Nonprofit Policy News | June 2009
SPOTLIGHT: State Nonprofit Associations Successfully Advocate to Save Nonprofit Costs | Federal Legislative Developments | Court Cases | Reports and Resources | State Policy Developments | Our Sponsors
State Nonprofit Associations Successfully Advocate to Save Nonprofit Costs
Congratulations to the Connecticut Association of Nonprofits and the Minnesota Council of Nonprofits for their successful advocacy to increase audit thresholds for nonprofits in ways that protect consumers while saving nonprofits millions of dollars that can go to their missions. In Connecticut, passage of PA No.09-102 raised the legal requirement for nonprofit formal audits from $200,000 to $500,000, effective July 1, 2009. The Connecticut Society of CPAs, the Connecticut Council for Philanthropy, and the different state regulators all supported the wisdom of saving an estimated 500 nonprofits $3 million in audit fees. In Minnesota, HF 1298 (sec.191.34) increased the audit threshold from $350,000, where it has been for the last twelve years, to $750,000, effective for nonprofits with a fiscal year ending July 1, 2008 or later.
Additionally, the Massachusetts Nonprofit Network and the Michigan Nonprofit Association have had success in advocating for nonprofit audit threshold legislation. In Michigan, HB 6633, effective January 2, 2009, established the audit threshold for Michigan nonprofits at $500,000 or more. In Massachusetts, HB 247, effective January 1, 2008, increased the audit threshold from $100,000 to $200,000 for Massachusetts nonprofits.
Many changes in the nonprofit landscape support limiting audit requirements for small nonprofits, not the least of which is the improved and enhanced Form 990 filing system implemented by the IRS last year which provides more information than ever for nonprofit oversight. Other reasons to raise audit thresholds in more states include:
- Many CPAs recognize that small organizations do not need a full expensive audit because a less expensive option - an independent financial review - will serve the same purpose at a much lower cost to the nonprofits and CPAs;
- the transparency provided by Guidestar’s posting of 990 information;
- the dramatically increased costs of audits which adversely impact not only the nonprofit but also their funders - and ultimately those whom the nonprofits serve because the extra $10,000 paid to a CPA for a full audit is $10,000 diverted from a nonprofit's core mission; and
- CPA firms that feel overwhelmed by requests to do so much pro bono or "low-bono" work on audits when a full-blown "audit" is not really needed.
Connecticut Governor Rell’s press release on the bill signing stated: “This bill provides financial relief to smaller charities and helps to ensure that more of the dollars raised are spent on the charity itself rather than on a costly audit....Outside auditors are expensive and they can cost smaller charitable organizations a big chunk of the money they raise.”
Photo by nikkinoquer.
Federal Legislative and Regulatory Developments
In this Section: Funding Nonprofit Capacity Building Program | Health Care Reform | Economic Stimulus Update
Senators Baucus and Grassley urge Senate Appropriations to Fund Nonprofit Capacity Building Program
The President’s proposed budget – prepared before the Serve America Act was passed – did not include funding for many programs at levels authorized by the Act and attempts to specifically remove the express reservation of funds language for the Nonprofit Capacity Building Program. Read more detail in the May Policy News. The Program’s champions, Senators Baucus (MT-D)and Grassley (IA-R), have written a supportive letter to the key appropriations subcommittee leaders, Senators Harkin (IA-D) and Cochran (MS-R), urging them to appropriate the full amount Congress specifically authorized for the Program - $5 million for FY 2010 (to be matched equally by private funding.) Their Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will mark up the budget for the Corporation for National and Community Service where the Program is housed in July. On the House side, the key House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies under Chairman Obey (WI-D) tentatively announced a mark up of this portion of the budget will occur when Congress returns from the July 4 recess.
At a recent ServiceNation coalition meeting, it was reported that the President’s request for a 29% increase in the Corporation’s budget is threatened to be cut substantially, putting many of these needed programs at risk.
Nonprofits Need to Watch Key Issues in Complex Health Care Reform: Credits and the Charitable Deduction Limitation
Since May's Policy News in which we explained the SHOP Act and its provision of credits for nonprofits, the 615-page draft Affordable Health Choices Act has proceeded to extensive mark up in the Senate Health, Education, Labor, and Pensions (HELP) Committee, incorporating favorable concepts from the SHOP Act. The draft legislation would define “qualified small employers” to include nonprofits with at least two and no more than 50 full-time employees on average. The credit provided would be a payment based on a calculation of (a) specified dollar amounts depending on type of coverage – self only ($1000) and family ($1500 or $2000 depending) – times (b) a sliding percentage scale based on employer size – the more employees, the smaller the percentage – times (c) the number of months coverage was provided. Qualified small employers would need to purchase insurance coverage and pay at least 60% of the health expenses, and have an average wage of less than $50,000 for full time employees.
This kind of inclusive treatment for nonprofits is not to be found so far in the other key draft legislation being considered, which offer “small businesses” tax credits and fail to provide nonprofit small employers with comparable treatment. The three House Committees with health care jurisdiction (Energy and Commerce, Education and Labor, and Ways and Means) released their 850-page House Tri-Committee Discussion Draft and the Senate Finance Committee (SFC), focused on working with the Congressional Budget Office on how to fund reform, released a short Powerpoint on their Draft Proposal. The SFC plans to release a draft bill after the July 4 recess.
On the funding side of health care reform, Senator Baucus (MT-D) confirmed last week that offsets exist to pay for $1 trillion of health care reform over the next ten years. The Senator has stated that a version of a cap on the exclusion of employee health benefits from taxes is likely, while Senator Conrad (ND-D) said President Obama's proposal to limit the value of charitable and other itemized deductions for high-income households is a contender for the package as well.
The Center for Budget & Policy Priorities has urged one way to do the charitable deduction limitation is to maintain the value of itemized deductions for filers in the top two brackets at their current levels of 33 and 35%, rather than allowing it to expand when those tax rates rise to 36 and 39.6% in 2011 for everyone making more than $200,000. The plan would keep the cap at 35 percent, for example, even for people whose income tax rate will jump to 39.6 percent. The Center said it would raise $68 billion over 10 years. The President’s version of the limit on itemized deductions would raise $318 billion over 10 years, raising the question of whether Senators would be willing to risk political backlash for so much less money.
In terms of cost containment, the most divisive issue surrounding health care reform is whether there would be a government or public plan option available in the various insurance exchanges being considered. Leaders of four Democratic caucuses representing about 120 members of Congress said that they would vote against any health care overhaul bill that does not include a “robust” government-run plan to compete with private insurers. Such a plan, the leaders of the Black, Hispanic, Asian Pacific American and Progressive caucuses said at a news conference, would resemble Medicare, the health care entitlement for the elderly; would have to be available to everyone; and could not be subject to a “trigger” or some other mechanism that might delay its implementation.
The Senate bills may not include a public option but Senator Baucus has said that the Finance Committee’s version of health care legislation is likely to call for a system of government-organized insurance “co-operatives” across the country. “I am inclined, and I think the committee is inclined, toward it,” Baucus said. “It’s got to be written in a way that accomplishes the objective of the public option, even though it itself is not public."
To stay current on how the multiple bills are evolving visit the Power of A website introduced by the American Society of Association Executives (ASAE) and the Center for Association Leadership.
CQ Online and Print Editions, 6/26.09, 6/25/09, 6/24/09, 6/19/09, 6/11/09; NationalJournal.com, 6/25/09
Economic Stimulus Update
• Ban on Oral Communications Regarding Stimulus Funds Expanded. The President's ban on lobbyists’ oral communications regarding specific stimulus matters is being extended to include everyone, not only federally registered lobbyists. The restriction however would be limited to the period "after competitive grant applications are submitted and before awards are made." Read more on the White House blog.
• To learn more about where the stimulus funds are going, read the Vice-President’s letter on the Roadmap to Recovery, and then view the maps showing where recovery money is being spent for different programs.
Court Cases
In this Section: Judge Rules Electioneering Law Unconstitutional | Supreme Court Retains Oversight by U.S. on Voting | California Sues Charities Raising Funds for Police, Firefighters and Veterans
Judge Rules Florida Electioneering Law Unconstitutional
A federal judge struck down a Florida electioneering law that requires groups - including nonprofits - to register with the state and submit financial reports if they mention candidates or issues in publications or on Web sites. The rules also applied to individuals who spend $100 or more on electioneering communications. The judge ruled that the law unconstitutionally limits political free speech. The state has announced it will appeal the decision.
The Broward Coalition of Condominiums, Homeowners Associations and Community Organizations filed the lawsuit after the group wanted to print a newsletter including information on candidates and constitutional amendments in November 2008. The Institute for Justice, a libertarian group, argued the case on behalf of the coalition, a libertarian student group at University of Florida, and the conservative National Taxpayers Union. For more information on the case, visit the Institute for Justice website. South Florida Sentinel Sun.com, 6/15/09
Supreme Court Retains Oversight by U.S. on Voting
The Supreme Court, in an 8-1 decision, left intact one of the signature legacies of the civil rights movement, the Voting Rights Act of 1965. At issue in Northwest Austin Municipal Utility District Number One v. Holder Attorney General, et al. was a provision allowing federal oversight of election law changes in Alabama, Alaska, Arizona, Georgia, Louisiana, Mississippi, South Carolina and Texas; most of Virginia; counties and townships in California, Florida, Michigan, New Hampshire, North Carolina and South Dakota; and three New York City boroughs, Manhattan, Brooklyn and the Bronx.
The Court did not rule on the constitutionality of federal oversight but instead gave an expansive interpretation to a narrow statutory ground, saying the utility district in Austin, Texas that had challenged the constitutionality of the law — along with other government entities around the nation — might be eligible to “bail out” from being covered by it. Chief Justice Roberts, writing for the majority, acknowledged that the Court’s approach stretched the statutory text, but he said the Court should avoid deciding hard constitutional questions when it could. “We are now a very different nation” than the one that first passed the Voting Rights Act, he said. “Whether conditions continue to justify such legislation is a difficult constitutional question we do not answer today.”
While the plaintiff utility district found the ruling “a complete victory as far as we’re concerned,” the NAACP Legal Defense and Educational Fund claimed victory also: “This case was brought to tear the heart out of the Voting Rights Act and today that effort failed.”
Only Justice Clarence Thomas, who dissented in part, would have addressed the larger question in the case, expressing his belief that the Act’s federal oversight was no longer needed. New York Times, 6/23/09
California Sues Charities Raising Funds for Police, Firefighters and Veterans
California filed eight civil lawsuits against 53 people, 17 telemarketers and 12 charities in a statewide crackdown accusing executive directors and telemarketers of conspiring and using deceptive practices to defraud donors as they raised more than $9.3 million. Sacramento Bee, 5/30/09
Reports and Resources
In this Section: IRS Agrees with GAO: Do Not Require Nonprofits to Report Individual Charitable Cash Contributions | Reports Document Significant Economic Stress on Nonprofits | Register Your Volunteer Opportunities | Federal Grants webinar | Nonprofit Staff with College Loans: Consider Income-based Repayment
IRS Agrees with GAO: Do Not Require Nonprofits to Report Individual Charitable Cash Contributions
In a recently released report, the Government Accountability Office (GAO) found that in 2001, an estimated 46 percent of taxpayers who deduct cash contributions misreported those contributions. Misreporting includes not having adequate documentation to substantiate a donation. The GAO concluded and the IRS has acknowledged in emails that requiring information reporting for charitable cash contributions may not be an effective way to improve taxpayers’ compliance with the law: “Charities could incur substantial costs and burdens if they were required to file information returns with IRS and taxpayers on the cash contributions they receive.”
On a related note, learn more about "Contributions to Nonprofits and the Gift Tax" by reading the new Alliance for Justice fact sheet.
Reports Document Significant Economic Stress on Nonprofits
Read more about the findings of the Impact of the 2007-2009 Economic Recession on Nonprofits in the Project’s most recent Communiqué. Triggered by declining revenues and endowments, decreased cash flows in part from government payment delays, and increased costs particularly for health benefits, 83% of the nonprofits surveyed report some level of fiscal stress from September 2008 to March 2009.
See also the updated report from the Bridgespan Group finding that the percentage of nonprofits that have resorted to layoffs has increased, as has the percentage that has made broad-based programmatic reductions. More organizations have drawn down their reserves.
Register Your Volunteer Opportunities on Serve.gov and Be Part of "United We Serve"
President Obama has asked Americans to volunteer during a "summer of service" to help the country progress in areas like clean energy, education and health care: "This summer, I'm calling on all of you to make volunteerism and community service part of your daily life and the life of this nation" - see the video remarks of both the President and the First Lady. He's asking people and organizations to list their volunteer opportunities, blog their stories, and use the toolkits provided to help organize projects on a new government website called Serve.gov, operated by the Corporation for National and Community Service and supported by the All for Good technology.
The "United We Serve" campaign launched at the recent national conference co-convened by the Corporation and the Points of Light Institute. The campaign will culminate with the newly designated National Day of Service and Remembrance on September 11, when further service initiatives will be launched from "cities of service" to the Entertainment Industry Foundation's plans for a week of network programming on service in October.
Applying for Federal Grants? Download a copy of our webinar.
Nonprofit Staff with College Loans: Consider Income-based Repayment
While the National Council has been active on college loan forgiveness issues to aid with nonprofit recruitment, the other relief provided by the College Cost Reduction and Access Act, signed in 2007, was the authorization of a new income-based repayment plan for many college loans. Starting this week, those with federal student loans can apply for a program that caps monthly payments based on income and forgives remaining balances after 25 years. Use the calculator at IBR info to help determine eligibility for the plan.
To recruit college students for your nonprofit, here's a flyer the National Council designed for them and some marketing tips for your nonprofit.
State Policy Developments
In this section: Special State Focus: Wisconsin Nonprofits Successful in Saving Property Tax Exemptions | New Bills Introduced
Special Focus: Wisconsin Nonprofits Successful in Saving Property Tax Exemptions
Congratulations to the Wisconsin Nonprofits Association for their work in getting important property tax legislation passed in the Wisconsin Legislature. AB75, an amendment to the senate's budget bill, contains language that preserves property tax exemptions for nonprofit rental housing. The bill became necessary after the Circuit Court decision in Future Madison Eastpointe, Inc. v. City of Madison and a subsequent Wisconsin Department of Revenue interpretation of the relevant law denied property tax exemptions for nonprofit affordable rental housing for low income and disadvantaged residents. The bill was signed by the Governor on June 29, 2009. For more information on AB75 and to find out what you can do to support Wisconsin Nonprofits, visit member Wisconsin Nonprofits Association Website.
In this section: Advocacy and Lobbying | Fundraising and Solicitations |Institutional Structure and Management | Tax Credits and Exemptions | Miscellaneous
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 post 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 | Modification of Certain State Grant Agreements
AB 1364 would allow any state agency that has entered into certain grant agreements to renegotiate deadlines and timetables or to invalidate grant agreements if the state agency is unable to comply with the agreement for specified reasons and if the grant recipient consents. For more information, visit the California Association of Nonprofits Website.
CO | Changes to Law Regarding Nonprofit Employer Unemployment Premiums
HB 1363 would amend the law regarding unemployment premiums paid to the state's unemployment compensation fund by nonprofit employers by exempting certain nonprofit organizations from certain surcharges, and by amending provisions that allow certain nonprofit employers to pay unemployment premiums or to make payments in lieu of premiums. For more information, visit the Colorado Nonprofit Association Website.
LA | Funding for the Nonprofit Rebuilding Pilot Program
SCR 150 would approve a proposed amendment to the Action Plan for Fiscal Year 2006 Community Development Block Grant Disaster Recovery Fund (CDBG) proposed by the Louisiana Recovery Authority to provide twenty million dollars of CDBG funds for the Nonprofit Rebuilding Pilot Program.
ME | Lobbying Laws Amended to include "Grassroots" Lobbying
LD 310, signed into law on June 6, 2009 and entitled "An Act Regarding Grassroots Lobbying," amends existing law by adding and defining the term "indirect lobbying." The bill also requires information regarding expenditures for indirect lobbying to be included in a lobbying organization's monthly session report. For more information, visit the Maine Association of Nonprofits Website.
DE | Financial Reporting and Audit Requirements for Delaware Nonprofits
HB 248 would require all charitable organizations domiciled in Delaware and/or soliciting Delaware citizens to register with the Department of State and file an annual financial report. Nonprofits receiving more then $500,000 in gross revenues in a year would be required to submit an audit prepared by a certified public accountant with their annual financial report.
Institutional Structure and Management
IL | Amendments to the General Not for Profit Corporation Act
SB 1390 would amend the General Not For Profit Corporation Act by allowing for electronic delivery of certain documents, amending voting procedures for certain membership organizations, permitting election of directors and officers via mail or electronic means, and by amending language concerning the rights of a voting member to inspect the nonprofit's records, among other changes.
NY | Training Requirements of Board Members of Certain Nonprofits
SB 5596 would require certain voluntary nonprofits affiliated with the Department of Health and Human Services to create procedural policies to address emergency situations affecting the health or safety of persons served by the nonprofit or that may affect fiscal viability or integrity. The bill would also require board members and trustees of such nonprofits to undergo training regarding fiduciary responsibilities and best practices.
CA | Tax Exemptions for Subordinate Nonprofit Organizations
AB 404 would amend laws concerning tax exemptions for nonprofits to allow subordinate organizations of tax exempt nonprofits to receive tax exemptions if the subordinate organization is listed in a group exemption letter from the IRS to the parent Nonprofit. This bill would also make verifying documents submitted to the Franchise Tax Board open to public inspection. For more information, visit the California Association of Nonprofits Website.
NY | Nonprofit Homeland Security Preparedness Study
SB 1743 commissions the NY Office of Homeland Security to study the security needs of nonprofits registered with the State of New York which are at risk of terrorist attack. The study will identify sources of federal and state funding to help protect nonprofits at risk to terrorist attack and the communities they serve.
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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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