In This Week's Edition of Snapshot...
- 2021 Budget Talks…already.
- Expiring Federal Tax Provisions
- New Reports from the Congressional Budget Office
- Legislative History of the Charitable Deduction Available
- Executive Branch and Regulatory Affairs
- Happening in the States
Congressional leaders and the White House have already locked in overall government spending levels for fiscal 2021, which begins on Oct. 1. This is a crucial step to getting the 2021 spending bills on track for passage by the end of the fiscal year.
It should make for a conducive environment to pass appropriations bills before the Sept. 30 deadline, however, with the presidential and congressional elections looming, a speedy appropriations process will likely take a backseat to politics. The specter of stop-gap spending bills by Congress is not out of the realm of possibilities and might be a truer reality, given its abysmal history of not passing bills on time.
The White House has announced that President Trump will unveil his 2021 budget proposal on February 10.
On January 16th, the Joint Committee on Taxation released its list of federal tax provisions set to expire in 2020-2029. Of note to philanthropy are provisions that expire in 2025 and 2026. These include an increase in the standard deduction of individuals, several suspensions of limitations on itemized deductions, an increase in percentage limitation on cash contributions to public charities, and an increase in estate and gift tax exemption.
The CBO has issued an overview of the foreign-born population in the United States and its effects on the US economy and the federal budget. The calculations of the CBO are important data as Congressional budget committees consider fiscal impacts of legislative proposals related to immigration.
The Congressional Research Service has posted a legislative history of the charitable deduction on EveryCRSReport.com this week. CRS is Congress’ think tank and does nonpartisan analysis of issues of public debate.
The White House National Economic Council Director Larry Kudlow announced this week that President Trump will unveil a new tax cut proposal later this year. No details are yet available, but Kudlow hinted at lower individual tax rates, lower capital gains tax rates, and other tax relief measures aimed at stimulating “middle class economic growth.”
- A new federal watchdog report is critical of the IRS's oversight of tax-exempt groups and Treasury's Inspector General for Tax Administration (TIGTA) highlighted a vacuum in their enforcement related to tax-exempt social welfare organizations registered under Section 501(c)(4) of the tax code. While these organizations don't have to apply to get their tax exemptions, they are legally required to report their existence to the IRS. TIGTA has identified 9,774 organizations that were potentially required to file a notification but did not and they and their officers could be liable for $96 million in penalties. The report outlines recommendations for the IRS to improve the reporting rate and includes the agency’s management response.
- Also in the news at Treasury, the Inspector General has opened an investigation into how Opportunity Zones are being used and whether the tax break is being misused to support luxury projects in affluent neighborhoods. Senator Cory Booker (D-NJ), Rep. Emanuel Cleaver II (D-MO), and Rep. Ron Kind(D-WI) requested the probe after reports in the New York Times and ProPublica raised questions about how the tax break was being utilized, including deals that were in effect prior to when the tax break was included in the passage of the Tax Cut and Jobs Act of 2017.
- The Treasury Department and IRS issued new guidance that exempts student loan borrowers from having to pay federal taxes on the amount of loan forgiveness they receive from a federal “closed school” discharge or successful “borrower defense to repayment” claim. The tax relief also applies to private student loans that are discharged as a result of a legal settlement involving “unlawful business practices against nonprofit or for-profit schools or private lenders that made student loans to finance attendance at these schools,” according to the guidance. The new policy applies retroactively for loans discharged on or after Jan. 1, 2016.
Department of Housing and Urban Development
HUD will finally release more than $8 million in disaster aid funding that was held up for months by the Trump Administration. The money was part of a congressionally authorized disaster package to help Puerto Rico recover from the devastation wrought by Hurricane Maria in 2017.
The National Oceanic and Aeronautics Administration (NOAA) is kicking off a year-long celebration to mark its upcoming 50th anniversary. Since its inception on October 3, 1970, NOAA has become one of the world’s premier science agencies that protects life and property, leads stewardship of the ocean and Great Lakes, and drives the blue economy.
DOT’s website is a resource for data and information related to federal investment in major infrastructure projects in and around Opportunity Zones (OZs). The information is intended to encourage further economic investment in OZs. A recently published interactive map shows data sets for major federal highway projects, commuter/light rail stations, airports and more.
Ten years after the end of the Great Recession, tax collections have fully recovered in 45 states. Still, the road to recovery has varied widely from state to state. Find the data in The Pew Charitable Trusts report, Decade After Recession, Tax Revenue Higher in 45 States.
Exclusive from our colleagues at the National Council of Nonprofits.
Nonprofits face numerous opportunities and challenges as lawmakers seek to revise their state tax systems in advance of the November elections. Legislators in Utah passed a tax reform package in special session last month that cut income tax rates and increased family exemptions, but raised sales taxes on groceries and added new fuel taxes. Legislators and the Governor are facing public opposition and a potential ballot measure to repeal the legislation. In Nebraska, the Governor is seeking tax reforms based on his belief that “cutting and reforming taxes is key to growing Nebraska.” The issue may go to the ballot should legislators not finalize property tax reform during this year’s short session. Connecticut Governor Lamont expressed interest in tax reform during a public address last Fall, specifically mentioning expanding charitable giving in the state, which is leading nonprofits in the state to ramp up advocacy efforts.
City Officials Look to PILOTs to Fill Coffers
The Mayor of New Haven, Connecticut is asking Yale University to increase its annual payments in lieu of taxes (PILOT) contributions from $11.5 million to $50 million. The Mayor said the city finances are in a “crisis” and is blaming the untaxed university properties for contributing to the budget gap despite untaxed local, state, and federal government properties also not contributing to city coffers. Further south, officials in Baltimore, Maryland are considering re-writing a memorandum of understanding with medical and educational nonprofits in the city for PILOTs to cover local school system reforms costing $330 million per year. The existing agreement provides $6 million in PILOT payments per year through 2026 from the nonprofits without any new tax assessments or fees by the City, and any new deal would have to be brokered by the Mayor. Councilperson Janey, in her first speech as the newly-elected Boston City Council President, complained that nonprofits don’t pay property taxes (a right guaranteed in the Massachusetts constitution) and announced her intention to seek increased PILOTs from charitable organizations that own property in the city. Boston requested about $110 million in “voluntary” payments from nonprofits in 2019 and received $34.2 million in cash from targeted colleges/universities, cultural institutions, and hospitals. Council President Janey said she wants to reevaluate the 10-year-old Boston PILOT scheme, ominously stating, “We’ve got to figure out if it’s the carrot or the stick.”