In This Week's Edition of Snapshot…
- Omnibus Signed into Law, Averting Another Shutdown
- House Continues Push for IRS Reform
- Guidance Forthcoming on New UBIT Laws
- In the States: Interest Grows for Medicaid Work and Volunteering Eligibility Mandates, Making Sure Donations Don’t Determine Domicile
On March 23—after a brief morning threat to veto the legislation—President Trump signed a $1.3 trillion omnibus spending bill into law, funding the federal government through the rest of fiscal year (FY) 2018. According to the Wall Street Journal, “President Donald Trump’s public complaints about the sweeping spending bill he threatened to veto before signing it into law Friday highlighted his discomfort with the classic Washington compromise: nobody wins everything, but both sides get some of what they want. The bill that will fund the government until October gave neither party what they wanted on immigration policy. But by boosting spending by more than $140 billion above limits set in 2011, lawmakers from both parties got enough policy wins to live with the $1.3 trillion result. With just hours left before a government shutdown, Mr. Trump decided to live with it too, but not happily.”
Of particular importance to the philanthropic sector was the exclusion of any language to weaken or repeal the Johnson Amendment—a law which prohibits 501(c)(3) organizations from participating in, or intervening in (including the publishing and distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. It is also an invaluable safeguard for the integrity of the sector by preventing bad actors from exploiting charitable designation for political gain. Keeping the Johnson Amendment language out of the omnibus was a victory for our sector, but we know that this fight will continue.
POLITICO listed some of the other excluded and included items in the omnibus such as:
- Border security and wall: The bill would provide nearly $1.6 billion for border security, but this money may not be used for an increase in detention beds or federal deportation agents. Adding those limits was a key priority for Democrats in the talks. The deal includes roughly $641 million for new physical barriers, which GOP leaders have called the “border wall project,” instead of the $18 billion Trump had sought for the wall. Republicans say it provides for more than 90 miles of “border wall system,” beyond Trump’s request of 74 miles in fiscal year 2018. Democrats point out that only half of the fencing is for “new barriers” and the rest is for “upgraded” existing barriers.
- 'Grain glitch': The Republican measure, favored by House Ways and Means Chairman Kevin Brady (R-TX) and ag-state lawmakers, fixes a loophole in the GOP tax law that allows farmers to get big tax cuts by selling directly to co-ops.
- Low-income housing: In exchange for the grain glitch fix, Democrats won provisions expanding a tax subsidy for affordable housing—designed to shore up the low-income housing tax credit in the wake of the GOP tax law.
- Fix NICS: The bipartisan bill offers financial incentives for federal and state authorities to comply with the U.S. criminal background check system. It rejects conservatives demands for an expansion of "concealed carry" laws alongside that measure.
- School safety bill: The bipartisan school safety bill would create a $50 million-a-year grant program for training to recognize signs of gun violence. It’s led by Rep. John Rutherford (R-FL) in the House and Sen. Orrin Hatch (R-UT) in the Senate.
- Border wall: Republicans wanted to devote at least $1.6 billion to begin construction on President Donald Trump’s border wall, though Trump had sought $18 billion. Democrats demanded other conditions.
- DREAMers: GOP leaders kept deportation relief for young undocumented immigrants, known as DREAMers, out of the spending bill.
- Obamacare stabilization: A bipartisan group of lawmakers fought for money for programs like cost-sharing subsidies and reinsurance to help avoid huge insurance premium hikes this fall.
Another item that got included in the recent omnibus was the Green and Healthy Homes Initiative (GHHI). This initiative got its start through the assistance of the Council in 2009—the Council’s first public-philanthropic partnerships effort—under the leadership of the Council’s board chair at the time, Ralph Smith (then executive vice president of the Annie E. Casey Foundation). According to GHHI’s press release, “The Congressional Omnibus FY2018 Budget, signed today by the President, brings excellent news for advancing green and healthy housing in the U.S. The Budget includes substantial increases in lead, healthy homes and weatherization related funding. … On behalf of every family, child and community who will benefit from healthier, safer homes, we applaud the members of the US Senate and House who stood up for healthy homes. We also thank those at HUD, DOE, EPA and CDC who have held firm in their continued commitment to lead poisoning prevention, the reduction of home-based environmental health hazards and addressing poorly weatherized homes.”
On Monday, Reps. Lynn Jenkins (R-KS) and John Lewis (D-GA) of the House Ways and Means Committee released a bipartisan discussion draft of the Taxpayer First Act. The draft bill aims to overhaul operations of the Internal Revenue Service (IRS) and the overall administration of our tax system.
Specifically, the draft bill seeks to “modernize the agency’s information technology, infrastructure, and services” for the first time in two decades. Ways and Means Oversight Subcommittee Chair Jenkins and Ranking Member Lewis offered the discussion draft as the culminating product of more than eleven hearings, roundtable discussions, and other Oversight Subcommittee events over the past three years.
The proposal would do a number of things, including changing the title of the agency’s chief from “Commissioner” to “Administrator” to emphasize the “primary responsibility of a person leader the IRS—to administer the tax code.” It would also mandate that tax-exempt organizations file Form 990s electronically—a measure supported by the Council.
The IRS received a bump of $195.6 million in funding under the recently passed omnibus bill—bringing the total budget for the agency to $11.43 billion.
IRS recently issued guidance that touched on some of the unrelated business income tax (UBIT) confusion surrounding “employee fringe benefits,” such as transportation benefits. According to the American Society of Association Executives (ASAE), “What comes at some surprise to many tax-exempt employers is that the new guidance issued by Treasury makes clear that employers should pay UBIT not just on direct payments for transportation and parking benefits, but also on amounts paid by employees through elective salary deferral via a compensation reduction agreement. Because employees pay for transportation themselves in this arrangement, many tax-exempt employers have not previously viewed salary deferrals for commuting costs as a fringe benefit.”
The philanthropic sector should hopefully have some additional clarification soon on the new UBIT that took effect with the passage of the recent tax code overhaul. According to BGOV, “The IRS will issue guidance on two nonprofit-related changes included in the tax law by the end of June, a Treasury official said. The guidance will instruct nonprofits on how to calculate unrelated business income separately for each trade or business, a ‘bucketing rule’ included in the 2017 tax act (Pub. L. No. 115-97). The Internal Revenue Service will also issue guidance on a 21 percent excise tax on executive compensation of more than $1 million, Elinor Ramey, an attorney-adviser in the Treasury Department's Office of Tax Policy, said March 23 at the Washington Nonprofit Legal & Tax Conference. Both projects are in the IRS and Treasury Department's 2018 priority guidance plan. The changes will hit large nonprofit organizations, such as colleges and universities, that have complex accounting structures and often employ several executives paid more than $1 million.”
Exclusive from our colleagues at the National Council of Nonprofits.
Arkansas is the latest state to receive Trump Administration approval for imposing a work and volunteering requirement that limits eligibility for individuals to participate in the Medicaid program. To date, 10 states have or are seeking such approval. Under the Arkansas plan, enrollees who do not work or volunteer with a charitable nonprofit at least 80 hours a month would lose coverage, perhaps as early as September. The work requirement exempts certain categories of people, such as those with opioid addiction and parents with dependent children.
Elsewhere, legislation pending in Connecticut proposes to require adult Medicaid participants to work or perform community service at least 20 hours per week for eligibility, with certain limitations. “Community service” is defined as uncompensated labor for a nonprofit community service provider. A similar proposal in Wyoming, however, failed to pass earlier this month.
This week, West Virginia extended the concept of mandatory work and volunteering requirement to eligibility for supplemental nutrition assistance program (SNAP or food stamps). Starting October 1, 2018, able-bodied persons between 18 and 49 years of age without dependents must either work, volunteer, or participate in workforce training programs for 20 hours per week to receive SNAP benefits.
Making Sure Donations Don’t Determine Domicile
Legislation awaiting the signature of the Oregon Governor seeks to rectify a disincentive for charitable giving in the Beaver State by prohibiting the Department of Revenue from using charitable contributions to determine an individual’s domicile or resident status. Recent court rulings recognized that law firms and accounting firms had been advising prior residents to avoid making charitable contributions and from engaging with Oregon-based charitable organizations because the Department was using those activities as determining factors for domicile or resident status, and thus liable for Oregon taxes. The Nonprofit Association of Oregon worked to amend the legislation to ensure that the nonprofits would no longer “los[e] the significant value of charitable giving and volunteering that these former Oregonians would make to the organizations and communities where they maintain deep relationships.”
New Jersey enacted a similar law in 2013, explaining that “Whether a person lives in Florida or Arizona, giving to charities in New Jersey, in and of itself, should not subject the person to New Jersey income tax as a New Jersey resident.”