We will not be sending Snapshot next week due to the holiday. We wish all of our readers a safe and fun Fourth of July!
In This Week's Edition of Snapshot…
- Hill Briefing on Charitable Giving and Tax Reform
- Tax Reform Update: Brady Insists on Complete Overhaul Instead of Mere Tax Cuts
- Senate Delays Health Care Vote, Complicates Tax Reform Timeline
- In the States: Lack of budgets in three states creating challenges, calls to action; Demonstrating nonprofit impact in St. Louis
On Wednesday, the Council on Foundations, along with Independent Sector and other colleagues in the field, hosted a policy briefing on Capitol Hill titled "Briefing to Learn About the Impact of Tax Reform on Charitable Giving." The standing-room-only event brought together congressional staff and other interested parties to learn about the possible unintended consequences of tax reform on charitable giving and the solution that we are proposing to mitigate those consequences, expanding the charitable deduction to all taxpayers.
The event, moderated by our Senior Vice President of Government Relations Hadar Susskind, kicked off with Representative (and House Philanthropy Caucus co-chair) Danny Davis (D-IL) giving remarks to the attendees about the importance of maintaining the full value and scope of charity giving. Following Representative Davis was Allison Grayson, Director of Policy Development and Analysis at Independent Sector, discussing new research commissioned by Independent Sector and conducted by Indiana University Lilly Family School of Philanthropy. The research found that the provisions in the current House and White House tax proposals would decrease charitable giving by at least $13.1 billion annually.
The panel provided examples that demonstrated the importance of charitable giving to every community and highlighted the need to maintain the full scope and value of the deduction as tax reform moves forward. Other speakers included: Steve Taylor, Senior Vice President and Counsel for Public Policy at United Way, John Ashmen, President of Association of Gospel Rescue Mission, Heather Noonan, Vice President for Advocacy at League of American Orchestras, and Josh Grandy, OrchKids Baltimore.
Pictured above (left to right): Representative Danny Davis (D-IL); the Council’s Senior Vice President of Government Relations, Hadar Susskind; (bottom) Josh Grady of OrchKids with the Baltimore Symphony Orchestra.
In the coming months, we will provide weekly updates with new developments in the tax reform process.
Despite the flurry of activity around health care this week, Congress continues to inch closer toward tax reform — with a few notable things happening this week.
First on the list was House Ways and Means Chairman Kevin Brady (R-TX) rejecting the idea of settling for tax cuts in lieu of a comprehensive reform of the tax code. There has been recent speculation that, due to the current unrest and disagreement within the Republican party, GOP leadership may opt for the seemingly more viable option of passing tax legislation that simply cuts rates as opposed to overhauling the entire the system. Chairman Brady, taking a step even further to support his objection to this approach, shared that his committee would be holding a handful of tax reform hearings in July to "continue to make progress toward a single, unified tax reform plan to be sent to the President's desk this year."
Another important development this week was a delay in the budget process that is hoped to produce a set of reconciliation rules that will allow Republicans to pass tax legislation without requiring votes from Democrats. Earlier this week, House Budget Committee Chairwoman Diane Black (R-TN) was forced to postpone the unveiling of a budget plan because of pushback from several Chairmen of other committees who did not want to see funding for their areas of jurisdiction cut. This setback delays a committee markup of the long-awaited bill until July at the earliest.
The final important item to note on tax reform this week was the news that President Trump plans to nominate former Senate Finance Committee GOP staff director Chris Campbell to serve as Assistant Treasury Secretary — a critically important position in Treasury that will support Secretary Steven Mnuchin's tax reform efforts on behalf of the Administration.
On Tuesday, Senate Majority Leader Mitch McConnell (R-KY) delayed a vote on the Senate’s version of repealing and replacing Obamacare. According to Politico, “Senate Republicans…delayed their plans to vote on repealing Obamacare this week, amid strong resistance from moderate and conservative Republicans to even beginning debate, GOP sources familiar with internal party discussions said. Republicans plan to re-write their health bill over the July 4th recess and get a new analysis from the Congressional Budget Office.”
The delay of further action on the health care legislation creates a bigger headache for Republican leaders in both the House and Senate who had hoped to pass a health care bill and a complete overhaul of tax reform in 2017. This is in addition to must-pass items such as fiscal year FY 2018 appropriations bills and raising the debt ceiling.
In regard to tax reform, Republicans have planned to use budget reconciliation instructions to pass the overhaul, which would allow the legislation to pass with a simple majority in the Senate. However, they will first have to pass a FY 2018 budget in order to do so and that cannot be accomplished until the health care bill is passed by Congress or abandoned. The Council will continue to closely monitor developments on the timeline of tax reform.
Just this morning, the IRS pre-released final regulations to adopt a streamlined 501(c)(3) application process for certain small, tax-exempt organizations using the 1023-EZ.
The regulations do a few things:
- authorize the Treasury Department and IRS to modify the requirement that an organization applying for tax-exempt status provide a detailed statement of its proposed activities;
- allow an organization to file a statement supporting its claim that it is exempt from annual returns in either its application or in a manner prescribed in IRS guidance;
- allow use of the Form 1023-EZ for eligible organizations; and
- makes other revisions to the Treasury Regulation sections 1.501(a)-1, 1.501(c)(3)-1, and 1.508-1.
These regulations will be retroactively effective as of July 1, 2014.
Exclusive from our colleagues at the National Council of Nonprofits.
The new fiscal year starts on Saturday, July 1, in four states that do not have budgets in place to resolve whether and how much charitable nonprofits and others will be paid for the work they perform. Despite several actions already this session, the Delaware Legislature still has a budget deficit of more than $200 million that it needs to close before June 30. Lawmakers are considering changes to the personal income tax, including repeal or cap of the charitable deduction under state law, along with other itemized deductions. See the summary from the Delaware Alliance for Nonprofit Advancement, “Incent Community Investment in Nonprofits – don’t take it away.” Legislators are also considering cancelling more than $50 million in grant-in-aid funding for over 300 nonprofit programs throughout the state.
Illinois is poised to enter its third year without a full budget and local organizations are taking action. An op-ed signed by four groups expresses the exasperation of many resulting from the failure of state policymakers to agree on spending and tax priorities: “Every single day, human service providers deliver meals to the elderly, counseling to abused children, workforce training and other vital services to our communities. Dedicated, professional and compassionate staff members have continued working even after Illinois has failed to fulfill its contracts by providing payment.” Forefront, the state association of nonprofits and regional association of grantmakers in Illinois, is encouraging nonprofits and taxpayers to call their legislators and the Governor urging them to “act today to pass a full-year, fully funded budget, with enough new, permanent revenue to stop the cuts, repair the damage that has already been done, and make smart investments in our future!”
Connecticut lawmakers likewise have not agreed to a budget for FY 2018. Some of the pending budget proposals call for imposing sales taxes on some nonprofits and perhaps foundations. Because of a significant revenue shortfall and the lack of a deal on the budget, the Governor recently announced an Executive Order Resource Allocation Plan that makes $2.1 billion in cuts to state funding, including $187 million to community nonprofits, and drastic cuts to municipalities, hospitals, and other discretionary programs. The CT Nonprofit Alliance is leading an advocacy campaign (#ForAllofUs) that encourages nonprofit board members, staff, volunteers, family advocates, funders and the people they serve to tell policymakers “exactly what the proposed cuts will do” to the work of their organizations.
Finally, Pennsylvania still doesn’t have a budget, with legislators hung up on whether to permit video poker games in bars and restaurants. In 2015-2016, the Commonwealth suffered a 10-month budget impasse over more substantive issues.
Outraged by allegations by a St. Louis, Missouri Alderman that nonprofits in the City weren’t paying their fair share to support public safety, nonprofits came out in force at a public hearing to push back against a proposal to remove the nonprofit exemption from a local payroll tax. One parochial school pointed out that the City saves the cost of educating every child the school serves. The executive director of a child services nonprofit rejected the notion that the tax-exempt organization was a burden on the City, stressing instead that her organization is "on the front lines of crime fighting along with law enforcement" by serving children affected by abuse and neglect. A Catholic service provider reported that its afterschool and summer programs help reduce crime by keeping young people away from risky behavior, and by offering training to police officers on how to effectively deal with an immigrant population. The bottom lines for many of the nonprofit representatives at the hearing were that "nobody wants to donate to an organization so they can pay administrative costs and taxes," and that the tax proposal would be taking money away from the people we serve" — families and individuals "struggling day to day." The Board of Aldermen is considering legislation to put a measure on the November ballot that would partially repeal the nonprofit payroll tax exemption.