Nonprofit Policy News | May 2009
SPOTLIGHT: Nonprofits Need to Be Vigilant in Healthcare Reform Debate| Federal Legislative and Regulatory Developments | IRS Updates | Court Cases and Regulatory Developments | Advocacy Resources | Webinars | State Policy Developments
SPOTLIGHT: Nonprofits Need to Be Vigilant in Healthcare Reform Debate
Comprehensive healthcare reform is very likely to move through Congress this summer helped in very large measure by the focused and steady bipartisan leadership of Senators Baucus (MT-D) and Grassley (IA-R) on the Senate Finance Committee (SFC). This effort was launched in November last year with Senator Baucus’ “Call to Action”, a white paper promoting a national “health insurance exchange” for the uninsured including both private plans and a public option, and envisioned to offer universal coverage and contain costs. The SFC has now held three roundtable hearings with panels of experts (access roundtable witness statements) and thereafter gone into lengthy closed sessions of debate. The Committee has set a mid-June deadline for markup of a bill.
Of greatest importance to nonprofits during this complex debate are the goals of universal coverage, reasonable cost of coverage, and access to healthcare choices. Until the SFC sets its direction, everything remains on the table except a single payer plan. Roundtable discussions have covered options from a Small Business Health Options Program (the SHOP Act, S 979, HR 2360), which would cover nonprofits with staff under 100 in a nationwide insurance pool, to eliminating the employer-sponsored health options in favor of individual deductions or credits to choose. See, for example, the Patient’s Choice Act of 2009.
Paying for the reform has surfaced a multitude of options to cover the estimated cost of $1 trillion or more over ten years. This month the SFC released its “Description of Policy Options” for financing that includes options such as modifying the tax exemption for nonprofit hospitals, increasing taxes on alcohol, taxing sugared drinks such as soda, and changing Medicaid and Medicare provider payments, among many others including reducing the limit on itemized deductions. CQ Today Print Edition – 5/20/09, 5/18/09, 5/14/09, 5/12/09;CQ Online 4/29/09
Flikr photo by ProgressOhio
Federal Legislative and Regulatory Developments
In this Section: The President's Budget Meets Congress' Budget Resolution and the Appropriations Process Has Begun | Strengthening Communities Fund Supplants the Compassion Capital Fund | Re-cap of New White House Offices | First Lady Announces Summer of Service Initiative | National Popular Vote bill over 20% of the Way There| Nonprofits Advocate!
The President's Budget Meets Congress' Budget Resolution and the Appropriations Process Has Begun
Congress passed its Budget Resolution for fiscal year 2010 in April, providing the 12 Appropriations Committees in each chamber with a total $1.086 trillion in discretionary spending - $10 billion less than the administration requested. The total $3.56 trillion budget proposal retains much of the core priorities of education, health care, and energy outlined in President Obama's budget blueprint released in February. The President has since released detailed proposals for expenditures for consideration by the Committees.
On issues of tax importance to nonprofits, the President's proposed budget is still asking for a limit of 28% on all individual itemized deductions on Schedule A, including charitable contributions; retention of the 2009 estate tax limits; and extension for two more years of charitable giving incentives including the IRA charitable rollover. Congress' Budget Resolution also calls for the permanent extension of the estate tax at 2009 levels and a two-year extension of the annual package of tax extenders, including the IRA rollover and other charitable giving provisions.
On specific nonprofit issues the National Council follows, the President's proposed budget:
- Substantially limits funding for new programs under the Serve America Act, including defunding the Nonprofit Capacity Building Program (see Chronicle of Philanthropy, 5/20/09); allocating only $10 million of the $50 million authorized to the Volunteer Generation Fund; funding fewer AmeriCorps positions than authorized; and limiting the Serve and Learn programs to their current budget. The big winner was the Social Innovation Fund which garnered its full authorized $50 million - read more on that in the President's Press Release.
- Shows the Strengthening Communities Fund becoming in FY 2010 the new administration's version of the Compassion Capital Fund. See below for more details.
- Includes a total of $435 million, up from $390 million in FY 2009, for the Legal Services Corporation (LSC). The President also requested the elimination of current burdensome restrictions on non-LSC funds, including the restrictions on attorney's fees and participation in class action suits. Read more on the OMB Watch website.
Learn more about the President's budget by visiting the White House website.
CQ Today Online News, 4/29/09
Strengthening Communities Fund Supplants the Compassion Capital Fund
This year's stimulus act, the American Recovery and Reinvestment Act of 2009 (PL 111-5), authorized $50 million to be provided directly for nonprofit capacity building by the Department of Health and Human Services (DHHS), Administration for Children and Families (ACF). That funding has become the new Strengthening Communities Fund which recently issued its first grant announcements, $34 million for nonprofit capacity building in distressed communities, and $12 million for the state, local, and tribal government capacity building program. The President's proposed budget would appropriate another $50 million to this Fund for fiscal year 2010, while not appropriating any further funds for the Compassion Capital Fund.
Re-cap of New White House Offices
- IN with the White House Office of Social Innovation through which the Corporation for National and Community Service reports - the agency that is administering the Serve America Act programs. Read more in a Chronicle of Philanthropy article.
- IN with the Office of Public Engagement aimed at allowing ordinary Americans to participate in the work of the White House and the President (formerly the Office of Public Liaison.)
- IN with the Office of Faith-based and Neighborhood Partnerships.
- For other Offices within the Executive Office of the President, visit Whitehouse.gov.
First Lady Announces Summer of Service Initiative
First Lady Michelle Obama and the Corporation for National and Community Service announced May 20 to an audience including the National Council an initiative designed to put volunteers on a path to sustained service in the administration's key areas of energy, education, health care and community renewal in face of the economic downturn. As part of this initiative, the Administration launched a new online portal, www.serve.gov, where organizations can list service opportunities and individuals can find openings of interest or develop their own projects. The program officially begins June 22 at the National Conference on Volunteering and Service in San Francisco and culminates in a National Day of Service and Remembrance on September 11. You can read more on the Corporation's website.
National Popular Vote Bill over 20% of the Way There
Usually it's the Constitution and federal law altering the impacts of state law, but not if the National Popular Vote bill is signed by enough states. Under this legislation, all of a state's electoral votes would be awarded to the presidential candidate who receives the most popular votes in all 50 states and the District of Columbia. The bill would take effect only when enacted, in identical form, by states possessing a majority of the electoral votes (270 of 538). The goal is to reach 270 by the 2012 election. Washington state recently joined Hawaii, Illinois, Maryland and New Jersey to become the fifth state to sign the bill into law, bringing the count to 61 electoral votes so far. Read more at the National Popular Vote website.
On July 15, 2009, State Associations of nonprofits will visit their members of Congress to advocate for issues of importance to the nonprofit sector. Read more on the National Council's website.
IRS UPDATES
• IRS makes public its 2009- 2013 strategic plan
The IRS released its strategic plan for 2009 to 2013, which includes a continued focus on oversight of the tax-exempt sector. The IRS believes the growing size and complexity of the nonprofit sector will require more oversight and advisory support than ever before. Its strategies in the tax-exempt organization area are to provide outreach and guidance to ensure widespread adherence to the requirements for tax-exempt status; proactively address misuse of tax-exempt organizations and/ or tax-exempt status; and maintain focus on universities, hospitals and other major segments of the tax-exempt community
Court Cases and Regulatory Action
Nevada Indicts Nonprofit Group on Voter-Registration Irregularities
Nevada's Attorney General issued an indictment against ACORN, the Association of Community Organizations for Reform Now, and its former Las Vegas field director and deputy regional director for paying incentives to canvassers to exceed registration quotas in violation of state law. Only one-quarter of the approximately 91,000 registrations submitted in Clark County were valid. Under Nevada law, it is illegal to attach incentives to such work, in theory because it encourages canvassers to submit fraudulent forms. ACORN had already fired both employees and cooperated with investigators. New York Times, 5/5/09
Court Upholds Legality of 2002 Raids on Muslim Charities
The U.S. Court of Appeals for the 4th Circuit upheld a lower court decision asserting the legality of federal raids on a Northern Virginia network of Muslim charities, think tanks, and businesses. The court ruled that the March 2002 raids in search of evidence of terrorist financing - which included raids on homes - did not violate the targets' constitutional rights. A Virginia family filed suit, alleging that agents fabricated evidence to obtain a search warrant and falsely imprisoned them in their home. The raids, which were strongly denounced by Muslim leaders, have led to several indictments and the conviction of a prominent Islamic activist, Abdurahman Alamoudi, but no charges have been filed against the Virginia organizations at the center of the probe. The Washington Post, 5/7/09
Are Nonprofits Businesses Covered by State Conflict-of-Interest Rules?
Pennsylvania's state ethics code generally prohibits state workers from using their positions to enrich themselves, their families or their businesses. At issue before Pennsylvania's highest court is whether a nonprofit can - and should - be included under the business definition. Two years ago, a pair of high-profile cabinet secretaries in the Governor's administration came under public scrutiny after their departments awarded grants to nonprofits that employed their spouses. The case pits the Governor against the state Ethics Commission, which in 2007 ruled that two of his officers would have a conflict of interest if they continued giving grants to nonprofits that employed their spouses. Philadelphia Inquirer, 5/12/09.
FTC Settlement Results in Closing Charities
As part of a sweeping nationwide crackdown on "fake charities," the Federal Trade Commission (FTC) and state officials took actions that forced dozens of groups to shut down or stop making false appeals in the name of police, firefighters and veterans. Among the groups singled out as sham nonprofit organizations were three fundraising groups from Santa Ana, California. The government said the groups raised $19 million from 2005 to 2008 but turned over only 5% of the money to legitimate charities. LA Times, 5/21/09.
In the last session of Congress, the FTC's Reauthorization Act of 2008, S 2831, would have repealed the current law exempting nonprofits from FTC laws and granted authority to regulate 501(c)(3) organizations for unfair or deceptive acts or practices. The bill did not make it out of the Senate Commerce Committee. As more pressing priorities are addressed, expect to see this bill and the language re-introduced in this session.
Advocacy Resources
With President Obama's nomination of federal appellate court Judge Sonia Sotomayor to the Supreme Court, this Q & A from the Alliance for Justice is timely.
Question: May 501(c)(3) public charities influence the confirmation of Supreme Court nominees?
Answer: Yes! The Internal Revenue Service has recognized that influencing the confirmation of federal judges is exactly like influencing any other legislative vote through lobbying. "Because the Senate's action of advice and consent on a judicial nomination is an action with respect to a resolution or similar item, the Senate's confirmation vote constitutes a vote on legislation." (Notice 88-76, 1988-2 C.B. 392.)
Likewise, Senate actions to confirm cabinet level and other executive branch nominations are also considered legislative actions. Attempts by a 501(c)(3) public charity to influence the confirmation of executive branch nominees would similarly fall under the IRS definition of lobbying.
It is important to remember that 501(c)(3) public charities can lobby within the generous limits allowed by law under the 501(h) expenditures test. Because influencing judicial and cabinet level confirmations are clearly lobbying activities, efforts to influence these nominations should be counted against a public charities lobbying limit.
Expanded Environmental Right-to-Know Website Debuts
In May, OMB Watch launched a redesigned and expanded website for the Right-to-Know Network (RTK NET) at www.rtknet.org. The website serves as a source for information about environmental and public health threats and opportunities for public engagement with environmental policy, and it offers news, data, and analysis of environmental right-to-know issues.
Webinars
- Applying for Federal Grants? Listen to our recorded webinar about "what it takes to win" a federal grant.
-
Register for a
"Joining Forces in the Back Office: How Collaboration Can Help Your Organization"
Wednesday, June 3,
- Learn more about "The Role of Nonprofits in the 2010 Census" on June 4 at 2 pm EDT: why the 2010 Census is important to your mission, why nonprofits will play such an important role in ensuring a complete and accurate count, and easy ways your nonprofit can get involved.
State Policy Developments
Special Congratulations to the Minnesota Council Of Nonprofits!
On May 16, 2009, the Minnesota Council of Nonprofits (MCN) and Minnesota nonprofits scored big when the Governor signed into law a public finance bill, HF 1298, that includes language preserving the state's charitable tax exemptions. In our February Policy news, we featured a Minnesota bill aimed at preserving property tax exemptions for charities after a Minnesota Supreme Court decision threatened to jeopardize them. After the court's decision, MCN successfully advocated for a moratorium on the assessment of property taxes until either the passage of a new law preserving the exemptions, or the close of the 2009 regular legislative session. We applaud MCN's tireless efforts in support of nonprofits, and the Minnesota Legislature's decision in preserving nonprofit tax exemptions.
As more and more Americans need the services of the nonprofit sector to weather this economic storm, nonprofits need to maintain their tax exemptions now more than ever. For more information on threats to nonprofit tax exemptions, see this article in the Chronicle of Philanthropy. Also, visit the website of member Wisconsin Nonprofits Association for information about their efforts against threats to nonprofit tax exemptions in Wisconsin.
In this section: Special State Focus: Ohio and Nonprofits | New Bills Introduced
Special State Focus: Ohio and Nonprofits - What NOT to Do
Ohio Governor Strickland successfully convinced the House to amend the state's proposed budget, HB 1, to include a measure allowing the Governor's administration to create and operate government nonprofit corporations to "solicit financial contributions or in-kind contributions" to support government offices. Such a plan raises obvious concerns regarding ethics and lobbying, and ensuring transparency. But most significantly for Ohio nonprofits, the Governor's plan would put the state in direct competition with Ohio nonprofits, many of which are already scrambling.
The state's need to raise revenues quickly is understandable. But this is not what policy makers should do during this time of ecnomic turmoil.
For more formation on Governor Strickland's proposal, see these articles in the Akron Beacon Journal: State's nonprofit entities plan is bad and Government, nonprofits don't mix
New Bills Introduced
In this section: Tax Credits and Exemptions | Institutional Structure and Management | Advocacy and Lobbying | Fundraising and Solicitations
State legislators regularly introduce dozens of bills that impact all nonprofits in their respective states. Below is a recent sampling of such bills, listed first by category, then alphabetically by state. Note that the National Council does not do comprehensive tracking of state legislative or regulatory changes. For more detailed information on public policy issues at the state level you can find your State Association's policy section here. Unless otherwise noted, the bills below have not become law.
CA | Permanent Licensure Exemptions for Program Related Investments
AB 401 would make permanent an exemption from licensure requirements for certain investments, loans, and guaranties by public charities and certain other tax-exempt organizations. Current law has these exemptions set to expire on January 1, 2010. For more information, visit the California Association of Nonprofits Policy Page.
CA | Sales and Use Tax Exemption for Sales to Nonprofits
SB 107 would provide a sales and use tax exemption to nonprofits for gross receipts from the sale, storage, use or other consumption of tangible personal property by a hotel, caterer, restaurant, or similar establishment. For more information, visit the California Association of Nonprofits Policy Page.
MI | Income Tax Credit for Charitable Contributions
HB 4864 would amend existing law to allow an income tax credit for certain tax payers equal to 50% of charitable contributions made to 501(c)(3) organizations.
MN | Higher Threshold for Tax Exempt Nonprofit Fundraisers
HF 2349 would have amended an existing law that provides a tax exemption on proceeds from fund-raising sales by certain nonprofits to by limiting the exemption to gross annual fund-raising receipts not exceeding $25,000. Current law limits the exemption to gross receipts not exceeding $10,000. This bill failed to pass before the end of this most recent legislative session.
Institutional Strucure and Management
NY | UPMIFA Adopted
AB 7907/SB 4778 would amend existing law by adopting the Uniform Prudent Management of Institutional Funds Act (UPMIFA), providing revised guidance and rules for investment and spending of nonprofit funds. For more information on UPMIFA, see our February 2009 Policy News.
CA | Pupils Excused for Participation in Nonprofit-led Civic Engagement Activities
AB 796 would broaden the scope of a law excusing students from school for specified reasons to include students who miss school to participate in civic engagement activities offered by a nonprofit organization or a government entity. For more information, visit the California Association of Nonprofits Policy Page.
CA | Prompt Pay Act Applies to Contracts with Nonprofits
SD 553 would extend late payment penalties assessed against state agencies under the California Prompt Pay Act to contracts with, or grants to nonprofit public benefit corporations. For more information, visit the California Association of Nonprofits Policy Page.
CT | State Funding for Projects by Nonprofit Entities
SB 996 would establish the Connecticut economic recovery program to provide funding for a variety of programs, including a regional block grant and funding pool for projects sponsored by nonprofit entities.
NY | Prohibition on Contributions from Nonprofits to Certain Officials
AB 7986 would prohibit a candidate or nominee for any public office, party position, or treasurer of a campaign committee to accept contributions from charitable organizations. The law would also provide a fine of $500 for violations of its provisions.
CA | Nonprofit Internet Raffle Advertisements Permitted.
SB 200 would amend existing law governing private, nonprofit raffles by removing a prohibition on advertising a raffle over the Internet and laying out specified information regarding the raffle that may be included on an Internet Website. For more information, visit the California Association of Nonprofits Policy Page.
NJ | Funding for Recreation and Conservation Organizations
A 3898/S 2771 would appropriate nearly $20 million from various Green Acres funds for grants to certain nonprofit entities for the purpose of acquiring or developing lands for recreation and conservation purposes.
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