Nonprofit Advocacy Matters | July 19, 2010

Five Worst Government Contracting Abuses

Late payments for contracted services is only one of many ways that governments shortchange nonprofits and exploit the contracting relationship. See the five worst government contracting abuses and let us know if you can add further documentation, if you've seen worse, or if you know of solutions in your state that help prevent these and other abuses.

Hearing to Consider Gulf Coast Need for Charitable Assistance

Viewing the impact of the Gulf oil spill on people in the region, Congress is asking "what needs to be done and how the charitable sector and others can reach out to these communities and help." The Oversight Subcommittee of the House Ways and Means Committee has scheduled a hearing for Tuesday, July 20, to consider these questions and examine how donations contributed to charities are being used. In announcing the hearing, Chairman John Lewis (D-GA) stated, "This is the moment when government must rely on charitable organizations to fulfill their missions and address these urgent needs."

Rival Estate Tax Revisions Proposed

The estate tax expired at the end of 2009, but will snap back automatically in 2011 to a 55 percent tax rate with a $1 million exemption unless changes are made. Senators are proposing rival plans to weaken or strengthen the federal tax on estates.  Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) introduced a measure last week to set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. Sen. Bernie Sanders (I-VT) recently introduced the Responsible Estate Tax Act, S.3533 to set an exemption of $3.5 million and impose tax rates from between 35 percent and 55 percent based on the size of the estate above the exemption level. Senate Majority Leader Harry Reid (D-NV) has said that he does not intend to allow any estate tax votes in the coming weeks, but he continues to negotiate with the Republican Leader, Sen. Mitch McConnell (R-KY), on the Senate schedule and amendments.

Financial Regulatory Reform Enacted, Cuts Debit Card Fees

Last week the Senate passed and sent to President Obama the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R.4173). The measure imposes new restrictions on risky financial investments, creates a Consumer Financial Protection Bureau within the Federal Reserve, and allows the Federal Reserve to regulate the amount of fees that nonprofits and merchants can be charged for debit card transactions. President Obama is expected to sign the bill this week.

Nonprofit Sector Act | Federal Data of "Uncertain Quality"

The case for the Nonprofit Sector and Community Solutions Act, H.R. 5533, was made recently by SubsidyScope, a program of Pew Charitable Trusts. In seeking to analyze the effects of tax subsidies and federal grants, the authors reached the following conclusions:

"It is challenging to assemble and present spending and subsidy data regarding the nonprofit sector because the federal government does not identify nonprofits as a distinct budget category. Further, federal budget data are of uncertain quality; specifically, the data available through USAspending.gov are incomplete because certain program information is missing for a number of records, making it difficult to discern which specific agencies and programs may be awarding funds to nonprofits."

A key component of H.R. 5533 is to overcome the data challenges that SubsidyScope, and many other nonprofit researchers, have identified.

IRS Seeks Comments on New Disclosure Requirement

The health care reform law enacted earlier this year requires nonprofits and businesses, starting in 2012, to report aggregate payments to vendors in excess of $600 for goods and other property. The requirement applies for payments to all vendors, not just those related to health care. Currently, nonprofits and others are required to file Form 1099s for payment of services by independent contractors, but not for goods from vendors. The IRS is seeking public comment on how to most effectively carry out the law change, with the stated goal of minimizing burdens and avoiding duplicate reporting. The deadline for comments is Sept. 29, 2010. Please share this information with your accounting and operations personnel and send the National Council your ideas on how best to limit the impact of this new reporting requirement.

States' Revenues Remain Volatile

State tax revenues increased 2.5 percent in the first quarter compared to last year, according to an analysis by the Nelson A. Rockefeller Institute of Government, but data suggest that second-quarter revenues will grow less than 1 percent. The first-quarter gain, the first such improvement since 2008, was largely the result of tax increases, although corporate income taxes fell from a year ago.

IL: State Revenue Drops by $2 billion

Illinois tax revenues for the 2010 fiscal year dropped $2 billion, or 7 percent, from the year before. It was the largest decline in state history and the largest percentage drop since the Great Depression. A year earlier, budget officials had projected revenue growth of $155 million.

MA: Sales Tax Cut Referendum

Proponents of an effort to cut Massachusetts' 6.25 percent sales tax in half appear to have secured a "challenge proof'' number of voter signatures needed to put on the November ballot. Opponents warn the referendum would cut state revenues by $2 billion or more, gutting budgets for police, teachers, and programs protecting the poor. Similar measures failed in 2002 and 2008.

WI: Nonprofits Weathering the Recession

Sixty-five percent of nonprofits responding to a survey by the Greater Green Bay Community Foundation said demand for their services was up in 2009, while 46 percent reported a drop in donations. Nonprofits made tough decisions during the year, but the survey results suggest that the organizations are better positioned to move forward in 2010.

The House hearing regarding the needs of nonprofits in the Gulf (see article above) is giving three State Associations the opportunity to build on the work they have already done. Beginning in June, the Alabama Association of Nonprofits, the Louisiana Association of Nonprofit Organizations, and the Mississippi Center for Nonprofits have been surveying their members to craft state-specific Nonprofit Needs Assessments. Last week, leaders of the three State Associations briefed congressional staff about these findings regarding the work of nonprofits in the Gulf region, and provided valuable insights that will inform the hearing and the response of Congress in the coming weeks. Not only does hard work and a reputation for integrity pay off in terms of community impact and membership retention, it also establishes State Associations as the go-to organizations when Congress comes calling.