In This Week's Edition of Snapshot…
- Tax Reform Update: Health care debate slows other legislative action, but Congress is still ramping up for tax reform
- House Appropriations Committee to consider Johnson Amendment provision in a bill markup today
- Senate Finance to hold confirmation hearing for Kautter
- Trending in Legal Affairs: Funding public charities that lobby when multiple funders are involved
In the coming months, we will provide weekly updates with new developments in the tax reform process.
On Tuesday, Senate Majority Leader Mitch McConnell (R-KY) announced that the traditional August recess—scheduled to begin on July 31 this year—would be delayed by two weeks in order to provide more time for legislative business. The House, which passed their version of the health care bill in May, is still expected to go on recess at the end of July—with the possibility of coming back into session if/when the Senate passes a bill.
According to the Washington Post, “…the GOP needed more time to achieve its legislative goals given the protracted negotiations over health care legislation and continued opposition from Democrats on several fronts. ‘To provide more time to complete action on important legislative items and process nominees that have been stalled by a lack of cooperation from our friends across the aisle, the Senate will delay the start of the August recess until the third week of August,’ McConnell (R-Ky.) said in a statement.”
It is expected that Majority Leader McConnell will release an updated version of the health care legislation to repeal and replace Obamacare today, and that a Congressional Budget Office (CBO) score—which estimates how much the bill will cost and how many people will be covered for health insurance—will follow early next week. According to Politico, “Senate Republicans have offered increasingly dour assessments of the bill’s prospects due to a push from conservative Sens. Ted Cruz of Texas and Mike Lee of Utah to drag the bill rightward and distaste from more moderate senators for future Medicaid spending cuts. Sen. John McCain of Arizona predicted Sunday the effort would be ‘dead,’ yet [Sen. John] Cornyn [of Texas] said he feels ‘pretty good about where we are.’”
This further pushes back action on other legislative items (i.e. tax reform) as Congress continues to devote time to health care. Republican leadership plans to use a process known as ‘reconciliation’ with the FY 2018 budget to pass tax legislation (see here for details on congressional procedure for this process). Given that Congress already activated reconciliation instructions with the FY 2017 budget to pass health care legislation, no new reconciliation instructions can be introduced in conjunction with tax reform and the FY 2018 budget until the health care legislation has either worked its way completely through Congress or is abandoned.
However, Congress is still gearing up for tax reform. Both the House Ways and Means and Senate Finance committees are mobilizing their members to produce draft legislation—starting with tax reform hearings. This morning at 10:00 am ET, the House Ways and Means Committee will hold a hearing on how tax reform will help America’s small businesses grow and create new jobs. The Senate Finance Committee will also be holding a tax reform next Tuesday, July 18, to discuss the prospects and challenges of comprehensive tax reform. The Council is meeting with committee staff in advance of the hearings and will be in attendance to monitor any discussion related to issues that would impact our sector.
In the Senate Finance Committee, Chairman Orrin Hatch (R-UT) recently assigned several members of the committee to focus on specific tax reform areas—including Senator Chuck Grassley (R-IA) to lead on individual taxes and Senator John Thune (R-SD) to lead on the business tax system. Notably, Senator Thune has demonstrated his support as a champion for charitable issues by leading the charge to introduce the CHARITY Act (S. 1343) in Senate the past two congresses. The CHARITY Act was also recently introduced in the House (H.R. 2916) by Ways and Means Committee members Mike Kelly (R-PA) and Earl Blumenauer (D-OR).
On June 29, the House Appropriations Financial Services and General Government Subcommittee voted to pass the FY 2018 Financial Services and General Government Appropriations Bill that includes language that would weaken the prohibition on political activity by charitable organizations—sometimes referred to as the “Johnson Amendment”—by making it difficult for the Internal Revenue Service (IRS) to investigate 501(c)(3) violations. As written, we believe this would make it very difficult for the IRS to investigate claims that churches have violated the law by requiring consent from the IRS Commissioner for each investigation and notification to two committees in Congress before such investigations commence.
This legislation will be considered before the full House Appropriations Committee today. In anticipation, yesterday, the Government Relations team reached out to every member of the appropriation committee expressing the Council’s concerns about the language. We strongly urged each member to oppose the inclusion of Section 116 of this bill, and the support the Wasserman Schultz amendment to strike it in the full committee markup this morning. In addition the Council signed on to a letter with 50 other organizations opposing the language on Sec. 116.
This is one element of the House Appropriations Committee’s strategy to push forward with the FY 2018 spending bills despite not having a formal budget resolution or confirmed top-line spending numbers. They plan to have the nine remaining bills released and moving by the end of this week. According to Bloomberg BNA, “Combined with previously announced markups, the committee’s aggressive schedule reflects an effort to have all 12 of the FY 2018 bills reported soon and ready for floor action before lawmakers depart July 29 for a five-week recess. Just three have been reported so far. Full-committee markups of the Labor-HHS, State-Foreign Operations, and other bills are seen as possible the week of July 17, aides said.”
The article goes on to note that the Senate Appropriations Committee is acting similarly on their versions of the spending legislation. With FY 2017 ending on Sept. 30, all 12 of the appropriations bills will need to be passed (or a continuing resolution or omnibus bill will have to be passed) in order to avoid a government shutdown.
President Trump nominated David Kautter to fill the position of Assistant Secretary for Tax Policy at the Department of Treasury.
The Senate Finance Committee is set to hold a confirmation hearing for Mr. Kautter on July 18 at 11:00 am ET. If approved by the committee, and confirmed by the full Senate, he would play a central role in implementing tax reform legislation when it is passed by Congress and signed into law by the President.
Funding Public Charities that Lobby When Multiple Funders are Involved
During a June 28th webinar discussing private foundations and lobbying, a question was posed involving a scenario where multiple private foundations were funding a specific grantee project that included a lobbying component.
The general rule for project specific grants is that a private foundation can only fund up to the maximum non-lobbying portion of the project expenses and no portion of the private foundation grant can be earmarked for lobbying activities.
However, when multiple private foundations are funding the same project, it is not necessary for any of the private foundation funders to adjust or reduce its funding to ensure that no portion of any private foundation dollars is used for lobbying. For project-specific grants, each foundation can do its own stand-alone determination based on a budget from the grantee showing that the foundation’s grant is equal to or less than the non-lobbying portion of the project’s budget. Even if the foundation knows that one or more other, unrelated private foundations are providing additional funding for the project and that some of the funds from at least one of the private foundation funders will be used to fund the lobbying portion of the project budget, the foundation will not be subject to the taxable expenditure penalties.