In This Week's Edition of Snapshot…
- Tax Cuts 2.0 Plan is Unveiled
- Rettig Expected to Be Confirmed Amid Other Pending Priorities
- Primary Elections Held in New Hampshire
- State Tax Revenues Vary Due to Federal Tax Law Changes
On Monday, the House Ways and Means Committee unveiled a package of three bills (H.R. 6760; H.R. 6757; H.R. 6756) which make up their “tax cuts 2.0” plan. The legislation would make permanent the individual and small business tax cuts that were passed at the end of 2017 and currently expire in 2025. A number of these provisions pose significant concerns for their expected negative impact on charitable giving (i.e. changes to the individual income tax rates, the increased standard deduction, and the increased threshold for the estate tax). One positive provision that would become permanent under this plan is the 60% AGI limitation for donations of cash. It also includes incentives for retirement savings and new business innovation.
The Joint Committee on Taxation (JCT) estimates that, if passed into law, this second round of tax cuts as proposed by the House would cost the federal government $657 billion over a decade—though multiple external models have predicted an even greater price tag.
As expected, the legislation includes a provision to make permanent the $10,000 cap for state and local taxes (SALT). This measure faces opposition from both Democrats and some Republicans and presents a significant hurdle to passage in the House. Even if it does pass the House, the package as a whole is not likely to be taken up by the Senate, perhaps with the exception of the Family Savings Act (H.R. 6757), which borrows heavily from a bipartisan Senate bill.
The House Ways and Means Committee is set to mark up the legislation today beginning at 10:00 a.m. ET.
Yesterday, the Senate confirmed Chuck Rettig to be the new commissioner of the IRS by a vote of 64-33. Rettig’s nomination passed the Senate Finance Committee by a party-line vote largely due to committee Democrats objecting “to a separate Trump administration policy change that allows political nonprofits to give less information about donors to the IRS.” Last month, 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.
POLITICO Pro Tax noted, “Chuck Rettig's nomination to be IRS commissioner eventually proved once more one of those fun Senate truisms—the chamber can move quickly when everyone wants to. And on Wednesday, with a hurricane bearing down on the Carolinas, all the senators did — which meant that Rettig, whose nomination previously had been in limbo for weeks, cleared both a procedural and confirmation vote in the span of about an hour. … Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee, was urging his colleagues to vote against Rettig, largely because of a Trump administration policy change that allows political nonprofits to shield the names and addresses of big donors from the IRS.”
In a broader look at what is facing Congress before the end of the fiscal year—which ends on Sept. 30—there are still many issues that need to be resolved. According to POLITICO Huddle, “Congress has a lot to do and not much time to do it. Government funding runs dry Sept. 30, but ‘appropriators in both chambers still face numerous policy disputes over controversial issues such as abortion as they work to cut deals on spending bills before the close of the fiscal year,’ Rachael [Bade] and Burgess [Everett] report. There’s also the farm bill, which has stalled amid a clash over work requirements for food stamp recipients. ‘Failure to pass a new farm bill by the Sept. 30 deadline could be a disaster,’ they warn. ‘Republicans say it’s the best way to counteract the ill effects of Trump’s trade war.’”
And looking past the end of the current fiscal year, it appears that Senate Majority Leader Mitch McConnell (R-KY) plans to keep the chamber in session while House members will be back in their districts campaigning. According to POLITICO, “Traditionally, the Senate hits the road in October of an election year. But the Senate is throwing tradition out the window this year. Majority Leader Mitch McConnell is planning to keep the chamber in session for a significant portion of October if not four entire weeks, costing Democrats key campaign trail days and allowing the Senate to continue its work into the fall, according to five Republican officials. … Moreover, the Senate GOP has only two members who are considered vulnerable in the election: Ted Cruz of Texas and Dean Heller of Nevada. Democrats, meanwhile, are defending 10 seats total in states that Trump won in 2016, with at least four considered extremely competitive. The House is expected to head home for the rest of the election season after passing a spending bill later this month.”
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.
On Tuesday, New Hampshire held primary elections for governor and Congress. Molly Kelly—a former state senator—won the Democratic nomination for governor with 65.7% of votes according to the Washington Post. In November, Mrs. Kelly will face incumbent Republican Chris Sununu.
New Hampshire has two congressional seats, both of which are currently held by Democrats. The race for the Democratic nomination for the 1st congressional district was secured by Chris Pappas—who obtained 42.2% of the votes—in a highly contested primary against 10 other candidates, among them Levi Sanders the son of Sen. Bernie Sanders (I-VT). In November, Mr. Pappas will face Eddie Edwards who won the Republican nomination. Last year incumbent Rep. Carol Shea-Porter (D-NH-1) announced that she will not seek reelection.
Rep. Ann McLane Kuster (D-NH-2)—who was uncontested—will face Steven Negron who won the Republican nomination for the 2nd congressional district. Rep. Kuster has been in office since 2013.
Exclusive from our colleagues at the National Council of Nonprofits.
States are beginning to feel the financial impact on revenues and budgets under the new federal tax reform law, and those impacts vary widely. North Dakota projects that individual taxpayers will pay $4.8 million more in state income taxes due to changes at the federal level, but businesses will pay $9.7 million less, resulting in $4.9 million decline in overall tax revenues to the state for 2018. That loss reportedly will grow to $28.9 million from 2019 to 2021. Virginia tax revenues, on the other hand, are expected to increase by $555 million for Fiscal Year 2018. Officials in Idaho are analyzing a $12.7 million shortfall from revenue projections that could be caused by newly-reduced individual state income tax rates or pay that is “under-withheld” under the new federal tax law that results in a larger paycheck now but higher tax liability at the end of the year.
So far this year, 13 states have taken action to conform state tax laws in part or in full to the 2017 federal tax law. Some state officials are still deciding on the best path forward to protect their taxpayers from increasing state tax liabilities caused by the federal repeal of various deductions and the automatic effect on state tax law. The Minnesota Department of Revenue is responding by letting taxpayers choose whether to itemize or take the standard deduction on their state and federal forms, instead of requiring them to use the same deduction for both. The option will allow taxpayers to avoid some state tax increases, as well as incentive them to donate to charitable nonprofits and foundations to receive the charitable deduction.