In This Week's Edition of Snapshot…
- Senators, Worried About a Decline in Charitable Giving, Request Information from Treasury
- House to Vote on Appropriations “Minibus” with Johnson Amendment Rider
- Treasury Rolls-Back Donor Disclosure Requirements, Wyden Disapproves
- Tax Cuts 2.0 Update
- 2018 HUD Award Winners Honored
- White House Legislative Affairs Director Moving On
- Primary Runoff Election Held in Alabama
- In the States: Four-State SALT Lawsuit, States Consider Expanding Overtime
Last week, Senators Chris Coons (D-DE) and Jim Lankford (R-OK) sent a letter to Treasury Secretary Steven Mnuchin requesting information on charitable giving. The letter was a follow-up to their questions at a Senate Appropriations Financial Services and General Government Subcommittee hearing in May, where they asked Sec. Mnuchin how the 2017 tax code overhaul would affect charitable giving. Council staff worked closely with Sen. Coons’ staff to provide thoughts and suggestions for the letter to Sec. Mnuchin.
According to POLITICO Morning Tax, “The nonprofit sector has long said that the new tax code’s more robust standard deduction would depress contributions, and Sens. James Lankford (R-OK) and Chris Coons (D-DE) are pressing Treasury Secretary Steven Mnuchin about a ‘potentially alarming decrease’ in donations. ‘Even in times of tight budgets,’ the two senators wrote, ‘we have a moral obligation to support our neighbors most in need, and charities play an essential role in doing just that. Despite our disagreements on other tax-related issues, we believe that our tax code should support American charities and the generosity of millions of Americans who donate to charities.’ Lankford and Coons asked for data on charitable deductions already claimed for this year and quarterly data going forward.”
On Tuesday, the House Rules Committee voted to allow a two-bill appropriations package (H.R. 6147—which includes Interior-Environment and Financial Services funding) to move to the House floor for debate.
The bill contains a rider that would carve-out an exception to enforcement of the Johnson Amendment for churches. Functionally, this would allow churches, classified as 501(c)(3) charitable organizations under the Internal Revenue Code, to engage in unlimited political and campaign activity—including using charitable dollars for non-charitable, political purposes. This explicitly encourages selective enforcement of the law and would threaten the integrity of the entire sector by corrupting and exploiting the intent of the charitable deduction as a means of supporting charitable activities.
The Council joined the National Council of Nonprofits, Independent Sector, and the National Human Services Assembly in issuing a strong statement in opposition to the Rules Committee action, and in support of nonprofit nonpartisanship.
Although disappointing, this outcome does not come as a surprise. The House has attempted to include this rider in every piece of must-pass legislation that has been put up for a vote since tax reform passed last year—and every time, the Senate has rejected it. We expect things to play out the same way in this situation as well. The House is expected to vote on this bill later today. If it passes, it will head to the Senate where Majority Leader Mitch McConnell’s (R-KY) staff have indicated that he does not intend to include “controversial” riders—including changing the Johnson Amendment—in Senate spending bills.
On Monday, the U.S. Treasury Department announced that it will no longer require nonprofit groups—except 501(c)(3)s—to file the Schedule B (which requires the disclosure of names and addresses of donors who contribute $5,000 or more in the filing year) of their Forms 990.
Prior to this announcement, all tax-exempt organizations described under 501(c) were required to file this information in accordance with IRS regulations, although only 501(c)(3)s are subject to these requirements by law. According to the press release, the decision reflects a sentiment that “the IRS simply does not need tax returns with donor names and addresses to do its job in this area.”
The point that has sparked pushback from some lawmakers is that many of the groups no longer required to share this information are active in political activity. On Tuesday, Ranking Member of the Senate Finance Committee Ron Wyden (D-OR) expressed disapproval, stating, “It's the latest attempt by Secretary Mnuchin and Donald Trump to eliminate transparency and keep officials and lawmakers from following the money.” He continued, “That's why I'll be opposing Charles Rettig, nominee to be IRS commissioner, unless Mr. Rettig commits to restoring this critical disclosure requirement."
The Senate Finance Committee is scheduled to vote on recommending Chuck Rettig to become IRS Commissioner later today.
On Tuesday, House Ways and Means Chairman Kevin Brady (R-TX) said that the House will vote on a second round of tax cuts—referred to as “tax cuts 2.0”—in September. According to POLITICO Tax Whiteboard, “The Texas Republican spoke as he and other Republican tax writers met with President Donald Trump at the White House to discuss their plans to extend tax cuts due to expire at the end of 2025. Dubbed Tax Cuts 2.0, the proposal stands no chance of becoming law because it will be blocked by Senate Democrats. But the vote is designed to force Democrats into an uncomfortable vote while reminding voters of the GOP’s commitment to cutting taxes.”
In related House news, George Callas—the former top tax counsel for House Speaker Paul Ryan (R-WI)—is leaving the Hill to become a managing director for Steptoe & Johnson LLP’s Government Affairs & Public Policy and Tax groups. According to POLITICO Morning Tax, “Callas’ departure from the Hill wasn’t unexpected, given the exodus of senior staffers who worked on the [Tax Cuts and Jobs Act] TCJA. He told [POLITICO] Pro Tax’s Aaron Lorenzo in an exit interview that the new tax law was a product of the ‘sausage-making process’ and surely wasn’t perfect… Still, Callas considers it a marvel that Republicans were able to get the corporate rate down to 21 percent. ‘It ended up that members were willing to be more aggressive than maybe we expected them to be,’ he said.”
On Monday, the Council, in partnership with the Department of Housing and Urban Development (HUD), honored the 10 winners of the 2018 Secretary’s Award for Public-Philanthropic Partnerships. Hosted at HUD’s headquarters in Washington, DC, the winning partnerships were given their awards by HUD Secretary Ben Carson and Interim Council President and CEO Gene Cochrane. The program also included a panel with representatives from each partnership to discuss their work and the challenges they faced, a networking lunch with philanthropy liaisons from several federal agencies, and a panel on scaling successful public-philanthropic partnerships.
The Secretary’s Award for Public-Philanthropic Partnerships—now in its sixth year—emphasizes cross-sector partnerships between the philanthropic and public sectors. The goal is to recognize the partnership process and its impact as a community strategy to increase the quality of life for low- and moderate-income residents across all American geographies—urban, suburban, and rural.
According to a joint press release from HUD and the Council, “‘It’s this collaborative approach to service that will lead us to find solutions to help the most vulnerable in our communities,’ Secretary Ben Carson said. ‘I’m pleased to recognize these award winners for the important work they do to serve the housing, health, safety, and educational needs of their fellow Americans.’ ‘The cross-sector partnerships demonstrated among the winners of this year’s awards highlight the power of collaboration,’ said Gene Cochrane, interim president and CEO of the Council on Foundations. ‘Through innovative, bold ideas and unique partnerships, these foundations are shining examples of philanthropy’s ability to promote the common good.’”
The 2018 winners are:
- Anthem Foundation
- Bon Secours of Maryland Foundation
- Charles Stewart Mott Foundation
- The Conrad N. Hilton Foundation
- Greater Cedar Rapids Community Foundation
- The Harry & Jeanette Weinberg Foundation and The Leonard & Helen R. Stulman Foundation
- Michael Reese Health Trust and Polk Bros. Foundation
- Rasmuson Foundation
- Spartanburg County Foundation
- U.S. Endowment for Forestry and Communities
Last week, POLITICO reported that Marc Short, White House legislative affairs director will leave his post on July 20. President Trump’s former liaison to Capitol Hill had been at the center of the President’s legislative agenda, from the successful effort to rewrite the tax code, to the failed attempt to repeal the Affordable Care Act (ACA). Mr. Short will join Guidepost Strategies as partner and will also teach at the University of Virginia’s business school. Mr. Short will be replaced by Shahira Knight—former White House National Economic Council deputy director.
The Hill reported on Knight’s key role in developing the policy in last year’s tax overhaul. Knight is a former senior staffer of the House Ways and Means Committee and a lobbyist for the financial industry. The immediate priorities of President Trump’s new envoy to Capitol Hill include: the smooth confirmation of Brett Kavanaugh, President Trumps’ Supreme Court nominee; the negotiations over government spending legislation—the current law will expire in Sept. 30; and efforts to make the 2017 tax cuts for individuals permanent. Ms. Knight’s job could become more complicated after the November midterm elections if Democrats win back the House.
In the weeks ahead, we will include updates from the midterm election trail. This is intended to provide nonpartisan, matter-of-fact election news about the primary races that will play a key role in the outcome of the November elections.
This Tuesday, incumbent Rep. Martha Roby (R-AL) won her runoff primary race against challenger Bobby Bright to be the Republican candidate in the race for Alabama’s 2nd district. Rep. Roby is heavily favored to defeat her Democratic challenger, Tabitha Isner, in the deeply conservative 2nd district this November.
Exclusive from our colleagues at the National Council of Nonprofits.
Four states (Connecticut, Maryland, New Jersey, and New York) filed a lawsuit this week claiming the recently-imposed $10,000 cap on the state and local tax (SALT) deduction under the new federal tax law is unconstitutional, specifically violating states’ rights under the Tenth Amendment. The lawsuit also claims the SALT cap exceeds federal taxing powers under the Sixteenth Amendment and Article 1, Section 8 of the U.S. Constitution. New York Attorney General Underwood stated that the tax law and subsequent cap disproportionately harms taxpayers in those four states, and others in similar regions with high local taxes, citing an estimated $14.3 billion in increased federal taxes for New York residents in 2018. Connecticut Governor Malloy estimates a $10 billion loss for residents this year. The lawsuit alleges partisan motives for imposing the cap and asks the court to “invalidate this unconstitutional assault on the States’ sovereign choices.”
An analysis of the suit by Governing, however, suggests that the constitutional challenge based on an argument of disproportionate impact may not be sufficient because laws often impact states differently. Historic precedence also shows that the federal government has previously limited the SALT deduction since its inception when the federal income tax was created. The suit comes after three of the four states passed workaround legislation to allow state taxpayers to pay their state and/or local taxes through contributions to government-run charities and claim charitable deductions on their federal taxes. The Internal Revenue Service is expected to issue proposed regulations to address the legality of this approach.
While efforts by the federal government to expand overtime were blocked in court in 2016 and 2017, some states have taken up the challenge. The Pennsylvania Department of Labor and Industry recently published proposed regulations to update the Commonwealth’s overtime pay rules, calling for increasing the minimum salary threshold (salary level test) for employees to qualify for the executive, administrative, and professional exemptions from overtime requirements. Under the proposed regulations, the current minimum salary level for these exemptions, $455 per week or $23,660 annually, would be increased over three years to $921 per week, or $47,892 annually, and then be adjusted for inflation thereafter. The proposed regulations also call for changes to the duties tests under the wage and hour law. See the Pennsylvania Bulletin Proposed Rulemaking and Regulatory Analysis Form for more information.
The Washington State Department of Labor & Industries is currently engaged in rulemaking to update the state’s overtime pay exemption threshold, likely raising the overtime exemption threshold for all employers, including nonprofits. Washington Nonprofits asks for “a simple and clear plain language duties test” that accounts for nonprofit employees who “wear many hats” and is reflective of a modern office, as well as “the ability to plan and forecast their staff costs” through “a predictable, non-political updating mechanism.” The state association of nonprofits is part of the stakeholder group working with the state and will work to disseminate information and opportunities for action to nonprofit organizations throughout Washington.