Policy updates: Overtime rule delay, federal spending bill, and charitable deductions
Overtime Final Rule Further Delayed -- Now What?
The Labor Department's Overtime Final Rule is unlikely to go into effect before the new Congress convenes on January 3 and the new President is inaugurated on January 20, due to the briefing schedule announced by the Fifth Circuit Court of Appeals in a lawsuit brought by 21 states and others. Shortly before Thanksgiving a federal district judge in Texas surprised proponents and opponents of the new rule by issuing a nationwide preliminary injunction blocking the rule from taking effect as scheduled on December 1. The federal government appealed to the Fifth Circuit Court of Appeals, which last week set a schedule for the last set of briefs to be filed on January 31, 2017, with oral arguments and a decision sometime later. That timing will give the 115 th Congress and the new Administration opportunities to activate several options for blocking or altering the rule before it ever goes into effect.
 
The pressing question for law-abiding, values-based nonprofit employers is what they should do now that they have made plans or actual adjustments in anticipation of the new overtime rule. Do they go ahead and implement the non-required changes; unravel job descriptions and revoke pay raises made to comply with a rule that's been blocked; tell employees to stand pat while we all wait for the courts, Congress, and the new Administration to work things out? Or was it all just a big waste of time? 

We sent out an earlier policy alert that gave some suggestions on how you may wish to think about implementing or not implementing the over-time rules changes in your organization. Read here for those ideas.
U.S. Congress Passes Short-time Funding Bill while Oregon Legislature Gets Ready for a Tough Session
Before leaving town perhaps for the rest of the year, the U.S. House and Senate of the 114 th Congress passed a short-term Continuing Resolution (CR) that averts a government shutdown and provides essentially  status quo funding for the federal government through April 28, 2017. That end date was set to allow the incoming Trump Administration the opportunity to weigh in on spending priorities, while also giving time to the Senate to confirm cabinet secretaries and other high-ranking federal officials. The temporary bill delays debates over whether to increase money for defense programs at the expense of domestic programs that are typically performed by nonprofits on behalf of governments.
 
Meanwhile in Salem, the Oregon Legislature kicks-off Legislative Days this week. There are scheduled hearings on a number of topics of interest to nonprofits chaired by interim committees before the new session appointments are made later this week. This is a prime opportunity for Oregon nonprofits to get involved with advocacy and see how our legislative process works in Salem.
Charitable Deduction: Cut here, Cut there!
One big issue that NAO is tracking at both the federal and state level is the possible caps and/or cuts to the charitable deduction. At the federal level, the incoming Trump administration has already floated a revised tax reform plan that limits the deductions taxpayers may take, including the deduction for charitable contributions. The first tax reform proposal offered by Trump last year preserved the current charitable deduction. This latest version proposes to cap all itemized deductions - including the charitable deduction, mortgage interest deduction, and state and local taxes paid - to $100,000 for single filers and $200,000 for couples. The Trump plan also would eliminate federal estate and gift taxes while eliminating step-up basis for estates valued at more than $10 million.

In Oregon, the Legislature has already begun to look at possible revenue streams for a state budget that is in deficit. It is believed that one source of funding that may be considered is from cuts or caps on Oregon's charitable deduction. The signs are that the state needs money and is working to identify sources for the funding they project to spend. On December 1st, Governor Kate Brown released her  2017-19 biennium budget. The Governor's budget is usually based on revenue sources currently available to the state through the General Fund and other funding sources. The budget submitted by Governor Brown this year assumed tax revenue from several sources that do not currently exist. It is important to note that new taxes require a 2/3 majority vote of the Legislature, while capping something like the charitable deduction would only require a simple majority vote.

Why should nonprofits be concerned about caps to the charitable deduction at either the federal or state level? Study after study have shown that caps or cuts to the charitable deduction at both the federal or state level have a negative effect on charitable giving. Nonprofits have many different business models to meet their missions, but all rely on charitable contributions to do their important work. The concept of cutting, curtailing or sunsetting the charitable deduction is fundamentally flawed as it assumes revenue to the government is more important than support to charities and that curtailing the charitable deduction will have minimum effects.

We believe that nonprofits should stand strong on the philosophy that the charitable deduction is a "lifeline, not a loophole" (R. Wyden 2012). We should not bargain on a modification - "no haircut, no sunset, no cuts" to the deduction. The deduction is proven to have multiplier effects for every dollar given and is the  only  tax deduction that has that capacity. To limit it in any way (even at the top end of giving) causes a reduction in total benefit to Oregon's communities.
 
Finally, citizens and voters agree that the charitable deduction is important and want to see it expanded, not curtailed. A 2016 polling study conducted by Independent Sector  "United for Charity: How Americans trust and value the charitable sector" found that:
  • About 88 percent of voters believe we should make it easier for people to deduct charitable contributions from their taxes.
  • About 74 percent of voters trust charities with their checkbooks over the government and want to see expanded access to charitable giving.
Now is not the time for either President-elect Trump or Governor Brown to cap or curtail the charitable deduction. Our communities count on nonprofits and nonprofits count on the charitable deduction.