Protecting Charitable Giving Incentives: Influencing the Federal Tax Debate Through State Policy Decisions
Two new op-eds highlight how successful efforts across the country to protect charitable giving incentives in state legislatures in 2013 can inform the work of Congress as it looks at comprehensive tax reform.
- “The Lab Results Are In on Tax Reform,” by Tim Delaney, inThe Hill, July 23. “The results from red, blue and purple states are unmistakable: Charitable giving incentives deserve a permanent place in every reformed tax code.“
- “Tax Reform Lessons Learned From State Experiments” by Lisa Maruyama and Tim Delaney, in the Huffington Post, July 25. “State legislators are learning from real world experiences and operating more intelligently with respect to incentives to support the important work of nonprofits in local communities. As the debate over our federal tax code continues, Congress and the President must do the same.”
Readers should feel free to share links to these articles with their colleagues, staff and board members, donors, and local news media so others can discover the important lessons learned at the state level about the negative consequences of tampering with charitable giving incentives.
Sequestration and 2014 Budget Remain Unresolved
There are very good reasons for repealing the arbitrary sequestration cuts enacted in 2011, according to a new nonpartisan analysis, yet negotiations to reach agreement on a federal budget remain deadlocked eight weeks before the beginning of the next fiscal year on October 1. The Congressional Budget Office (CBO) released a report projecting that the economy would generate 900,000 new jobs if Congress cancels sequestration cuts for the rest of this fiscal year and for fiscal year 2014. CBO also warned that the short-term gain in jobs would eventually reduce the nation’s output and income, presuming that additional federal borrowing would be needed. Currently, the House and Senate remain $81 billion apart on total spending for next year, and this is before additional arbitrary sequestration spending cuts of $90 billion are factored in. President Obama has put out word that he will veto spending bills that reduce domestic programs even more deeply than the arbitrary sequestration cuts, essentially warning lawmakers not to shift cuts from military to non-military programs. Further complicating negotiations is the rapidly approaching federal borrowing limit, or “debt ceiling,” that could result in a government shutdown in October or November, unless a temporary solution is adopted.
Go to the Council of Nonprofits’ GiveVoice.org website to read howsequestration has hurt individuals in your state.
Tax Reform Advice to Remain a Mystery (for 50 Years)
Friday, July 26 was the deadline for Senators to make the case for which tax incentives should be included in forthcoming comprehensive tax reform legislation, but the recommendations of individual Senators may not be known for most of our lifetimes. Senate Finance Committee leaders Max Baucus (D-MT) and Orrin Hatch (R-UT) in June announced a “clean slate” approach to tax reform and called on Senators to provide lists of tax provisions they’d like to see in comprehensive legislation. Last week, it became clear that Senators were reluctant to produce such a list out of concern that it could be used against them by opposing candidates and constituents – for the tax breaks they supported and the ones they left out. In response, Senators Baucus and Hatch made an unusual promise: Senators' recommendations for favored tax provisions would be sealed in the National Archives and kept confidential for 50 years.
Additional Federal Stories
North Carolina Preserves Charitable Incentive, Alters Other Taxes
North Carolina’s Governor signed a tax reform law last week that protects the state’s charitable giving incentive by carving it out from a new $20,000 cap on all other itemized deductions. The law still dramatically alters the State’s current tax code, however, and includes changes to some nonprofit exemptions and deductions that could adversely affect the ability of charitable organizations to serve their communities. These changes include eliminating the credit for contributions from non-itemizers; imposing a $45 million cap on sales tax refunds and authorizing a study committee to examine lowering this cap or eliminating the refund in future years; replacing the three-percent gross receipts tax on entertainment with a sales tax that will now be applied to arts nonprofits and authorizing a study on expanding the sales tax to other services.
Maine Politicians Seek to Divert Nonprofit Resources
The Maine budget for 2013-2015 enacted last month creates a nonprofit tax review task force to “evaluate the feasibility and desirability of identifying parameters and a process for imposing a temporary assessment on certain nonprofit organizations that will generate approximately $100,000,000 in revenue annually.” The task force grew out of an earlier proposal to levy a two-percent tax on nonprofit assets that would have been collected and used for the state’s revenue sharing program with municipalities. The Maine Association of Nonprofits is assured a seat on the task force. At the local l evel, the town of Biddeford has established a committee of the City Council to develop a formula for calculating payments in lieu of taxes (PILOTs) that politicians will ask nonprofits to pay voluntarily.
Government-Nonprofit Contracting News
Illinois Comptroller Holds Meeting on Late Payments
The Illinois Comptroller convened the first meeting of the newNonprofit Advisory Council formed to help create ways to address the ongoing problem of late payments to nonprofit service providers. In Illinois, where late payments to nonprofit human services providers and others is the norm, the state owes $5.8 billion, and the Comptroller predicts that another $1 billion will be added to the debt this fall. Illinois is required to pay one-percent interest on payments later than 90 days; in FY2013, the interest payment alone was $186 million.
Transparency Trumps Free Speech Protections, SC Court Rules
Nonprofit organizations receiving public funds in South Carolina may be subject to the state’s Freedom of Information Act (FOIA) and required to disclose records and open meetings to the public, according to a ruling of the South Carolina Supreme Court. At issue in the case was the very broad definition of “public body” in SC’s FOIA and where to draw the line between the public’s right to know about governmental activities and a private organization’s free speech and freedom of assembly protections under the Constitution. The court held that “FOIA is a content-neutral statute that serves important governmental interests and does not burden substantially more speech than necessary to serve those interests” of transparency and preventing the secret exercise of governmental power. The case was sent back to the lower court to determine whether the funds received from the state amounted to reimbursement for services under an arms’ length contract (which would not trigger FOIA application) or were received “en masse or [the nonprofit] manages the expenditure of public funds.” Charitable nonprofits across the US have faced similar challenges to their independence in recent years, ranging from application of government transparency laws to costly staff training requirements. As the executive director in the South Carolina case stated, “The great concern is that it could open this up to all types of entities that may receive a dollar from the government.”
Additional State and Local Stories
Nonprofit Advocates Share Their Successes in Minnesota
As organizations immersed in the needs of their communities, nonprofits are particularly well-suited to and commonly do have amazing impacts on the policy issues that affect the individuals they serve. However, as quiet servants of their communities, the stories of nonprofits’ policy victories are rarely told … until now.
This summer the Minnesota Council of Nonprofits (MCN) began highlighting the local nonprofit advocates that accomplished major policy successes for their communities during the 2013 legislative session. In July, MCN shined the advocacy spotlight on the Immigrant Law Center of Minnesota (ILCM) and the Conflict Resolution Center (CRC).
ILCM worked in concert with other local nonprofits to pass the Minnesota DREAM Act, which removes the obstacles currently facing the State’s undocumented students in accessing equal and affordable higher education.
Similarly, CRC worked with Minnesota policymakers to create a new Statewide Office of Collaboration and Dispute Resolution to promote the use of mediation and collaboration in communities. “CRC is a small organization that had not done policy work in the past and did not think that it had the resources or capability to do so. We learned that legislative advocacy is easier and more beneficial than we thought. We were pleasantly surprised by the access to legislators and the mutually beneficial relationships that we built with them,” the CRC Executive Director said.
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Federal fiscal uncertainty has decreased economic output by 2.3 percent and resulted in the loss of 2.6 million jobs, according to Measuring Economic Policy Uncertainty, by Scott R. Baker, Nicholas Bloom, and Steven J. Davis
“Sequestration hits Hispanic families hard,” The Washington Post, July 22, 2013, highlighting the harmful impact of arbitrary spending cuts.
“States Make 'Historic and Disturbing Cuts' to Unemployment Benefits,”Stateline, July 11, 2013,
July 11, 2013, analyzing state cuts to unemployment benefits to levels not seen since the 1935 Social Security Act created the program.
“All Politics are Not National, States are Powerful” Lara M. Brown, theNew York Times, July 16, 2013, describing the importance of state policy over federal policy: “In sum, the vast majority of the laws under which each of us abide are state laws, not federal laws.”
See other articles in New York Times series: State Politics vs. the Federal Government.
“Thanks again for your advocacy.” Closing comment in an email from a senior staffer of a U.S. Senator to a nonprofit State Association leader.