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.
Earlier this week, the Department of Treasury issued an Interim Final Rule implementing the Coronavirus State and Local Fiscal Recovery Funds established under the American Rescue Plan Act. The funds will provide state, local, territorial, and Tribal governments with $350 billion in emergency funding to support ongoing COVID-19 response efforts, support communities and populations hardest hit by the crisis, and other uses as outlined in the guidance. In addition, the Department of Treasury released a Frequently Asked Questions document to help provide more information.
Bipartisan retirement legislation continues to move forward. Last week, the House Ways and Means Committee advanced the bipartisan Securing A Strong Retirement Act (H.R.2954). The bill was amended to include a modified version of the Legacy IRA Act to encourage more charitable giving by enabling seniors to make tax-free contributions from their individual retirement accounts (IRA) to charities through life-income plans. The Council supports passage of the Legacy IRA Act and in April joined a coalition of nonprofit organizations asking for its inclusion in the retirement package.
The White House Office of Management and Budget is currently seeking information from a broad array of stakeholders, including philanthropies, about methods, tools, and leading practices for advancing equity and support for underserved communities through government. OMB will use what it learns to expand equity-assessment methods across the Federal Government. Comments are due through the Federal eRulemaking Portal by July 6, 2021.
In response to President Joe Biden’s Executive Order on January 25, 2021, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, all federal agencies have been directed to consult with members of the communities that have been underrepresented in the Federal Government and underserved -- or subjected to discrimination -- in Federal policies and programs. All agencies must submit Equity Agency Action Plans to the White House Domestic Policy Council by January 19, 2022, and must also evaluate opportunities to increase coordination, communication, and engagement with community-based and civil rights organizations.
President Biden met with the four Congressional leaders as well as other members of Congress this week as he continues to host conversations on his infrastructure package. While Congressional Republicans have put forward their own infrastructure package in response to the President’s proposal, it is unclear if the negotiations will result in a bipartisan package.
Congressional Committees continued to discuss changes to the tax system this week, with hearings in the House and Senate as Democrats search for revenue sources to pay for the president’s infrastructure packages and address economic inequities.
- The House Ways and Means Select Revenue Measures Subcommittee met to discuss the tax system’s treatment of taxpayers across the income spectrum. During the hearing, the witnesses discussed a variety of reforms, including abolishing the preferential rate on long-term capital gains, repealing the estate tax step-up in basis, and decreasing spending to avoid creating a need for higher taxes.
- The Senate Finance Subcommittee on Taxation and IRS Oversight held a hearing discussing the IRS’s need for additional funding and upgraded technology in order to successfully ensure compliance with existing tax laws.
- The Joint Economic Committee held a hearing focused on how the tax system perpetuates systemic racism. Witnesses discussed some solutions, including baby bonds and changes to the tax code that they believe would help address these inequities.
The Biden Administration has indicated they will release their complete budget request for fiscal year 2022 on May 27, 2021. In April, the Administration released an initial budget request of $1.5 trillion providing lawmakers with their “top line” numbers for defense and non-defense discretionary spending. It is expected that in addition to more details on their discretionary asks, the request will include proposals affecting mandatory spending as well as tax reform.
Even without the full request, both Senate and House Appropriations Committees have been moving the appropriations process forward. House Appropriations Committee Chairwoman Rosa DeLauro (D-CT) expects that her committee will consider all 12 spending bills in June, with floor passage in July. Senator Patrick Leahy (D-VT), chairman of the Appropriations Committee, has yet to lay out a similar timeline. The federal fiscal year 2022 begins October 1.
Exclusive from our colleagues at the National Council of Nonprofits.
Unemployment Costs on the Front Burner for the States
Despite poor unemployment numbers reported last week, nearly a dozen Republican Governors have served notice to the federal government of their intent to cancel some or all of the extended and expanded unemployment relief created by Congress since the pandemic began. As a result, unemployed individuals will be cut off from additional weeks of benefits, the $300 increase in weekly benefits will cease, and work-search requirements will be reinstated, among other things. All of these Governors express the belief that extended and enhanced unemployment benefits are discouraging individuals from taking jobs that are available, making it hard for employers to hire staff.
Some nonprofit employers may be particularly hard hit by these changes. Of the 11 states that are ending some benefits, three states - Arkansas, Missouri, and South Carolina – are canceling a provision of the American Rescue Plan Act (ARPA) that increases to 75% the federal share of costs of reimbursing employers. This will mean that nonprofits and local governments that self-insure and typically reimburse their states for benefits paid to former employees will be forced to pay 100% of the costs starting as early as July 1.
This week, the U.S. Treasury Department issued guidance that, if followed by the states, will greatly reduce looming tax hikes for contributing employers that pay into the state's unemployment trust fund, including both nonprofit and for-profit employers. The Interim Final Rule makes clear that governments are free to use funds they receive under the American Rescue Plan Act to bring their unemployment systems back up to pre-pandemic levels or pay off unemployment loans from the Labor Department. This is an important clarification because many states impose automatic unemployment tax increases on contributing employers when trust funds fall below certain levels. It’s now clear that the tax hikes averted by paying into the unemployment trust funds (up to certain levels) will not run afoul of the ARPA provision preventing use of the money to provide tax cuts or delay tax hikes. However, the states must still allocate funds to restore their trust funds before employers can receive this relief.
New York City Acts to Fully Fund Nonprofit Indirect Costs
Last week, New York City officials announced the City will include full funding in the upcoming budget for reimbursing nonprofits for the indirect costs they incur when performing City grants and contracts. This signals a major win for nonprofits providing services on behalf of the City. The result, if enacted as announced, will be that nonprofit human services providers receive 100 percent of their approved indirect funding this year instead of the previously announced cut of up to 70 percent. The Indirect Cost Rate Funding Initiative was launched in 2019 and grew out of a partnership between the Mayor, City Council, and sector leaders through the Nonprofit Resiliency Committee. Responding to the news, a coalition of nonprofits stated, “This announcement is both an acknowledgment of the true cost of our work and a recognition that a healthy nonprofit sector is essential to a stronger and more equitable city.” See the joint news release for more details.