.
State Reliance on Federal Funds
The specter of significant cuts to federal funding for the states brings to the forefront data from the updated 2015 Annual Survey of State Government Finances from the Census Bureau, which delves into how much each state relies on federal aid across major spending areas. On average, states receive nearly one-third of their funding from the federal government. These federal funds are most often used for costs in Medicaid and other social assistance programs, which are the single largest line items in states’ budgets. Key findings from the survey show that federal intergovernmental revenues comprise 42 percent of the general fund revenues of Louisiana and Mississippi, and federal funding for education-related programs make up 20 percent of the Wyoming budget. Public welfare, specifically costs associated with Medicaid, is the single largest source of federal funding. New Mexico and Ohio rely on federal funds for over 90 percent of their public welfare general expenditures.
New amendments to the Nonprofit Revitalization Act are now taking effect, further refining the New York Not-for-Profit Corporation Law. The revisions were enacted to eliminate minor issues of noncompliance due to certain aspects of the Act being “operationally impractical” or posing challenges not serving the purposes of the law. Significant areas impacted are committee formation and operational provisions, conflict of interest and whistleblower provisions, definitions of independent director and key person, employees as board chair, and related party transaction provisions. The Nonprofit Coordinating Committee of New York and the New York Council of Nonprofits provide updated resources.