In This Week's Edition of Snapshot...
- Preserve Charities and Houses of Worship Act Introduced
- Request for Information on Opportunity Zones Regulations
- At-Risk Community Index for 2020 Census
- States Continue Enacting Targeted Tax Credits
The Council Hosted Public Policy Preconference in Miami
On April 29, the Council hosted a Public Policy Preconference session, “Building a 2020 Policy Agenda Together,” that preceded its Leading Together 2019 Conference in Miami. Keynote speaker Patrick Guerriero, Founding Partner of Civitas Consulting Group, spoke about the importance of engaging in advocacy. Lucy Bernholz, Senior Research Scholar, Director, Digital Civil Society Lab, Stanford PACS raised critical questions about the role of philanthropy and technology, specifically within the privacy data realm. The Council also took this opportunity to solicit input from attendees for its 2020 public policy priorities and to guide its federal agency and national organizations’ relationships.
Last week, Senators Ted Cruz (R-TX) and Jeanne Shaheen (D-NH) introduced the Preserve Charities and Houses of Worship Act. This bipartisan bill would repeal the two unrelated income tax (UBIT) provisions enacted during the 2017 tax overhaul. These provisions require that 1) tax-exempt organizations with more than one unrelated trade or business activity treat each activity separately for the purposes of calculating unrelated business income, and 2) tax-exempt organizations pay UBIT on the value of certain fringe benefits provided to employees—such as transportation benefits. This legislation is the companion bill of the Nonprofits Support Act (H.R.513), introduced earlier this year by Rep. Mike Conaway (R-TX).
The filing deadline for tax exempt organizations is May 15. This means foundations, charities, houses of worship and nonprofits will have to divert resources from their mission and communities in order to comply with the UBIT provisions for this fiscal year. The Council on Foundations has previously submitted comment letters to the IRS, Treasury, and Congress asking for a delay in implementation, and the repeal of both the siloing and the transportation benefits provisions.
Last month, the IRS published a second set of proposed regulations for Opportunity Zones. These regulations (REG-120186-18) provide guidance under new section 1400Z-2 on gains that may be deferred as a result of a taxpayer’s investment in a qualified opportunity fund (QOF) and special rules for an investment in a QOF held by a taxpayer for at least 10 years. The new guidance supplements and updates proposed regulations issued in October 2018.
Created by changes to the tax code in the Tax Cuts and Jobs Act in December 2017, Opportunity Zones are state-nominated, economically depressed communities that are in need of new investment. These investments could, under certain circumstances, be eligible for preferential tax treatment in an effort to help spur economic development. Interested communities submitted recommendations to the Department of Treasury, and each state’s governor was allowed to nominate up to 25 percent of its low-income community tracts to receive the Opportunity Zone designation. Current law allows designations to expire after 10 years.
Concurrent with the release of the new regulations, Treasury published a request for information on data collection and tracking for Opportunity Zones. Comments on this notice and request for information are due May 31, 2019. The stated purpose of information collection and tracking is to measure the effectiveness of the tax incentives in improving economic development and creating jobs within the zones, and to “ensure that this investment opportunity remains an attractive option.” A public hearing is scheduled for July 9 at 10 am, at the New Carrollton Federal Building at 5000 Ellin Road in Lanham, Maryland.
Additionally, the Department for Housing and Urban Development has also published a request for information that would help to inform best practices and the policies about Opportunity Zones programs. HUD has been designated by President Trump to chair the White House Opportunity and Revitalization Council, and in that capacity, the Department is particularly interested in hearing from foundations and the charitable sector.
To help stakeholders target effort and resources, the Rockefeller Institute of Government developed an “At-Risk Community Index.” The institute has identified the communities in the state of New York that would be at most risk of an undercount in the 2020 census.
Exclusive from our colleagues at the National Council of Nonprofits.
Despite looming federal restrictions, state policymakers continue to extend, expand, and create state tax credits to incentivize contributions to various nonprofits and foundations. The Montana Governor recently signed legislation to continue the state’s nonprofit and foundation endowment tax credit for another six years, and the Georgia Legislature extended tax credits to 2024 for donations to rural health organizations. North Dakota expanded a tax credit for charitable contributions by individuals to nonprofit private schools; prior law had allowed credits only for donations via a partnership or other pass-through entities. Under a newly enacted law in Mississippi, contributions to nonprofits working with Child Protective Services are now eligible for a business tax credit equal to 50 percent with an aggregate cap of $5 million, while an annual aggregate cap for individual contributions has been raised from $1 million to $3 million.
The ultimate value of these state tax credits depends on federal decisions yet to be announced. The Treasury Department and IRS issued draft regulations last year proposing changes to how the federal government would treat donations to charitable organizations that generate state or local tax credits. The stated goal of the federal proposal is to block state “workaround” laws designed to avoid the new federal $10,000 cap on the amount individual taxpayers can deduct for state and local taxes they paid. As written, however, the proposed rule would apply to most state tax credits, limiting the amounts that donors would be permitted to deduct from federal taxes.