In This Week's Edition of Snapshot
- Tax reform: House passes tax reform package; Senate continues committee markup.
- IRS notices rule for charitable giving for wildfire damages.
- In the States: The Cuts are Coming, Montana Continues its Strict Campaign Finance Tradition
Today, the Council on Foundations released the following statement from President and CEO Vikki Spruill about the House passing H.R. 1:
“Just minutes ago, the House of Representatives passed H.R. 1, the Tax Cuts and Jobs Act. A once-in-a-generation opportunity for tax reform has been missed. The negative impacts of this bill on the charitable sector will be felt for many years to come.”
Following the markup process last week, where the Ways and Means Committee ultimately voted on a 16-24 party-line vote to pass the bill out of committee, the House voted 227-205 to pass H.R. 1 (see here for our analysis). The bill passed with relatively little resistance—despite outcry from the charitable sector, citing research from the Tax Policy Center, the Joint Committee on Taxation (JCT), and Indiana University, about how this would negatively impact charitable giving and philanthropy.
Having cleared the House, the burden of maintaining momentum on tax reform shifts to the Senate.
On Nov. 9, Republican leaders in the Senate—led by Majority Leader Mitch McConnell (R-KY) and Senate Finance Committee Chairman Orrin Hatch (R-UT)—introduced a bill to reform the United States tax code: The Tax Cuts and Jobs Act. See the Council’s analysis of the Senate tax bill.
Chairman Hatch and the Senate Finance Committee (SFC) began marking-up the bill on Monday; however, late in the day on Tuesday, Senator Hatch included some major changes in a modified version of the bill. According to The Hill, “[Hatch] released a modified version of the Senate tax bill late Tuesday that includes two key changes: the previously announced elimination of the Obamacare individual insurance mandate and a sunsetting of individual tax rates in 2025. The sunset clause in Hatch's ‘modified mark’ would mean the new individual rates in the Senate bill would end 10 years after their creation. This would solve a key problem in the Senate, which would have to prevent the overall tax bill from adding to the deficit after 10 years to make the new individual tax rates permanent—and use special budgetary rules to pass the package with a simple-majority vote and prevent Democrats from using a filibuster.”
The individual mandate repeal inclusion could complicate overall passage for tax reform, given the problems Republicans had earlier this year unifying their caucus to repeal and replace Obamacare. The Senate Finance Committee will continue the consideration of amendments today and are expected to wrap up the markup later today or tomorrow by voting the bill out of committee—likely along party lines.
The Council opposes the Senate bill as currently written (it is subject to change through the amendment process), given that it does a number of things that would restrict and decrease the charitable giving that our communities rely on.
The Council will continue to engage both our members, as well as policymakers in Congress, to push for the final version of this bill to include provisions that support and strengthen philanthropy rather than hinder it.
The Internal Revenue Service (IRS) released Notice 2017-70 explaining that employees will not be taxed when they “forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to a charitable organization” providing relieve to victims of California Wildfire that began on October 8, 2017. Employers may subtract the amount as a business expense if the donation is made before January 1, 2019. Under similar situations in the past, the IRS has provided guidance for these types of donations.
According to Thomson Reuters, “leave-based donation programs is an employer-sponsored program whereby employees agree to not use their accumulated leave (e.g., vacation, sick or PTO hours) in exchange for the employer making a cash donation equal to the gross value of the accumulated leave to a charitable organization.” The amounts donated will be free of income and payroll tax withholding.
Exclusive from our colleagues at the National Council of Nonprofits.
The Cuts are Coming
Even before anticipated federal spending cuts are enacted, states–which on average receive more than 30 percent of their revenue from the federal government–continue to struggle paying their obligations. States have already racked up more than $2 trillion in unfunded liabilities for employee pensions and other benefits, making them that much less resilient to fewer revenues coming from Washington. West Virginia recently announced that people who apply for Temporary Assistance for Needy Families (TANF) must submit to drug screening. The move is touted as an effort to reduce substance abuse, but could reduce the number of recipients by five to ten percent, who invariably will turn to nonprofits for more help. Earlier this year, Missouri approved cuts in health care services to an estimated 8,000 elderly and disabled people. A hoped-for special session to restore the cuts did not materialize this month.
Montana Continues its Strict Campaign Finance Tradition
Montana has a long history of enacting strong laws to regulate campaign contributions, dating back to a U.S. Senate bribery scandal in 1899. Since then, Montana voters have approved two laws restricting corporate spending in state elections and limiting the amount given to candidates from donors. The Corrupt Practices Act from 1912 stood for nearly 100 years and prohibited corporate donations to political candidates, until it was struck down by the U.S. Supreme Court in 2012 based on the Citizens United decision. However, contribution caps approved by voters in 1994 have so far survived federal court scrutiny. A federal district court judge has twice found the limits unconstitutional as violations of free speech rights. Last month the Ninth Circuit Court of Appeals once again overturned the judge, keeping the voter-approved limitations in place. A three-judge panel held that Montana’s campaign finance limits were both justified by and adequately tailored to the state’s interest in combating quid pro quo corruption or its appearances.