In This Week's Edition of Snapshot:
- Brief Government Shutdown Ended with Passage of Budget Deal
- Trump Administration Releases 2018-19 Budget
- Repeal of Johnson Amendment Raised at National Prayer Breakfast
- President Trump Officially Nominates New IRS Head
- FEMA Requests Comments on Natural Hazard Mitigation Strategy
- In the States: Estate Taxes on Legislative Agendas, and Maine Governor Issues Renewed Assaults on Nonprofits, Foundations
Government funding was set to run out at midnight last Thursday, Feb. 8, if Congress did not vote to pass legislation to fund the federal government. Though a funding deal was reached by Senate leadership on Wednesday, Sen. Rand Paul (R-KY) stalled a vote from happening in the Senate until just after midnight—triggering an, albeit short-lived, shutdown. Senator Paul expressed concern with the increased spending levels under the deal and called for maintaining strict budget caps. Despite the delay, Senate rules compelled a vote at 1 a.m. on Friday morning—which passed by a vote of 71-28.
Given that the deal passed by the Senate was different than what the House had passed earlier that week, it was sent back to the House where it passed with bipartisan support by a vote of 240-186. The legislation was signed into law by President Trump on Friday—pushing the deadline until March 23 for the House and Senate Appropriations Committees to negotiate an omnibus spending bill to fund federal agencies through Sept. 30.
The legislation increases current spending levels for defense and domestic programs by roughly $300 billion—adding approximately $320 billion to the deficit, according to the Congressional Budget Office (CBO). Elements of the deal included four years of funding for the Children’s Health Insurance Program (CHIP), disaster aid for areas affected by hurricanes, and funding to combat the opioid crisis. The measure also raises the government’s borrowing limit (often referred to as the “debt limit”) through March 2019.
On Monday, the Trump Administration released its budget proposal for fiscal year (FY) 2019. The proposal calls for increased defense spending, as well as for additional funding to combat the opioid crisis. Additionally, the proposal suggests slashing funding for a number of domestic programs—including Medicare. The budget proposal totals $4.4 trillion, and would add $7 trillion to the deficit over the next ten years.
Historically, budget proposals put forward by Administrations have served as a messaging document for laying out a President’s priorities for the upcoming fiscal year, as opposed to an actual starting point for Congress to draft a budget.
This week, the congressional tax-writing committees held several hearings on the president’s FY 2019 budget request. On Wednesday, the Senate Finance Committee held two hearings “to examine the administration’s budget request for the Treasury Department, Internal Revenue Service (IRS), and Department of Health and Human Services (HHS).” The committee heard testimony in the morning from Treasury Secretary Steven Mnuchin and in the afternoon from IRS Acting Commissioner and Assistant Secretary for Tax Policy David Kautter.
Of particular note, Acting Commissioner Kautter testified that “2018 implementation of the tax reform bill is going to consume a lot of energy and effort in the Internal Revenue Service, so we've got to balance the desire to do some restructuring at the Internal Revenue Service while not disrupting the implementation of tax reform.” He also noted, on the topic of charitable deductions to states in lieu of the state and local tax (SALT) deduction, that “Under the general principles for charitable contribution, the primary purpose of the contribution is donative, which is a disinterested and detached interest of generosity.”
Today, the House Ways and Means Committee is holding a hearing to discuss President Trump’s budget request for Treasury. Chairman Kevin Brady (R-TX) said in a press release, “We are excited to welcome Secretary Steven Mnuchin to discuss President Trump’s proposed 2019 budget for the Department of Treasury. Last year—working together with the Secretary and President Trump—we successfully delivered historic tax reform to the American people. Already, we are seeing the positive impacts this new tax law is having for hardworking families and local businesses across the country.”
During his address at the National Prayer Breakfast last Thursday, House Majority Whip Steve Scalise (R-LA) reiterated his desire to repeal the Johnson Amendment—a long-standing provision in the tax code to ensure that nonprofits and foundations remain nonpartisan in pursuit of their charitable missions.
In his remarks, Majority Whip Scalise expressed his belief that the separation of church and state is an impossible notion, and expressed pride in the fact that the House successfully passed a repeal of the Johnson Amendment (it was included in one of the initial versions of the tax reform bill, but did not make it into the final legislation).
Leaders in the charitable and philanthropic sectors pushed back against Rep. Scalise’s comments, sharing their concerns about how any attempt to weaken or repeal the Johnson Amendment would threaten the fundamental integrity of our sector. In the statement released by the National Council of Nonprofits, Council President and CEO Vikki Spruill is quoted saying how important it is that “the public trust [charitable foundations] have earned over the years is not diminished by partisan labels or influence.”
While POLITICO first reported last month that President Trump would nominate tax lawyer Charles “Chuck” Rettig to be the next IRS commissioner, his nomination was not made official by the White House until last week. According to POLITICO, “Rettig, a specialist in handling tax disputes who is a partner in a Beverly Hills, CA, law firm, has for more than three decades represented clients before the IRS, the Justice Department, state tax authorities and other jurisdictions.”
House Ways and Means Committee Chairman Kevin Brady (R-TX) applauded the move, saying, “I am pleased to see President Trump moving forward with a new leader at the IRS who is focused on serving taxpayers and administering our new tax code fairly, effectively, and with integrity. With a long history of helping families and job creators navigate the tax code and stand up to the IRS when the agency is wrong, Chuck Rettig as the new IRS commissioner is just the partner we need as we work to overhaul our nation’s tax administrator.” Rettig’s nomination will need to be approved by the Senate before he can begin serving as the new IRS commissioner.
The Federal Emergency Management Agency (FEMA) is pushing for better investments in natural hazard mitigation and is asking for public comments that will help develop strategies to do so. According to a recent FEMA email, “For our nation to become more resilient, we must develop a more effective and efficient way to invest in mitigation. The U.S. Department of Homeland Security tasked the Mitigation Framework Leadership Group (MitFLG) to develop a National Mitigation Investment Strategy (Investment Strategy). As of Jan. 11, the public is encouraged to review the draft Investment Strategy and provide comment. The draft Investment Strategy makes a series of recommendations, organized by six desired outcomes which, if met, could result in a nation better equipped for, and less vulnerable to, natural hazards. The draft Investment Strategy provides a national approach to investments in mitigation activities and risk management across federal, state, local, and territorial and tribal government and the private and non-profit sectors.”
FEMA will be accepting public comments on the draft investment strategy thought March 11, 2018.
Exclusive from our colleagues at the National Council of Nonprofits.
Estate Taxes on Legislative Agendas
Some state legislatures are considering bills affecting estate taxes, seemingly in response to the changes in the new federal tax law that doubled the federal threshold to nearly $11 million for individuals and $22 million for couples. A newly introduced bill in Rhode Island would increase the state estate tax threshold from $64,400 to $99,600. Legislation in New York that has passed the Senate would repeal the state estate tax. A bipartisan bill in Pennsylvania repeals provisions of the state inheritance tax and exempts certain transfers between family members. Connecticut lawmakers have introduced separate measures would align the state threshold with the new federal level, and another that would phase out the estate tax completely over a five-year period. Policymakers in Hawaii and Maine are attempting to extend estate taxes by increasing the tax rate and lowering the threshold, respectively.
The estate tax is an important source of revenue for charitable nonprofits and foundations, and increases in threshold amounts inversely affect charitable giving. The doubling of the federal amount is projected to reduce federal revenues by nearly $100 billion over ten years and lower charitable giving by $4 billion per year.
Maine Governor Issues Renewed Assaults on Nonprofits, Foundations
During his last State-of the-State address, Maine Governor Paul LePage continued his seven-year assault on nonprofits. Directly targeting charitable nonprofits and foundations exempt from property taxation under the law, LePage stated that nonprofits are the “real culprit” for rising property taxes. In an effort to reduce those property taxes, LePage reiterated his call to allow “municipalities to collect property taxes or fees from large [nonprofit] entities,” but lamented that he has “been met with staunch resistance.” Last year alone saw seven legislative bills in the state focused on nonprofit property tax exemption. They ranged from passing a new requirement that conservation property owners register with the state, which the Governor touted during his speech, to charging nonprofits service fees not connected to services provided.