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Nonprofit Advocacy Matters | May 19, 2014

Posted: 
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

Posted: 
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

Posted: 
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.

Nonprofit Advocacy Matters | April 7, 2014

Posted: 
April 7, 2014

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

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

Federal Issues 

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

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

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

Expired Charitable and Other Tax Incentives on the Agenda

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

State and Local Issues

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

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

Taxes, Fees, PILOTs

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

Government-Nonprofit Contracting Update
Contracting Challenges Chronicled in NFF Survey

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

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

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

Additional State and Local Issues

Advocacy in Action 

Advancing Mission through Data

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

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


 

Worth Reading

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

Worth Quoting

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

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

Worth Studying

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

Worth Citing

$18.93 - $27.00 per hour

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

Nonprofit Advocacy Matters | March 24, 2014

Posted: 
March 24, 2014

Federal Issues

Senate Action Likely on Expired Giving Incentives

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

Federal Agencies Shifted Sequestration Burdens on Nonprofits, Others

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

Congress May (Again) Tighten State Trigger for Food Benefits

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

State and Local Issues 

Connecticut Reconsiders Support for Some Nonprofit Property Exemptions

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

Public University Pegged for “PILOTs”

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

The Relationship Between Cities and Nonprofits: It’s Complicated

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

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

Additional State and Local Issues

Advocacy in Action 

Advancing Your Mission Through … Compelling Data

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

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

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

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


Worth Reading

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

Worth Quoting

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

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

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

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

Worth Watching

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

Worth Studying

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

Nonprofit Advocacy Matters | March 10, 2014

Posted: 
March 10, 2014

Federal Issues

Budget Season Opens in Earnest

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

Tax Reform Draft Made Public

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

Proposal to Regulate Social Welfare Nonprofits Draws Record Response

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

State and Local Issues 

Cities Seek to Tax Employers, Employees

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

Taxes, Fees, PILOTs

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

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

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

Legislatures Continue to Tweak Solicitation Regulation

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

Additional State and Local Issues

Advocacy in Action 

Here’s Why

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

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

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

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

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


 

Worth Reading

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

Worth Quoting
Respect from Washington

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

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

Worth Quoting

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

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

Worth Studying

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

Nonprofit Advocacy Matters | February 24, 2014

Posted: 
February 24, 2014

Federal Issues

News Coming on Taxes and Spending; Little Traction Expected

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

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

Proposal to Regulate Social Welfare Nonprofits Under Fire

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

First Answers Provided to OMB Guidance Questions

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

State and Local Issues

Taxes, Fees, PILOTs

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

Putting “Voluntary” into Volunteerism

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

Nonprofit Compensation Flags Agenda Items

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

Advocacy in Action 

Big Day Advocacy

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

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

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

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

 


 

 

Worth Reading

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

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

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

Worth Quoting

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

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

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

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

Worth Watching

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

Nonprofit Advocacy Matters | February 10, 2014

Posted: 
February 10, 2014

Federal Issues

Low Drama, Expectations on Effort to Extend Federal Debt Limit

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

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

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

State and Local Issues 

States Consider New Charity and Solicitation Regulations, Fees

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

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

Taxes, Fees, PILOTs

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

Advocacy in Action 

Advocating with the State of the Union Address

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

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

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

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


 

Worth Reading

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

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

Worth Listening

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

Worth Quoting

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

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

Reminder

Comments Due Feb. 27 for Proposed Regulations

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

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