In This Week's Edition of Snapshot…
- JCT Releases New Estimates in Advance of Senate Finance Hearing
- Council Call Highlights Public-Philanthropic Partnerships
- Council Raises Concerns About FARA
- In the States: Kentucky Preserves Charitable Incentive in Tax Reform, Maryland Passes Law Mirroring the Federal Uniform Guidance Requirement to Pay Indirect Costs
On Monday, the Joint Committee on Taxation (JCT)—a nonpartisan committee of the U.S. Congress tasked with supporting the House and Senate tax-writing committees by providing expertise and analysis—released a new analysis this week estimating a 61.3% decrease in the number of taxpayers who will choose to itemize their taxes in 2018 versus in 2017. Stemming from a number of changes made under the tax reform bill that passed in late 2017 (including the nearly-doubling of the standard deduction, coupled with the elimination of several itemized deductions), JCT estimates that approximately 18 million taxpayers will itemize their 2018 tax returns, compared to the 46.5 million people who itemized in 2017.
This is important for philanthropy and charitable giving because only taxpayers who itemize will have access to the benefits of the charitable deduction. If only 10% of the 175.8 million taxpayers (as estimated by a JCT analysis from February) are expected to itemize in 2018, then nearly 90% of taxpayers will not receive a tax benefit for their charitable giving.
This was a point of debate at a Senate Finance Committee hearing held on Tuesday to discuss the Early Impressions of the New Tax Law. During the hearing, Republican members of the committee emphasized the economic growth that they expect the new tax law to generate, while Democrats focused on the findings of the JCT report.
On the south side of the Capitol, the House Ways and Means Committee appointed a new staff director. According to a Monday press release from Chairman Kevin Brady (R-TX), “Today, Chairman Kevin Brady (R-TX) announced Gary Andres as the new Majority Staff Director of the Ways and Means Committee: ‘I am thrilled to announce Gary Andres as the new staff director of the Committee. Gary is a seasoned public policy expert with decades of experience at the White House, on Capitol Hill, and in the private sector. His wisdom and leadership will be critical as we work to build off this newfound economic momentum and help American families thrive.’” A POLITICO Pro email noted that Andres will manage a staff of close to 60 people and is replacing his son-in-law, Dave Stewart, who recently left the job.
This week, the Council, along with the U.S. Department of Housing and Urban Development (HUD), hosted the first learning opportunity for the Excellence in Public-Philanthropic Partnerships Exchange—an online community comprised exclusively of previous HUD Award winners and their public partners. The purpose of the conference call was to hear a foundation and their public sector partners discuss their joint initiatives and answer questions about the dynamics of partnering between government and philanthropy. The panelists were:
- Denise Spencer, President and CEO, Community Foundation of the Lowcountry;
- David Bennett, Mayor of Hilton Head Island;
- Pete Nardi, General Manager of the Hilton Head Public Service District.
During the call, the panelists discussed their winning partnership—including what it took to get it off the ground, how they sustained momentum, and the results they achieved. The call concluded with a question-and-answer portion from the call-in participants. Council members can listen to the audio of the insightful discussion here.
The Council has joined with more than 40 civil society organizations in a sign-on letter to Congress, sharing concerns about how proposed changes to the Foreign Agent Registration Act (FARA) may adversely impact the US non-profit sector. “We support Congress’ wish to empower government enforcement of FARA in response to foreign governments efforts to destabilize our democracy. We kindly ask Congress to ensure that it also safeguards an independent non-profit sector.”
Starting in late 2017, several bills drafted in both the House and Senate have proposed to amend FARA in order to increase enforcement resources and mandate within the Department of Justice. These proposed bills, however, do not propose changes to the 1938 language that defines key elements within FARA, like “foreign principals”. Therefore, expanded enforcement capabilities for FARA without clarified definitions within the original 1938 law could have significant unintended impacts on nonprofits and foundations that would be required to register due to relationships with non-U.S. partners. The Council has been working with the International Center for Not-for-Profit Law (ICNL), InterAction, and a number of other partners since late 2017 to raise awareness on these concerns. You can read more about the possible impact of FARA in a recent article from Just Security, The Unintended Foreign Agents.
Exclusive from our colleagues at the National Council of Nonprofits.
After Kentucky Governor Matt Bevin vetoed the state budget and revenue bills earlier this month, Kentucky’s Legislature voted by wide margins to override his actions and thus enact those bills. The new budget law maintains a 6.25 percent cut to most state agencies, yet provides increased funding for education and programs for children, health, behavioral health, disabilities, and aging. The new revenue law, introduced to respond to federal tax reform, overhauls the state tax system by switching to a flat 5 percent tax rate for personal and corporate income taxes, a change from the current brackets ranging from 2-6 percent and 4-6 percent respectively. The new law also expands sales tax to services and labor, plus eliminates all itemized deductions except for social security income, mortgage income, and, most importantly, charitable giving.
Maryland Passes Law Mirroring the Federal Uniform Guidance Requirement to Pay Indirect Costs
Maryland nonprofits are eagerly awaiting Governor Larry Hogan’s signature on a bill that unanimously passed the General Assembly. Maryland Nonprofits worked closely with the bill’s sponsor to ensure passage of SB 1045, which requires state agencies to reimburse nonprofits for indirect costs they incur when performing work under grants/contracts paid with state funds or a combination of state and other nonfederal funds. Like the federal OMB Uniform Guidance requires for federal grants, the new Maryland law will require state agencies to pay a nonprofit’s federally approved indirect cost rate, if one exists. If not, then a nonprofit with an indirect cost rate established with a nonfederal entity using the federal cost principles can use this rate for reimbursements. Nonprofits that have not negotiated a rate based on the federal cost principles will be paid at least 10 percent of modified total direct costs in accordance with the Uniform Guidance. This bill ensures that nonprofits are reimbursed for services closer to their actual costs. In addition, by aligning with the Uniform Guidance, it streamlines and simplifies the process for state agencies to reimburse nonprofits for indirect costs by creating a single standardized set of rules.