Nonprofit Advocacy Matters | April 19, 2010

Spring Legislative Agenda

With only six weeks remaining until Memorial Day recess, legislators have perhaps their last and best chance to reach bi-partisan agreement on major bills before the election season is fully upon them. The following provides a synopsis of key bills we are following:

• Financial Regulatory Reform and Consumer Protection: The Senate is expected to take up a bill to overhaul regulation of the financial services sector, but all 41 Republican Senators signed a letter expressing opposition to the measure as currently written. This stalemate could change, however, due to a lawsuit filed by the Securities and Exchange Commission against Goldman Sachs alleging fraud in transactions at the root of the market collapse. The consumer protection components of the bill are of interest to many nonprofits.
• Federal Budget for FY 2011: The Senate and House Budget Committees are finalizing their budget resolutions in preparation for floor action scheduled for the coming weeks. The odds are that Congress will not be successful in adopting a formal budget, which is frequently the case in election years. The debate is still worth following because leaders use the document to establish priorities, and rank-and-file members frequently seek to force votes on controversial issues, such as advocacy rights and the estate tax.
• American Workers, State and Business Relief Act of 2010: This bill, which includes extension of the IRA Rollover and provides pension funding relief and $28 billion in additional funds to help the states balance their budgets, passed the Senate in March and must be reconciled with a House-passed bill. There is bi-partisan support for each of the initiatives, but legislators must come up with around $30 billion in additional revenues to pay for the bill.
• Estate Tax: The tax expired at the end of 2009, but will return to higher 2001 levels next year. The President has proposed restoring the tax at 2009 levels - exemptions of $3.5 million/individual and a tax rate of 45%; Senators Lincoln (D-AR) and Kyl (R-AZ) are calling for weakening the estate tax by raising the exemption to $5 million/individual and lowering the tax rate to 35%. A weaker estate tax would generate nearly $100 billion less to the U.S. Treasury and provide less of an incentive for charitable giving.

Citizens United Legislation to be Introduced

Representative Chris Van Hollen (D-MD) and Senator Charles Schumer (D-NY) are preparing to unveil legislation to counteract the controversial Citizens United Supreme Court ruling that allows some types of corporate and union campaign spending. The legislation reportedly will include strict disclosure and disclaimer requirements for campaign ads funded by corporations or unions and ban contributions from government contractors or firms that have not repaid Troubled Asset Relief Program (TARP) funds. Rep. Van Hollen said that he expects the bill to move "fairly quickly" once introduced. (See the National Council analysis on the impact of Citizens United on 501(c)(3) organizations.)

House Passes Bill Repealing Cell Phone Records Requirement

On April 14, the House passed the Taxpayers Assistance Act of 2010 (HR 4994). The bill includes a provision repealing the burdensome cell phone record keeping requirement. The bill would remove mobile phones from the items employers are required to report as listed property under the Internal Revenue Code, so employers would no longer have to keep a log of all non-business related calls made by or to employees. The rationale is straightforward: since the law was enacted, technology has changed, with flat rate plans in place rather than per-call rates, and it costs far more in employee, management, and organizational time than the tiny amount that might be in question. Nonprofits are particularly impacted because the IRS continually cites failure to comply with these requirements during audits of nonprofits, despite the fact the IRS acknowledges the rules are outdated. The bill now moves to the Senate for consideration.

Boston Task Force to Recommend $25 Million PILOT

After a 14-month review of Boston's payment-in-lieu-of-taxes (PILOT) agreements with nonprofit institutions, a mayoral task force will recommend  that major tax-exempt land owners make contributions to the city of up to 25% of their estimated tax liability. According to the report, which will be released publicly next month, nonprofits could receive credit for certain properties and community benefits, potentially reducing the rate from 25% to 12.5% of assessed value. The new PILOT plan reportedly would raise an estimated $25 million over 5 years. Critics of the proposal argue that it will lead to a reduction in services, layoffs, and increased costs to students and consumers. A recent column in the Boston Globe, however, rejected nonprofit arguments of a culture of giving back to the community through service and urged them instead to adopt "a culture of pay-more-money."

Other Taxes, Fees

• BALTIMORE, MD:  The Mayor of Baltimore has proposed a Bed Tax of $350 per year on universities and hospitals in the city. The proposed tax is aimed at making up budgetary shortfalls because of the city's reliance on property tax revenue. It is estimated that this proposal will raise $15 million. Local hospitals and colleges have argued the tax will result in reduced community services and layoffs.
• NEW JERSEY: Several towns in New Jersey have asked the state legislature to impose a fee of $100 per full-time student and $50 per part-time student on all colleges and universities. The funds would then be allocated to offset the local costs of providing municipal services such as police and fire.

Nonprofit Insurers Draw Ire of MA officials

Regulators in Massachusetts are chastising nonprofit health insurers for seeking 275 separate premium hikes for small businesses, and are raising questions over whether their tax status should be reassessed. Secretary of State William Galvin asked, "Is it simply a mask for a for-profit entity?" Nonprofit insurers argue that removal of their nonprofit status will result in higher costs for consumers. The state's insurance commissioner has blocked the vast majority of the proposed increases.

Modest Increases in State Revenue Exceed Predictions

While states continue to grapple with large deficits, some modest signs point to an improved future. Several states are reporting greater than anticipated revenues, allowing them to lessen previously proposed cuts and in a few cases restoring previously cut funding.

• California: According to the State Controller, tax collections were up an estimated 5.9%, resulting in an additional $356 million in revenues collected by the state. While this is good news, Controller John Chiang advised that recovery will continue to be slow because of the state's high unemployment rate.
• Indiana: March tax revenues were $2 million higher than originally forecasted, reversing 17 months of lower-than-anticipated collections.
• Kansas: Tax revenues collected in March were above projections by $14 million (3.7%), reducing the state's deficit by $34 million or from $467 to $433 for fiscal year 2011.

These positive signs signal that the economic freefall may be ending, but nonprofit leaders need to recognize that full recovery still has not blossomed. These reports indicate simply that more money came in than the meager amount that budget forecasters had projected and that state deficits may not be as deep as feared; they do not indicate that any state has returned to pre-Great Recession status. As relayed in the National Council's recent Special Report on the state budget crises, state government officials predict it will take this entire decade to return to "normal," so nonprofits must plan accordingly.

Perseverance Pays

A decade-long struggle over charitable regulation in Washington State has paid off with not only improved transparency, but also respect. After many years of debate, Northwest Nonprofit Resources successfully lobbied in 2007 for responsible revisions to the charitable solicitation laws of Washington. That law created the Charities Advisory Council that has two essential functions that are important to this story about advocacy and impact. First, the Council is a forum through which nonprofit leaders meet with government regulators and enforcement officials and have the opportunity to present the professional, responsible side of our sector.

The Council also makes recommendations on the types of nonprofit capacity building training that can be funded out of the Charitable Organization Education Account that was also created by the 2007 statute. That account, however, has not been funded. This month, the Governor is expected to sign into law a new schedule that, among other things, funds the Education Account through solicitation registration fees. After persistent advocacy, our colleagues in Washington have direct access to government officials who look to these sector leaders for advice on how best to spend training dollars.

Other News

Celebrate National Volunteer Week 2010!  April 18-24

National Volunteer Week, a 27-year tradition, coincides this year with the first anniversary of enactment of the Edward M. Kennedy Serve America Act. The week is dedicated to celebrating "ordinary people doing extraordinary things to improve communities across the nation." The Hands On Network and Points of Light Institute have developed resources for highlighting events and activities.

Send us your stories

The National Council of Nonprofits is working on a special project with the Center on Nonprofits and Philanthropy at the Urban Institute to document the growing problems with government contracts with nonprofits (including delayed payments, partial payments, changed terms, requirements to waive certain rights, and more). We invite nonprofits to share your experiences - not only negative stories about problems, but also any stories that demonstrate success in solving them. Submit your story through our website or contact Chris Conkey.