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Nonprofit Advocacy Matters | April 7, 2014

Posted: 
April 7, 2014

2014 State of the Sector Report
Recovery Delayed for Nonprofits and Those They Serve

The economic recovery is leaving behind many nonprofits and communities in need, according to the 2014 State of the Sector Report released today by the Nonprofit Finance Fund. The survey responses from more than 5,000 nonprofits found that four out of five (80%) reported an increase in demand for services, the 6th straight year of increased demand. More than half (56%) of respondents were unable to meet demand in 2013 - the highest reported in the survey's history. As proof of the fragile nature of the social safety net, an alarming 28% of responding nonprofits ended their 2013 fiscal year with a deficit, and 55% have 3 months or less cash-on-hand. Full survey results, along with an interactive survey analyzer and a look at trends over the past six years, are available at the Nonprofit Finance Fund website. See related article in Government-Nonprofit Contracting Reform, below.

Federal Issues 

Wyden to Nonprofits: “You are on the right side of history”

Senate Finance Committee Chairman Ron Wyden (D-OR), speaking April 1 at the annual member meeting of the National Council of Nonprofits, made his clearest statement of support for charitable giving tax incentives and for the work of charitable nonprofits in their communities. Reiterating his observation that the charitable deduction is a “lifeline, not a loophole,” Wyden stated his conviction that reforming the tax code “does not mean throwing overboard the charitable deduction.” He shared that he is troubled by the concept of a “giving floor,” rejecting a proposal in the discussion draft from House Ways and Means Committee Chairman Dave Camp (R-MI) to require giving of at least two-percent of a person’s adjusted gross income before claiming a charitable deduction.

Chairman Wyden demonstrated his respect for the work of charities by telling the audience of State Association leaders, “What you all do allows Americans to make their way up the ladder of economic mobility.” He urged nonprofits to tell their story to policymakers, saying that “your ’word picture’ is the economic multiplier of the work you do and how dollars cycle through in communities. Job growth, preventive nature of work, save money.” He concluded his remarks by stressing, “You are on the right side of history.”

Expired Charitable and Other Tax Incentives on the Agenda

Senate and House tax committees are shifting from comprehensive tax reform debates to consideration of expired tax incentives, including the food donation tax deduction, the enhanced deduction for conservation easement donations, and the IRA charitable rollover. Last week, the Senate Finance Committee approved by voice vote a bipartisan package of incentives that expired at the end of 2013, collectively known as the “tax extenders package.” Under the bill, each tax provision is extended through 2015. In a letter to Senate Finance Committee Chairman Ron Wyden, Feeding America, the Land Trust Alliance, and the National Council of Nonprofits made the case that “the important incentives for giving back to communities represent a significant commitment to families in need, to the conservation of cherished resources, and to the vibrancy and sustainability of community-based organizations.” Scheduling for action by the full Senate is uncertain. The House Ways and Means Committee is expected to take longer to evaluate individual “extenders” before drafting a bill.

State and Local Issues

States Cutting Taxes, but Restoring Charitable Giving Incentives a Tough Sell

In this election year, governors and legislators in more than 30 states are pursuing tax changes, yet only a handful are looking to enhance charitable giving. So far, Indiana, Minnesota, Nebraska, and Wisconsin have enacted a mix of business, individual, and property tax cuts valued at hundreds of millions of dollars. In Maine, legislators have struggled all session with exempting charitable giving from a cap on all itemized deductions enacted in 2013. A recent compromise measure to phase out the cap was unanimously approved by a key committee, but final action remains in doubt (see related article below). Legislation in Michigan seeks to restore tax credits for donations to homeless shelters, food banks, museums, and community foundations. The tax credits were repealed in 2011 to fund a business tax cut. The Ohio House has passed a bill authorizing a tax credit for donations to the permanent endowment fund of eligible community foundations. According to Philanthropy Ohio, the “Endow Ohio” tax credit would “build and retain wealth for the prosperity and vibrancy of Ohio communities, in perpetuity,” and “strengthen the charitable giving in Ohio, which currently ranks 41st in the country in average charitable contributions.”

Taxes, Fees, PILOTs

  • Fees: Nonprofit and other private employers in Washington, DC were relieved to learn that a proposed $100 per employee “local services fee” was not included in the Mayor’s budget for fiscal year 2015. The “fee,” also called a "head tax," had been proposed by the DC Tax Revision Commission as a way of generating $45 million annually in new revenue.
  • Fees: The Maine House finally put to rest a bill that would have authorized municipalities to impose service charges on tax-exempt property owned by certain nonprofit organizations (mainly hospitals and higher education institutions). The measure was tabled several times last year, but returned to the agenda based on recommendations of the Maine Nonprofit Tax Review Task Force. The legislation was rejected on March 28 by a vote of 80 to 57.

Government-Nonprofit Contracting Update
Contracting Challenges Chronicled in NFF Survey

Results of the Nonprofit Finance Fund’s (NFF) 2014 Annual Nonprofit Survey released today indicate that the need for government-nonprofit contracting reform is increasing. Although there are slight variations depending on whether the contracts and grants are federal, state, or local, the responses for all levels of government were relatively similar. The survey finds:

  • More than half (51%) report that governments at all levels pay nonprofits late for the services they perform on behalf of governments;
  • In a troubling trend, a quarter (24%) indicate that reimbursement for indirect costs has decreased over the past 5 years;
  • 45% said they have experienced a decline in government revenues over the past 5 years, with three out of four (74%) stating that government funds have remained the same or declined during the same period.

The National Council of Nonprofits has proposed several common-sense solutions to address these and other problems with government-nonprofit contracting systems. 

Additional State and Local Issues

Advocacy in Action 

Advancing Mission through Data

The Nonprofit Finance Fund annual survey gives nonprofits powerful data points they can use to advance their missions through advocacy. For instance, the National Council of Nonprofits has used the NFF survey results in recent years in support of the charitable giving incentive (federal and state testimony), in opposition to efforts at the local level to impose new taxes or fees, or demand payments in lieu of taxes (PILOTs) (advocacy campaign), in highlighting the effects of across-the-board sequestration cuts on nonprofits (news article), in demonstrating the shift of public burdens onto the backs of charitable nonprofits (speeches, articles), and in identifying the challenges to philanthropy (article). State Associations of nonprofits have likewise woven state-specific data from NFF into their narratives about the impact and condition of the nonprofits in their states.

Our colleagues at NFF collect, analyze, and distribute this information – both nationwide data and state-specific data – so charitable nonprofits can put it to use. How else can nonprofits use this new data to tell their stories? We’d like to learn how readers incorporate the NFF data and other resources to advance their missions through advocacy.


 

Worth Reading

Philanthropy Is No Substitute for Government Funding,’ March 25, 2014, New York Times editorial making the case for government spending on science research, a message that applies to the work of all fields served by charitable nonprofits.

Worth Quoting

“Organizations and churches give back in so many different ways. They give back to citizens and provide services towns can’t do. We get what we can get. It’s a win-win situation for both of us.”

- Huntersville, North Carolina Town Manager Greg Ferguson discussing the desirability of having nonprofits in town, quoted in the local Herald Weekly on April 4, 2014.

Worth Studying

Nonprofits, Voting and Elections: A 501(c)(3) Guide to Nonpartisan Voter Engagement, Nonprofit VOTE. This free, downloadable Guide covers all the basics, from general rules to voter registration, voter education, candidate engagement, and getting out the vote. Each section contains links to additional resources on each topic to help further your work.

Worth Citing

$18.93 - $27.00 per hour

The range (from Arkansas to Massachusetts) of the value of volunteer services in the states in 2013, according to Independent Sector. The nationwide average hourly rate for 2013 was $22.55, up 41 cents from 2012. 

Nonprofit Advocacy Matters | March 24, 2014

Posted: 
March 24, 2014

Federal Issues

Senate Action Likely on Expired Giving Incentives

The Senate Finance Committee reportedly will consider legislation in the coming weeks to renew a package of several dozen expired tax incentives, including the following three provisions that promote giving to the work of charitable nonprofits. The food inventory enhanced tax deductions allowed individuals, businesses, and corporations to donate wholesome food to nonprofits and deduct their cost basis plus one-half the difference between their cost and the market value of the donated goods. The enhanced tax deduction for conservation easement donations permitted landowners to donate or sell certain rights associated with his or her property, such as the right to subdivide or develop, and a private organization or public agency agrees to hold the landowner’s promise not to exercise those rights. The IRA charitable rollover allowed individual taxpayers older than 70 ½ years to donate up to $100,000 from their individual retirement accounts (IRAs) and Roth IRAs to charitable nonprofits without having to treat the withdrawals as taxable income. The three provisions are expected to be included in legislation likely to come before the Finance Committee by early April.

Federal Agencies Shifted Sequestration Burdens on Nonprofits, Others

In 2013, the arbitrary, across-the-board spending cuts known as “sequestration” reduced assistance for education, housing, health, and nutrition, according to a new report from the Government Accountability Office (GAO). Among other things, GAO found that “sequestration reduced the size and number of grants, vouchers, and other forms of assistance provided to states and localities, nonprofits, and other partner entities that assist in carrying out federal missions.” Of concern to charitable nonprofits is that sequestration not only reduced direct grants to nonprofits, but that nonprofits also had to fill the void created by cuts to other programs. Perhaps most telling, GAO found that “many of the effects of sequestration could not be quantified or will not be known until future years, if at all, for a number of reasons including the timing of when funds are disbursed (such as grant cycles that start late in the fiscal year), challenges in isolating the effects from other factors, and the lack of currently available performance data for some programs.” Read the full report: 2013 Sequestration: Agencies Reduced Some Services and Investments, While Taking Certain Actions to Mitigate Effects, GAO, March 2014.

Congress May (Again) Tighten State Trigger for Food Benefits

Governors in six states so far — Connecticut, Montana, New York, Oregon, Pennsylvania, and Rhode Island — have taken steps to reclaim more than a combined $800 million in annual Supplemental Nutrition Assistance Program payments from the federal government by increasing energy subsidies to individuals in need, Governing reports. Eight other states — California, Maine, Massachusetts, Michigan, New Jersey, Vermont, Washington, and Wisconsin — are considering taking similar actions, according to Stateline. The federal Farm Bill, enacted earlier this year, was supposed to cut the cost of the food stamp program by preventing states from triggering eligibility by providing a mere $1 a year in heating assistance aid. U.S. House Speaker John Boehner (R-OH) has complained that “states have found ways to cheat, once again.” He and other House Republicans are promising to investigate the actions of the states and move legislation, if necessary, to prevent what they consider circumvention of the goal of the Farm Bill. 

State and Local Issues 

Connecticut Reconsiders Support for Some Nonprofit Property Exemptions

Connecticut, the state that actually reimburses towns and cities for tax revenues lost due to state property tax exemptions for governments and nonprofits, is roiling with competing bills to increase how much money the municipalities actually receive. Current law calls on the state to pay 77 percent of the tax bills that nonprofit hospitals and colleges/universities would otherwise pay; yet lately the legislature has appropriated only about 32 percent of that amount. One pending bill would require the state to pay at least 50 percent of the tax bills directly to the largest cities and a lesser percentage to smaller communities. The Governor is proposing an additional $8 million in funding for cities in his budget to address the concerns raised by this bill’s supporters. The Speaker of the Connecticut House has taken a different approach by introducing a bill to dramatically alter the existing state “grant in lieu of taxes” program. The Speaker’s bill would effectively repeal the property tax exemption of nonprofit higher education institutions and hospitals and call for the state to reimburse the “Eds and Meds” at a reduced rate of up to 77 percent. See recent testimony of the Connecticut Association of Nonprofits.

Public University Pegged for “PILOTs”

A local government in Iowa has secured an unusual promise from the publicly-owned University of Iowa –payments of over $1 million per year to match the taxes that a private landowner would have been required to pay to all overlapping jurisdictions. The University system purchased a 150,000-square-foot parcel of property from the city on which to build a health clinic. The payment amount reportedly is based on the taxes that all overlaying taxing bodies would assess annually on the property, yet the city will be keeping the whole amount for itself, causing some politicians to complain. The same issue – cities negotiating payments that cut out other taxing bodies – is the subject of legislation in Wisconsin that would force cities in that state to share a proportion of voluntary payments.

The Relationship Between Cities and Nonprofits: It’s Complicated

Is it just us or do the following two situations demonstrate the push-pull relationship with governments that nonprofits experience every day? In these, one city sees nonprofits as a problem-solver for a chronic local problem; the other finds that its need for cash trumps its desire to solve local problems through nonprofits.

  • The St. Louis Public Schools Superintendent will soon be issuing requests for proposals to turn underperforming public schools into “contract schools” run independently by charitable nonprofits. The nonprofits would hire staff and set curricula, but the schools would still belong to the public school district. The approach reportedly has also been tried in Chicago, Philadelphia and New York.
  • San Diego is considering a plan to keep for itself a larger share of federal funds under the Community Development Block Grant program, and cut funding to projects managed by nonprofits. Citing infrastructure needs such as replacing street lights and repairing sidewalks, city officials reportedly would divert over $1 million in federal funds that normally are used by nonprofits to leverage outside resources for community improvement projects. This plan is currently undergoing a 30-day public comment period prior to final approval.

Additional State and Local Issues

Advocacy in Action 

Advancing Your Mission Through … Compelling Data

People advocating on behalf of their nonprofit’s mission – to funders, journalists, public officials, volunteers, etc. – are used to telling compelling stories of impact and need in their communities. So much the better when they have compelling data to back up their narrative stories. New Jersey’s Center for Non-Profits has mastered the fine art of data collection, and reporting o n those data points.

The New Jersey Non-Profits 2014: Trends and Outlook, published this month, reports on the responses from the Center’s annual survey of the experiences of the nonprofit community for 2013. The current survey found that New Jersey nonprofits reported some modest signs of improvement in their circumstances compared to 2012, but rising demand for services and flat or uncertain funding streams continue to create a cautious outlook for 2014. Here are some of the specific findings:

  • Four-fifths (82%) of responding organizations reported that demand for services had increased during the past year, and a similar percentage (80%) expected demand to continue rising in 2014.
  • Nearly half (46%) reported relatively level funding in 2013 vs. 2012, but 31% acknowledged that expenses exceeded revenue during their most recently completed fiscal year. 
  • Seventy-four percent expected their total expenses to increase in 2014, but only 58% expected total 2014 funding to increase.  

When New Jersey nonprofits get questions (or need to correct presumptions) from the news media, politicians, the public, and others, they have this data to tell their story. Check out, and use, the data from State Sector Economic Impact reports for your state, posted on the National Council of Nonprofits website. 


Worth Reading

Advocacy by Charitable Nonprofits: Flipping the Accountability Lens to Focus on Government ActionsTim Delaney, President and CEO, National Council of Nonprofits, in an article published by Columbia Law School, providing a purposefully provocative explanation of how five hidden-in-plain-sight trends of government actions are harming the ability of nonprofits to serve individuals and local communities.

Worth Quoting

“Connecticut rightly recognizes both that nonprofits earn their property tax exemptions through community impact and that those exemptions mean lost tax receipts for municipalities. The benefits of creating jobs, revitalizing neighborhoods and encouraging vibrant growth of host communities outweigh the forgone revenue.”

- Jeff Shaw, Director of Public Policy, Connecticut Association of Nonprofits, in testimony before a Joint Committee of the Connecticut Legislature, March 21, 2014.

“The lesson is that if you want to have an impact, and to protect the interests of your organization, you need to participate actively in large regulatory changes.” 

- Henry Flood, Senior Advisor,The Super Circular: Who Benefits?, The Grantsmanship Center, making the point that the most engaged and vocal organizations secured the most favorable terms in the new OMB Uniform Guidance on federal grants reforms.

Worth Watching

The OMB Super Circular: What the New Rules Mean for Nonprofit Recipients of Federal Awards, Venable LLP law form webinar, March 20, 2014, presenting an overview of the new OMB Uniform Guidance emphasizing noteworthy changes that will have important implications for nonprofit recipients of, and applicants for, federal grants and cooperative agreements.

Worth Studying

The story of the recession, as told through 8 beautiful Atlanta Fed graphicsWashington Post, March 19, 2015, highlighting visuals from a recent report of the Atlanta Federal Reserve that present a highly visual mix of graphics, charts and text that describe “where the labor market stands, what’s holding it back and what can be done.” 

Nonprofit Advocacy Matters | March 10, 2014

Posted: 
March 10, 2014

Federal Issues

Budget Season Opens in Earnest

President Obama kicked off the official annual budget and spending season with the release of his fiscal year 2015 budget proposals and House and Senate committees are now getting busy attending to spending priorities. The President’s budget, released on March 4, mostly follows the spending limits that Congress approved in December. It once again calls for limiting the value of itemized deductions (including the charitable deduction) for higher-income taxpayers. It also includes increased spending on some programs that are of interest to nonprofits. Congress is not expected to act on the President's budget blueprint, but it could factor into appropriation discussions. The budget deal reached in December answered the question of how much the federal government will spend in FY 2015, an issue that has frustrated recent appropriations decisions. With that question resolved, the spending committees are pursuing “regular order,” the process of picking which programs to fund and by how much. While optimistic by past experience, the chairs of the Appropriations Committees in the House and Senate are pushing their colleagues to move the 12 spending bills out of committee by June and approved by either chamber of Congress by early August.

Tax Reform Draft Made Public

Like the President’s FY2015 budget blueprint (see above article), House Ways and Means Committee Chairman Dave Camp (R-MI) released a draft tax reform plan that is full of interesting details and ideas, but by all accounts has no chance of becoming law this year. The proposal calls for lowering top tax rates for individuals and corporations and modifying or eliminating thousands of existing tax provisions. It proposes changes to standard and itemized deductions that Camp projects will reduce itemizing to only five percent of taxpayers. It would also levy an excise tax on some nonprofit salaries that exceed $1 million, impose pay-out requirements for Donor Advised Funds, alter how unrelated business income taxes are calculated, and eliminate most forms of supporting organizations. Go to the National Council of Nonprofits website to see our statement and a summary of the Camp tax reform proposal.

Proposal to Regulate Social Welfare Nonprofits Draws Record Response

A record-setting 143,730 respondents submitted comments to the Internal Revenue Service on proposed regulations relating to political activities of 501(c)(4) social welfare organizations. By most analyses, the comments are predominantly negative, whether submitted by conservatively or progressively leaning individuals and organizations. The draft proposals seek to define the types of political activities that 501(c)(4) social welfare organizations can engage in without running the risk of losing their tax-exempt status. They do not ban any such activities, provide a spending limit, or remove donor confidentiality for partisan spending that would otherwise be made public by entities organized under different sections of the Tax Code. Comments submitted by the National Council of Nonprofits focus on the unintended and harmful impact that the proposed regulations would have on the legitimate and essential nonpartisan advocacy activities of 501(c)(3) charitable nonprofits such as nonprofit lobbying, work on ballot measures (initiatives, referenda, and bond measures), and nonpartisan election-related activities such as voter guides, candidate forums, and voter registration activities.

State and Local Issues 

Cities Seek to Tax Employers, Employees

Across the country, cities are looking to expand their revenues beyond property tax receipts by imposing new taxes and fees on individuals and businesses, including nonprofits. Cities ranging from New York City to Johnstown, Pennsylvania reportedly are considering implementing commuter taxes. The Adjustment Plan to address the debts of bankrupt Detroit confides that the “City is considering the enactment of a local ordinance that would require employers to withhold City income taxes of reverse commuters.” Washington, DC, which is prohibited by Congress from levying a commuter tax, is considering a recommendation from a recent Tax Revision Commission to impose a “local service fee” on non-governmental employers, including nonprofits, of $100 per employee. The Commission reportedly opted for the fee approach as a better alternative to seeking payments in lieu of taxes (PILOTs) from nonprofits.

Taxes, Fees, PILOTs

  • Fees: The Honolulu City Council voted to reject a proposed ordinance to extend a trash collection fee to charitable nonprofits. Lisa Maruyama, president of the Hawai`i Alliance of Nonprofit Organizations, voiced the concerns of the nonprofit community: "It's a slippery slope of fees that actually contribute to nonprofit overhead and increased business costs. This type of overhead expense is very hard to recoup in fundraising initiatives."
  • PILOTs: The Speaker of the Connecticut House is threatening to turn up the pressure on nonprofit hospitals and universities to provide more money to their local governments. He is describing a plan to alter the State’s revenue sharing plan to reduce payments that go to communities to cover revenues lost from property tax exemptions by those institutions. Although no legislation has yet been introduced, the Speaker claims to have bi-partisan support for a proposal that could require universities and hospitals to pay property taxes and then submit a request to the State for reimbursement for all or some of the amount.
  • PILOTs: Bryant University in Smithfield, Rhode Island, has effectively agreed to all of the town’s terms – payment of $200,000 annually to cover the costs of emergency police and fire services it receives – and the Town Council members apparently are having difficulty taking “yes” for an answer. Bryant and Smithfield have been locked in heated negotiations for years, culminating in a controversial law enacted last year by the General Assembly empowering the town to charge fees if Bryant doesn’t capitulate.

Government-Nonprofit Contracting Update
Maryland Nonprofits Excluded from Applying for Contracts

Smaller nonprofits that historically have performed services on behalf of governments may be excluded from competing for state contracts if small-business legislation is enacted. The measure would mandate that contracts valued between $15,000 and $100,000 must be set aside in a Small Business Reserve (SBR) by all state agencies and only awarded to those certified as small businesses. Nonprofits would not be eligible for the preferential treatment because they are not independently owned and operated. We would like to hear from any other states that have – or that have rejected – similar programs that prevent nonprofits from competing for state contracts to serve their local communities.

Legislatures Continue to Tweak Solicitation Regulation

State legislatures continue to tweak their solicitation laws in an effort to increase accountability, and occasionally, to reduce burdens on nonprofits. A bill pushed by the Maine Attorney General would eliminate registration and disclosure requirements for charitable nonprofits and professional fundraising counsel, leaving only professional third-party solicitors still required to register and report. Maryland appears likely to adopt a rewrite of the state’s solicitation registration law to increase the Attorney General/Secretary of State’s oversight of nonprofits and raise certain fees for charities. Maryland Nonprofits, the State Association in Maryland, supports the bill on the grounds that it would “provide resources and authority to address glaring shortcomings in the state’s ability to protect charitable donors from fraud, effectively monitor compliance with state rules on charitable solicitations, and when necessary intervene to prevent the misuse of charitable assets.” In Oregon, both the House and Senate have passed the bill authorizing the Attorney General to impose increased penalties, including fees, on nonprofits that fail to comply with reporting and other regulatory requirements. The measure, which was expressly amended to restrict the creation of additional and burdensome reporting requirements, now goes to the Governor for his signature. See the recent Nonprofit Advocacy Matters for more background on these and other proposals.

Additional State and Local Issues

Advocacy in Action 

Here’s Why

We’ve all heard the declaration: Your nonprofit can/should/must engage in advocacy! The typical reasons given are that you serve a population that doesn’t have a voice or the public needs your good sense. Rarely does the speaker of the opening declaration explain “why” in terms that matter to the mission and day-to-day responsibilities of the busy nonprofit professional. Until now.

Dennis McMillian, President of the Foraker Group, opened his March message to members of the state association of nonprofits in Alaska with a message worth sharing. In The Case to Engage in Public Policy, Dennis used facts to make his point clear for residents of his state: “Nationally 31% of charitable nonprofit revenue comes from government grants. Alaska gets twice that much! That fact alone should make it clear that public policy is not just a good thing to do, many organizations must engage in it to survive.”

He went on to explain: “Even nonprofits that depend on earned revenue or charitable giving are not immune to today's policy challenges. Never have stakes been so high. Individually and collectively we must act – we must do a better job of advocating for ourselves.”

And then there is this universal truth that all nonprofits should acknowledge: “Some elected officials don't understand why nonprofits are important, others lack respect for what we do. For example, recently some of our legislators were heard making statements that nonprofits are "not effective,” that "salaries are too high,” we "waste money,” we "don't know how to run our businesses,” and that we need to be "taught" to do more for less. Unfortunately, these officials don't know what they don't know. If we don't speak for ourselves, they may assume their perceptions are true.”

In other words – for Alaskans and nonprofits throughout the United States – advocating on behalf of your nonprofit is an essential tool for advancing mission.


 

Worth Reading

Foundations Can Rewrite History by Focusing on the States, Tim Delaney, Nonprofit Quarterly, March 5, 2014, demonstrating that while much attention is focused on federal proposals in Washington, DC that often are dead on arrival, “the real action is in the states” when it comes to legislating: last year Congress passed fewer than 80 laws, while state legislatures adopted 40,000.

Worth Quoting
Respect from Washington

“Representing 10 percent of the nation’s adult workforce and contributing more than $800 billion to US GDP, nonprofits also serve as an economic engine for job creation in communities across America.”

- Strengthening and Supporting the Social Sector to Grow the Middle Class, White House Budget Fact Sheet accompanying the President’s FY 2015 Budget, March 4, 2014.

Worth Quoting

"Nonprofit leaders are the best business people in the state. They are able to deliver world-class services, balance the books, and run a marketing campaign -- usually all on a shoe-string budget."

- Washington Governor Jay Inslee speaking to an audience of 200+ nonprofits at Washington Nonprofits' Legislative Reception, February 12, 2014.

Worth Studying

25 Maps and Charts That Explain America Today, Washington Post, February 24, 2015, offering a fascinating pictorial collection of demographic information ranging from the economic and digital divides to tax and social policies across the country.

Nonprofit Advocacy Matters | February 24, 2014

Posted: 
February 24, 2014

Federal Issues

News Coming on Taxes and Spending; Little Traction Expected

Within the next two weeks, the public will learn the details of two major proposals that, if enacted, would significantly alter federal tax and spending policies. Neither, however, is expected to do more than serve as discussion drafts for the 2014 elections. First up, perhaps as soon as this week, is a draft bill by House Ways and Means Committee Chairman Dave Camp (R-MI) that is expected to reduce corporate and individual tax rates and eliminate numerous special-interest provisions. It is unclear what changes will be proposed to provisions that affect charitable nonprofits. Less than a week later, President Obama is expected to release his budget proposal for fiscal year 2015. Early reports suggest that he will move away from past austerity budgets by calling for $56 billion in new spending on domestic and defense priorities. 

While largely symbolic – neither package is expected to be enacted as written this year – the details could well appear in legislatures across the country. For example, the President’s proposal to cap itemized deductions, first raised in his 2009 budget proposal, was enacted in modified form in Hawai`i in 2011 (where it was reversed in 2013 due to the harmful consequences) and considered in several other states in 2013. Likewise, the call to convert tax deductions into tax credits – a proposal seen in several federal tax-reform packages – was seriously considered before being rejected in Minnesota last year.

Proposal to Regulate Social Welfare Nonprofits Under Fire

Partisans and nonpartisan nonprofits alike are expressing the common view that proposed regulations from the Treasury Department and the Internal Revenue Service should be withdrawn. To date, a record of nearly 70,000 comments have been filed on the proposed rules to define what should be considered “candidate-related political activity” by 501(c)(4) social welfare organizations. Many of those comments express concern about the adverse effect on partisan activities of conservative or progressive organizations. The House is expected, this week, to take up a bill to delay consideration of the proposed regulations until after the November elections. Several charitable nonprofit, such as Nonprofit VOTE the Colorado Nonprofit Association, and the North Carolina Center for Nonprofits have filed comments challenging the draft as overly broad and likely to infringe on the legitimate advocacy and civic engagement work of 501(c)(3) organizations. The National Council of Nonprofits will be submitting comments in the coming days and all interested parties are encouraged to file public comments; the deadline is Thursday, February 27. Read recent articles in Nonprofit Advocacy Matters (January 27, 2014, December 16, 2013, and December 2, 2013) for background information. 

First Answers Provided to OMB Guidance Questions

The December release of new Grants Guidance by the White House Office of Management and Budget (OMB) has generated enthusiastic interest by charitable nonprofits that perform work on behalf of governments, as well as hundreds of questions from non-federal entities trying to understand the details and scope of the once-in-a-generation overhaul of federal grants policies. In response, the Council on Financial Assistance Reform (COFAR), which is working with OMB to implement the Guidance, has published its first set of 24 answers to Frequently Asked Questions (FAQs), covering such topics as when the new rules go into effect and what “profit” means in the context of charitable nonprofits. Federal officials have not yet addressed a number of questions regarding the mandate that pass-through entities (typically state and local governments) pay the indirect costs of nonprofits. The initial FAQs are the first of several expected sets over the next few months. The COFAR is encouraging individuals and organizations to submit additional questions to help it identify where additional clarification is needed. The National Council of Nonprofits also asks nonprofits with governments contracts or grants to share their questions so that we can follow up and work to ensure that the promise of the new OMB Guidance is achieved through appropriate government actions and interpretations. Please give us your questions and feedback.

State and Local Issues

Taxes, Fees, PILOTs

  • Property Taxes: Legislation in Kansas seeks to remove property tax exemptions from nonprofit human service providers that receive 40 percent or more of their revenues from the sale of membership or program services that would otherwise incur a sales tax if sold by a for-profit organization. For-profit fitness centers reportedly are targeting YMCAs that sell memberships for their athletic programs in addition to providing community benefits particularly to low-income children and families. Other nonprofits, including Goodwill Industries of Kansas, are expressing concern that the legislation could adversely affect their missions as well.
  • Fees: The Honolulu City Council is considering an ordinance to extend trash pickup fees and cart usage fees to nonprofits that own real property. The proposal is supported by the local newspaper

Putting “Voluntary” into Volunteerism

Reversing a trend nonprofits have been seeing in state legislatures, a bill in Washington State treats volunteering with charitable nonprofits as a positive incentive rather than a punishment. The legislation would give unemployed individuals the option of performing volunteer services in lieu of previously mandated job-search requirements. Elsewhere, legislators have sought to impose community service requirements performed at nonprofits as a condition of receiving mandatory or previously earned public benefits. Typically such bills are promoted without regard to the potential avalanche of people who might descend on well-known “name-brand” charities and the sudden liability exposure the bills could impose on nonprofits. Bills to create the community service mandate, known as “mandatory volunteerism,” have been introduced most recently in Alabama and Michigan.

Nonprofit Compensation Flags Agenda Items

Scrutiny of allegedly high compensation levels paid by some nonprofit organizations can lend support for others to advance their agendas against charitable nonprofits. The St. Louis County Missouri Assessor recently announced that he has launched a review of tax-exempt organizations to determine whether they continue to qualify for property tax exemptions. The Assessor, an elected position, was responding to a series of articles in the St. Louis Post-Dispatch questioning the charitable care provided by two nonprofit senior living facilities that pay their CEOs in excess of $1 million each and whether they deserve to remain exempt from paying over $3 million in property taxes annually. In Oregon, a labor union is collecting signatures to put an initiative on the November ballot that would cap the salaries of nonprofit hospital executives at no more than 15 times that of the lowest-paid workers. Hospital officials assert that the ballot measure is designed to give unions leverage to organize and negotiate at the nonprofit hospitals.

Advocacy in Action 

Big Day Advocacy

There’s every day advocacy to which most of us aspire, and then there is Big Day Advocacy like CommonGood Vermont choreographed in the Green Mountain State earlier this month. The Vermont Nonprofit Legislative Day, conducted this year on February 6, presented a lineup of events that left no doubt that charitable nonprofits have the ear of legislators.

The day began with a welcome from the Speaker of the House, followed by a panel of luminaries providing an overview of legislative issues facing the nonprofit sector, how nonprofits can effectively communicate their impact, and advocate for their issues. 

In an interesting twist, the House of Representatives opened its session with inspirational words from a nonprofit leader (see Worth Watching, above) and a Vermont Nonprofit Proclamation, during which the speaker estimated that half of the members of the House have served their communities through local nonprofits, whether as employees, board members, or volunteers.

The day also included not just lobbying for the nonprofit policy agenda but also testimony before a Senate Committee on the top legislative priority for the year, a bill to require results-based accountability by government. Five nonprofit leaders, including Lauren-Glenn Davitian of CommonGood Vermont, provided committee members with hands-on analyses of what better data collection and reporting will mean for government efficiency and the work of charitable nonprofits.

 


 

 

Worth Reading

Social Innovation Investment Testimony, Jeff Shaw, Public Policy Director of the Connecticut Association of Nonprofits, testifying before the Connecticut Senate Human Services Committee, in which he strikes a sobering tone of “hope, but verify,” meaning that new revenue sources such as “social impact bonds” and “pay for success” models might look promising, but must include necessary safeguards to ensure that innocent nonprofits are not by design or default left footing the costs.

Common Themes in the 2014 State of the State Addresses, Governing, February 13, 2014, summarizing the governors’ recurring priorities this year, including tax reform, education, pension reform, and minimum wage hikes, with links to each state of the state address.

Expansion Year for Earned Income Tax Credit?, State Net, February 17, 2014, summarizing why conservative and progressive politicians in nine states are promoting creation or expansion of state tax credits for working poor families.

Worth Quoting

“[A] critically important role for nonprofits is their watchdog function, to ensure that governors of all stripes uphold their pledges to use subsidies and incentives to stimulate direct and indirect job creation.”

 - Rick Cohen,When it Comes to Job Creation, It’s the Governors, Stupid!,” Nonprofit Quarterly, February 11, 2014.

“Instead of trying to find new ways to bring additional hardships to these [nonprofits], our commissioners should focus on ways to help the people whose mission is to help others in our community.”

- Help, don't hinder nonprofits, editorial in Carroll County (MD) Times, February 16, 2014.

Worth Watching

Horse Sense for Legislators,” John Killacky speaking before the Vermont House of Representatives on February, 6, 2014, during which the performing arts center director provided whimsical musings from the real world to help legislators focus their energies on the issues that matter most. See related story in Advocacy In Action, below.

Nonprofit Advocacy Matters | February 10, 2014

Posted: 
February 10, 2014

Federal Issues

Low Drama, Expectations on Effort to Extend Federal Debt Limit

The federal government reached its maximum borrowing authority (debt limit) on February 7, with neither chamber of Congress in session to address it and none of the urgency and rancor that policymakers have expressed during past fiscal showdowns. One reason is that recent experience demonstrates that the U.S. Treasury Department can exercise extraordinary measures, like delaying pension payments, to postpone the need to borrow more cash than permitted by law (although this time that tactic will last only a few weeks). Another reason is that lawmakers tend to agree that the federal government shutdown in October eroded public support for high-stakes, and high-drama, negotiating tactics designed to bend political will in favor of greater fiscal restraint. As a result, politicians across the spectrum appear in agreement that legislation to extend federal borrowing authority will be enacted during February.

Nonprofit Input Requested
Government Seeks Help in Clarifying New OMB Guidance on Federal Grantmaking

The federal government wants to know what you want to know. Specifically, federal officials are asking nonprofits and others affected by the new OMB Guidance on uniform grant reform to tell them what is unclear and what needs extra explanations. As part of its public awareness efforts, the Council on Financial Assistance Reform (COFAR) is conducting webinars and developing responses to frequently asked questions (FAQs). Ultimately, they want to make certain that interpretations of the Guidance are consistent across the many levels of government and the grantee/contractor community. The more clarification that can be provided prior to implementation in late 2014, the fewer differences there will be and therefore the fewer problems as everyone gets acclimated to the new Guidance. Nonprofits are encouraged to submit questions at cofar@omb.eop.gov so that COFAR can publicly clarify areas that are not fully understood. 

State and Local Issues 

States Consider New Charity and Solicitation Regulations, Fees

Multiple state legislatures are looking at either imposing or increasing filing requirements, filing fees, and regulatory burdens on charitable nonprofits wanting to fundraise in their states. Here is a recap of recently filed bills:

  • A new bill in Colorado would amend the state’s Charitable Solicitations Act to clarify rulemaking authority, prohibit solicitation by unregistered persons on behalf of charities, require appointment of registered agents, and clarify existing fines for failing to file required notices on time.
  • Delaware, a state currently without charitable solicitation requirements, is considering legislation that would require most nonprofits to annually submit their IRS Form 990s. Some larger organizations would be required to undergo financial audits. This blog post by the Delaware Alliance for Nonprofit Advancement (DANA) reports how it and many other nonprofit groups have been working with the Attorney General to improve the bill.
  • New legislation in Florida would require all nonprofits, including those reporting less than $25,000 in donations, to register with the state to solicit funds. The bill would empower the state’s charity regulators to revoke the sales tax exemptions of nonprofits that spend less than 25 percent on program costs for three consecutive years. It also would create new audit requirements for nonprofits receiving higher amounts of donations, and create a new annual financial reporting requirement.
  • Maryland legislators are considering a measure granting to the Attorney General the same powers enjoyed by the Secretary of State to investigate and enforce compliance with charity regulations. The bill also would create a Charitable Enforcement Fund and assess application fees from fund-raising counsel ($250) and professional solicitors ($350).
  • Legislation in Oregon would increase the Attorney General’s power to enforce nonprofit regulations and raise penalties and fees for nonprofits that fail to comply with requirements. Concerned about the unintended consequences that could result for smaller organizations, the Nonprofit Association of Oregon (NAO) recommended changes to limit burdensome reporting requirements and ensure noncompliant nonprofits are allowed to correct their mistakes. NAO’s suggestions were incorporated in an amendment legislators adopted last week. “We are going after sharks, not minnows,” the bill sponsor said in agreement.
  • Pennsylvania lawmakers are considering a bill that would require nonprofits to electronically file, and the Commonwealth to post, all charitable solicitation documents on a searchable database. The measure would also set up a Solicitation of Funds for Charitable Purposes Account, funded through registration fees and dedicated to paying for regulatory oversight.
  • Finally, as of January 1, Nevada nonprofits are now required to register with the Secretary of State to solicit donations. “Nobody likes new regulations, but the sector has agreed that additional transparency is important,” Phil Johncock of the Alliance for Nevada Nonprofits (ANN) said. ANN has created a toolkit to help smaller nonprofits comply with the new rules.

Taxes, Fees, PILOTs

  • Stormwater Fees: Local policymakers in Maryland and Illinois are considering options for lowering the burden that new stormwater fees impose on nonprofits. Baltimore County officials announced last month that they are setting aside $3 million in funding for nonprofit remediation projects to help lower the costs incurred by the organizations. "These faith-based organizations and nonprofits are experts in serving the community — not in stormwater remediation and engineering," said County Executive Kevin Kamenetz in a statement. "By sharing the County's technical resources and targeted funding, these organizations can reduce their impact on the environment while still fulfilling their service mission." Similarly, council members in Winnetka Village, Illinois are considering an ordinance that would offer nonprofits exemptions to the new stormwater fees that will go into effect this summer if nonprofits allow for stormwater improvement projects on their property.
  • PILOTs: Connecticut’s Speaker of the House plans to propose legislation that would require the state’s nonprofits, namely hospitals and colleges, to pay local property taxes. Nonprofits would be able to avoid the taxes by instead reaching “voluntary” payment in lieu of taxes (PILOT) agreements with municipalities. Taking another approach, Connecticut’s Governor is proposing an $8 million increase in state payments to municipalities for nonprofit hospitals and colleges.
  • PILOTs: In a curious twist in the usual PILOT story, legislation in Wisconsin would require municipalities that successfully negotiate PILOT payments from nonprofits to share the revenues with overlying taxing bodies, such as school districts and state and county governments. If enacted, these taxing bodies would be able to access a portion of the PILOT payments in relation to the amounts they would collect from nonprofits were they not tax-exempt.

Advocacy in Action 

Advocating with the State of the Union Address

To Susan Dreyfus, President and CEO of the Alliance for Children and Families, the annual gathering in the U.S. Capitol for the State of the Union Address is not just a listening experience but also a participatory event. Which explains her 5½ -minute video response to the President’s speech, combining praise for positive actions by the Administration with a call for greater attention to the economic impact of nonprofits.

In the video, Dreyfus urges the President, Members of Congress, and state and local policymakers to include nonprofits in their efforts to protect and grow the small business community: “We [nonprofits] are businesses, we too are job creators, and we are part of the economic vitality of our communities.” She gave as an example her organization, the Alliance of Children and Families, which as a network represents 500 human serving organizations across the United States with a combined budget of $6.8 billion and 130,791 employees that pay taxes on $4.1 billion in wages and compensation. 

Dreyfus also effectively makes the case that regulatory challenges affect all small businesses, for-profit and nonprofit alike. She specifically thanked the Administration for the new OMB Guidance that, among other things, is “requiring reasonable overhead and administrative rates” in federal contracts and grants, and identifying “outdated, duplicative, and redundant processes and regulatory rules and doing away with them so that we can do what businesses are always wanting to do: have the environment you need to thrive, to innovate, and succeed.”

She concludes with a heads-up for America: “It is important for America to realize that without the nonprofits in your communities being able to do what they do every day, but also the fact that we are job creators, we are economic contributors, and we are part of a vibrant America.”


 

Worth Reading

OMB increases indirect cost reimbursements for nonprofits, Sarah Todd, Savannah Morning News, January 31, 2014, providing keen insights into the impact on all nonprofits and foundations of the new federal grants reforms in the OMB Guidance and urging nonprofit leaders to let “their key funders know about these new developments” and engage in “honest dialogue with them about the problems unreimbursed indirect costs bring to even the best run nonprofits.” 

The Budget and Economic Outlook: 2014 to 2024, Congressional Budget Office, February 4, 2014, projecting that the federal budget deficit will decline to $478 billion in 2015 before rising in 2016.

Worth Listening

Debate on social impact bonds between Jeffery Liebman, Harvard Professor and Director of the Social Impact Bond Technical Assistance Lab, who spoke in favor, and Jon Pratt, Executive Director of the Minnesota Council of Nonprofits, who identified concerns and potential perverse consequences, on Radio Boston, February 5, 2014.

Worth Quoting

“Kentucky’s nonprofits exist to solve problems in our communities and we do so because we care about this Commonwealth and its people. Nonprofits are also businesses, and like any business, operating requires adequate resources – whether those funds come from providing services under government contracts, charitable contributions, earned income or a combination.”

- Memo from the Kentucky Nonprofit Network to Kentucky Governor Beshear, February 4, 2014.

Reminder

Comments Due Feb. 27 for Proposed Regulations

Nonprofits are encouraged to read the draft regulations on 501(c)(4) Social Welfare Nonprofits and to submit comments to the IRS (RE: IRS REG-134417-13) by February 27, 2014. Read recent articles in Nonprofit Advocacy Matters (January 27, 2014, December 16 and December 2, 2013) for background information. 

Nonprofit Advocacy Matters | January 27, 2014

Posted: 
January 27, 2014

Federal Issues

Proposed Electioneering Rules for 501(c)(4) Social Welfare Groups Under Attack

The Chairman of the House Ways and Means Committee is leading an effort to the block implementation of proposed regulations from the Treasury Department that would redefine what constitutes electioneering activities of 501(c)(4) social welfare organizations under the Internal Revenue Code. Legislation by Chairman Dave Camp (R-MI) would prohibit the modification of the rules for one year, thus freezing in place the standards and definitions for determining whether a 501(c)(4) organization crosses the line from promoting social welfare to engaging in too much partisan electioneering. The legislation adds Camp’s name to the list of individuals and groups that oppose draft regulations released in November that would restrict the types of political activities that 501(c)(4) social welfare organizations could engage in without running the risk of losing their tax-exempt status. Conservative and progressive groups alike are panning the proposed regulations. Readers are encouraged to read the proposed regulations and to submit comments (to IRS REG-134417-13) by February 27, 2014.

Strong, Bi-Partisan Support Expressed in Senate for Charitable Giving Incentive

A third of the US Senate has taken a public position in support of the charitable giving incentive in federal tax law in a letter delivered last week to Senate tax committee leaders. Senators Ron Wyden (D-OR), who is expected to be the next Chairman of the Senate Finance Committee, and John Thune (R-SD), who also serves on the Committee, wrote the letter and called on their colleagues to sign on. The message in support of the work of charitable nonprofits in communities is clear: “The charitable deduction is unique. It is the only provision that encourages taxpayers to give away a portion of their income for the benefit of others. For this reason, it is not a loophole, but a lifeline for millions of Americans in need.” Thirty-three Senators from more than half the states signed the Wyden-Thune letter: Alaska (Murkowski); Arkansas (Boozman), California (Boxer); Colorado (Udall); Florida (Nelson); Hawai`i (Hirono, Schatz); Idaho (Risch); Illinois (Kirk); Indiana (Coats); Kansas (Roberts, Moran); Louisiana (Vitter); Maine (Collins); Maryland (Mikulski); Massachusetts (Markey); Michigan (Levin, Stabenow); Minnesota (Klobuchar); Mississippi (Cochran, Wicker); Missouri (Blunt); Nebraska (Heller); New Hampshire (Shaheen); New York (Schuster, Gillibrand); North Dakota (Hoeven, Heitkamp); Oklahoma (Inhofe); Oregon (Wyden); South Carolina (Scott); South Dakota (Thune, Johnson).

State and Local Issues 

The State of the States
As the Governors See It

Governors across the country are announcing their plans and priorities this month as their legislatures convene for the 2014 session. Here are recurring themes and trends of interest to nonprofits:

  • “Comeback State”: Many Governors used their State of the State address to define 2014 as a “comeback” year of recovery from the Great Recession. But as the Washington Post reports, “in many cases, the ‘comebacks’ will manifest as an absence of further cuts, rather than a return to pre-recession spending levels. Thirty states are collecting less revenue than they did before the recession hit.”
  • Tax Reform: A handful of Governors are hoping positive signs in their states’ economic outlooks will make tax cuts possible in 2014. Citing a more comfortable economic outlook than in years past, the Nebraska Governor proposed $500 million in tax relief, particularly in property taxes. Similarly, the Governor in Wisconsin proposed cutting property and income taxes for the third time in less than a year. Governors in New Jersey and Iowa also spoke in favor of property tax relief. Conversely, Rhode Island’s Governor wants to keep tax rates the same and increase overall spending levels.
  • Social Services: Some governors spoke of the need to reinvest in programs that suffered secere cuts during the recession. The California Governor remarked on the significant economic growth the state has experienced and recommended a $154.9 billion spending plan that would increase funding for social services and schools. The Governor of Michigan also touted the state’s improving economy and promised to increase funding for Great Start early childhood education and Meals on Wheels, programs which support the work of many nonprofits in communities.
  • Education: Governors from many states made new investments in education a top priority in their State of the State addresses. Several pledged support for early education: the Governor of New York announced proposals for full funding of a statewide pre-kindergarten; the Kansas Governor proposed full funding for all-day kindergarten while simultaneously fighting a state court case that mandates additional education funding; and Missouri’s Governor proposed tripling pre-school funding. In higher education, Governors in Missouri, Rhode Island, and Iowa recommended freezing tuition rates at public institutions. Similarly, the Arizona Governor wants to stabilize university tuition rates, and is pushing again for a controversial program that would tie base funding for public schools to performance measures. Governors in Alabama, Washington, and Georgia are calling for raising teacher salaries.

 

Maine Nonprofits Call for Return of Full Charitable Giving Incentive

The Maine nonprofit community came out in full force at a public hearing last week in support of a bill that would exempt charitable deductions from the $27,500 cap on itemized deductions enacted late in the session last year. If enacted, the new legislation would be retroactive to January 1, 2013. The Maine Association of Nonprofits (MANP) estimates that application of the cap to charitable giving will result in reduced donations by at least $20 million per year, a conservative estimate according to many of the speakers at the hearing. To learn more about efforts to protect Maine’s charitable giving incentive, see the nonprofit sign-on letter with 83 nonprofit signatories and testimony of MANP and the National Council of Nonprofits.

 

Taxes, Fees, and PILOTs

  • Taxes: To lower the tax rate for for-profit businesses, proposed legislation in New Hampshire seeks to apply the state’s business enterprise tax base to larger nonprofits. The proposal, which targets mostly nonprofit hospitals and colleges, would extend the tax to nonprofits that accept fees for services and collect more than $2 million in annual revenues. Mary Ellen Jackson, Executive Director of the New Hampshire Center for Nonprofits, has expressed opposition to the bill because it ignores nonprofits’ contributions to society and the “long-held” agreement between government and nonprofits.
  • Tax Exemptions: A Nebraska State Senator introduced a bill to eliminate property tax exemptions for religious organizations, arguing that churches should pay property taxes and that the legislation would increase state revenue. Religious nonprofits have opposed the legislation, saying it ignores the important contributions of churches to their communities.
  • PILOTs: Wisconsin policymakers are considering legislation that would require municipalities that negotiate payments in lieu of taxes (PILOTs) from nonprofits to share the revenues with “overlying” taxing bodies, such as school districts and state and county governments. Municipalities oppose the legislation and believe it infringes on local authority. “[The other taxing bodies] are not coming here and cleaning our streets, removing snow ... why should they get a piece of the revenue?,” one City Administrator asked.

Government-Nonprofit Contracting News
New Mexico Withholds Contract Payments to Nonprofit Mental Health Providers

New Mexico is withholding payments to fifteen mental health services providers and has transferred their caseloads to Arizona providers based on allegations of fraud that state officials have not substantiated to the public. The accusations of fraud are reportedly based on findings by a private consulting firm which also manages the New Mexico Health Care Exchange; state officials have so far refused to make the audit findings public. The State Attorney General’s Office, which is investigating the findings, found no fraud in its first review of one of the organizations and cleared it to reopen. Unfortunately, that nonprofit has already gone out of business because of the state’s actions and is still owed $400,000 for services it provided under contracts with the state. The situation raises serious questions about the need for government to follow the same transparency expectations it has for nonprofits and to exercise due process for nonprofits contracting with governments to provide services. State legislators reportedly are considering how to protect service providers from unfair attacks. 

Additional State and Local Issues

Advocacy in Action 

Putting Policy In Nonprofit Perspective

State of the State addresses give Governors the opportunity to tick off the things they have done and offer a to-do list for their legislators to act on. (See related article, above.) Donna Murray-Brown, President and CEO of the Michigan Nonprofit Association, took the opportunity of the Michigan Governor’s recent address to provide insights to nonprofits in the Wolverine State and hand out a few to-do items as well.

First, Donna offered perspective on which all nonprofits should agree: “No matter your political persuasion, and whether you agree or disagree with the progress Michigan has made over the last few years, one thing is certain: all sectors must all work together to realize the hopes and dreams we have for the residents of Michigan.” Reflecting on the significant economic impact provided by the nonprofit community, she observed, “It is becoming clearer and clearer that real progress is inextricably connected with the work nonprofits do every day to meet the needs of the community.”

Murray-Brown moved past the statement of fact and provided a call to action: “We must enhance our narrative of our work beyond ‘it’s the right thing to do,’ to ‘our work is imperative to creating a thriving state, and we too have proven results!’” Donna provides six to-do items that all nonprofits, in Michigan and beyond, can take to heart to improve our public policies, our own performance, and our communities. These include continuing to collaborate; leveraging technology as a strategy for mission attainment; recognizing that diversity, inclusion, and equity are key principles to meeting mission; and nonprofits must hone their public policy and advocacy skills to block threats to our work.

We are inspired by the optimism of this nonprofit leader in one of our nation's most economically challenged states. As advocates for your mission, we hope that all readers can say the same thing about their work as Donna Murray-Brown did in her conclusion: “These are exciting times in the state of Michigan. It will require much to accomplish the goals we set for ourselves, yet we can and will succeed. We are truly the change we have been looking for! Now, let’s get to work!”

 


 

 

Worth Quoting

“The first thing to remember about payments in lieu of taxes is that they're voluntary. That means quiet diplomacy, with willingness to accept "no" for an answer, is generally the way to go.”

- “Nonprofits’ Pockets,” editorial in the Worchester (MA) Telegram, January 23, 2014, offering advice to City Council members considering making demands for money from some local nonprofits.

Worth Watching

Join Us for KY Nonprofit Day at the Capitol!,” January 27 video highlighting the critical advocacy issues the Kentucky Nonprofit Network is raising during their annual lobby day on Jan. 30: regulatory reform, charitable giving incentive, government-nonprofit contracting reform.

Worth Reading

Charitable nonprofits: A little take, a lot of give,” Utica Observer-Dispatch, January 27, 2014, reporting that “when it comes to tax-exempt properties, charitable nonprofits often become the scapegoat” by those who miss “the point of what nonprofits provide to a community.”

5 reasons candidates should listen to nonprofits,” by Ember Farber, Campaigns and Elections Magazine, January 15, 2014, in which our colleague at the American Alliance of Museums makes the case for nonprofit outreach to candidates for public office, noting: "It's not completely clear to me to what degree nonprofits are, or are not, on the radar of the a verage candidate for elected office. But there are plenty of good reasons why they should be."

Why Our Foundations are Investing in Detroit,” by Alberto Ibarguen, Mariam Noland, Rip Rapson, and Darren Walker, Chronicle of Philanthropy, January 17, 2014, in which four foundation leaders address questions of why their organizations are providing hundreds of millions of dollars to shore up public employee pension plans and preserve the collection at the Detroit Institute of Art.

Nonprofit Advocacy Matters | January 13, 2014

Posted: 
January 13, 2014

OMB Guidance on Indirect Costs: What It Does and What It Means

The new guidance published by the Office of Management and Budget (OMB) in late December provides needed clarity and direction on reimbursing charitable nonprofits for their indirect costs (sometimes called administrative or overhead costs) on work performed in communities on behalf of governments. The National Council of Nonprofits has prepared a brief analysis of the indirect cost reforms made in OMB’s new binding Guidance that highlights who benefits from the changes (nonprofit contractors/grantees, foundations, and nonprofits without government contracts/grants), and lays out the next steps nonprofits should take to prepare. Readers are encouraged to forward this brief analysis to their colleagues in the nonprofit community.

Federal Issues

Federal Spending Bills (Nearly) on Track

House and Senate Appropriations Committee leaders have reportedly come to an agreement and are expected to release today an omnibus spending package that would fund the government through September 30. Although the $1.012 trillion spending legislation would come ahead of the January 15 deadline, Congress is likely to pass a three-day stopgap measure, giving them until Saturday to complete all the legislative logistics related to the omnibus. The Ryan-Murray budget deal in December set the federal discretionary spending levels for 2014 and 2015 fiscal years. The House and Senate appropriators have worked since December to parcel out the $1 Trillion in an “Omnibus” sending bill that covers 12 appropriations bills and thousands of line items. The details of how the money will be spent have been kept secret until today to discourage opposition before the negotiations were concluded. Negotiations on the spending bill were delayed by consideration of multiple proposed policy amendments relating to such matters as the Affordable Care Act, abortion, the Dodd-Frank financial overhaul, and EPA regulations on carbon emissions.

Expired Tax Incentives Tied to Decisions on Comprehensive Tax Reform

Fifty-five tax breaks, including the IRA rollover and enhanced incentives for gifts of food and land, expired on January 1, 2014 in large part because the chairmen of the two tax-writing committees said they wanted to deal with all tax breaks in comprehensive tax reform. Broad-based tax reform appears to be losing steam, however, now that the 2014 election year has begun and one of the chief architects of reform, Senator Finance Committee Chairman Max Baucus (D-MT), has been nominated to serve as Ambassador to China. Several influential tax committee members have expressed interest in expediting the retroactive renewal of some of the tax provisions, known as “extenders,” but are saying they want to pare back the list, which includes special breaks for NASCAR and others. 

Federal Sequestration and Shutdown Effects Still Rippling through the Nonprofit Community

Nearly a year after the first $85 billion round of arbitrary, across-the-board sequestration cuts began, the effects on nonprofits are still being seen. Volunteers of America-Minnesota, one of the largest nonprofits in the state, recently made 15 administrative layoffs and froze capital spending due in part to funding loses that resulted from sequestration that began last March and the government shutdown last October. Despite an increase in private contributions last year, the nonprofit realized a four percent shortfall in budgeted revenues at the mid-point of its fiscal year because more than 60 percent of its revenue comes from government grants and contracts. Readers can share stories about the ongoing effects of sequestration in their communities and read others from every state at www.GiveVoice.org

State and Local Issues 

Legislatures Convene, Governors Address States

Tax reforms and spending priorities top the agendas as state legislatures and governors get to work in the New Year, even as state budget pressures continue to plague many areas of the country. Thirty-seven legislatures convene this month and eight others will start in February and March. In State of the State Speeches, Governors so far have focused mainly on tax reform and education funding increases. Governor Cuomo of New York announced proposals for a $2 billion tax cut, including property and estate tax adjustments, and creation of statewide pre-kindergarten in schools. Kentucky’s Governor also focused on tax reform and repeated his call for the legalization of gambling in his speech. The Governor of West Virginia recommended a two-percent increase in teacher salaries, which drew criticisms from some legislators with concerns about balancing the state’s budget. Colorado’s Governor is drawing special notice from his announcement of a proposal to create a new nonprofit tasked with fostering public-private partnerships to fund infrastructure improvements. 

Maine Considers Restoring Charitable Giving Incentive

Maine legislators will hold a public hearing next week on legislation that would reinstate the full deduction for charitable contributions retroactive to January 1, 2013. The State’s total itemized deduction allowance was capped at $27,500 in the 2014-2015 biennial budget last year, limiting incentives for charitable contributions to nonprofits. The Maine Association of Nonprofits supports the bill and is encouraging nonprofits from around the state to share with their representatives why the charitable giving incentive is exceptional and should be carved out from the new cap. The legislation in Maine follows the same path as Hawai`i, which enacted legislation last summer that restored the State’s charitable giving incentive by removing a cap placed on all itemized deductions in 2011. Several other states last year considered but rejected proposals to cap itemized deductions, including those for charitable giving. “Virtually every state has concluded that the support that charitable nonprofits provide to their communities, made possible by charitable donations, is too important to risk limiting the tax incentives,” CEO Tim Delaney of the National Council of Nonprofits observed about the trend among states in The Hill last summer.

Pittsburgh Mayor Hires Nonprofit Liaison, Demands More PILOTs

Pittsburgh Mayor Bill Peduto announced last week that he has created the post of Non-Profit & Faith Based Manager in his office to improve collaboration with local nonprofits working in low-income communities. To serve in the City’s first-ever nonprofit liaison position, the Mayor appointed Betty Cruz, formerly the Director of the Greater Pittsburgh Nonprofit Partnership (GPNP), a coalition of more than 350 nonprofits and corporations in Southwestern Pennsylvania. Pittsburgh joins one other city, Denver, Colorado, and two states, Connecticut and New York, with nonprofit liaisons. Pittsburgh’s new Mayor coupled the good news of greater collaboration with the nonprofit community with continuation of the confrontational style of his predecessor in demanding from nonprofits increased payments in lieu of taxes (PILOTs). Specifically, Peduto is proposing replacing the City’s annual PILOT agreements with the Pittsburgh Public Service Fund (PPSF) for millions of dollars with a longer-term agreement that would demand even more money. 

Taxes, Fees and PILOTs

  • Fees: Legislators in Maine are considering legislation that would make it easier for local governments to charge nonprofits fees for municipal services. The Maine Association of Nonprofits has submitted testimony in opposition to the first bill and is encouraging nonprofits in Maine to contact their members to remind them why nonprofits are and should remain tax exempt.
  • Fees: The city of Lewes, Delaware is considering a proposal to eliminate local nonprofits’ exemptions from certain rental fees, including those charged for renting spaces at libraries parks, and beaches. A decision on the proposal was delayed to give the public more time to consider the issue.
  • Tax Exemptions: The Massachusetts Supreme Court today will consider a case that could open the door for Massachusetts municipalities to impose taxes on local nonprofits. At issue is whether a small town in Western Massachusetts has the power to charge a local nonprofit conservation group property taxes for its 120 acres of woodlands based on the extent of public access. The town's government argues that the nonprofit should lose its property tax exemptions because it does not promote public use of the land and, therefore, the community receives little benefit. The New England Forestry Foundation maintains that public activity is just one benefit its lands provide; others include wildlife protection, and cleaner air and water. “If we lose this case, it would signal to every town that has conservation land to ask for taxes to be paid on those properties,” a spokesperson for a local land trust coalition said. “In some instances, it could spell the demise of the smaller land trusts.” 

South Dakota City Leans on Nonprofits to Support Transit Program  

As the Sioux Falls, South Dakota City Council reduces spending on a transit program, it is turning to nonprofits to plug the resulting service gap. The Paratransit program at issue provides home pick-up to people with disabilities. The City Council has created a 20-member transit task force to analyze how nonprofits could step in to make sure communities are not going underserved due to budget restraints. The measure is another example of cash-strapped governments shifting costs onto nonprofits for the services the governments have agreed to provide for their communities. A former New York City Planner proposed similar measures when he suggested last year that responsibility for US public transit systems should be reassigned to nonprofits. Other examples can be found in Iowa, Michigan, and Pennsylvania.  

Advocacy in Action 

Nonprofit Advocacy and the Power of “Thank You”

While nonprofit advocacy is often characterized by policy threats that require opposition and at times even confrontation, it can also offer opportunities for agreement and appreciation. And as the Nonprofit Association of the Midlands (NAM) demonstrates, thanking policymakers for their support is a core component of successful nonprofit advocacy.

Nebraska’s Tax Modernization Committee released recommendations in December that, among other things, call for funding increases in education and property tax assistance. The recommendations also rejected previous proposals to cut taxes. In response to these tax reform recommendations, NAM sent Committee members thank you letters and is encouraging other local nonprofits to share their gratitude with Committee members for their leadership.

To prevent future tax reform threats, NAM is also asking Nebraska nonprofits to sign a petition calling for responsible and community-focused tax reform changes from lawmakers.

 


 

 

Worth Reading

Federal Grantees to Get Help with Overhead Costs, Chronicle of Philanthropy, January 9, 2014, article explaining the significance of the changes in the new OMB guidance related to indirect costs, stressing: “The rate is a floor, not a cap. Nonprofits can choose 10 percent as a default rate for overhead costs, or negotiate for a higher rate.”

Worth Quoting

 “Nonprofits are not made to pay taxes because we do public good and make up for services not provided elsewhere.”

- Donna Murray-Brown, president and CEO of the Michigan Nonprofit Association, quoted in Nonprofits brace for financial squeeze from municipalities,” MiBiz, January 5, 2014.

Nonprofit Advocacy Matters | January 3, 2014

Posted: 
January 3, 2014

Federal Issues

OMB Publishes Streamlined Grants Guidance that Benefits Charitable Nonprofits

The White House Office of Management and Budget (OMB) officially published its overhaul of federal grants policies and procedures on December 26, and many of the changes should benefit charitable nonprofits, their work in communities on behalf of governments, and the nonprofit community as a whole.  Most notably for community-based organizations, the new Final Guidance will require pass-through entities (typically state and local governments) entering into contracts or grants with nonprofits to pay the nonprofit’s approved federal indirect cost rate, negotiate a rate based on the federal guidelines, or, at the election of the nonprofit, pay a minimum default rate of 10 percent of a nonprofit’s modified total direct costs. Additionally, all federal agencies will be required, under most circumstances, to utilize a nonprofit’s approved indirect cost rate if one exists, rather than negotiating its own rate. The new guidance merges and replaces eight OMB Circulars, including A-110, A-122, and A-133, that most directly affect grants and contracts with charitable nonprofits. The Council on Financial Assistance Reform (COFAR), which worked closely with OMB on this effort, will now facilitate the implementation of the new guidance. For more information, see the official publication by OMB, the special edition of Nonprofit Advocacy Matters, and the statement from the National Council of Nonprofits.

Regular Order Returning to Congress, for Now

Congress faces yet another deadline (January 15) to approve $1.012 trillion in appropriations for the federal government before temporary spending authority expires, but this deadline is different because Congress is focused on where to spend the money rather than whether to spend at all. This approach, known as “regular order” or the normal process, is the result of the budget deal reached by Representative Paul Ryan (R-WI) and Senator Patty Murray (D-WA), chairs of the House and Senate Budget Committees, and approved by Congress in December. The agreement ends disputes over total spending by setting specific levels for Fiscal Years 2014 and 2015 while temporarily turning off $65 billion in additional arbitrary sequestration cuts. Appropriators in Congress are busily at work allocating resources to all federal departments, agencies, and programs; House and Senate action are expected in the next two weeks. The likely “omnibus” spending bill will not address the federal borrowing limit (debt ceiling), leaving the possibility of another government shutdown in the spring. 

Changes in Tax Leadership in 2014

The New Year is bringing changes at the top for federal tax law drafting and enforcement:

  • Senate Finance Committee: In December, President Obama nominated Senator Max Baucus (D-MT) to serve as Ambassador to China. If Baucus is confirmed, as expected, then the chairmanship of the powerful Senate Finance Committee will likely pass to Senator Ron Wyden (D-OR), who has a record for seeking bi-partisan solutions to tax problems and is a vocal supporter of the charitable deduction. As an indication of Senator Wyden’s respect for the work of charitable nonprofits, check out the feature on his Senate website: A Lifeline not a Loophole.
  • Internal Revenue Service: Also in December, the Senate confirmed John Koskinen to be 48th Commissioner of the IRS. As Commissioner, he presides over the nation’s tax system, which collects approximately $2.4 trillion in tax revenue each year and manages many of the rules governing tax-exempt organizations including charitable nonprofits. Prior to his appointment, Koskinen served as the non-executive chairman of Freddie Mac from 2008 to 2012 and its acting chief executive officer in 2009.

State and Local Issues 

State Budgets See Meager Growth, More Fiscal Uncertainty in 2014

State budgets are expected to undergo only modest improvements and continued financial challenges in FY 2014, according to a report from the National Association of State Budget Officers (NASBO). Revenue is projected to increase by only 0.8 percent in FY 2014 as a result of federal tax rate increases in 2013 and tax cuts in states in 2014. “The lingering effects of the recession are still present, as a number of states have yet to surpass pre-recession revenue and spending levels in nominal terms,” the report authors find. A meager spending increase will represent an improvement from the 26-year low reached in 2012, but “for most states, spending growth will be very limited and there will be few additional budget dollars available.”

These continued fiscal strains could limit or negatively affect the programs that support the work of nonprofits in many states. “For many states, operating budgets also face pressure from spending needs in such areas as transportation and infrastructure, as well as pensions and retiree health care,” the NASBO report states. For example, the Kentucky Legislature is facing a major budget gap that is likely to trigger cuts, with $600 million in required expenditures and only $230 million in increased revenue. Similarly, Pennsylvania officials anticipate major battles over the 2014-2015 budget due in part to increased pension and medical assistance costs amid meager revenue growth. Governments in California, Florida, Illinois, Indiana, Michigan, Nevada, New Hampshire, New Jersey, New York, and Rhode Island are also expecting budget pressures in 2014. 

State Tax Reform in 2014 and Charitable Giving Incentives

Comprehensive tax reform remains a priority on several state legislative agendas in 2014, and nonprofits learned from past experience that such “reform” efforts could subject the charitable giving incentives in their states to artificial caps or attempts at restructuring. Governors in Kentucky, Nebraska, New York, and Oregon have identified tax reform as a policy priority in 2014, and other governors could advance similar goals in their budget proposals in the coming weeks and months. As a result of effective nonprofit advocacy, consensus among states in 2013 about the importance of charitable giving incentives holds an important lesson and warning for states wading into tax reform in 2014. Notably, legislators in Kansas, Minnesota, North Carolina, and elsewhere considered but ultimately decided against changes to charitable giving incentives that would have negatively affected the work of nonprofits and the communities they serve. Late last year, the Governor of Vermont spoke out against a proposal from the Legislature’s tax writing committees to limit state itemized deductions, including the charitable giving incentive, saying it violated his promise not to increase taxes. Legislators in Maine will be considering a bill this year to reinstate the full deduction for charitable donations retroactive to January 1, 2013. The proposal would undo the damage caused by the imposition of a $27,500 cap on total itemized deductions which was inserted at the last minute in the State’s 2014-2015 biennial budget

Research Questions the Effectiveness of Tax Incentives for Businesses

A new report on business taxes indicates that states doling out tax incentives or exemptions to businesses in hopes of increasing jobs may be wasting tax revenues. The report found that tax breaks have far less to do with where a business decides to locate than is commonly believed. Instead, the report documents that other factors, such as housing costs, labor costs, and the supply of certain types of skilled workers, are equally if not more important than business tax rates. As reported in a recent issue of Nonprofit Advocacy Matters, half of states are unable to demonstrate that tax breaks given to businesses lead to the desired economic outcomes, and several states are considering ending existing incentives.

Additional State and Local Issues

Advocacy in Action 

Illinois’ Donors Forum Expands Policy, Capacity Building in 2014

Donors Forum, the state association of nonprofits in Illinois, is beginning 2014 with a giant step forward through a dramatic expansion of its engagement in policy and advocacy and by announcing plans to expand its capacity building work across the middle of the state.

Acting on feedback received from member nonprofits at its annual Nonprofit Summit late last year, Donors Forum has revealed plans to help strengthen and unify nonprofits’ policy work by building their advocacy capacity, creating a sector-wide voice, and better demonstrating the value of nonprofits to policymakers. To meet these goals, Illinois’ nonprofit state association is offering member organizations more of the policy tools needed for success in 2014, including increased member engagement and policy guidance, improved advocacy trainings, timely data and research, more agile policy communications, and a stronger social media presence. 

These new policy commitments come on top of a powerful advocacy tool Donors Forum unveiled last fall. Known as BuildingStrongerIL, the new web portal offers nonprofits, policymakers, members of the media, and other site visitors a variety of new graphs, charts, and district-level maps on Illinois’ robust and diverse nonprofit community.

Further demonstrating its statewide impact, this week Donors Forum officially absorbed Good Works CONNECT (GWC), a network of community foundations and operating nonprofits located in Central Illinois. "GWC is vital to philanthropy and nonprofits in Central Illinois," one Central Illinois foundation leader said. "We are … thrilled that GWC is now in the capable hands of Donors Forum."

 


 

Worth Quoting

“The new guidance means that nonprofits should be able to focus more on their missions and should be under less pressure to raise additional funds to essentially subsidize governments. In turn, charities with no government contracts or grants could see less competition for scarce philanthropic dollars. This is a major win for the entire charitable nonprofit community.”

- Tim Delaney, President and CEO, National Council of Nonprofits in a news release on the OMB Guidance that was published in the Federal Register on December 26, 2013.

Contracting Facts Worth Noting

75 percent of nonprofits responding to a Urban Institute survey reported that reimbursements from governments for administration/overhead costs are limited to 10 percent or less, with 24 percent reporting no reimbursement whatsoever for these expenses. 

Source: Nonprofit-Government Contracts and Grants: Findings from the 2013 National Survey, Urban Institute, December 2013

Worth Reading

"Struggling for revenue, local governments look to nonprofits," The Washington Post, December 21, 2013, providing an analysis of and nonprofit perspective on efforts by municipalities to impose new taxes, fees, and payments in lieu of taxes (PILOTs).

"How Food Stamp Cuts Affect Your State," Stateline, December 30, 2013, explaining the impact of reduced food stamp benefits on individuals and providing a state-by-state breakdown.

Defining, Not Reinventing the Wheel: A Pilot Study on Youth Development Outcomes and Budgeting for Results, Donors Forum, December 13, 2013, analyzing Illinois’ “Budgeting for Results” reform efforts and highlighting that developing measurable outcomes can be a complex process, requiring a sustained, long-term, and broad level of contact with nonprofit providers and experts field by field, program by program.

Artists Can Impact ’14 Nonprofit Trends, Art in Praxis Blog, December 30, 2013, applying the National Council of Nonprofits’  “2014 Nonprofit Trends to Watch” to show ways that artists can use advocacy “to influence the (potentially life-saving) decisions made within political, economic, and social systems and institutions.”

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