In This Week's Edition of Snapshot
- Tax reform: The Senate begins debate on tax reform, advancing tax reform ever closer to the President’s desk
- In the States: Michigan nonprofits and philanthropic groups promote Census 2020, a year in review of the charitable deduction challenges and expansion, and Kansas state lawmakers honored for their work on tax policy
What’s Going on with the Senate Tax Bill?
Yesterday evening, the Senate voted to begin debate on its version of the Tax Cuts and Jobs Act (S. 1)—kicking off 20 hours of debate on the bill, and eventually, a process that is often referred to as “vote-a-rama.” (As a reminder, you can see our analysis of the S. 1 on our website.) During this process, the Senate will vote on amendments offered by fifteen or more members to alter the bill as introduced on the floor. A number of senators filed amendments, and are expected to raise them on the Senate floor for consideration throughout the day until wrapping things up for a final vote later today or tomorrow.
Many of these amendments have served primarily as a strategy for individual members to signal their desired priorities for tax reform rather than a means of actually augmenting the proposed bill (as was the case in the Senate Finance Committee markup). However, it is worth noting that a number of signaling efforts have been made on behalf of preserving charitable giving under this bill. In the Committee markup, Sen. Debbie Stabenow (D-MI) and Committee Ranking Member Ron Wyden (D-OR) offered an amendment that would have created a universal charitable deduction, allowing all taxpayers to claim the charitable deduction, regardless of itemizing status. The amendment failed on a straight party-line vote of 12-14. When the bill came to the Senate floor yesterday, Sen. Wyden again made an attempt to block the bill and argued that it would be detrimental to charities. This effort also included a universal charitable deduction, but again, it failed on a 48-51 party-line vote. Sen. James Lankford (R-OK) also filed an amendment to extend the charitable deduction to all taxpayers, up to one-third of the standard deduction for those who would claim it in addition to the standard deduction. Sen. John Thune (R-SD) also filed an amendment to incorporate the CHARITY Act into S.1—which includes provisions to expand the IRA charitable rollover, simplify the private foundation excise tax, and other provisions in support of charitable giving. It is possible that these amendments could come up for a vote today, but with no offset offered for either, they are not likely to get enough support to be incorporated into the final bill.
Even beyond this amendment process, there are still a number of GOP senators who have yet to confirm themselves as a “YES” vote for the bill—leaving Majority Leader Mitch McConnell (R-KY) with the challenge of converting enough of those individuals with declared concerns to “YES” votes to pass the bill. Under the rules of reconciliation (and assuming that all Democrats vote against the bill, as expected), Republicans can only afford to lose two votes from within their party. Sens. Ron Johnson (R-WI), Bob Corker (R-TN), Susan Collins (R-ME), and Jeff Flake (R-AZ) are considered undecided. (See also the Washington Post’s whip list for the S. 1.) One other key vote that may be back in-play is that of Sen. Lisa Murkowski (R-AK). Yesterday, the Senate parliamentarian informed members and staff that parts of the tax bill that would authorize drilling in the Arctic National Wildlife Refuge—an addition to the bill meant to secure Sen. Murkowski’s “YES” vote on the bill—are not allowed under the rules of reconciliation. Senate Republicans have reworked the language in hopes that the changes will be enough to permit the provision, but it is not yet clear whether the changes will be sufficient. Sen. Murkowksi has not shared whether a bill without this provision would be enough to lose her current support.
If this bill passes, it is expected that there will be a conference to negotiate a single version of the bill that reconciles the differences between the House and Senate versions. At this point, it is unclear whether this would be a formal conference according to legislative procedure, or if it would be an informal conference between Majority Leader McConnell and House Speaker Paul Ryan (R-WI).
What Does the Bill Mean for Philanthropy?
Regardless of which provisions from each bill make it into the final, conferenced version of the legislation, the data shows that it will be harmful to charities. In addition to the existing research on the severely damaging impact the House bill would have on philanthropy, new data continues to come out with findings on how the Senate bill would have consistent negative effects on charitable giving. This Tuesday, two separate entities reported new findings that demonstrate this: one by the Joint Economic Committee, and two more by the Tax Policy Center.
The Council remains committed in our opposition to this bill and will continue our efforts to lobby against the passage of the Senate bill. Yesterday, we sent a joint letter with our colleagues at Independent Sector and the National Council of Nonprofits to every Senate office urging members to vote “NO” on S. 1. The letter states, in part, “The charitable nonprofit and foundation communities stand united in opposition to the Tax Cuts and Jobs Act and, in the strongest possible terms, urge a “NO” vote on the bill. The current legislation damages the civic infrastructure upon which our communities depend, and hurts the people that we serve.”
Why the Rush?
If the Senate cannot get a vote out this week, it might push them until next week. However, Congress has five legislative days before funding for the government expires on Dec. 8. Other factors to take into consideration are Deferred Action for Childhood Arrivals (DACA) and the Children’s Health Insurance program (CHIP). As reported by the Wall Street Journal, “Democrats may use their leverage in the spending bill to demand that the protections [for DACA recipients] be included.” CHIP expired back on Sept. 30 and Congress has not come to an agreement to keep funding the program for approximately nine million children.
Exclusive from our colleagues at the National Council of Nonprofits.
Michigan Nonprofits, Philanthropic Groups Promote Census 2020
Michigan nonprofits and foundations are gearing up for a three-year campaign for accurate counting of all Michiganders in the 2020 Census. The campaign will work to support the count through outreach and other guidance with special focus on hard-to-count groups such as immigrants, minorities, children, and low-income populations. The state is second in the nation for reliance on federal funding with forty-three percent of the state budget coming from the federal government. An accurate count under the Census is essential for reallocation of federal funding as well as representation in Congress, another concern being addressed by the campaign. “One thing we’ve learned is that nonprofits are trusted in their communities,” said Joan Bowman, external affairs officer with the Michigan Nonprofit Association. She continued, “They have established relationships and speak the community’s language and because of the role nonprofits play, they’re going to be most successful in counting those hard-to-count populations.” The campaign seeks to raise $4 million, which will be distributed via grants to nonprofits supporting field work of the campaign, and is led by the Michigan Nonprofit Association, the Council of Michigan Foundations, and the W.K. Kellogg Foundation.
Year in Review: Charitable Deduction Challenges and Expansion
Whether states consider the charitable giving tax incentive a lifeline to communities or a costly tax expenditure depends on many factors, including a culture of giving, economic vitality, and looming deficits. Many states steadfastly encourage charitable giving through their tax codes, and several this year acted to reinstate or establish new incentives. Legislators in six states (Connecticut, Illinois, Massachusetts, Michigan, Oregon, and Utah) all introduced bills this year that would have provided some tax relief for charitable donations. Illinois enacted an income tax checkoff for certain youth services while Utah established a non-refundable tax credit for certain projects in an enterprise zone.
Other states continued a troubling trend over the past seven years of taking up proposals to cap or eliminate these giving incentives. Some policymakers in Delaware and Oklahoma this year saw curbing the giving incentive as a means to fill budget deficits, but met strong opposition by champions in the nonprofit sector of both states. The Speaker of the Oklahoma House pulled a bill to impose a $17,000 cap on all itemized deductions, including charitable deductions, in the face of growing opposition of nonprofits. Delaware’s Governor included the repeal of giving incentives as part of broader personal income tax reform, which was defeated by concerted collaboration by nonprofit leaders. Also this year, Arkansas repealed a law that provided sales tax abatements to nonprofits locating or expanding in the state, and New York permanently extended a cap on the deductibility of charitable donations for those with incomes of more than $1 million.
Kansas State Lawmakers Honored for Their Work on Tax Policy
Kansas lawmakers struggled for five years dealing with the consequences of the historic tax cut experiment, but it took a supermajority in each chamber to override the veto by the Republican Governor protecting his policy agenda. The Governor’s plan called for cutting individual income taxes by 25 percent and eliminating the income tax for pass-through businesses, based on a theory that the cuts would jump-start the State’s economy relative to neighboring states. The results, instead, were significant revenue losses and spending cuts. Addressing the economic reality and intransigence of the Governor, various Republican party factions and Democrats worked together to pull the State back from “taking on water,” as one Senator put it. The conservative Senate majority leader, conceding that the tax reform package had gone too far, admitted, “I knew we needed to do something to get Kansas back on sound financial footing.” As a result of their efforts, Kansas Senate Majority Leader Jim Denning and House Minority Leader Jim Ward are 2017 Honorees for the Governing Public Officials of the Year Award.