In This Week's Edition of Snapshot...
- Important House Ways & Means Markup
- 2019 USA Giving Report is Out
- Nonprofit Relief Act Introduced to Remove Tax Barriers
- Some States Facing Government Shutdowns
- New York Holding Firm in Support of Nonprofit Nonpartisanship
Today the House Ways and Means Committee is marking up the Democrats’ extenders package. Chairman Richard Neal’s (D-MA) tax plans would cost about $106.6 billion. There are two important items on this package for the nonprofit and the philanthropic sector. One is the possibility of a repeal on the UBIT fringe benefit provision included in section 401 of H.R. 3300, The Economic Mobility Act of 2019. It would cost $1.9 billion to repeal the new tax on Houses of Worships and other nonprofits that provide parking and other transportation benefits to their employees. The repeal of the tax imposed to nonprofits has become a bipartisan priority for the Committee, and it is expected that this section will be supported for most members. The Council along with other organizations in the nonprofit sector has called for a repeal of this provision which diverts money from charitable programming and increases the cost of being an employer. The Council submitted a letter to the Committee urging members to support section 401.
The other important item is the proposal to reduce the Private Foundation Excise Tax from a two-tiered level of 1% and 2% to a flat 1.39% proposed in section 306 of H.R. 3301, The Taxpayer Certainty and Disaster Relief Act of 2019. Overall, Rep. Neal would spend $9.2 billion on disaster-related tax cuts. The Council on Foundations deems it a positive action that the Committee is proposing to streamline the process for calculating the tax and will continue to advocate for a flat 1% rate, but the Council finds today’s action a step in the right direction.
Rep. Kevin Brady (R-TX), the Ranking member of the Committee has criticized Democrats’ plans to revive a batch of temporary tax extenders as well as their proposal to expand the earned income and child tax credits. Rep. Neal’s proposal to make the Child Tax Credit fully refundable would be the single-biggest ticket item, running $50.7 billion, according to Joint Committee on Taxation. It is not clear if Republicans will offer amendments to fix glitches in the Tax Cuts and Jobs Act.
Congresswoman Carolyn Maloney (D-NY) and Majority Whip Clyburn (D-SC) introduced the Nonprofit Relief Act (H.R. 3323) that would repeal the new tax that requires nonprofits to treat every unrelated business revenue stream as a separate “trade or business” that may not be aggregated with other profits and losses in calculating tax liabilities. The bill also would extend the paid leave tax credit to tax-exempt organizations and change the tax treatment of mileage reimbursements to volunteers, so they are no longer subject to federal and state income taxes. See the news release.
Politico reports that Congressional leaders and the Trump administration reached no budget agreement after a critical meeting on Wednesday and are deadlocked over how much to increase domestic spending to avoid a fiscal calamity in early fall. Republicans are pitching a short-term agreement to avoid breaching the debt ceiling and blunt budget cuts from a sequester that will kick in automatically if no agreement can be reached by then. It's unclear if Democrats will agree.
The 2019 USA Giving report published by the Giving USA Foundation and written by the Indiana University Lilly Family School of Philanthropy was released on Tuesday. Giving by individuals declined 3.4% in inflation-adjusted dollars to $292 billion, after four straight years of growing by at least 2.4%, according to the annual Giving USA report. Overall, giving was down 1.7% in inflation-adjusted dollars, with the decline in individual donations partially offset by corporations and foundations—The Wall Street Journal reported.
Exclusive from our colleagues at the National Council of Nonprofits.
Thirty-nine states have either passed or are awaiting signature on their budgets for this year, compared to only eleven that had enacted budgets this time last year. Revenues are up for most states, and at least 28 are expected to exceed projections for the current year. The new fiscal year begins on July 1 for most states, and 47 states are looking at spending increases for 2020. Despite these projections, some states are facing possible government shutdowns due to disagreements between governors and state legislatures. Nonprofits with experiences with shutdowns are getting prepared.
A second special session has been called in Alaska after the first adjourned with lawmakers passing a capital budget, but failing to fund capital projects. In the event Governor Dunleavy vetoes the operating budget, the government will shut down beginning July 1. The Foraker Group, the state association of nonprofits in Alaska, is warning nonprofit leaders to take steps to avoid the adverse effects of a government closure. “For those who have a partnership with government to deliver services in Alaska, this is the time to plan for a shutdown or delay in receiving funds – two possibilities that will have an impact on all of us,” wrote Laurie Wolf, The Foraker Group’s President and CEO.
New Jersey Governor Murphy announced that “all options remain on the table” in response to whether the state government could face a shutdown over his proposed tax on high income-earners. A constitutional deadline of June 30 requires the budget to be finalized, but the Governor argues an increase in taxes for certain individuals could raise $536 million in revenues and bring stability to a state that has had budgeting problems for years.
Nonprofits in Connecticut, Minnesota, Pennsylvania, and elsewhere across the country understand the hardships that state government shutdowns cause to their operations, their finances, and the people they serve. Likewise, the federal government shutdown in December and January “impose[d] unfunded costs on nonprofits, resulting in direct harm and significant collateral damage” to innocent nonprofits, their employees, and the people they serve, according to a statement to the House Small Business Committee from the National Council of Nonprofits in February. The inability of governments to award and execute new grants or contracts to nonprofits, as well as make payments for work under existing grants and contracts, increased both the public’s needs and the work of nonprofits to meet those needs during the federal government shutdown.
The New York Senate and Assembly have approved a bill (A. 623 / S. 4347) to “enshrine in state law the 65-year balance achieved under federal tax law by the ‘Johnson Amendment,’ whereby religious and 501(c)(3) nonprofit corporations are granted tax-exempt status but may not endorse or oppose a candidate for political office.” The joint news release from the bill’s sponsors explains: “The bill would codify the Johnson Amendment into state law for any New York corporation, association, trust, fund, foundation, or limited liability organized and operated for religious, charitable, scientific, public safety, literary, or educational purposes as defined by section 501(c)(3) of the internal revenue code, and would continue that requirement in New York even if the Amendment were to be repealed in the future at the federal level.”