Nonprofit Policy News | February 2009
Minnesota Preserve Charitable Tax Exemptions Campaign
Nonprofit Surveys
Federal Legislative and Regulatory Developments
State Policy Developments
About Nonprofit Policy News
The Minnesota Preserve Charitable Tax Exemptions Campaign
On February 16, as a result of outstanding policy leadership by the Minnesota Council of Nonprofits (MCN), key state legislative champions for nonprofits introduced the Preserve Charitable Tax Exemptions bill (HF 872, SF 0751) that clarifies the state property tax exemption for nonprofits. This bill became necessary because of the December 2007 Minnesota Supreme Court decision in Under the Rainbow Child Care Center vs. County of Goodhue that threatened to jeopardize tax exemptions for many Minnesota nonprofits. After the court's decision, MCN expeditiously and successfully advocated for a moratorium on the assessment of property taxes until either the passage of a new law to clarify the scope of the nonprofit property tax exemption or the close of the 2009 regular legislative session.
The purpose of the bill is to "provide clear standards that can be applied uniformly to determine eligibility for exemption from property taxations." Currently, the draft bill makes three out of six factors mandatory: "(1) whether the organizational purpose is intended to be helpful to others without immediate expectation of material reward;...(4) Whether the income received, including material gifts and donations, produced a profit to the charitable institution that is distributed to private interests;...and (6) whether dividends in form or substance, or assets upon dissolution, are available to private interests." A key factor in the court's decision was whether the charity's recipients received benefits or services at reduced or cost, but under the bill, this factor may be missing if there is "reasonable justification for failing to meet it."
Over the past year, MCN participated in almost a score of negotiation sessions with the state Department of Revenue, and county tax assessors and attorneys. In addition to this clarifying legislation, the Department has also agreed to create a special review panel - to include representatives of Revenue, assessors and MCN - to provide guidance in difficult cases. For more information on Minnesota's Preserve Charitable Tax Exemptions Campaign, visit the MCN policy page.
Nonprofit surveys you should know about
The Johns Hopkins University Listening Post Project recently conducted a nationwide survey to discover the scope of stalled "shovel-ready" infrastructure projects at the nation's nonprofits (not including hospitals and universities). Key findings include:
- The researchers' projection that nationwide $166 billion worth of community infrastructure projects are ready to go if funding were available.
- Of the organizations that responded, shovel-ready projects were most prevalent among museums (64%), community and economic development organizations (59%), and elderly housing and service organizations (47%).
- Altogether, 1,837 organizations identified 1,065 specific shovel-ready projects that have been stalled due to the credit crisis, representing some $10.6 billion of infrastructure investments.
To learn more, read the Communiqué.
Nonprofit Finance Fund, a nonprofit that advocates for a financially healthy and successful nonprofit sector, is conducting a 10-minute survey to help nonprofits better advocate for solutions to nonprofits' challenges. Take it by clicking here.
Federal Legislative and Regulatory Developments
In this section: Stimulus Bill | President Obama Signs SCHIP Expansion | Charitable Driving | Office Of Faith-Based And Neighborhood Partnerships | Voter Rights and 2010 Census | IRS Updates
Economic Stimulus Now Effective - Learn More on the National Council Website
On February 17, President Obama signed into law the $787.2 billion economic recovery package, the American Recovery and Reinvestment Act, historic legislation including unprecedented spending and tax cut measures. The President stated: "The wide breadth of the economic stimulus includes massive funding for federal agencies, help for the state and local governments, help for individuals, and tax cuts for individuals and businesses." The bill tallies out at 65% percent spending and 35% tax cuts with sizable investments in infrastructure projects, science and energy. It includes billions in new money for food stamps; expanded child care and services for the homeless; funds long-sought increases in education funding for low-income and special education students; new refundable tax credits for low-income workers; stepped-up job training; expanded health-care coverage; and an extension and increase of unemployment insurance. All of the new spending is temporary, with most of it slated to end after two years.
Read our new on-going series of "Special Reports" designed to help nonprofit leaders, grantmakers, and policymakers better understand the intersections between the nonprofit sector and our nation's economic recovery.
President Obama Signs SCHIP Expansion
The State Children's Health Insurance Program (SCHIP) is now expanded to provide $32.8 billion extra coverage over the next four and a half years, an amount estimated to extend coverage to an additional 4.1 million children. The program covered about 7 million children in 2008. The expansion was funded by federal tobacco tax hikes, including a nearly 62 cent-per-pack increase on cigarettes.
The law now allows legal immigrant children who have been in the United States for less than five years to enroll, a change from legislation passed and vetoed by President Bush. That change, along with higher family income eligibility limits and less strict identity checks for enrollment, caused Republicans in both chambers to speak out against the bill.
SCHIP, a joint federal-state program, was created in 1997 to provide health insurance to children in families that are low-income, but not poor enough to qualify for the larger Medicaid program. It was initially funded at $40 billion, to be spent over 10 years, and has been credited with reducing the number of children in the nation without health insurance. CQ TODAY ONLINE NEWS 2/4/09
Charitable Driving Tax Relief Act (HR 590) Introduced
As noted in the January Policy News, the charitable mileage issue is very much alive in the new Congress. Most recently, Senator Grassley (IA-R) tried unsuccessfully to have last year's compromise on the GIVE Act - an IRS-determined deduction and allowable reimbursement rate of at least the medical rate of 27 cents - appended to the economic stimulus package. Now Congressmen Petri (WI-R), Campbell (CA-R), and Platts (PA-R) have introduced a bill focused only on the reimbursement side, the less costly aspect of relief. Their bill would exclude from taxpayer income any reimbursements received by a nonprofit for volunteer driving up to the standard mileage rate - today 55 cents. The current discrepancy between the charitable and business mileage rates is viewed as discriminatory and unfair by nonprofits. The new bill would also drop a federal requirement that charities report their reimbursements to the IRS, thereby removing an administrative and paperwork burden.
Office of Faith-Based and Neighborhood Partnerships Essentially Continues Presidential Focus
President Obama, continuing and broadening an initiative begun by former President Bush, has created a new White House Office of Faith-Based and Neighborhood Partnerships. The office in the past has supported the federal government's investment of more than $2 billion a year in private, mostly faith-based charities providing social services.
Obama said the office will help all community organizations -- religious and secular alike -- work on everything from helping people facing home mortgage foreclosure to providing job-training for those in need of work. Its priorities are:
- Making community groups an integral part of the nation's economic recovery and making poverty "a burden fewer have to bear when recovery is complete."
- Offering advice on supporting women and children, addressing teenage pregnancy, and reducing the need for abortion.
- Supporting fathers "who stand by their families," helping young men find well-paying jobs, and promoting "responsible fatherhood."
- Working with the National Security Council to foster interfaith dialogue with leaders and scholars around the world.
Also created by executive order is the President's Advisory Council on Faith-Based and Neighborhood Partnerships, which is a group of 25 religious and nonprofit leaders who will advise the president on antipoverty and other issues. White House Press Release, 2/5/09; The Washington Post, 2/11/09.
Voter Rights and 2010 Census Already Gaining Attention
Representative Conyers (MI-D) has introduced the Caging Prohibition Act of 2009 (HR 103) that would ban deceptive voting practices and eliminate voter caging (voter caging is a practice of sending mass direct mailings to registered voters by non-forwardable mail, then compiling lists of voters, called “caging lists,” from the returned mail in order to formally challenge their right to vote on that basis alone); and the Voting Opportunity and Technology Enhancement Rights Act of 2009 (HR 105) that would restore voting rights to numerous individuals who have been convicted of felonies and would make Election Day a holiday. During the 2008 presidential election, there were allegations of attempts to disenfranchise legitimate voters that involved voter caging, voter purging, and deceptive practices. To learn more about these issues, visit the Project Vote website.
Nonprofits have a particular interest at stake in ensuring a full count of their communities. Census data are used to distribute congressional seats to states, to inform the drawing of district lines, to make decisions about what community services to provide, and to distribute $300 billion in federal funds to local, state and tribal governments each year. For resources and materials, visit the NVEN website.
IRS
Spring Workshops for Small and Mid-Sized Exempt Organizations - These introductory one-day workshops, designed for administrators or volunteers responsible for an organization's tax compliance, will be held in Los Angeles, CA (March 3, 4, and 5), Minneapolis, MN (April 28, 29, and 30), and Boston, MA (June 9, 10, and 11). You can register here.
State Policy Developments
In this section: UPMIFA Helps Nonprofits| New Bills Introduced
UPMIFA Passage in States Helps Nonprofits
In light of the recent economic crisis, many nonprofits have been looking for ways to ease the financial strain. In some states, legal limits placed on nonprofits freeze spending from endowments if the endowment falls below its original amount. These restrictions are a part of the Uniform Management of Investment Funds Act (UMIFA) and were intended to insulate nonprofits from the dangers of irresponsible spending. However many institutions are finding that the law hurts more than it helps at a time when so many nonprofits are struggling to stay afloat. See Wall Street Journal, 2/11/09.
In response to changes in the legal and economic realities of managing nonprofit endowments, the National Conference of Commissioners on Uniform State Laws revised UMIFA in 2006, creating the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The new model law moves away from a "historic" dollar value limitation into a "prudent" spending rule based on donor intent and permanent duration of the endowment; and modifies restrictions on gifts made to nonprofits when amounts are small and older than 20 years. Currently, 26 states and the District of Columbia have adopted UPMIFA. UPMIFA has been introduced in 13 additional states. For additional information on UPMIFA, visit the UPMIFA website.
New Bills Introduced
In this section: Advocacy and Lobbying | Tax Credits and Exemptions | Institutional Structure and Management | | Fundraising and Solicitations | Miscellaneous
Note: 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.
AL | Disclosures for Electioneering Communications and Paid Political Advertising
HB 140 would require an entity, including a nonprofit, paying for an electioneering communication or political advertisement to disclose the names of the sources of funding to the entity.
HI | Registration Fee Exemption for Nonprofit Lobbyists
HB 1007 would amend the lobbyist registration requirements to require payment of a registration fee, except that lobbyists representing only nonprofit organizations with annual revenues of less than two hundred thousand dollars would be exempt.
AZ | Income Tax Credits for Charitable Contributions
HB 2286 would increase the maximum charitable tax credit for married couples that file jointly and that itemize deductions from three hundred dollars to four hundred dollars for the taxable year; and require charities to provide written certification verifying the organization's 501(c)(3) status and providing certain organizational financial information.
CO | Abatement Interest for Nonprofits Erroneously Denied Exemption
HB 1265 would allow a nonprofit that fails to qualify for tax-exempt status due to an error or omission on the part of the nonprofit to escape interest penalties attaching to the property tax for a period of two years.
HI | Repeal of Nonprofit Tax Exemption
HB 1742 would repeal the general excise and use tax exemption for nonprofits, other than religious nonprofits.
MD | Maryland Uniform Prudent Management of Institutional Funds Act
HB 200 would establish the Maryland Uniform Prudent Management of Institutional Funds Act and provide revised guidance and rules for investment and spending of nonprofit funds.
NY | Property Tax Exemption and Appropriation for Nonprofits
AB 2236 would amend the real property tax law to provide a property tax exemption to nonprofits, and allow owners of exempt property to apply for state financial aid in an amount equal to the sum of the property tax that the owner would have paid had the property not been exempt.
ND | Charitable Gifts Income Tax Credit
HB 1203 would amend the tax credit for charitable contributions in several ways, including setting a maximum credit for contributions and altering the credit available to individuals for charitable gifts.
Institutional Structure and Management
Note on L3Cs (Low Profit Limited Liability Companies): Proponents of low profit limited liability companies or L3Cs claim that they will enable the flow of philanthropic funds to businesses designed for so-called "charitable purpose" that engage in economic development activities. The LC3 business form proposes to do this by simplifying the complex analysis required before private foundations can undertake Program Related Investments. See this post on Nonprofit Law Blog for more information on L3Cs. Already passed in Vermont and Michigan, L3C enabling legislation has now been introduced in Illinois, North Dakota, Utah, and Wyoming. Follow the links below for the text of each bill. The National Council is not taking a policy position on L3Cs. Many nonprofits have expressed concern about L3Cs because this novel approach has not existed very long. The Council of Foundations includes L3Cs in its 2008 Agenda for Philantropic Partnership.
IL | Creation of Low profit Limited Liability Companies
SB 55 would define and allow for the creation of low profit limited liability or L3C companies, which are hybrids of standard nonprofit and for profit entities.
MS | Revised Nonprofit Corporation Act
HB 680 would revise the dissolution process for nonprofit corporations by requiring that the articles of dissolution include a statement that the nonprofit's debts, obligations and liabilities have been paid, discharged or otherwise appropriately disposed of; and by revising registration renewal and registration expiration procedures.
ND | Nonprofit Limited Liability Company Act
HB 1298 would allow for the creation of Nonprofit Limited Liability Companies and provide definitions and procedural requirements for their creation, including annual reporting requirements.
UT | Low Profit Limited Liability Company Act
SB 148 would amend the Utah Revised Limited Liability Company Act to provide for the creation of low-profit limited liability companies, which are hybrids of standard nonprofit and for profit entities.
VT | Compensation of Employees of Nonprofits That Receive State Funding
HB 187 would require any nonprofit receiving funding through a 2010 fiscal year appropriation to reduce by five percent the annualized compensation of any employee whose total annualized income exceeds $60,000.00 prior to release of appropriated funds.
WY | Low Profit Limited Liability Companies
HB 182 would provide for the creation of low profit limited liability companies, which are hybrids of standard nonprofit and for profit entities.
AZ | Disclosure at Donation Sites
HB 2091 would require disclosure at a donation site of the percentage of revenue received by the charity from the donations, and the percentage of items donated that remain in the state to be resold to benefit the charity.
CT | Clarification on Charitable Donation Bins
HB 5222 would clarify the definition of "donation bin," and require that donation bins placed in public places bear a notice containing certain information about the purpose of the donations.
KY | Nonprofits Providing Services to the State
SB 89 would require nonprofits that have income less than ten million dollars and that receive state grants for providing services to the state to have an attorney review and sign the state grant agreement, attend all meetings of the nonprofit's governing body and sign all their minutes of meetings - with a copy provided to the granting agency.
NY | Required Posting on Charitable Solicitation Containers
AB 2678 would amend existing law regarding charitable contributions to require charities that solicit donations through unattended containers to post the percentage of the funds that will actually be used for the stated charitable purpose.
CO | Certification of Nonprofits as Local Public Procurement Units
HB 1088 would allow public benefit nonprofit entities with 501(c)(3) status that receive funds from the state or federal government to be certified as local public procurement units by the Department of Personnel.
State Spending Transparency
A growing number of states are putting everything from budgets and contracts to travel expenses online for the public to scrutinize. Twelve states post all their state spending, six post the checkbooks of selected departments, and seven have passed laws ordering the creation of online spending websites Learn what your state is doing from The Center for Fiscal Responsibility. USA Today, 2/23/09
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This monthly e-newsletter contains updates on federal and state policy issues that impact all 501(c)(3) organizations, including budget concerns, advocacy rights, and oversight and accountability. Nonprofits have the right and responsibility to engage in the policy process. Please use this information to advocate for the nonprofit sector and the communities we serve. For more information on how to engage in public policy, click here.
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