Nonprofit Advocacy Matters Archive

Nonprofit Advocacy Matters | July 28, 2014

July 28, 2014

Take the Survey, Share the Survey

In less than five months, new reforms governing payments to nonprofits for their indirect (overhead) and other costs will go into effect. Learn what the reforms do and why they matter to nonprofits.

You can help in the development of tools to turn the promise of the new reforms into reality for your organization and others by completing this short survey and by encouraging your colleagues at other nonprofits to fill it out as well. 

Federal Issues

House Passes Charitable Giving Tax Provisions

The House of Representatives approved a package of charitable tax provisions on July 17 by a vote of 277 to 130. The bill (American Gives More Act of 2014) would permanently extend three expired charitable giving incentives – food inventories, conservation easements, and the IRA rollover – as well as permit taxpayers to claim charitable deductions from the previous year up through April 15. The bill also would simplify the current two-tiered excise tax to a flat rate of one percent. The underlying substance of the package appears to have strong bi-partisan support, although a majority of Democrats voted against it because the bill did not include provisions to offset the $16 billion cost. The Senate, due to a separate partisan dispute, has not been able to advance legislation to renew for two years several expired tax provisions, including the charitable giving incentives. Without significant advocacy efforts by the nonprofit community, the Senate is unlikely to take up the House-passed bill before adjourning for the mid-term elections.

Winter Optimism Turns to Summer Doldrums on Federal Budget

Seven months after an historic deal on the federal budget, Congress has failed to enact any of the dozen spending bills that fund the federal government and a stopgap funding measure, known as a Continuing Resolution or “CR,” is already being discussed as a likely solution to continuing partisan gridlock. At the end of 2013, Congress reached agreement on a budget that set spending levels and was supposed to allow the appropriations committees to approve annual spending legislation prior to the start of the next fiscal year on October 1. However, both the House and Senate are scheduled to start a five-week recess on Friday without addressing n umerous policy and political disagreements. For example, the bill to fund the Treasury Department next year has drawn strong opposition from the White House partly because the House-passed version cuts the budget of the Internal Revenue Service by more than $550 million. The cuts reportedly are intended as punishment for perceived obstruction of congressional investigations into the IRS’s allegedly partisan handling of applications for tax-exempt status. Many in the nonprofit community are concerned that the reduced funding will divert the IRS diverted from its assigned duties of enforcing against fraud, lawfully screening applications for tax-exempt status, and providing help to the public and charities about appropriate stewardship of donor resources.

State and Local Issues

National Voter Registration Day Proclaimed

The fourth Tuesday of September is officially designated National Voter Registration Day for the next five years, according to a resolution adopted this month by the National Association of Secretaries of State. The bipartisan endorsement from top state election officers puts this celebration of voting and democracy firmly on the election calendar through the rest of the decade and reinforces the commitment to expand the electorate and engage thousands of new voters in the democratic process as the deadlines to register and vote approach. The third annual National Voter Registration Day takes place this year on September 23, 2014. In its first two years, over 1,000 organizations and 10,000 volunteers registered more than 300,000 people to vote. Readers are encouraged to check out Nonprofit VOTE's 501(c)(3) Permissible Activities Checklist, visit its webpage on Staying Nonpartisan, and register for a national webinar on National Voter Registration Day on Thursday August 7th at 2pm Eastern. 

Human Service Providers Assess Progress on Government Contracts and Grants

Nonprofit human services providers continue to struggle with challenges presented by government contracting and grantmaking policies and procedures, according to a new report from the Urban Institute which compares the experiences reported in its surveys conducted in 2010 and 2013. The analysis found that significantly more nonprofits reported decreases in the percentage of government contract and grant dollars that could be used for organizational overhead costs. Fifty percent of nonprofits reported limits on how the amount of funds that could be used for organizational overhead, and of those, three-quarters said the amount was limited to 10 percent or less. This important finding reinforces the need to protect the new federal requirement that state and local governments pay nonprofits their legitimate indirect costs.

The new Urban Institute report also found that nationwide late payments showed a slight improvement from 2009 to 2012 in terms of the length of time payments are delayed, with fewer being reported more than 90 days late. Yet 42 percent of nonprofits surveyed still reported problems in their states with late payments. Complex and time consuming application and reporting requirements continue to be reported as the biggest problem by nearly three-quarters of survey takers. Go to the National Council of Nonprofits' website dedicated to contracting/grantmaking reforms for more information.

Additional Government-Nonprofit Contracting Reform News

Taxes, Fees, PILOTs

  • Taxes: The New Orleans City Council President has blamed nonprofits for crumbling public roads. She contends the city is “missing out on” tax dollars that she believes the 15,000 nonprofit property owners in the city should have to pay. The idea of imposing a property tax onto nonprofit property owners has been brought up before by the Council President, but may gain more traction now that she has suggested that the extra revenue could be put toward the politically popular use of repairing city roads.
  • Fees: The City Commission in Helena, Montana is considering whether to levy a fee on nonprofit property owners to help fund the city fire department, which is currently funded by property tax revenues. The plan being considered by the Commission would allow the city to create a methodology to levy a fire protection fee on tax-exempt properties, mainly government entities such as the VA hospital, and local nonprofits including churches and schools.

Maine to Allow Volunteerism as One Requirement for Food Benefits

Maine will, once again, start requiring recipients of the supplemental nutritional assistance program (SNAP, or food stamps) to work a certain number or hours or volunteer with nonprofits to be eligible for the benefits. This requirement is federally mandated, but the state had received a waiver due to high unemployment. In response to protests that the jobless rate still remains too high in the state to assume that recipients could easily find work, the Department of Health and Human Services Commissioner claimed that volunteer work was an easily accessible alternative to receive the benefits. 

Privately Funded Detroit

Detroit is turning to private funding sources to support the arts as well as political priorities. The Detroit Institute of Arts has secured an additional $26.8M in corporate donations towards its total $100 million pledge to the “Grand Bargain.” The museum has now raised over $80M towards paying down Detroit’s pension liability and transferring ownership of the museum from the city to a nonprofit. Separately, Detroit Mayor Mike Duggan is raising private funds for his new 501(c)(4) organization, the Detroit Progress Fund. The new nonprofit, which is tax-exempt under the “civic league, social welfare organization” portion of the federal tax code, was formed in February to support the “Mayor of Detroit’s agenda.” The Mayor’s spokesperson has said the fund can also be used to “pay for some city-related needs that we don’t currently have the budget for.” It is unclear what those needs are, but some suggest it may be to provide travel budgets for out-of-state job candidates, and not to supplement funding for services provided by nonprofits on behalf of the government. Mayor Duggan says he will disclose funders and spending of the Detroit Progress Fund.

Milwaukee Nonprofit Sector has Grown and Will Continue to Do So

Milwaukee has a “growing, robust nonprofit sector supported by a donor base willing to fund its endeavors,” according to a report from the Public Policy Forum. The report, titled “Give and You Will Receive,” also finds that the growth of the nonprofit sector in the city outpaced that of the city’s GDP, but observes that the increase in the number of nonprofits may have also led to a decrease in overall revenue in all nonprofits. The study suggests that the nonprofit sector in Milwaukee is healthy and will continue to be so, yet individual nonprofits may want to consider more collaboration to maintain or increase capacity.

Advocacy in Action

And the Beat Goes On

Nonprofit advocacy is about advancing nonprofit missions, every day. You win one day, you lose another, and you show up the next day and keep trying. And that’s a good thing because nonprofit missions need and deserve the effort.

Over the years, the Center for Non-Profits in New Jersey has identified complex contract and grant applications processes with the state as barriers to nonprofit efficiency and effectiveness. The state association of nonprofits in the Garden State has successfully advocated with others for numerous reforms, such as increased acceptance of electronic submissions and ensuring that the new e-procurement portal, www.NJSTART.gov, is “nonprofit-friendly.” Recognizing that advocacy works on a continuum, the Center’s advocacy efforts aren’t limited to just legislative lobbying and they don’t stop with the administrative “win” of new regulations written into law or e-systems gone live; the Center regularly surveys its members to ask what has gotten better and what has gotten worse with contracting/grantmaking with the state of New Jersey. 

The latest survey results showed positive and negative attitudes about various changes and provided valuable insights that can be shared with government officials to help streamline processes even farther. Seeing the results of past efforts, nonprofits know that their survey response can make a difference. So it is not surprising that one nonprofit official took the opportunity to raise a “very important point” even though it “doesn’t fit any of your questions” on the survey. The person wanted to challenge the state’s “use it or lose it” policy through which unspent funds from government contracts or grants must be returned to the state rather than applied to the next year’s contract or grant. The comment was imminently reasonable from a nonprofit’s perspective: “I would like to be able to move money forward for the next year since I know that rent, insurance, health, etc. will continue to rise and I can’t count on additional funding from the government contract.”

Because the nonprofit official used his or her voice to broach the issue, the Center received a crucial reminder of its continued significance to organizations. Making the point that every communication provides the opportunity to advance a nonprofit mission, every day.




Worth Reading

Social Impact Bonds: Phantom of the Nonprofit Sector, Rick Cohen, Nonprofit Quarterly, July 25, 2014, providing an extensive analysis and critical review of social impact bonds and pay-for-success initiatives at the federal level.

Worth Quoting

“We depend on these nonprofit organizations, which in many cases operate on tight budgets in their mission to help needy and vulnerable people. A government that expects the rest of us to pay our taxes on time needs to also pay what’s due, when it’s due.”

- “State Should Pay Up Now,” editorial in the Albany (NY) Times-Union, July 14, 2014 urging state officials to start complying with prompt payment and prompt contracting laws designed to protect nonprofits.

“There is no virtue in self-imposed austerity that leads to mediocrity in our programs, and constant turmoil in our finances.”

- Kurt Clotz, “Value, cost, and price: a nonprofit dilemma,” blog posting for Nonprofits Assistance Fund, July 17, 2014 addressing the challenge that merely covering costs is a meager measure of success.” 

Worth Studying

States Recording the Largest Job Gains, Losses in June, Governing, July 18, 2014, providing an analysis of state-specific employment data, showing that 33 states added jobs last month, while 17 lost them.

Nonprofit Advocacy Matters | July 14, 2014

July 14, 2014

The Promise of Government-Nonprofit Contracting Reforms

In less than six months, new reforms governing payments to nonprofits for their indirect (overhead) and other costs will go into effect. To prepare, and to benefit all nonprofits (not just those with government contracts and grants) and grantmakers (that historically often have been forced to subsidize government shortfalls), we're dedicating space in Nonprofit Advocacy Matters and on Twitter at hashtag #NPFullCosts to talk about recovery of full costs and how nonprofits and governments can work together toward more effective service delivery. Learn what the reforms do and why they matter to nonprofits.

You can help in the development of tools to turn the promise of the new reforms into reality for your organization and others by completing this short survey and by encouraging your colleagues at other nonprofits to fill it out as well. Thank you.

Federal Issues 

House to Consider Charitable Giving Incentives

The House is expected this week to consider a package of nonprofit-related tax provisions that would permanently extend three expired charitable giving incentives – the IRA charitable rollover, food inventories, and conservation easements – as well as permit charitable deductions for the previous year up to April 15 and streamline the excise tax for foundation investment income. Five separate bills will likely be combined into one piece of legislation, the Fighting Hunger Incentive Act of 2014 (H.R. 4719). As when the measures came before the House Ways and Means Committee in May, votes are expected to be cast along partisan lines, but for reasons other than the substance of the underlying provisions, which remain popular. Specifically, Democrats continue to object that the proposed permanent renewal of the expired provisions are not being paid for with offsetting revenue increases elsewhere in the tax code. 

Tax Reform Draft Proposal Reduces Tax Incentive for Charitable Giving

A much-discussed comprehensive tax reform plan contains a combination of provisions that would reduce the tax incentive to make charitable contributions, according to extensive analysis by the Tax Policy Center. In February, House Ways and Means Committee Chairman Dave Camp (R-MI) issued a “discussion draft” tax reform plan that, among other things, called for imposing a floor on how much a taxpayer must give before taking an itemized deduction, raising the standard deduction, and restricting how much individuals may deduct each year. Several of these factors and lower tax rates proposed in the draft “would reduce the tax incentive to make charitable contributions,” the Tax Policy Center concluded. The report specifically found that the after-tax cost of making charitable deductions is increased, and thus the incentives are reduced, in every tax bracket and earnings quintile. Overall, the effective cost of giving a dollar would rise under the Camp plan from 77¢ to 88¢.

State and Local Issues 

Nonprofits Facing New Regulatory, Other Changes in New (Fiscal) Year

July 1 marked the beginning of the new fiscal year for most state governments and ushered in several new laws dealing with nonprofit operations, regulations, and fundraising. Many provisions of New York’s Nonprofit Revitalization Act went into effect July 1, raising audit thresholds and simplifying the procedures for forming, dissolving, and merging nonprofits in the state. The law requires nonprofits to alter many of their governance documents; as a result, the Governor’s office has suspended for 90 days the enforcement of prequalification requirements in the New York Grants Gateway, the State’s online contracting website, to provide nonprofits more time to update their internal documents without being penalized.

Significant changes to charity registration and disclosure requirements are taking place in Florida and soon in Maine. The new law in Florida, reportedly drafted in response to the Tampa Bay Times series on “America’s worst charities,” requires all nonprofits, including those based outside of Florida and those reporting less than $25,000 in donations, to register with the state to solicit funds. Significantly, the law empowers charity regulators to revoke the sales tax exemptions of nonprofits that spend less than 25 percent on program costs for three consecutive years and creates new audit requirements for nonprofits receiving higher amounts of donations. Nonprofit regulations in Maine will change on August 1, based on revisions to the laws governing charitable solicitations. The law will eliminate registration and disclosure requirements for professional fundraising counsel and charitable organizations that solicit below stated thresholds. It also removes the requirement of IRS determination letter for licensure as well as the exemption for professional third-party solicitors soliciting on behalf of faith-based nonprofits.

Also effective July 1 is a new Maryland income tax credit that applies for donations made to a qualified permanent endowment fund at an eligible community foundation. The value of the credit that can be applied to tax year 2015 and beyond, will be equal to the lesser of 25% of the eligible donation or $50,000. The Department of Housing and Community Development may award a maximum of $250,000 in credits in each tax year. 

Taxes, Fees, PILOTs
Idaho Nonprofit Overcomes For-Profit Tax Challenge

The Boise, Idaho YMCA made its case of community impact and support before the Ada County Commissioner’s Board of Equalization, which reversed its previous decision by voting unanimously in support for the full tax-exempt status of the 122-year-old nonprofit. In May, the Commissioners decided to lower the Y’s property tax exemption rate from 100 percent to 19 percent, following a challenge brought by two for-profit fitness clubs in the area. At a July 3 hearing, the first opportunity for the Y to plead its case, more than 200 supporters from the community showed up to hear Executive Director Jim Everett explain that the vast majority of activities of the facility enhance public access to fitness and other services, especially among children, disabled individuals, homeless people, and other at-risk populations. See television news report.

Government-Nonprofit Contracting News
Detroit Nonprofits Targeted for Contract Cancelation in Bankruptcy

Questions abound in Detroit after the City filed a list of hundreds of contracts, including many with nonprofits, it does not intend to honor as a result of its bankruptcy. It is unclear how many of these contracts are still active or whether the publication of the list will simply allow the City to clean up its books. The posting of the list raises concerns among the many charitable nonprofits that are providing services on behalf of the local government that their work could be affected as the bankruptcy proceedings advance. The City’s finances remain precarious, and with the election of a new administration, nonprofits are anticipating that some longstanding contracts may not be renewed.

Virginia Facilitates Nonprofit Property Purchases

A new law in Virginia empowers nonprofits to purchase properties worth up to $100,000 from Richmond and five other cities for less-than-market rates when the nonprofits use them to create low-income housing. The previous rules allowed anyone to purchase at auction properties valued at less than $50,000, but renovations and use were not required, and rarely occurred. The reform raises expectations in the six Virginia cities that nonprofits will step in and help transform communities. “It provides homeownership opportunities to families in the areas they want to live,” said Jack Thompson with Habitat for Humanity. “We can acquire more properties and serve more families.”

Advocacy in Action 

The Many Dimensions of Nonprofit Advocacy

During the recent legislative session in Illinois, the people at Donors Forum, Illinois’ State Association of nonprofits, demonstrated that nonprofit advocacy has many dimensions and can produce multiple payoffs for the people and communities served by nonprofits. The Donors Forum approach combines an organizational culture in support of advocacy with data, new tools, and relationships.

Among other things, leaders at Donors Forum demanded greater attention for issues affecting the work of charitable nonprofits by leveraging Illinois’ poor showing in the Urban Institute survey of nonprofit contracts and grants with nonprofits. Through blogs, radio appearances, newspaper articles, and an effective data sheet, Doug Schenkelburg, Donors Forum’s Vice President of Public Policy, urged “state lawmakers to create a budget that is adequate, responsive, fair, and meets the needs of the people of Illinois.”

Donors Forum also advanced its work in improving government-nonprofit contracting through the creation of a new website: Building a Better Illinois: The Public Nonprofit Partnership Initiative. The findings on the website provide a unique, in-depth look at the size and impact of charitable nonprofits in every legislative district and census tract in the state, as well as 77 community areas around Chicago. The project highlights the relationship between nonprofits and state government and it helps to ensure that policymakers truly understand the value of the sector and the challenges it faces.

Donors Forum’s comprehensive efforts to influence and build relationships with public officials are paying off: Illinois leads the nation in adapting some of the new federal reforms on grantmaking to state policies. With the anticipated signature on legislation by the Governor this week, the new Illinois Grant Accountability and Transparency Office and the Single Audit Commission will be working with nonprofits and government officials to streamline processes, reduce administrative burdens, and update regulations. Not all advocacy efforts show such an immediate or well-defined return on the investment of time and resources. But the Donors Forum approach is showing that when you focus on the ultimate goals, many tools help clear the path.


Worth Reading

Who Has the Time, and Other Questions on Nonprofit Advocacy, by David L. Thompson in the Summer 2014 edition of Nonprofit Advantage (pp 3-4), a publication of CT Nonprofits, making the case for everyday advocacy using government-nonprofit contracting data and the new OMB Uniform Guidance on mandatory reimbursement of nonprofits’ indirect costs.

Changing the Conversation about Overhead, by Rick Cohen of the National Council of Nonprofits, in NTEN: Change, June 2014, making the case that old thinking about overhead or indirect costs is undermining the ability of nonprofits to be effective and demonstrating ways to communicate the connection between investments in technology and greater mission impact.

Social Impact Investing - Fad or the Future?, by Brenda Peluso, Maine Association of Nonprofits Blog, July 1, 2014, providing a compilation of articles on new investing mechanisms and posing four key questions on the minds of many nonprofits.

Costs Campaign Resource

Federal Grant & Contract News For Nonprofits – June 2014, by Venable law firm, offering interpretations of key definitions in the OMB Uniform Guidance (sometimes called the “Super Circular”) and making recommendations for actions nonprofits can take to clarify areas of ambiguity caused by the new rules. 

Nonprofit Advocacy Matters | June 30, 2014

June 30, 2014

Celebrating a Revolutionary Development in Paying Full Costs for Nonprofit Service Delivery 

In less than six months, new regulations governing payments to nonprofits for their actual costs will go into effect. To prepare, and to benefit all nonprofits (not just those with government contracts and grants), we'll be dedicating space in Nonprofit Advocacy Matters and on Twitter at hashtag #npfullcosts to talking about full costs and how nonprofits and governments can work together toward more effective service delivery. You can look forward to practical tips for full cost accounting, negotiation of indirect (overhead) cost rates, and updates on how the new regulations mandating payment of indirect costs are being implemented. Join us in this nationwide campaign of turning the promise of the recent OMB Uniform Guidance into the reality of nonprofits receiving reimbursement for their full costs.

Federal Issues 

The IRS Under Siege

The certainty is that the Tax Exempt Organizations unit of the Internal Revenue Service is under attack; the uncertainty is how the challenges, and any outcomes, will affect charitable nonprofits. In May 2013, news surfaced that the IRS was setting aside for extra scrutiny applications from organizations seeking tax-exempt status that had partisan words like “tea party” in their names, raising charges of a political litmus test by the federal agency that is supposed to be scrupulously apolitical. Several committees in Congress began conducting extensive investigations that continue today. The House voted in May to hold the former head of that IRS unit in contempt of Congress. It was recently revealed that the IRS has lost two years of her emails, raising accusations by some of a cover up. Several others point to staff reductions of 20 percent due to previous budget cuts as proof that the unit does not have enough personnel or technology to do its job. The current House spending bill that covers the IRS would cut funding by an additional $341 million and impose a number of policy riders aimed at restricting the IRS. One section expressly prohibits the IRS from targeting “groups for regulatory scrutiny based on their ideological beliefs.” The investigations of serious allegations and the challenges of reduced funding and policy restraints mean that the IRS is being diverted from its assigned duties of enforcing against fraud, lawfully screening applications for tax-exempt status, and providing help to the public and charities about appropriate stewardship of donor resources.

State and Local Issues 

Mixed Reports on State Fiscal Prospects

Recent reports on state revenues and spending suggest uncertainty and instability will continue. The Rockefeller Institute announced an “April surprise” of state personal income tax collections falling across the country by 7.1 percent in January-April of 2014, compared to the same period a year earlier. A downward trend had been expected, but the deep magnitude was not. The report authors observed, “States with revenue shortfalls in 2014 generally will reduce their forecasts for 2015 as well, causing a ‘double whammy’ effect on budgets currently being finalized.” Separately, results of a survey by the National Association of State Budget Officers found that spending in the states in the next fiscal year will remain lower than average. Total state expenditures are projected to increase by $750.5 billion, or 2.9 percent, which is below the average rate of spending growth since 1979 of 5.5 percent. 

Trend Spotting
Suit Challenges Tax-Exempt Status of Nonprofit Health Insurer

A lawsuit in Oregon is challenging the nonprofit status of a large nonprofit health insurer, alleging that the organization is not spending enough on advancing its charitable mission and is no longer acting like a nonprofit. The case claims that Regence BlueCross BlueShield has built up large cash reserves in excess of state minimums and pays high salaries that are indicative of the organization acting less like a nonprofit and more like a commercial company. In addition to the suit, Regence has been criticized in recent years for investing surplus funds in for-profit companies while increasing premiums and cutting benefits. Regence argues that more than 85% of the premiums collected are used to pay health care providers. Lawsuits challenging the tax-exempt status of large nonprofits are not new. Illinois’ community benefit standard for hospitals was rewritten after the Provena case and Princeton University in New Jersey is fighting a similar challenge that asserts it operates more like a for-profit business than an eleemosynary institution.

New York Governance, Contracting Rules in Transition

Nonprofits in New York are rushing to comply with a major overhaul of the nonprofit corporation law that goes into effect July 1, while also working to ensure they remain in compliance with relatively new contracting obligations imposed by the state. The Nonprofit Revitalization Act of 2013 requires nonprofits to adopt or change their conflict of interests, whistleblower, and other policies and procedures that many nonprofits have not had the time to revise. The timing raises concerns for nonprofit contractors with the state because many of the new documents are needed to prequalify for grants and contracts through the New York Grants Gateway. Recognizing the conflict, the state is suspending enforcement of prequalification requirements for 90 days to allow nonprofit grantees time to adopt new policies and adjust to the new filing requirements, while remaining eligible for State grant funding. A bill to extend the Gateway suspension until January 1, as well as a measure to require payment of late contracting interest, passed the Assembly and Senate and are awaiting action by the Governor.    

Government-Nonprofit Contracting Reforms
Nonprofits Insert Themselves in Helping Government Streamlining Efforts

A new initiative in North Carolina seeks to follow the trend in New Jersey and elsewhere of improving government operations by sharing nonprofits’ insights into a more narrowly-contemplated program that asks the regulated community for suggestions. NC GEAR, the Government Efficiency and Reform Initiative, is seeking recommendations focused on structural changes; yet, to date, it has not recognized nonprofits as a significant voice in the process. This oversight is changing as a result of the launch of a new website to collect ideas on reforming state government. The North Carolina Center for Nonprofits is urging nonprofits in the state to use the online form to submit suggestions to promote contracting reforms. The experience of New Jersey nonprofits suggests that engagement in government streamlining efforts could pay off for governments, taxpayers, and nonprofits alike. The New Jersey Center for Non-Profits, along with several other nonprofit organizations, has made multiple recommendations that have been adopted by the Governor’s Red Tape Review Commission, and numerous reforms are being implemented.

Boston Schools Seek Money from Corporations, Philanthropy for “Transformational Change”

The Boston public school system is asking corporations, foundations, and nonprofits to contribute $25 million to help fund a campaign to attract, retain, and improve its teachers and principals. Budgeting uncertainty from the Commonwealth and federal government reportedly led to the overt effort to subsidize government operations through private fundraising. “We know we can’t do it alone in order to make transformational changes,” Schools Superintendent John McDonough said after a meeting with 100 prospective contributors. The Boston effort is not unique, according to the Council of the Great City Schools, which recognizes that large city school districts have turned to private fundraising over the past five to eight years “because of the downturn in the economy and the irregular revenue streams they now have.”

Independent Nonprofit or Quasi-Governmental? Hard to Tell

At North Miami’s Museum of Contemporary Art (MOCA), it is difficult to determine whether the nonprofit’s board or the city has the final say on running the organization. The museum operates in a city-owned building and the director position is officially listed as a city employee, hired by the city but approved by the board. Currently, the MOCA has two different museum directors: one hired by and answering to the city and another hired by and answering to the board. The board has not approved the city’s hire and the city has stopped paying the salary of the board’s employee. How the dispute is resolved could have ramifications for other nonprofits i n the city and across Florida and the nation. The public policy agenda of the National Council of Nonprofits makes a strong statement in support of nonprofit independence and identifies clear lines that must be maintained in dealings between governments and nonprofits.

Maine Governor Reconsidering Opposition to Nonprofit Bonds

The Governor of Maine is considering reinstituting a bond program that offers affordable financing options to many nonprofits. Governor LePage essentially shut down the bond program three years ago when he refused to sign a pool bond package for eight colleges, hospitals, and other nonprofits, stating that he was concerned that Maine could be liable if the nonprofits defaulted on the bonds. For twenty years, Maine nonprofits were allowed to pool their major projects and issue tax-exempt bonds together through a state-affiliated entity. Although no reason has been given for a change of heart on the bond program, the Governor’s spokeswoman stressed the need to reduce the paperwork involved in the process for securing the Governor’s approval.

Advocacy in Action 

Sometimes It Is About the Numbers

The Caring Force, a campaign of Providers’ Council in Massachusetts, is a unique coalition of nonprofit service providers, their employees, and the people they serve dedicated to improving public and government support for their work. The coalition’s mission is to “advance an agenda that creates an environment in Massachusetts that protects our most vulnerable neighbors and creates a stronger economy with the pay, recognition, and respect our workers deserve.” Active advocacy efforts are key to that mission. Here are some results, by the numbers.

In April, more than 600 members of The Caring Force took to the Massachusetts State House to rally and lobby for programs and workers. Partly as a result of their advocacy, more than half of the House members co-sponsored a salary reserve amendment put forth by The Caring Force. After an email push of over 1000 members of the Caring Force, better than half the members of the Senate cosponsored their amendment as well.

As of this writing, the Legislature is on the verge of approving the salary reserve amendment and $200 million in new human services funding. The Caring Force is calling on the Governor to sign the legislation when it gets to his desk.

Advocacy success is leading to broader public success. In the last six months alone, more than 2,000 people signed up in support of The Caring Force. Now, more than 17,000 people are members of the campaign to advocate for human services across Massachusetts. In a big way, The Caring Force puts advocacy to action in support of its mission.


Worth Reading

Changing the Conversation about Overhead, by Rick Cohen of the National Council of Nonprofits, in NTEN: Change, June 2014, making the case that old thinking about overhead or indirect costs is undermining the ability of nonprofits to be effective and demonstrating ways to communicate the connection between investments in technology and greater mission impact.

Voting and Health: 5 Reasons It’s Good for You, Nonprofit VOTE, June 2014, highlighting the many personal benefits of voting, including improved social ties, better physical and mental health, and greater well-being and life satisfaction.

Worth Quoting

"Every day, New Yorkers rely on not-for-profits to care for their children, improve their health, get housing and much more. Simply put, the state can't provide all of these basic services without the help of not-for-profit organizations.”

- Thomas DiNapoli, New York State Comptroller in a news release announcing the publication of the 2013 Prompt Contracting Report

Data Visualization

State-by-State Tax Collections 2013, Stateline, June 9, 2014, showing that state tax collections in 26 states remain below 2008 levels. 

Nonprofit Advocacy Matters | June 16, 2014

June 16, 2014

Federal Issues

Hope, Uncertainty for Summer Action on Tax Reforms

Even as expectations sink for summer passage of significant nonprofit-friendly tax provisions, hope remains that bipartisan progress will be made towards producing passage of the measures by year’s end. In May, the House Ways and Means Committee approved bills to permanently extend three expired charitable giving incentives – the IRS rollover, food inventories, and conservation easements – as well as to permit charitable deductions for the previous year up to April 15 and streamline the foundation excise tax. The votes on the measures were along partisan lines, but for reasons other than the substance of the underlying bills, which remain popular. Earlier this spring, the Senate Finance Committee approved a temporary two-year extension of a package of expired tax incentives that included the three charity provisions. Action on that bill was halted, however, because of a partisan dispute over Senate floor strategy. Importantly, bipartisan support for the substantive policy of the bill remains strong. Senate leaders have vowed to work to come up with a plan to bring the bill back to the Senate floor, perhaps before the July 4 holiday.

Readers can help promote progress on the nonprofit-related bills by signing onto a nonprofit community letter to the House of Representatives urging lawmakers to vote for these key charitable provisions.

State and Local Issues

Illinois Moves to Align Grantmaking Practices with new Federal Standards

On the day before adjourning, the Illinois General Assembly passed and sent to the Governor the Grant Accountability and Transparency Act, a bill to streamline grant processes. The legislation is intended to increase the accountability and transparency in the use of grant funds from whatever source – federal and/or state – and “to reduce administrative burdens on both State agencies and grantees by adopting federal guidance and regulations applicable to such grant funds.” If signed, the bill will align some state grant processes with those recently established in the new OMB Uniform Guidance, particularly those related to auditing. It would also create a Grant Accountability and Transparency Unit within the Governor’s Office of Management and Budget to facilitate the changes. Additionally, it would reconvene the Single Audit Commission, which includes nonprofits, to advise the new Unit in drafting associated rules scheduled for completion by July 1, 2015.

Taxes, Fees, PILOTs

  • Taxes: Bellingham, Washington is considering taxing a nonprofit, Catholic-affiliated hospital to bolster city revenues. The tax would be levied on the 30% of the income the hospital receives from private insurers and would result in a $1.2 million revenue increase for the city. The hospital and its supporters claim that the city is cutting the safety net for the poor in Bellingham and trying to balance the budget on the backs of the sick.
  • Fees: Two nonprofit organizations in New Hartford, New York will not be receiving refunds from sewer maintenance fees that were assessed improperly by the local government. Although the nonprofits are listed as exempt, confusion in coding on the city’s end resulted in the improper charging of fees. Counsel for the government has recommended that a refund not be issued; the nonprofits are being forced to take legal action to recover payments termed “improper taxation” by one reporter.
  • PILOTs: Fall River, Massachusetts is developing a “uniform set of guidelines” that tax-exempt nonprofits will be asked to follow in making payments in lieu of taxes (PILOTs). The formula will likely be based on the controversial PILOT schemes imposed on some nonprofits in Boston and Providence.
  • PILOTs: In lieu of raising taxes, the Mayor of Brockton, Massachusetts is asking 21 nonprofit organizations to make payments of up to 30 percent of the tax bill they would otherwise be required to pay if Commonwealth law did not expressly prohibit taxation of nonprofit properties. Targeted nonprofits go beyond the typical list of nonprofit colleges and hospitals to include Father Bill’s & MainSpring, a homeless shelter and housing advocacy group and the Old Colony YMCA.

Governments Continue to Offload Activities onto Nonprofits

Recent developments suggest there is no let-up in the trend of governments at all levels offloading their responsibilities onto nonprofits. Henderson, Nevada is cutting $200,000 from its payments to ITN Las Vegas’s senior transportation program that provides rides for senior citizens who cannot drive or get to a bus stop to access nutrition programs and go to the City’s senior center. In Pennsylvania, reductions in government funding are forcing nonprofit cultural centers like the Carnegie Science Center, the Phipps Conservatory, and Botanical Gardens to implement new, often burdensome ways to support their normal operations and programs.

Government-Nonprofit Contracting Reform Update

  • Solutions Offered to New Jersey’s Contracting Problems
    Despite dismal rankings in contracting complexities and other problems, New Jersey can become a leader in government-nonprofit contracting reform efforts by adopting a series of common-sense recommendations offered in a new report from a coalition of nonprofits, spearheaded by New Jersey’s Center for Non-Profits. Continue reading...
  • Prompt Contracting Improvements Needed in New York
    New York State government agencies failed to live up to the state’s prompt contracting law 87 percent of the time in 2013, up from a late rate of 78 percent in 2012, according to the New York Comptroller’s 2013 Prompt Contracting Report. Continue reading...

Delaware Town Mandates Charity Events Donate at Least 60% of Proceeds

Organizations running charity fundraisers that use public facilities in Bethany Beach, Delaware must turn over at least 60 percent of gross proceeds to the nonprofit, a new city council resolution mandates. The town’s new rule aims to dissuade organizations looking to make a profit by holding events to raise money for charities. The 60 percent threshold reportedly is based on Charity Watch’s recommended percent of donations nonprofits should spend on mission-advancing programs. Interestingly, Daniel Borochoff, president of Charity Watch, encouraged the town to establish better disclosure requirements rather than regulate the percentage directed to charities, which he correctly observed is constitutionally suspect. 

“Grand Bargain” on Detroit Bankruptcy Advances

The Michigan legislature overwhelmingly approved $195 million in state aid for bankrupt Detroit, a condition of the so-called “Grand Bargain” made with private foundations. Several foundations have pledged $466 million to help Detroit emerge from bankruptcy while preserving intact the art collection of the city-owned Detroit Institute of Arts and helping pay the City’s pension obligations to retired public employees. Automakers in the state also contributed a combined $26 million. As part of the deal, the municipal assets at the Detroit Institute of Arts will be transferred to a charitable trust so that the museum’s collection will be shielded from sale.

New Tool for Accessing Information on Foundation “Democracy Funding”

Foundation Funding for U.S. Democracy is a new, interactive data platform that defines democracy funding and allows users to see which foundations are funding what and where. Developed by the Foundation Center, the platform seeks to track the more than one thousand foundations granting nearly $1.4 billion to nonprofits advocating for “American democracy” improvement. The platform breaks down democracy funding into several categories for easier use, and allows users to explore the tactics that different foundations are using to accomplish their goals in this area. 

Additional State and Local Issues

Advocacy in Action 

Declaring Victory … and Getting Back to Work

At the end of a legislative session, many advocates – at nonprofit and for-profit businesses alike – declare “victory” and go home. Not Nikki Love Kingman at the Hawai`i Alliance of Nonprofit Organizations (HANO), who combines a celebratory message with a to-do list for maintaining momentum in advancing nonprofit missions.

“Congratulations to all nonprofit advocates for surviving another legislative session,” Nikki opens in Next Steps for Summer 2014: Advocacy and Elections, noting that “[o]nce again, nonprofit leaders played important roles in shaping legislation on many topics,” ranging from the environment and education, to government transparency and countless other topics affecting the state.

But no laurel resting is in order, according to HANO’s public policy director, because important work remains. For instance, numerous bills are sitting on the Governor’s desk awaiting action; Nikki gives a short civics lesson and intel on how to make a difference. Next, the article reminds readers that policy action isn’t over for the year, pointing out that “there are many county level issues that impact nonprofits and the communities they serve, so it is important to stay informed and engaged in your county’s policy-making process.” Again, her awareness message includes links to help nonprofits stay informed.

The third item on the to-do list in “Next Steps for Summer 2014” is key: seizing the opportunity of the upcoming primary election “to strengthen our democracy with nonpartisan voter registration and other voter engagement efforts.” Using data from a 2012 Nonprofit VOTE study, she made the case for nonprofit engagement by explaining that “voters contacted by nonprofits had a higher turnout rate than the average for all registered voters, and nonprofits were especially effective at increasing turnout among those who are traditionally underrepresented in elections.” The good idea is accompanied with easy access to the great resources from Nonprofit VOTE.

Victories are good; maintaining nonprofit momentum is better. And this example of Advocacy in Action is excellent at showing what needs to be done and how to do it. 




Worth Reading

How Philanthropy is Changing the Culture of Full Cost Funding, Valerie S. Lies, Huffington Post, June 13, 2014, highlighting innovative approaches by private foundations to support the sustainability of nonprofit organizations and overcome the “starvation cycle” on overhead expenses. See also the Donors Forum “Commitment to Full-Cost Funding.”

5 Steps to Pay for Success, the Urban Institute, June 2014, reviewing the advantages and disadvantages of pay-for-success funding mechanisms in juvenile and criminal justice systems.

Nonprofit Quarterly series on new corporate forms and funding methods

Worth Quoting

“No doubt the Anytown Council was put off by the political risks of a new tax and by the expected pushback from nonprofit organizations.”

- June 4 editorial in the Washington Post acknowledging the advocacy clout of the nonprofit community in opposing a new tax on employees of nonprofits and other organizations proposed by a tax reform commission in Washington, DC.

“In the State Senate, I can get legislation passed while [Congress] is mired in gridlock.”

--Activist Sandra Fluke explaining her decision to run for the California State Senate rather than a seat in Congress, quoted in Governing, June 4, 2014.

Worth Watching

One in Four: America’s Housing Assistance Lottery, Erika Poethig, Urban Institute, May 28, 2014, a 3-minute video employing the fast-draw technique to visually and succinctly explain the challenges of rental assistance data and policy.

Data Visualization

S&P State Credit Ratings, 2001–2014, Pew State and Consumer Initiatives, June 9, 2014, chart showing credit rating trends and rankings for each of the states.

Nonprofit Advocacy Matters | June 2, 2014

June 2, 2014

Federal Issues

House Tax Committee Approves Charitable Giving Provisions

The House Ways and Means Committee approved five bills of interest to the nonprofit and foundation communities on May 29. Each of the bills received bi-partisan support in the debate, but all were approved by party-line votes due to a dispute over whether to pay for the tax provisions. Republicans voted yes to permanently extend the measures but without providing for offsetting revenue raisers to pay for the changes; Democrats voiced support for the policies but voted no on the bills because they did not include “pay fors.” The bills are listed below:

  • Make permanent the enhanced deduction for property donated for conservation easements (HR 2807).
  • Permanently extend the IRA charitable rollover (HR 4619).
  • Make permanent the enhanced charitable deductions for food inventory (HR 4719).
  • Allow individuals to claim a charitable deduction for contributions made up to the date their income tax return is due (usually April 15) (HR 3134).
  • Eliminate the upper tier excise tax and reduce the excise tax on investment income of private foundations from two to one percent (HR 4691). 

IRS to Rewrite Proposed Regulations on 501(c)(4) Election-Related Political Activities

The Internal Revenue Service announced that it is postponing a public hearing on controversial draft regulations defining political activities of 501(c)(4) social welfare organizations. The IRS is not scrapping the first draft, as reported by some organizations and news outlets, but is instead revising the proposal to reflect concerns expressed in more than 150,000 comments submitted to the agency. The IRS plans to publish a revised draft regulation before rescheduling a public hearing. Commentators predict that the revised draft will not be released until after the November elections.

IRS Proposed New Form 1023-EZ Still Pending

In March 2014, the IRS submitted a proposed Form 1023-EZ to the Office of Management and Budget (OMB) for approval under the Paperwork Reduction Act. The proposed form offers an alternative to the normal Form 1023 for those claiming to be a small group (no more than $200,000 in annual gross receipts and no more than $500,000 in total assets, with some exceptions) to use to become recognized as a charitable nonprofit: just a two-page quick checklist. The radical change could lead to chaos for any nonprofits engaged in fundraising as well as for foundations "if the field is suddenly flooded with hundreds of thousands, if not millions, of newly minted c3’s.” The National Council of Nonprofits filed formal Comments opposing the proposed form, noting that "we support efficiency and reducing burdens to applicants, but not at the expense of accountability." The National Association of State Charity Officials (NASCO) also filed official Comments in opposition, noting that its members “uniformly oppose" the proposed Form 1023-EZ because it “will increase opportunity for fraud and heighten the burden on state regulators.” The IRS recently told NASCO that, notwithstanding the serious widespread concerns, it intends to deploy the new form this summer. To date, however, OMB has not approved the proposed form. For nonprofits, donors, and foundations wanting to know more, read this op-ed by Tim Delaney, President & CEO of the National Council of Nonprofits, published today in The Hill: "An Express Lane to More Trouble for the IRS?"

State and Local Issues

States Enact Significant Registration, Voting Reforms

Several state legislatures have taken action this year to ease the voting process by, among other ways, implementing online voter registration and allowing same-day registration. More than half the states, home to over 100 million voters, will have some form of online registration by the end of the summer, reports the National Conference of State Legislatures. Other reforms enacted this year include easing absentee voting (Maryland), relaxing voter ID requirements (Oklahoma), lengthening the early voting period (Florida), authorizing automatic registration systems (Colorado, West Virginia), and removing waiting periods for nonviolent felons to regain their voting rights (Delaware). The reforms are in part a reaction to the restrictive measures many states put in place following the 2010 elections, as well as a favorable response to a bipartisan presidential elections commission report put out in January of this year. In addition to online registration and multiple opportunities for voting, that Commission called for the use of state-of-the-art techniques to assure efficient management of polling places and use of improved voting technology. Nonprofits serve a vital role in many communities by promoting democracy and civic engagement through voter registration, voting, and providing nonprofit voter information. Go to Nonprofit VOTE to learn more. 

North Carolina Modifies Sales Taxes Rules for Nonprofits

North Carolina Governor McCrory signed legislation to revise the 2013 tax reform package that replaced the 3% gross receipts tax on entertainment with a sales tax, and eliminated exemptions for arts nonprofits. The new 2014 law clarifies that the tax on “live entertainment events” will not apply to the greatest number of nonprofit activities: educational events, recreational sports, and fundraising events. In exchange, the newly enacted statute repeals three rarely-used nonprofit sales tax exemptions and adds a narrow exemption for events sponsored by volunteer-only nonprofits and an exemption for any tax-deductible contributions. The measure also exempts nonprofits from local privilege taxes. 

Government-Nonprofit Contracting Reform Update
Federal Non-Health Related Grants to States Decline

While overall federal grantmaking to the states were above pre-recession levels for federal fiscal year 2014, funding for non-health related grants has declined by five percent, according to an analysis of trends by the Pew Charitable Trusts. “Trends in Federal Grants Vary Between Health and Non-Health Programs” found that, adjusted for inflation, grants increased by one percent for income security support while grants declined nine percent for transportation, dropped 10 percent for education, and fell 13 percent for everything else outside of Medicaid and other health grants.

Reconsidering Charitable Checkoffs on California Tax Forms

The California Senate unanimously approved a bill to establish a system and standards for determining which charitable nonprofits may be designated for tax checkoffs on the California income tax form. California Volunteers, the state office that manages programs and initiatives aimed at increasing the number of Californians engaged in service and volunteering, would be tasked with working out the details by 2017, with the goal of making the system fairer and allowing more charities access to the check-off system. The latest version added a "Charitable Giving Fund," which would allow taxpayers who don't want to pick and choose among the organizations listed on the tax form to turn over their designated dollars to California Volunteers to distribute "according to the regulation established for distribution." Reforming tax-form giving appears to be an emerging trend in legislatures; we’d like to know what readers think works and doesn’t work in their states.

Massachusetts AG Supports Nonprofit Buyback Program

Federal policy that prevents qualified nonprofits from purchasing homes from lending banks at market value and then financing the resale to former homeowners conflicts with Massachusetts law, the commonwealth’s Attorney General asserted in a letter to the director of the Federal Housing Finance Agency. Attorney General Coakley urged the agency, which oversees Fannie Mae and Freddie Mac, to change its policy against such buybacks that she believes run counter to Massachusetts’s successful Act to Prevent Unnecessary and Unreasonable Foreclosures. That Act prohibits creditors that sell a property to a 501(c)(3) charitable nonprofit from conditioning that sale on an agreement that the property will not be resold or rented to the former homeowner. 

Michigan Nonprofits Return Economic Benefits

Nonprofits in Michigan were integral in stabilizing the state’s economy during the 2008 economic downturn, according to a new report commissioned by the Michigan Nonprofit Association and the Council of Michigan Foundations. The report, “Economic Benefits of Michigan’s Nonprofit Sector,” found that, since 2006, the nonprofit community has added 12,000 jobs. During this same time period, other industries in the state purged 200,000 jobs. Nonprofits in Michigan employ more than 10 percent of the state's workforce, pay about $5 billion every three months in wages to their employees, and serve as anchor institutions in communities large and small, the analysis reports. Significantly, Michigan charities spent $44 billion dollars in advancing their charitable missions in 2011 alone. Nonprofits in the state provide a “sense of stability that the community can rely upon,” said Donna Murray-Brown, President and CEO of the Michigan Nonprofit Association. She also observed that the new study “helps us inform policymakers and citizens on the great work nonprofits are doing – and can do – for the people of this state.”

Collaborating to Understand Poverty in New York City

What public programs are currently in place in New York City to help people living in poverty and to work towards real and better solutions to the problems these government programs may be trying, but failing, to address? Those are the questions three umbrella groups are asking and studying in a unique collaboration of faith-based organizations. The organizations, the Federation of Protestant Welfare Agencies, Catholic Charities of the Archdiocese of New York, and the United Jewish Appeal–Federation of New York, have tapped the Urban Institute to research various government anti-poverty programs to learn more about what is effective in stamping out poverty. They hope that the results from the study will shed light on the problem of poverty in New York City and that the solutions they decide on will be heard by City Hall.

Detroit Art, Pension Deal Advances

The Michigan legislature overwhelmingly approved $195 million in state aid for bankrupt Detroit, a condition of the so-called “Grand Bargain” made with foundations to preserve intact the art collection of the Detroit Institute of Arts and to help pay the City’s pension obligations to retired public employees. Last year, several private foundations, including the Charles Stewart Mott Foundation, Kresge Foundation, and the Ford Foundation, pledged $370 million to assist the city emerge from bankruptcy. Finding a way for Detroit to “come out of this bankruptcy and to reestablish itself as one of the greatest cities in the world … [is] very important,” said Bill White, President of the Charles Stewart Mott Foundation. 

Advocacy in Action

Changing the Culture on Costs, One Community at a Time

Most nonprofits know the problems caused when governments, funders, and the public incorrectly assume that only program costs are well spent and that overhead costs are undesirable. Some nonprofit leaders in Napa Valley, California are doing something about those attitudes, and providing inspiration for the rest of the nonprofit community.

The Napa Valley Coalition of Nonprofit Agencies recently created an Advocacy Education Committee that is dedicated to two primary goals. First, the committee seeks to promote the sustainability and growth of the nonprofit sector by providing its membership with tools and education to effectively advocate for their mission and clients. Second, the group is educating the community at large about the value of nonprofits. Core to both goals is helping people understand what overhead is and why it is so important for maintaining a vital and effective nonprofit sector.

Sara Cakebread, Co-Chair of the Committee, put it succinctly: “What we’re trying to do is to create a whole program that educates the public: What is overhead, why it is important and why we need to support our nonprofits, if we want them to thrive.” Toward this end, Committee member Becky Peterson reframes how nonprofits should be viewed, “[They] do good work in our community, often filling the gap that government or the private sector doesn’t fill… we need to think about nonprofits as service providers, not as charities.”

This subtle, but important shift supports the growing understanding that to be effective and efficient nonprofits must invest in their infrastructures and a solid base from which to operate.

Cakebread said it well when she observed:

“Donors say we want our money to go to programs, we don’t want to spend anything on overhead. As a donor you can’t do that — you can’t give somebody a lot of money and tell them they can’t pay for somebody to administer it. Or deposit the check. Or pay for an office or pay for utilities. All of those things people don’t think about.”

Jan Masaoka, CEO of CalNonprofits, calls The Napa Valley Coalition of Nonprofit Agencies “a great example of local nonprofits working together to get more funding to the communities they serve and represent, as well as working with county officials to streamline government processes."

For more information on the changing attitudes on overhead costs (also known as administrative or indirect costs), see two reports from the National Council of Nonprofits, Toward Common Sense Contracting; What Taxpayers Deserve (2014) and Investing for Impact: Indirect Costs are Essential for Success (2013).




Worth Studying

This week’s best state in America? Utah, for its generosity, Reid Wilson, The Washington Post, May 23, 2014, providing a chart identifying the most (Utah, Mississippi) and least (New Hampshire, Maine) generous states as measured by charitable giving as a percentage of median discretionary income.



The number of museums in the United States, up from 17,500 in 1990s, according to the Institute of Museum and Library Services. Source: Nonprofit Quarterly, May 21, 2014.

State Laws


The number of laws Minnesota repealed as part of Governor Mark Dayton's "unsession" initiative to erase obsolete laws. Source: Governing, May 29, 2014

State Parks

33 percent

The national average of state park costs covered from state general revenues in fiscal 2012, down from 59 percent in fiscal 1990. Source: Stateline, May 23, 2014.

Nonprofit Advocacy Matters | May 19, 2014

May 19, 2014

Problems Persist, Solutions Abound

Significant aspects of government-nonprofit contracting practices have been proven to be seriously broken, but common sense solutions to the problems are ready for implementation, according to new reports released by the Urban Institute and the National Council of Nonprofits.

The Urban Institute published state-specific data from a nationwide survey documenting the serious and widespread problems experienced by nonprofit organizations (excluding hospitals and higher education) that have contracts and grants with governments at the local, state, and federal levels. The report, National Study of Nonprofit-Government Contracts and Grants 2013: State Profiles, provides essential data on contracting practices for the nation and individual states, and ranks states on several areas of concern. See full data report (with state-specific data) and blog posting.

Toward Common Sense ContractingThe National Council of Nonprofits released Toward Common Sense Contracting: What Taxpayers Deserve, a report that examines the causes and consequences of five recurring problem areas that involve billions of dollars. The report connects data from the Urban Institute with the experiences of front-line nonprofits that are delivering services on behalf of governments at all levels. The report goes on to lay out 16 proven and often readily available solutions to these problems. Read the full reportexecutive summary, and news release.

Also read the early analysis of the data in these states: Illinois; Kentucky; New JerseyNew York; and Washington.

Federal Issues

Extension of Giving Incentives Mired in Politics, Other Priorities

The Senate started action last week on a bill to extend expired tax provisions, including three important provisions relating to charitable giving, but the debate quickly became bogged down in partisan wrangling. At issue in the EXPIRE Act is the extension of 53 tax provisions through 2015; among the tax items is the IRA rollover, and enhanced deductions for donations of food inventories and conservation easements. Senate progress was blocked by a filibuster led by Republicans objecting to the refusal of Democratic leaders to allow additional floor amendments to the bill. The top Senators on the Senate Finance Committee are scheduled to talk early this week to try to overcome the impasse and secure passage of the bill that is generally considered uncontroversial and popular. Over on the House side, action on any of the extenders has been postponed until June, reportedly in part because of the confusion in the Senate and in part due to growing attention on misconduct at Veterans Affairs hospitals.

Nonprofits Seek to Revise Combined Federal Campaign Reforms

The Office of Personnel Management recently finalized reforms to the Combined Federal Campaign that, in the view of many nonprofits participating in the program, will dramatically alter the federal workplace giving program for the worse. Among other things, the new rules require nonprofits wanting to participate as possible recipients of donations to pay an up-front flat application fee, restrict giving options to electronic means, and move administration of the program from local community offices to centralized offices, potentially creating a disconnect between local nonprofits and the federal employees making the donations. The rules were published largely unchanged despite overwhelming opposition from the nonprofit community and the expression of bipartisan concerns at a congressional oversight hearing and a letter in opposition from key Members of the House. Nonprofits are turning to a last option to block the rules: reliance on the expedited procedure in the Congressional Review Act to overturn agency regulations. United Way Worldwide and others have issued a call to action that encourages constituents to ask their Senators and Representatives to pass a resolution to overturn the rules.

State and Local Issues 

Mixed News on Social Impact Bonds

Just as social impact bonds are being taken off the table in the United Kingdom, California prepares for its own Pay-for-Success experiments. In April, the British Ministry of Justice announced that the “payment-by-results” social impact bond pilot program will not be renewed. The first-ever social impact bond experiment was tried at Peterborough Prison, where private investors provided funding for an innovative way of rehabilitating offenders that, if it reduced recidivism rates by a pre-determined level, would pay a premium to the funders. The Ministry cut the pilot program short and is shifting priorities to other methods for reducing incarceration rates. In California this month, the Nonprofit Finance Fund and the James Irvine Foundation advanced their $2.5 million California Pay for Success Initiative, a variation of the social impact bond model, by naming five participating projects. The Initiative is designed to “provide flexible funding and expert support to help nonprofit and government leaders structure Pay for Success agreements in California over the next two years.” As described by the Nonprofit Finance Fund, “Pay for Success is an approach to funding social services to both improve outcomes and ultimately reduce costs,” in which “private investors provide funding for preventative or interventional services up-front, and government reimburses these investors with a return on their investment, only if results are achieved.” 

Taxes, Fees, PILOTs

  • Taxes: The Kansas Legislature approved a property tax reform bill this month, but only after striking a special tax break that would have provided a property tax exemption for certain health clubs.
  • Tax Exemptions: Land conservation nonprofits won a major victory in Massachusetts when the state Supreme Judicial Court rejected a tax bill sent to the New England Forestry Foundation (NEFF) that was grounded in the town’s belief that the nonprofit didn’t do enough to encourage public access. “By holding land in its natural pristine condition and thereby protecting wildlife habitats, filtering the air and water supply, and absorbing carbon emissions, combined with engaging in sustainable harvests to ensure the longevity of the forest, NEFF engages in charitable activities of a type that may benefit the general public,” the court wrote.
  • Tax Exemptions: The Connecticut Senate adjourned without approving the House Speaker’s bill to remove property tax exemption from nonprofit hospitals and colleges/universities. The Speaker made clear, however, that the issue of property tax reform will be the focus of the 2015 session and beyond, having included a two-year study of the Connecticut tax system in the last bill to pass before adjournment prior to midnight on May 7.

California Enacts Campaign Donor Disclosures for 501(c)(4) Organizations

California has taken steps to eliminate secret campaign contributions, or “dark money,” by requiring politically active, non-charitable nonprofits to disclose the names of their donors under certain circumstances. A new law requires social welfare 501(c)(4) organizations and trade groups organized under 501(c)(6) to make public the names of their donors if the organizations spend or contribute more than $50,000 in a year or $100,000 over four years on elections in California. The requirement applies to donors who contribute $1,000 or more for political activity in California. The law also requires committees raising at least $1 million on ballot measures to release a list of the top 10 contributors who gave $10,000 or more. The bill comes in the aftermath of a scandal in 2012 in which social welfare organizations in Arizona funneled millions in undisclosed dollars to support and oppose separate California ballot measures. 

Vermont Nonprofits Support Government Accountability Measure

The Vermont Legislature approved a bill to institutionalize the use of results-based policy making throughout state government and Vermont’s social sector. If signed by the Governor, the legislation would require the establishment of population-level results for the state and outlines an annual reporting process to ensure that state investments are achieving results. Nonprofits in the state, led by Common Good Vermont, have advocated for the bill they believe will have an impact on how Vermont nonprofits interact with state government as recipients of funds and designers of programs.

Government-Nonprofit Contracting News
Hawai`i Creates Contracting Reform Action Team

The Hawai`i State Procurement Office is establishing the Health and Human Services Action Team designed to apply nonprofit and government expertise to streamline and improve government contracting practices. The Action Team’s goals are to facilitate state agencies and nonprofits in collaboratively developing and implementing best procurement practices, sharing information and resources, and developing and revising policies and regulations that lead to more effective procurement of health and human services within the State. Creation of the Action Team is the latest progress in the State’s ongoing efforts to investigate and analyze various contracting issues and then offering recommendations for improvements.

New York Reconsiders Deadline on Governance Reforms

Two newly introduced bills in New York address the actions nonprofits must take to comply with the new Nonprofit Revitalization Act. The first measure would extend the deadline for compliance with certain provisions of the law from July 1, 2014 to March 31, 2015. The reform law enacted in 2013 requires nonprofit boards to perform financial audits and better oversee insider transactions and contracts, and requires nonprofits to adopt conflict of interest policies and prohibit any employee from serving as a board chair. The second bill would prevent nonprofits that are currently in compliance with New York State’s Grants Gateway system from being temporarily disqualified from future grant awards as they submit corporate by-laws amendments and other legal filings in response to the Act’s new requirements.

Additional State and Local Issues

Advocacy in Action 

Keeping Connecticut Nonprofits in the Know

Connecticut is a small state geographically, but its nonprofits have a big interest in what the legislature does and doesn’t do. Good thing the Connecticut Association of Nonprofits, the state association of nonprofits in the Nutmeg State, is on the job … late into the evening.

Moments after the legislature adjourned sine die just before midnight on May 7, members of Connecticut Nonprofits read (or woke up to) an up-to-the-minute, concise report on all of the community’s priorities, provided via email from Jeff Shaw, director of policy for the statewide association of nonprofits. Readers learned of the passage of the State budget, the demise of the House Speaker’s bill to subject some nonprofits to property taxes (see above article), the fate and details of an omnibus “implementer” bill that incorporated scores of policy changes (it passed), and the approval of $50 million for the Nonprofit Grant Program, a bonding pool for capital improvements at nonprofits that contract with the state to provide health and human services. The missive pointed out that more work is needed on tax spending issues, but it is noteworthy that the news – good and bad – couldn’t wait for a good night’s sleep.

Many advocacy organizations are good at encouraging action and asking for help. Providing “the rest of the story,” as Jeff’s wee-hours message did on May 8th, demonstrates the partnership and community spirit fostered by the nonprofit associations. 




Worth Reading

Nonprofit Finance Fund Social Currency Blog series by Beth Bowsky of the National Council of Nonprofits, providing insights on using data from the NFF 2014 State of the Sector Survey to measure and document problems in government-nonprofit contracting systems and highlighting common-sense solutions to contracting challenges. Read Part One (April 28, 2014) and Part Two (May 2, 2014). 

Worth Quoting

“While the government must ensure accountability from nonprofits, limiting organizations’ ability to effectively run programs and make improvements presents challenges for nonprofits and the communities they serve.”

- Maura Farrell, in “The important government-nonprofit relationship doesn’t always work as well as it could,” MetroTrends Blog, Urban Institute, May 15, 2014.

Worth Studying

State and Local Tax Collections: Percentage of Totals, reported in Stateline, May 14, 2014, providing percentages of the reliance of each state government on property tax collections, ranging from a high of 63% in New Hampshire (which has no income tax) to a low of 16% in Delaware and North Dakota.

A 501(c)(3) Guide to Nonprofit Voter Engagement, Nonprofit VOTE, offering a full range of tips and general rules to help charitable nonprofits interested in encouraging voting and voter participation among their staff, board, clients, constituents, and communities.

Numbers in the News

$4.17 billion

The amount the State of Illinois owes contractors – for profit and nonprofit alike – for services already rendered and billed, down from a $5.3 billion backlog last year. Source: Governor’s Office of Management and Budget, Bills Outstanding – Summary, May 14, 2014.

Nonprofit Advocacy Matters | May 5, 2014

May 5, 2014

Federal Issues

A “Pre-cap” of the Congressional Agenda

It’s an even-numbered, election-shortened year for Congress. Typically that means anything that can be done in the non-spending area must occur in May (before Memorial Day) and in the appropriations arena before the month-long August recess. Officeholders of all stripes have already begun calculating the competing urges of doing no harm to themselves and their party versus hurting/embarrassing the other side. Conventional wisdom holds that those urges are more intellectual than visceral prior to August, and then controlling thereafter until Election Day. With those thoughts in mind, here is a summary of what’s scheduled:

  • Spending: For the first time in years, House and Senate appropriators are officially and actually following “regular order,” that is, each of the 12 spending bills that funds federal programs is being proposed and debated in committee and is being scheduled for floor consideration prior to the end of the fiscal year on September 30. The House may pass several of the bills prior to Memorial Day; the Senate usually moves slower, but appears committed to passing as many individual measures as possible. The Labor-Education-HHS bill, which funds the largest number of programs performed in communities through the work of charitable nonprofits, tends to be the most controversial and gets put off until the last.
  • Taxes: Comprehensive tax reform is all but officially off the table for this year and the Senate and House are taking different approaches to restoring some or all of a package of expired tax provisions. Among those are the enhanced deductions for donations of food inventories and land conservation easements, and the IRA charitable rollover. The Senate is scheduled to take up a bill to restore for 2014 and extend through 2015 the package of about four dozen tax provisions. The House, instead, is planning to go through the package on a piecemeal basis, starting with six that are very popular with the business community. No plan has yet emerged to get the two chambers on the same page, suggesting that an end-of-year bill is likely.
  • Social Issues: It remains too soon to say whether several stalled issues will break free of gridlock in the coming weeks, but as time passes, their chances diminish. A Republican-led filibuster blocked action last week on a proposal to raise the federal minimum wage to $10.10 per hour. The Republican majority in the House continues to insist on inclusion of one or more of its priorities, such as reforms to job-training programs, before taking up a Senate-passed bill to restore extended unemployment benefits. Neither chamber has been successful in reaching consensus on immigration reform which may or may not include a form of amnesty or pathway to legal status for individuals who entered the United States illegally. 

Opposition to IRS Proposed Form 1023-EZ and Express-Lane Approvals

The IRS recently proposed a new Form 1023-EZ that would create an express-lane approval process for 501(c)(3) status. Opposition to the proposed two-page form and fast-track process has focused on how it would significantly reduce the amount of due diligence done by the IRS. One executive director forecasts chaos for fundraising and foundations "if the field is suddenly flooded with hundreds of thousands, if not millions, of newly minted c3’s.” 

The National Council of Nonprofits filed Comments in opposition as well. In summary, “We agree with the IRS that the long-established Form 1023 and application process need review and streamlining. However, we are concerned that the proposed new EZ Form and related express-lane approval process go too far and too fast, representing radical departures from proven protocols.” The National Association of State Charity Officials (NASCO) also filed Comments in opposition to the IRS proposal, noting that “State charity officials uniformly oppose a Form 1023-EZ,” and predicting “that the Form 1023-EZ will increase opportunity for fraud and heighten the burden on state regulators.”

State and Local Issues 

Challenges Remain for State Revenues, Spending Priorities

The data for 2014 are mixed on how states are faring with tax revenues and on which programs they are restoring funding that they previously slashed at the depths of the recession. State revenues have experienced growth for 16 straight quarters through the third quarter of 2013, according to the Census Bureau. Governors in 42 states proposed higher spending levels for 2014 than the prior year, the National Association of State Budget Officers (NASBO) reports. Yet an analysis by The Pew Charitable Trusts found that, after adjusting for inflation, only 20 states were back to their peak levels by the second quarter of 2013. The NASBO survey shows that that the vast majority of states are increasing spending on elementary and secondary education, as well as on transportation and infrastructure. Other spending is going to “any kind of program that can be tied to economic development and job creation,” according to a NASBO official. For Florida, that means spending on tourism, while Nebraska is cutting taxes by $412 million. California, on the other hand, is considering devoting additional resources to the state’s rainy day fund. Noticeably absent from the reports is restored funding for human services and other programs that are typically provided through contracts and grants with nonprofit organizations. For a more detailed analysis, read “Lawmakers Jockey Over Budget Surpluses,” published in Stateline.

Taxes, Fees, PILOTs

  • PILOTs: Princeton University agreed to make nearly $22 million in payments in lieu of taxes to Princeton, New Jersey over a seven-year period. The new payments come on top of roughly $3 million in property tax payments the university pays on tax-exempt properties and upcoming contributions to local fire stations. In announcing the new PILOT agreement, the university president stated that the purpose was “to reaffirm both our desire to help sustain the vitality and well-being of our home community and our deep appreciation for the many aspirations and interests we share.”
  • PILOTs: The Hartford Courant has come out in strong opposition to legislation sponsored by the Connecticut House Speaker (and opposed by the Governor) that would impose property taxes on nonprofit hospitals and universities. Calling the proposal unfair and premature, a Courant editorial observed: “just because a college or hospital isn't paying property taxes doesn't mean it isn't contributing to the community. The University of Hartford, for example, offers scholarships to Hartford residents, has made land available for two magnet schools, helps incubate small businesses in the Upper Albany neighborhood and beautifully renovated an empty car dealership into an arts building, among other things.” The editors ask: “If the school was pressed for property tax revenue and had to abandon programs such as these, would Hartford be better off? Is it worth the chance?” The Connecticut House passed a scaled-down version of the Speaker's bill over the weekend; Senate passage is uncertain. 

Vermont Calls for Constitutional Convention on Citizens United

On May 1, Vermont became the first state to call for a convention to amend the U.S. Constitution to reverse the U.S. Supreme Court’s Citizens United decision, which disallowed many restrictions on money in politics. The Legislature formally resolved: “That the General Assembly, pursuant to Article V of the U.S. Constitution, hereby petitions the U.S. Congress to call a convention for the sole purpose of proposing amendments to the Constitution of the United States of America that would limit the corrupting influence of money in our electoral process, including, inter alia, by overturning the Citizens United decision, ….” Congress must convene a constitutional convention if thirty-three other states call for one.

Government-Nonprofit Contracting News
New Jersey Sees Contracting Reform Progress, Continues Streamlining Efforts

The recent progress report from New Jersey’s Red Tape Review Commission includes two items of particular interest to nonprofits. The Department of Children and Families has implemented an electronic system for bidding on contracts that reduces time and duplicative paper submissions. Additionally, the State Board of Social Work Examiners has revised its licensing requirements for greater flexibility, and the Board will now defer to accreditation standards set by national social work organizations, rather than utilizing its own. In recognition of the progress the Review Commission is making in streamlining government contracting and other problem areas, this past week Governor Christie issued an Executive Order extending its operations through 2015. The Order expressly recognizes the contributions and public input of nonprofits in helping the Review Commission analyze the impact of the regulatory environment on job creation, economic growth, and investment in New Jersey. The Review Commission was established in 2010 to address the concerns of for-profit businesses, but quickly added nonprofits as a result of the successful advocacy efforts spearheaded by the Center for Non-Profits, the state association of nonprofits in New Jersey.

Arizona Revises Nonprofit Audit Requirements

Arizona legislatively revised audit requirements for nonprofits with state contracts, increasing the audit threshold as well as adjusting the frequency with which audits conducted by a certified public accountant are necessary. Under the new law, nonprofits with more than $250,000 annually in state contracts must undergo an audit each year. Less stringent financial reporting requirements will apply to nonprofits with $250,000 or less in state contracts for the year. Under previous law, nonprofits were required to secure an audit every other year if they receive between $50,000 and $100,000 in contracts and annually if they receive more than $100,000.

Nonprofit Conservancy Helps Preserve National Park

The Yosemite Conservancy, a nonprofit based in San Francisco, has agreed to pay the lion’s share of a $36 million project to help preserve the giant Sequoias in Yosemite National Park. Past mistakes and declining federal spending on parks reportedly have caused experts to fear that the 2000-year-old trees in the Mariposa Grove at Yosemite may suffer decline. The new project will remove a road and parking lot, build an elevated walkway, and make other improvements to make the trees more resilient. In recent years, nonprofits and private funders have stepped in to underwrite operations or maintain public access to parks in Arizona, California, North Carolina, Wyoming, and elsewhere.

Judge Blocks Clothing Bin Ban

A federal judge granted Planet Aid a temporary restraining order against enforcement of an Ypsilanti, Michigan ban on unattended clothing and shoe collection bins on commercial property. Asserting that the solicitation of clothing and other donations is a form of free speech, the nonprofit argued that the city’s prohibition infringed its First and Fourteenth Amendment rights. The clothing bin ban reportedly was spurred by complaints about dumping near the bins and criticism about the organization's sale of the donated goods overseas. A bill pending in the Michigan Senate would take away from local governments the power to impose bans on clothing bins set up on private property.

Advocacy in Action 

Round One Goes to Maine Nonprofits, Round Two …

Nonprofits in Maine won a stunning legislative victory when they successfully lobbied for a bill to partially remove a cap on charitable giving. While some would be tempted to declare victory and go home, the Maine Association of Nonprofits (MANP) is rallying the advocates for the next phase.

First, the background. In 2013, at the very end of the legislative session, the Legislature, with the Governor’s concurrence, imposed a $27,500 cap on all itemized deductions, including for charitable donations. In April 2014, the Maine House and Senate undid some of the damage by increasing by $18,000 the amount of charitable donations that are deductible in tax year 2016, and removing charitable giving from the cap altogether in 2017 and beyond. The Governor didn’t sign the bill nor veto it; he let it go into law without taking any action. 

Now comes the nonprofit advocacy leadership lesson. In announcing the news about the legislative win, Brenda Peluso of MANP first gave credit where it was due: to the nonprofit leaders who spoke up for the work they perform and the people they serve. Brenda wrote: “If it were not for the calls, emails, and public testimony this community generated, we would not have been as successful as we were.”

And second? Brenda reminded her coalition colleagues that “our work is not done.” Removing charitable deductions from the cap has always been the goal, so she laid out an aggressive advocacy strategy to maintain momentum toward that aim. She encouraged Maine nonprofits to join MANP in engaging candidates throughout the campaign season, encouraging other nonprofits to talk to the candidates, and identifying sponsors and champions for new legislation next year. MANP has a special webpage to learn more.

Brenda didn’t say it, but we will: if at first you succeed in nonprofit advocacy, try, try for more.


Worth Reading

Nonprofit Finance Fund Social Currency Blog

By Beth Bowsky of the National Council of Nonprofits

Kansas Rejects Tax-Exempt Status for For-Profit Fitness Clubs,” Rick Cohen, Nonprofit Quarterly, May 5, 2014, providing an update and keen insights on the efforts and mindset of for-profit businesses that only see tax-exemptions, and not the community benefits, of nonprofits providing services that the for-profits consider unfair competitive.

The State of Campaign Finance Policy: Recent Developments and Issues for Congress, Congressional Research Service, April 22, 2014, providing an up-to-date analysis of the history and philosophy of federal campaign finance laws, the effects of the Citizens United Supreme Court decision, and proposals to alter the status quo.

Worth Quoting

“The best thing that can happen in any local jurisdiction is for nonprofits and local governments to sit down together, share insights about needs for the community and what group can best deliver those needs…if out of that dialogue comes a good solution in terms of voluntary (payments in lieu of taxes), then that’s great.”

- Richard Koontz, director of the Iowa Nonprofit Resource Center, quoted in the Des Moines Register, May 4, 2014.

Worth Studying

Electioneering Rules for Private Foundations and Public Charities, a free online resource that walks nonprofit and foundation staff through the basic legal rules around the electioneering prohibition that applies to their organizations. The resource is one of four developed by the legal staff at the Packard Foundation, Gates Foundation, Hewlett Foundation and Moore Foundation.

What you’d need to make in every county in America to afford a decent one-bedroom, Washington Post, April 22, 2014, providing an interactive map of community-specific housing cost data.

Nonprofit Advocacy Matters | April 21, 2014

April 21, 2014

Federal Issues

Action Expected on Expired Giving Incentives, Tax Extenders

The Senate is expected to vote in the coming weeks to restore and extend through 2015 a package of 50-plus expired tax provisions, including three charitable giving incentives: the food donation tax deduction, the enhanced deduction for conservation easement donations, and the IRA charitable rollover. The bill does not include offsetting revenue raisers to pay for the estimated $85 billion cost. The House Ways and Means Committee is taking longer to evaluate and decide whether to extend each of the expired tax provisions, known as “extenders,” before drafting a bill. The Committee held a hearing earlier this month on a series of expired business tax breaks that Chairman Dave Camp (R-MI) included in his tax reform discussion draft. More hearings are expected later in the year.

IRS Likely to Pull, Revise Social Welfare Politicking Rules

The Internal Revenue Service likely will withdraw controversial draft regulations aimed at 501(c)(4) social welfare nonprofit organizations and propose news ones, according to IRS Commissioner John Koskinen. The IRS proposed regulations in November seeking 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. The IRS received a record number of public comments; more than 150,000 submissions provided mostly negative comments from across the political spectrum, as well as from 501(c)(3) charitable nonprofits concerned about the breadth and adverse impact on nonpartisan voter education activities. The IRS Commissioner stated “It’s going to take us a while to sort through all those comments, hold a public hearing, possibly repropose a draft regulation and get more public comments.” He observed, “This means that it is unlikely we will be able to complete this process before the end of the year.”

Government-Nonprofit Contracting Update
Is it a Grant or a Contract?

As a recent court case proves, it is sometimes hard for even government officials to tell whether the written agreement between the government and a nonprofit is a contract or a grant. This distinction matters to nonprofits because whether their work is performed pursuant to a “contract” or a “grant” determines a number of things, including what accounting rules to follow and whether the project is subject to the federal government’s single audit requirements. The new Uniform Guidance from the Office of Management and Budget – despite other improvements for nonprofits – could confuse the contract-or-grant question even further because it changes the definition of “vendor” to “contractor” and presumes, incorrectly, that states and local governments use the same definitions of grants and contracts as the federal government does. Opportunities still exist to warn OMB about the importance of consistent language; readers are asked to share their views on whether the new definition of “contractor” (section 200.330) could create problems for nonprofits.

Nonprofits Object to Combined Federal Campaign Revisions

Changes to the annual federal workplace giving campaign may make it more difficult for federal workers to donate to local charitable organizations of their choice, according to many nonprofit representatives. The new regulations for the Combined Federal Campaign will limit program administration to a few central federal agencies, rather than numerous campaign administrators. Nonprofits leaders have spoken out in opposition, predicting that this centralized process will likely exclude a variety of previously eligible local charities across the country from federal employee donations. “With the centralization, with the lack of authority from the local employee committee, you lose that,” said Steve Taylor, senior vice president of United Way Worldwide, referencing previous regulations in which the campaign was run by local outreach coordinators across over 100 financial centers. Expressing concern “about how the rules are going to reduce giving through the CFC,” Taylor pointed out that “charities like United Way are the experts on charitable giving, and the federal Office of Personnel Management is not.”

State and Local Issues 

Arbitrary Caps on Salary, Administrative Cost Reimbursement Struck Down

Ruling that the New York Governor does not have the power to limit how much the state will reimburse contractors for the salaries of their employees, a judge has struck down regulations implementing Executive Order 38. In January 2012 Governor Andrew Cuomo issued EO 38 to restrict state reimbursement of salaries in excess of $199,000 and limit the amount of administrative (indirect) costs of nonprofit and for-profit contractors to 15 percent effective in 2015. A spokesperson for the New York Attorney General’s Office said the State intends to appeal.

The court decision, if upheld, will remove a potential conflict between New York and federal contracting and grantmaking policies. New Uniform Guidance from the White House Office of Management and Budget will require states to pay nonprofits their negotiated rates for indirect costs when using federal funds. The federal government has recognized that the limitation on reimbursing nonprofits for their indirect costs decreases the nonprofit’s ability to operate efficiently and effectively. 

Kansas For-Profit Competition for Tax Exemptions

The Kansas Legislature voted to resolve a long-standing complaint by a for-profit health club operator by making his operations exempt from property taxes starting next year. The owner of the for-profit Wichita-based Genesis Health Clubs, has argued for years that the property tax exemption of YMCAs and YWCAs gave them an unfair advantage over his business. In recent years, he or his company reportedly contributed to the political campaigns of 22 of the 40 State Senators. Earlier this month, 19 of those 22 beneficiaries voted in favor of an amendment to pending legislation granting Steven’s for-profit business the same exemption from property taxes. The protestations of this for-profit business person notwithstanding, people familiar with the YMCA (For Youth Development, For Healthy Living, For Social Responsibility) and the YWCA (Eliminating Racism, Empowering Women) are aware that every day their community benefits exceed any tax exemption they receive.

Taxes, Fees, PILOTs

  • Taxes: Last week the Georgia Governor signed a measure that, among other things, temporarily exempts from sales and use taxes purchases by qualified food banks. Governor Deal had vetoed a similar exemption last year.
  • PILOTs: Connecticut’s Governor and House Speaker, both Democrats, don’t agree on whether some nonprofits should start paying property taxes. The Speaker is pushing a bill to require nonprofit hospitals and colleges/universities to start paying taxes and receive partial reimbursement from the state (known as a reverse payment in lieu of taxes or “reverse PILOT”). The Governor is opposed to this approach and is predicting that the Speaker’s bill won’t pass anytime soon. "We need to have an honest discussion (about tax reform)," the Governor told the newspaper in the Capitol, but stressed, "It's just not going to take place this year."

Maine Acts to Partially Restore Giving Incentive

Legislation approved last week by the Maine House and Senate will partially alleviate the disincentive to charitable giving created in 2013 when the Legislature enacted a $27,500 cap on all itemized deductions, including the charitable deduction. A compromise bill keeps charitable giving under the cap through tax year 2015, allows taxpayers to deduct an additional $18,000 in charitable donations for tax year 2016, and removes the cap on charitable giving entirely thereafter. The latest report is that the Governor will sign the bill. Visit the dedicated webpage of the Maine Association of Nonprofits for more information.

California Tax Check-off Program Reconsidered

A bill in the California Senate would establish a new system and standards for determining which charitable nonprofits may be designated for tax check-offs on the state income tax form. The legislation reportedly is intended to provide fairer access to the check-off giving program. California Volunteers, a state agency, would administer the new system. Currently there are three separate bills authorizing the addition of specified nonprofits to the list of organizations eligible to receive tax check-off donations.

Advocacy in Action 

Birth of a Nonprofit Advocacy Community

Every person at every charitable nonprofit can advance its mission through advocacy every day. But that doesn’t mean we need to be sector of lone wolves acting by ourselves or free agents wandering off in different directions.

Quite the contrary was brought home to nonprofits in Memphis, Tennessee, recently when the Alliance for Nonprofit Excellence hosted a session on public policy challenges and everyday advocacy. The audience contained an eclectic mix of charitable nonprofits, including those working in the areas of the arts, river conservation, criminal justice, early childhood education, and veterans rehabilitation. The presenter from Washington, DC, spoke of legislation, told stories of nonprofit actions, and answered questions about what the news of the day means to the individual organizations represented in the room. 

But the attendees weren’t converted from inward-looking nonprofits to community problem solvers until one of their own stood up and changed their perspective. A gentleman from an area legal aid society got their attention by stating, “Eighty percent of the challenges we all face are the same.” He said each of the organizations represented has to deal with funding problems, with policymakers who don’t understand how the nonprofits operate and what impact they are having, and with the public. His words were received with momentary contemplation and then enthusiastic applause in relief and recognition that each was a part of the larger whole and that others can and will offer help to advance the missions of all.


Worth Reading

Supporting and Engaging in Networks: Partnering for Greater Impact, by Exponent Philanthropy and Grantmakers for Effective Organizations, April 2014, identifying four key components of the network mindset for effective collaborations between nonprofits and funders: 1) mission, not organization, 2) trust, not control, 3) humility, not brand, 4) node, not hub.

Worth Quoting

“I think comparing private health clubs to either the YM or YWCA, quite frankly, is offensive. The Y’s do so much more for the community than do private health clubs.”

- Kansas Senate Minority Leader Anthony Hensley, criticizing an amendment to extend property tax exemption to for-profit health clubs, reported in Nonprofit Quarterly, April 11, 2014.

Worth Studying

Tax Trends in States, Stateline, April 10, 2014, a featured collection of Stateline stories that help explain recent tax developments in the states, from tax cuts to new rules for independent tax preparers.

The Top 5 (Okay, 6) State Tax Charts, compiled by the Center for Budget and Policy Priorities, April 14, 2014, providing the progressive think tank’s visual representations of state revenue, spending priorities, and data on earned income tax credits.

Annual State-Local Tax Burden Ranking FY 2011, Tax Foundation, April 2, 2013, providing the conservative think tank’s annual analysis of state tax burdens, ranking New York as having the highest and Wyoming the lowest.

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