In This Week's Edition of Snapshot
- Tax Reform Update: House votes on key measure to advance tax reform; tax bill expected next week
- IRS releases 2017-2018 Priority Guidance
- In the States: Elected official fundraising for nonprofits under review in the states
Last Thursday, the Senate passed a budget resolution that included reconciliation instructions for tax reform, continuing the tax code overhaul process. According to NPR, “Senate Republicans passed a $4 trillion budget blueprint late Thursday [Oct. 19] by a narrow 51-49 vote, with Kentucky's Sen. Rand Paul joining Democrats in opposing the measure considered a key step in forward on President Trump's promises of a tax overhaul.” In the early hours on Friday (Oct. 20) shortly after the resolution passed, President Donald Trump tweeted, “Great news on the 2018 budget @SenateMajLdr McConnell - first step toward delivering MASSIVE tax cuts for the American people! #TaxReform.” (President Trump also went up to the Hill this past Tuesday to join Senate Republicans for lunch in an effort to unite them behind tax reform).
It was initially thought that the House—which passed their budget on Oct. 5—and the Senate would go to a conference committee (either officially or informally) to work out the differences in the two resolutions; however, the House agreed to take up the Senate-passed language (with some urging from President Trump) and is slated to pass it later today. According to POLITICO, “The House is slated to vote Thursday to formally back the Senate’s budget resolution, fast-tracking the GOP’s effort to advance a tax overhaul with a simple majority in the Senate. … The House GOP conference tentatively agreed Sunday to take up the budget the Senate passed last week—rather than try to reconcile differences through a conference committee—to save several weeks of legislative work.”
However, there could still be some complications to the passage of the budget resolution. Some House Republicans are concerned about the lack of details surrounding the possible elimination of the state and local tax (SALT) deduction—which would disproportionately affect high-tax states like those in the Northeast and on the West Coast. According to POLITICO, “That [the budget] vote has the potential to go down to the wire…given concerns that Republicans from New Jersey and New York have about the state and local tax deduction. Reps. Pete King (R-NY), Tom MacArthur (R-NJ) and Lee Zeldin (R-NY) have all said in recent days that they needed more assurances that the incentive wouldn’t be totally wiped out, as the House GOP originally proposed. (One idea has been to keep the deduction only for the middle-class, which would still require some offsetting.) ‘As of right now, I don't have enough answers to vote 'yes' on the budget,’ Zeldin said.”
Fortunately for Republican leaders, another group of legislators which could have further complicated the budget vote, the House Freedom Caucus, is likely to support passage. According to The Hill, “Conservatives that had pushed for the inclusion of mandatory spending cuts in the House budget are now focusing on swiftly passing tax reform. … According to [Rep. Dave] Brat [R-VA], they [the Freedom Caucus] were willing to drop the spending cuts if leadership would publicly set a Thanksgiving deadline for passing the tax plan.”
If the budget passes as expected in the House, we will be facing a quick progression of this legislation through Congress, according to Republican leadership. According to a House aide with knowledge of the legislation, the plan will be introduced on Nov. 1 with the intent of a markup by the Ways and Means Committee the following week and passage through the House before Thanksgiving. The aide also suggested that the Senate Finance Committee could begin markup of a bill as early as the week of Nov. 13. However, a spokeswoman for Senate Finance Chairman Orrin Hatch (R-UT) suggested that the upper chamber will adhere to its own timeline, stating that, “[the Chairman] intends to lay down a mark for the committee to advance in the coming weeks. Details will be released when finalized.”
Democrats in Congress have also weighed in on tax reform, releasing their Middle-Class Tax Reform Principles yesterday morning. In a statement on the principles, House Ways and Means Ranking Member Richard Neal (D-MA) stated that, “This country is long overdue for real tax reform that helps middle-class families, and those striving to reach the middle class, get ahead.” The principles cover several key priorities, including:
- Providing relief and education opportunities for middle-class families;
- Assisting middle-class families with the high cost of dependent care;
- Ensuring a secure retirement for American families;
- Closing the skills gap;
- Expanding infrastructure investment and enhancing economic development; and
- Strengthening the competitiveness of American businesses in the global economy.
In House Ways and Means Committee news, last week Rep. Pat Tiberi (R-OH) became the latest in the list of committee members who will have to be replaced by next Congress, if not sooner. The list of members—who are retiring early, not running for reelection, or leaving the House to seek a different public office—includes, Reps. Sam Johnson (R-TX), Lynn Jenkins (R-KS), Diane Black (R-TN), Jim Renacci (R-OH), Kristi Noem (R-SD), and Dave Reichert (R-WA). POLITICO Pro takes a deeper look at the members leaving the House this Congress noting, “To date, 17 Republicans and 10 Democrats have announced they intend to leave the House after the 115th Congress. Of those, 18 will run for another office, with nine running for governor in their home states. The remaining nine are ‘true retirements,’ seven Republicans and two Democrats.”
Last week, the Department of Treasury released its priority guidance plan for 2017–2018. The priority guidance plan identifies and prioritizes tax issues that the agency aims to address through regulations or revenue rulings, revenue procedures, notices, and guidance throughout the upcoming year.
In May 2017, the Council submitted comments to Treasury outlining issues of importance and urging them to prioritize these in the coming year. The plan includes several items related to philanthropy, including:
- Guidance under §170(e)(3) regarding charitable contributions of inventory;
- Final regulations on §509(a)(3) supporting organizations (proposed regulations were published on Feb. 19, 2016);
- Guidance under §4941 regarding a private foundation’s investment in a partnership in which disqualified persons are also partners; and
- Guidance regarding the excise taxes on donor advised funds and fund management.
For more information on the 2017-18 priority guidance plan, please contact Senior Counsel and Vice President of Legal Affairs, Suzanne Friday.
Exclusive from our colleagues at the National Council of Nonprofits.
While eyes are on the federal budget and tax reform, nonprofits and philanthropy are feeling the weight of budget woes heavier than ever. The Montana Nonprofit Association annual conference brought together more than 400 nonprofits across the state this month to discuss the role of nonprofits in their communities and the need for a stable state budget. As evidenced by a recent op-ed by representatives of two United Ways, the concerns focus on threats to the ability of organizations to have impacts in their communities and the recurring mis-presumption that nonprofits and foundations can fill gaps created by spending cuts. “Charitable organizations and the nonprofit community cannot shoulder the additional weight of thousands of Montana families’ needs as the state reduces or eliminates resources and services,” the community leaders wrote. The article continued with a warning about reduced funding for social programs by asserting, “If these budget cuts go into effect, a generation from now Montana will look drastically different – and not for the better.”
Earlier this month, Nina Stack, President & CEO of the Council of New Jersey Grantmakers, raised similar concerns about the challenges philanthropies face when the governments cuts funding. “The resources in private philanthropy are miniscule compared to what government provides,” Stack explained. She stressed that philanthropy is working now to anticipate potential cuts, stating, “We have a lot of funders who are looking at their budgets and working with their grantees to understand how they can be as responsible, flexible, nimble as they need to be when the shoes start to drop.”
Massachusetts Implements New Retirement Benefits for Small Nonprofits
Massachusetts nonprofits with twenty or fewer employees may now take advantage of a new statewide 401(k) retirement plan with minimal fees and charges often associated with savings plans. The Massachusetts Defined Contribution CORE Plan is a concerted collaboration between the Commonwealth’s Office of State Treasurer and Receiver and the Massachusetts Nonprofit Network, the state association of nonprofits. The Treasurer’s Office will now be providing administration and oversight on behalf of participating employers, as well as fiduciary assistance, professional investment options, and automatic enrollment under the plan. The goal is to enable smaller charitable organizations to focus more on their missions and less on cumbersome paperwork. By providing comprehensive retirement benefits for employees, the CORE Plan is also expected to make nonprofits more competitive in the job market. The joint government-nonprofit sector program is believed to be the first of its kind in the nation.