In This Week's Edition of Snapshot...
Submit Recommendations Through the Council for the Department of Treasury's Priority Guidance Plan
In April, the Department of Treasury and Internal Revenue Service (IRS) issued Notice 2021-28, which invites the public to submit recommendations for their upcoming 2021-2022 Priority Guidance Plan. If there are issues important to the philanthropic sector that the Council should consider including in its upcoming letter, please email Jenn Holcomb at [email protected] by May 14, 2021. Letters are to be submitted to the Federal eRulemaking Portal by May 28, 2021.
Americans for Prosperity v. Bonta
The Supreme Court heard oral arguments this week in the case Americans for Prosperity v. Bonta. The outcome of the case will determine the constitutionality of a California regulation requiring nonprofit organizations to disclose unredacted Schedule Bs when they file their 990s with the California Attorney General. The Supreme Court’s decision is expected to be handed down in June.
On Wednesday, the White House released a Fact Sheet detailing the American Families Plan. The plan includes $1.8 trillion in investments and tax credits over ten years, funded by a set of tax increases on those earning over $400,000. Council on Foundations staff have summarized key provisions of both the tax and investment plans below; for more detail, see USAToday and the Washington Post.
The Biden Administration proposed extending or making permanent a series of tax cuts and credits for low- and middle-income Americans. These provisions include:
- Making permanent the expanded Affordable Care Act premiums from the American Rescue Plan (ARP).
- Extending the expanded Child Tax Credit through 2025 and making the Child Tax Credit permanently fully refundable.
- Making permanent the Child and Dependent Care Tax Credit from the ARP.
- Making permanent the ARP expansion of the Earned Income Tax Credit.
To pay for the American Families Plan, the package proposes several tax increases, including:
- Increasing the top income tax rate from 37 percent to 39.6 percent, returning it to its pre-2018 level.
- Taxing capital gains the same as other forms of income, effectively increasing the top long-term capital gains tax rate to 39.6 percent.
- Eliminating the stepped-up basis estate tax loophole for gains in excess of $1 million that are not donated to charity.
- Closing the carried interest loophole.
- Ending the special real estate tax break that allows real estate investors to defer taxation when exchanging property for gains in excess of $500,000.
- Applying the 3.8 percent Medicare tax to all workers and investors earning over $400,000 annually.
This package does not include a cap on itemized deductions, including charitable gifts, as an offset. The Council will continue to urge policymakers to oppose policies that discourage charitable giving and to enact policies that expand current incentives to better recognize all individuals for their gifts.
The proposal prioritizes human capital investments, including unemployment insurance reform and a large increase in education funding that the White House says would expand access to education to those who have historically been denied it. The American Families Plan proposes investing:
- $200 billion in free universal pre-school for three- and four-year-olds.
- $109 billion in two years of free community college for all Americans, including those eligible for Deferred Action for Childhood Arrivals status (“Dreamers”).
- $80 billion in additional Pell Grant funding.
- $62 billion in strengthening completion and retention rates at community colleges.
- $46 billion in historically Black colleges and universities, Tribal colleges and universities, and minority-serving institutions.
- $9 billion in training, equipping, and diversifying American teachers, including $2.8 billion for Grow Your Own programs and $900 million for the development of special education teachers.
The plan also includes investments in children and families. The White House proposes investing:
- $225 billion in childcare, including expanding the childcare workforce and subsidizing childcare costs for families earning up to 1.5 times their state median income.
- $225 billion over ten years in a paid leave program for workers taking parental, family, and personal illness/safe leave.
- $45 billion in expanding access to healthy food to children from low-income families, improving the nutrition standards of school meals, and restoring SNAP eligibility to formerly incarcerated individuals who were convicted of a drug-related felony.
For the most part, Republican lawmakers have said that they do not support the White House proposals. A bipartisan group of lawmakers is said to be crafting its own smaller infrastructure package, and last week Senate Republicans released their $568 billion infrastructure proposal. Speaker Nancy Pelosi (D-CA) has said that she hopes to have a package passed this summer. If Democrats are unable to secure enough Republican support for a bill, they will need to turn to budget reconciliation, which may limit what they can include in a final package.
Creating Opportunity Through a Fairer Tax System
On Tuesday, the Senate Finance Committee's Subcommittee on Fiscal Responsibility and Economic Growth discussed Chair Elizabeth Warren's (D-MA) proposals to raise revenue. The hearing focused on the Ultra-Millionaire Tax, the Real Corporate Profits Tax, and increased tax enforcement for wealthy individuals and large corporations. Witnesses included tax experts and small business owners.
On April 25, President Biden announced that Celeste Drake will be the first director of the new Made in America office at the White House. The office was established in his executive order on Insuring The Future In All Of America by All Of America’s Workers issued on January 25. The purpose of the new organization, part of the Office of Management and Budget, is to push federal agencies to buy more products made in the United States. It builds on current laws—the Buy American and Buy America statutes, passed in 1933 and 1982, respectively.
Department of Treasury
A series of proposals in the American Families Plan are aimed at overhauling Treasury’s tax administration and providing the IRS the resources and information it needs to address tax evasion. The reforms are intended to generate an additional $700 billion in tax revenue over the course of a decade. Specifically, the tax administration reforms will:
- Provide the IRS the resources it needs to stop sophisticated tax evasion.
- Provide the IRS with more complete information
- Overhaul outdated technology to help the IRS identify tax evasion.
- Improve taxpayer service and deliver tax credits.
- Regulate paid tax preparers
For more information, read the Treasury press release.
Department of Commerce
U.S. Secretary of Commerce Gina Raimondo will host the 2021 SelectUSA Investment Summit June 7-11, 2021. The 2021 Investment Summit will feature programs focused on the U.S. investment environment, industry trends, and new opportunities while concurrently promoting foreign direct investment (FDI) in the United States. Additionally, the 2021 Investment Summit will introduce the Select Global Women in Tech Mentorship and Training Network, a global mentorship network supporting international female tech entrepreneurs interested in expanding their business to the U.S.
The Bureau announced the population count for the 2020 Congressional apportionment on April 26.
The national population grew by 7.4% since 2010, one of the lowest decades of growth in US history. With a total population of 331,449,281, seven Congressional seats will shift among 13 states:
- TX gains two seats.
- CO, FL, MT, NC, and OR each gain one seat.
- CA, IL, MI, NY, OH, PA, and WV each lose one seat.
The Census Bureau and the Biden Administration are following the adjusted timeline to deliver fair and accurate apportionment numbers and redistricting data to the states as quickly as possible. States must adjust their own laws and regulations to comply with the Census Bureau’s adjusted timeline. The data and census experts need time to process the data, run spot checks, and produce the necessary data products for states to redraw their maps.
Small Business Administration
SBA is currently offering the following funding options:
- Paycheck Protection Program loans
- First Draw PPP loans: If your organization or grantees have not received a PPP loan before, First Draw PPP loans are available.
- Second Draw PPP loans: If your organization has previously received a PPP loan, certain businesses are eligible for a Second Draw PPP loan.
- COVID-19 Economic Injury Disaster Loan (EIDL)
- SBA debt relief (for existing borrowers)
- Shuttered Venue Operators Grant (SVOG)
SBA is preparing to offer:
Economic Development Administration
EDA held their first annual EDA University Centers Week from April 17-21 to showcase how the leveraging of university assets can be powerful tools to build regional economic ecosystems that support innovation, high-growth entrepreneurship, resilience, and inclusivity.
Bureau of Economic Analysis
The Bureau released the advance estimate for gross domestic product (GDP) for the first quarter of 2021, showing that real GDP increased at a 6.4-percent annual rate. Personal consumption expenditures increased by a robust 10.7 percent annual rate, while business investment in equipment and intellectual property products continued to grow steadily.
Department of Health and Human Services
Centers for Medicare and Medicaid Services
The Office of Minority Health will host a webinar on May 13 for organizations looking to build COVID-19 vaccine confidence in their communities. Information and resources for developing strategies to address vaccine hesitancy will be presented by federal health experts. Register for the webinar.
Exclusive from our colleagues at the National Council of Nonprofits.
States' Unemployment Laws in Flux for Nonprofit Employers
Charitable nonprofit employers throughout the country are set to see rapidly increasing unemployment costs, depending on decisions by policymakers at the federal and state levels. Essentially, there are three types of nonprofit employers under state unemployment law: those that are exempt as religious institutions or very small, those that make quarterly payments into the state unemployment system (contributing employers), and those that self-insure and reimburse the state directly for benefits paid to their former employees (reimbursing employers). Through the CARES Act of 2020, the federal government fully covered the costs of exempt employers, delayed any costs for contributing employers, and covered only 50% of the costs charged to reimbursing employers. In the coming weeks, the taxes charged to contributing employers may jump exponentially, and reimbursing employers will suffer large out-of-pocket expenses – unless governments act appropriately and quickly.
For contributing employers, the challenges are complicated by the so-called “tax-cut prohibition” in the American Rescue Plan Act (ARPA), which prevents states from using the ARPA funds to “either directly or indirectly offset a reduction in the net tax revenue… or delay the imposition of any tax or tax increase.” In many states, these employers are facing automatic tax hikes unless and until the state unemployment trust fund is restored to pre-pandemic solvency. It is unclear whether the use of American Rescue Plan Act funds by a state to pay down the trust fund debt would trigger the law’s prohibition on delaying the imposition of a tax. This question will have to be resolved by the Treasury Department or through litigation.
Reimbursing employers received support from about a dozen states last year, but that relief has largely expired or is in need of revision to hold these nonprofits harmless. Legislation has recently been introduced in New Jersey to clarify and update an earlier law intended to provide relief for employers that have had to lay off employees due to the COVID-19 pandemic. The bill provides that employers that reimburse the state for unemployment claims are not liable for any portion of the payments of unemployment benefits that are not paid by the federal government pursuant to the CARES Act, the American Rescue Plan Act, or any other applicable federal law. Earlier this year North Carolina enacted a bill to update its coverage. Unfortunately, legislation in Washington State failed and a measure in Kansas was amended to remove the operative language protecting nonprofits.