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NAO Public Policy Alert
Part 2: Federal Level
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Spending Decisions
Much of the media coverage of federal inaction on a number of important issues has focused on the personal animus between politicians, with very little coverage of the serious consequences of leaders not reaching agreement on the looming budget crisis. If the players fail to amend the existing budget control law, $126 billion in automatic spending cuts will take effect this October when the next fiscal year starts. Further complicating things, the federal government is likely to hit the debt limit in September, which would result in a default on the nation's financial obligations. The President and congressional leaders have scheduled and cancelled meetings to avert the crisis, but animosity rather than the interests of the country have so far prevailed.
The Senate is taking a wait-and-see approach, opting to hold off on appropriating until there is an agreement on spending levels for the next fiscal year. For its part, the House started debating fiscal 2020 spending bills on the floor June 12. The House is working with tentative spending totals that will likely change once a bipartisan deal is struck or will be scrapped altogether if lawmakers fail to reach a broader agreement. Failing that, Congress would have to resort to another stopgap spending bill, known as a "continuing resolution" or "CR," to extend funding at current levels beyond the September 30 end of fiscal 2019.
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Charity Act Reintroduced
- Raise the current volunteer mileage rate (fixed at 14 cents/mile) to the rate for medical and moving expenses, which is currently set at 20 cents/mile;
- Require electronic filing of most Form 990s making it much easier for all nonprofits to do their filings;
- Expand the IRA charitable rollover to allow for distributions to donor-advised funds (see more about the importance of this provision in the AFP-NAO report on year-end charitable giving); and
- Simplify the private foundation excise tax from the current two-tiered structure to a flat rate of one percent.
NAO supports all of these provisions and applauds the Senators for taking this bipartisan action. Please call or write Senator Wyden's office to let him know that you support S.1475.
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The 2020 Census
The House Appropriations Committee approved $8.4 billion for funding the 2020 U.S. Census as part of a
$74 billion spending package on May 22nd, and the full House is expected to consider it in the coming weeks. The proposed census funding, $2.4 billion more than the President requested, is to be used to conduct the decennial count of everyone in the country and contemplates a partnership and communications campaign to "help maximize the number of persons filling out their census forms" via promotion, outreach, and marketing activities. The bill includes language that prevents funding from being used for a citizenship question on the 2020 census questionnaire.
Also related to the 2020 Census, attorneys who sued to remove the citizenship question from the 2020 census questionnaire filed with the federal district court what they described as "new evidence, concealed by [the government]" that "contradicts sworn testimony of" two senior Trump Administration officials. According to the motion for sanctions, a "longtime Republican redistricting specialist, played a significant role in orchestrating the addition of the citizenship question to the 2020 Decennial Census in order to create a structural electoral advantage for, in his own words, 'Republicans and Non-Hispanic Whites.'" The lawyers then filed a copy of that motion - with the new materials - with the Supreme Court so it could be aware.
The federal district court judge, the first of three federal judges who previously ordered that the question be removed from the 2020 questionnaire and whose earlier order is now being reviewed by the Supreme Court, scheduled a hearing on the matter for this Wednesday. If he finds that the new material is, in fact, real, then the new evidence could cause the U.S. Supreme Court to delay or alter its decision. A determination of whether the question will be included is needed by the end of June because the Commerce Department must start printing the millions of questionnaires.
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Disaster Relief and Response
Yesterday, Oregon's Senators Ron Wyden and Jeff Merkley introduced four bills to help Oregon communities recover from wildfire smoke, including the Smoke-Ready Communities Act, the Wildfire Smoke Emergency Declaration Act, the Farmworker Smoke Protection Act, and the Smoke Planning and Research Act.
It is
clear from the research
conducted last year by Portland State University supported by NAO that Oregon's nonprofit sector needs help in preparing for and responding to disasters. Nonprofits need better training and resources to prioritize and prepare assistance to communities recovering from disasters. One of the findings of that research showed the importance of removing some of the regulatory and financial bottle-necks that impedes resources from flowing into communities (often through responding nonprofits) during and after disasters.
The Senate Finance Committee has formed a
Disaster Tax Relief Taskforce
that will be determining whether there is a core package of tax relief provisions that should be available when natural disasters occur. The members of the Taskforce have been asked to propose a package of temporary tax provisions that automatically go into effect whenever the President declares a natural disaster. This is an opportunity to address problems nonprofits have experienced in previous disaster tax packages - packages that typically were crafted on the fly by politicians that don't reflect the input of nonprofits on the ground - and advance a long-term policy priority. The Taskforce must have its recommendations to the Finance Committee leaders by June 30, so time is of the essence to make your voice heard.
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UBIT - Taxing Tax Exempts
On May 15, 2019 - the first Nonprofit Tax Day for many nonprofits - organizations with a calendar-year fiscal year had to pay a
21-percent unrelated business income tax on the expenses they incurred in 2018
for providing their employees with transportation benefits, such as parking and transit passes. This oxymoronic (and just plain moronic!) tax - a tax on tax-exempt organizations - is estimated by the nonpartisan Joint Committee on Taxation to divert more than $200 million from nonprofit missions in 2019 alone. This is all to pay a tax that very few on Capitol Hill think is a good idea.
To convince Congress to repeal this tax, lawmakers need to see real-world examples of the harm the law is causing. The National Council of Nonprofits has prepared this quick survey asking nonprofits to report how much your nonprofit paid in taxes, what it cost your nonprofit to estimate the tax liability using the IRS's complicated four-step calculus, and how that money could have been better spent advancing your mission in local communities.
NAO was very pleased to see Congressman Earl Blumenauer hold a Commuter Tax Benefit Roundtable in Washington DC on May 16. The commuter tax benefit roundtable examining the impacts of the TCJA that subjected transportation fringe benefits to nonprofits' unrelated business income tax, preventing employers from writing off transportation fringe benefits as a business expense, and suspending the bicycle reimbursement through 2025.
Congress needs to know how the tax, and the failure to repeal it, hurts nonprofits, nonprofit employees, and the people and communities they serve in congressional districts and states.
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Final Rule on
SALT
and State Credit Programs
T
he U.S. Treasury Department and Internal Revenue Service pre-released late yesterday the final rule on how the federal government will treat charitable donations that individual taxpayers make to nonprofits via giving programs incentivized by state and local tax (SALT) credits. According to Treasury Decision 9864 (which will be formally published today, June 13, 2019),
taxpayers may not claim as federal charitable deductions the portion of donations that generate state or local tax credits
. The new restriction applies to donations made to both nonprofits run by governmental entities as well as charitable nonprofits operated independent of government.
In a concession to critics of earlier draft regulations issued in August 2018, the final rule includes a safe harbor provision that allows federal taxpayers to still deduct the value of the tax credit as payment of state and local taxes, but only up to the $10,000 cap on SALT deductions enacted in the 2017 tax law. Thus, federal taxpayers with state and local tax bills less than $10,000 will still be able to deduct the full value of these donations that are encouraged by tax credits, albeit through two separate lines on the federal tax form - for state and local taxes and for charitable donations. Those paying state and local taxes in excess of $10,000 will no longer be able to deduct the value of the tax credits.
While the new final rule backs away some from what had been proposed earlier, it still means important programs here in Oregon that provide a state or local tax credit when a taxpayer makes a donation (the Oregon Cultural Trust Tax Credit, school choice scholarship funds, nonprofit endowments, and land conservation) are limited for federal tax deductions.
Some of the adverse economic impact of the regulatory process may have already been felt. The draft regulations published last August clearly stated that donations made after August 27, 2018 would be subject to the rule limiting the value of federal deductions to any of the donations to which it applied.
Presumably individual taxpayers who made donations to the targeted nonprofits may file amended 2018 tax returns and take advantage of the safe harbor, if applicable. But the donations not made after August 2018 cannot be corrected retroactively and services denied last year due to lack of funds will never be restored.
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Charitable Giving Incentives
In late May, Arizona joined Colorado and Minnesota in offering taxpayers the ability to claim a non-itemizer deduction for donations to charitable nonprofits. Specifically, donors who take the standard deduction on their state tax returns will still be able to deduct 25 percent of their donations from their state taxes.
NAO is looking to build support and interest in a non-itemizer deduction in the Oregon tax code to bring to a future legislative session. We are interested in your feedback on this idea. Please take this pulse poll and let us know your thoughts.
Should Oregon follow Arizona, Colorado and Minnesota in adopting a non-itemizer tax incentive for charitable giving?
Remember, you have a right to advocate and lobby for your mission and program participants. Exercise your democratic rights and be sure you are heard! For more information on how to engage in advocacy and lobbying activities
Be a member of NAO and support our public policy work on behalf of all charitable nonprofits. Get details to
join NAO here or call us at 503-239-4001 Ext 127.
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Donate now
to support NAO's public policy efforts and our mission to strengthen the collective voice, leadership and capacity of nonprofits to enrich the lives of all Oregonians.
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