Take Time to Help Yourself
How Is the Small Employer Health Credit Working for Your Organization?
The Small Employer Health Credit that qualified smaller for-profit and nonprofit organizations may claim to help reduce the cost of employee health insurance has come under criticism for its complexity and low payout rates. We are asking for your help in better understanding how this new program actually works and how it can be improved. The Government Accountability Office (GAO) is looking to speak with nonprofits willing to share their experiences with claiming the Health Credit that was passed as part of the 2010 health care reform act. The GAO will be holding two focus groups that are open to all nonprofits that have applied for the credit to gather information about its overall effectiveness. Read more about the GAO review.
Here are three ways you can help:
- Contact the State Association of nonprofits in your state to let them know your experiences with the Small Employer Health Credit – whether you applied for it, or if you decided not to apply for some reason.
- Contact the GAO directly to share your experiences.
- Spread the word to your colleague organizations about this opportunity to understand and improve this important tool for making employee health insurance more affordable.
Challenges to Charitable Giving Incentive in Transition
Unlike the last three years in which his proposed federal budget recommended capping all deductions – including for charitable giving – for wealthy Americans, President Obama is apparently adjusting his tax reform focus to avoid damaging the work of nonprofit organizations through changes to the charitable deduction. In his State of the Union address, the President proposed eliminating many tax deductions for individuals with incomes of more than $1 million as part of his proposal to require millionaires to pay at least 30 percent of their income in taxes. The White House then released Blueprint for an America Built to Last that states the Administration will work to ensure the fair implementation of these new rules “without disadvantaging individuals who make large charitable contributions.” The Nonprofit Quarterly reports that White House officials are acknowledging that efforts to limit the value of the charitable giving incentive are off the table for 2012. While the nonprofit sector may breathe some relief at least until the White House releases more details in its proposed FY2013 budget, word from Capitol Hill is that members of Congress are still actively looking at modifying the charitable giving incentive as part of tax reform discussions.
Extending Payroll Tax Cut and Expired Benefits
Congressional leaders met shortly after the State of the Union Address to begin negotiations over a year-long extension of the two-percent cut in payroll taxes, and of food and unemployment benefits. There appears to be general consensus in Congress for an extension through December 2012; however, to date congressional leaders have not been able to agree on how to pay for the extension of these benefits, which expire after February 29 unless Congress acts.
IRA Rollover and Other Charitable Incentives
Congress is considering whether and how to renew the more than 60 annual tax breaks, including the IRA rollover and several other charitable giving incentives, that expired at the end of 2011. The Senate Finance Committee will hold a hearing on Tuesday, January 31 at 10:00 am to decide whether these tax breaks should be made permanent and how they will be paid for if they are renewed.
Senate to Consider Postal Service Overhaul The Senate may consider legislation as early as this week to overhaul the law governing the U.S. Postal Service to close a projected $10 billion deficit. Lawmakers are considering a package of reforms that could lead to post office closures, changes in postage prices, and restructuring of the workforce, among many other proposals. Unlike a similar House bill, the Senate version does not alter the nonprofit bulk rate discount that provides lower costs for mailings for fundraising and other purposes.
Behind the Budgets
Governors’ Budgets Reveal Nonprofit Impact
Tax reform proposals offered by governors in January reveal a trend that could negatively impact the work of nonprofits. In Oklahoma, the Governor would pay for lower income tax rates by removing most of the state’s current tax credits, exemptions, exclusions, and deductions, which could include the charitable giving incentive. Maryland’s Governor has called for increased tax revenues, and is proposing to alter the charitable deduction by capping at certain levels what individuals with incomes of more than $100,000 and $200,000 can deduct. Bearing both good and bad news for nonprofits in Kansas, the Governor, who is also seeking to cut taxes and reduce charitable and other deductions, is proposing to resume state funding for arts programs that he eliminated last year.
New Fundraising Opportunities Under Consideration
Legislatures in Pennsylvania, Alaska, and Illinois have approved or are considering legislation that would open up new funding avenues to support the missions of nonprofits. Pennsylvania legislators recently amended a 24-year-old law to allow nonprofits to use raffles, prize drawings, and other “small games of chance” to raise revenue. An Alaska lawmaker has introduced legislation that would create the “Endow Alaska grant program,” providing annual grants that philanthropic organizations can offer to community foundations that match each dollar of the grant. Similar legislation, known as “Endow Illinois,” is pending in Illinois.
Cities Demand PILOTS, “Goodwill Gestures”
Despite a state law that exempts charitable nonprofits from property taxes, nonprofits in Boston have contributed $9.4 million in payments in lieu of taxes (PILOTs) to the city since July 2011, after the city mailed simulated tax bills to charitable organizations that own property worth more than $15 million. Eighteen nonprofits, including the New England Aquarium, the Museum of Science, and Suffolk University, have refused to give any cash to the government, noting that they already provide various benefits to the city. A similar effort to demand “voluntary” contributions from nonprofits is now underway in Pittsburgh, where city officials have asked nonprofits to donate $3.2 million in “goodwill gestures in lieu of taxes.” Previous agreements for voluntary contributions from nonprofits to the city expired on December 31 of last year.
Government Contracting Update
New laws and practices affecting nonprofits contracting with state governments are surfacing throughout the country, with mixed results:
- Connecticut’s Governor announced the creation of a Point of Service Contracting Efficiency Office within the Office of Policy and Management that will allow the state's health and human service agencies to improve the ways in which they work with nonprofits to provide government services.
- In New York, the Governor has ordered a $199,000 cap on the state funds that for-profit and nonprofit organizations can use to compensate executives. The Governor’s action will also require nonprofits to spend 75 percent of the state funds they receive on services – not administrative costs – and 85 percent by 2015.
- A Florida committee approved a bill to cap the salaries of all employees of nonprofit contractors at no more than the highest-paid state employee, $130,000. The legislation would apply to nonprofits that receive at least two-thirds of their revenues from government contracts. It expressly exempts for-profit vendors.
- Legislation was introduced in Maryland to implement numerous contracting reforms to help reduce costs and burdens on nonprofits providing services on behalf of the state government. The bill is based on recommendations of a government-nonprofit task force report published late last year.
- Chicago’s Hull House, a nonprofit that Nobel Prize Winner Jane Addams founded in 1889, is closing its doors after 120 years of community services due to ongoing financial struggles, including late government payments that have afflicted many nonprofits in Illinois.
- The New Hampshire Senate passed legislation that would require nonprofits – but not for-profits – that receive government funds to send at least one board member to trainings on fiscal management and ethics.
Taking Nonpartisanship to the Political Parties
Even though a political party is holding a meeting, that doesn’t mean it’s off limits to nonprofits. The Minnesota Council of Nonprofits (MCN) is alerting its members that the political parties will be hosting their precinct caucuses on February 7, when the parties will begin the process of selecting policy positions to shape the party platform. MCN advises:
"501(c)(3) organizations can provide education about the purpose of a caucus and how to get involved. Organizations can also help shape party platforms by drafting sample nonpartisan issue resolutions for members to bring to the caucus and advocate for adoption by the party of their choosing. This is great way for citizens to educate their neighbors on an issue and raise them as serious concerns with the political parties they choose to identify with." (emphasis added)