In This Week's Edition of Snapshot…
- Government Shutdown Set to Continue
- Senate Finance Filled, Retirement Announced
- IRS to Issue Tax Refunds During Shutdown
- Michigan Governor Blocks Expansive Donor Secrecy Legislation
- State Legislatures Look to Expand Targeted Giving Incentives
The partial government shutdown, which began on Dec. 22 and is now on its third week, shows no signs of ending. Last week, after the inauguration of the 116th Congress, the House voted 241-190 in favor of a bill that would provide funding for eight federal departments and several agencies through Sept. 30, the end of fiscal year 2019. The measure, H.R. 21, would restart funding for the departments of State, Commerce, Transportation, Treasury, Housing and Urban Development, Justice, Agriculture, and Interior, as well as the National Science Foundation, EPA, IRS, and FDA.
Due to the ongoing debate about funding a wall on the U.S.-Mexico border, funding for the Department of Homeland Security (DHS) was separated from H.R. 21. The DHS funding resolution passed 239-192. As POLITICO reported, Senate Majority Leader Mitch McConnell (R-KY), declined to consider the House measure.
Over 800,000 federal employees are currently impacted by the shutdown, with 380,000 furloughed without pay and 420,000 working without pay. Since the beginning of the government shutdown, 4,806 federal employees and contractors living in D.C., Maryland, and Virginia have applied for unemployment benefits. Federal employees are expected to miss their paycheck tomorrow, given that Tuesday was the last day to process federal paychecks and no spending agreement was reached.
On Tuesday, President Donald Trump addressed the nation from the Oval Office to discuss the crisis at the southern border. In his prime-time address, the President said, “This is a humanitarian crisis—a crisis of the heart and a crisis of the soul,” and urged Congress to provide $5.7 billion for a steel barrier, POLITICO reported. After the presidential address, House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) offered their rebuttal. Today President Trump is set to travel to the border in Texas to make his case for a border wall.
Last week, the Senate Finance Committee was officially filled for the 116th Congress. According to POLITICO Pro Tax Whiteboard, “Republican Sens. James Lankford [R-OK], Steve Daines [R-MT], and Todd Young [R-IN] are joining the Senate Finance Committee. The appointments, announced this evening [Jan. 3] by Majority Leader Mitch McConnell [R-KY], increase the number of Republicans on the panel by one, bringing it to 15. The GOP had lost two panel members with the retirement of [Sen.] Orrin Hatch [R-UT] and the November defeat of [Sen.] Dean Heller [R-NV].”
In December, Democrats announced that Sens. Maggie Hassan (D-NH) and Catherine Cortez Masto (D-NV) would join the Committee, replacing Sens. Bill Nelson (D-FL) and Claire McCaskill (D-MO), who lost their reelection races in the midterms.
In other Finance Committee news, Sen. Pat Roberts (R-KS) announced he would not be running for reelection in 2020. According to POLITICO, “[Sen.] Roberts, 82, has served four terms in the Senate and last won reelection in 2014 after facing a bruising Republican primary. His retirement has already sparked interest in his seat from a number of other Kansas Republicans, heralding a potentially crowded 2020 primary—though Democrats hope they can make the race competitive after winning the governorship in 2018.”
Yesterday the House Ways and Means Committee welcomed 10 new Democrats according to POLITICO Pro Tax Whiteboard, “They are Reps. Gwen Moore [D-WI], Dan Kildee [D-MI], Brendan Boyle [D-PA], Don Beyer [D-VA], Dwight Evans [D-PA], Tom Suozzi [D-NY], Jimmy Panetta [D-CA], Stephanie Murphy [D-FL], Brad Schneider [D-IL] and Steven Horsford [D-NV]. The full Democratic Caucus still has to ratify the committee memberships.”
With part of the government still shut down—including the Treasury Department and IRS—and no end in sight, there had been concern that refunds owed to taxpayers would be delayed. However, the Trump administration plans to issue refunds, even if the partial shutdown continues into tax filing season. According to the New York Times, “The Trump administration will direct the Internal Revenue Service to issue tax refunds during the ongoing federal government shutdown, reversing previous policy, officials said Monday.… In a late-afternoon call with the chairman of the Ways and Means Committee, Richard E. Neal of Massachusetts, Treasury Secretary Steven Mnuchin said the administration will call back a significant number of IRS employees from furlough, in order to issue refunds. Mr. Mnuchin also told Mr. Neal that the IRS would open the tax filing season on time at the end of January, and that enough employees would return to work to allow the IRS to answer 60 to 70 percent of phone calls seeking tax assistance.”
The furloughed workers who are recalled to process refunds will need Congress to pass legislation to issue them backpay once the shutdown ends.
Exclusive from our colleagues at the National Council of Nonprofits.
In a last-minute veto, outgoing Governor Rick Snyder saved Michigan from becoming the darkest “dark money” state during its lame duck session, which ended a few days ago. The bill would have barred government officials from requesting or requiring tax-exempt organizations to disclose any “personal information,” which was broadly defined to include nearly everyone who had any relationship – member, donor, or volunteer – with a charitable nonprofit or foundation. In his veto message, Snyder stated that the bill, which would have prevented law enforcement from identifying bad actors in the nonprofit sector, “had significant issues.” Earlier in 2018, the West Virginia Senate passed a narrower version of the legislation, only to see it die at the end of that state’s legislative session.
Federal legislative and regulatory actions haven’t dampened the enthusiasm for tax credits at the state level. Two states – Georgia and Missouri – enacted or expanded their existing tax incentives last year despite proposed regulations announced by the U.S. Treasury Department and Internal Revenue Service in August. Bills introduced in Michigan after the proposed regulations were published would have created 50-percent tax credits for charitable contributions to support the work of food banks and donations to community foundations. The Indiana Legislature is set to consider a bill that provides a 50-percent tax credit, with caps, for charitable contributions to a public school foundation.
The federal Tax Cuts and Jobs Act capped state and local tax (SALT) deductions at $10,000. Several states responded by passing workaround legislation last year providing tax credits against income taxes for donations to government-run charitable organizations. Treasury and the IRS looked to curtail those workarounds in proposed regulations that appear to also apply to many programs in 32 states and the District of Columbia that provide a state or local tax credit for donations to certain nonprofits. Due to the federal government shutdown and other factors, it is unclear when the federal regulations will be finalized or if they will be revised to protect some existing or newly enacted state credits.