Nonprofit Advocacy Matters | May 17, 2010

Today is the final deadline! Nonprofits that have not filed an annual return with the IRS in the past three years will automatically lose their tax-exempt status unless they file today. Thanks to an incredible final push over the past 10 days by our network of State Associations, the Urban Institute, and reports from National Public Radio, Nonprofit Quarterly, and many others, the tax-exemptions of thousands of nonprofits have been saved because they learned that they needed to file the Form 990 with the IRS. Please spread the word to your friends and neighbors who may be involved with small nonprofits that may still not know that they must file today. Visit our website for more information.

House to Consider Giving Incentives, Other Relief

The House is scheduled this week to take up legislation that includes restoration and extension of the IRS rollover and other charitable giving incentives through 2010. The bill also reportedly will include extension of unemployment insurance payments and COBRA benefits, additional Medicaid funding to the states, and pension funding relief that would allow sponsors of defined benefit pension plans to stretch out their payments. Both the House and Senate have passed versions of the legislation, and the new bill coming to the House floor this week is a compromise bill worked out by the Democratic leadership of the two bodies. Senate leaders have said they would also like to pass this new version before Memorial Day.

Senators Negotiate Estate Tax Renewal

Senators Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) are seeking support for an alternative to the federal estate tax that expired on December 31 by proposing a permanent tax on estates above a $5 million individual exemption at a rate of 35 percent. The House last year passed a permanent extension of the estate tax at 2009 levels ($3.5 million/individuals; 45 percent tax rate). Since the House action in December, however, Congress approved new "pay as you go" (PAYGO) rules that requires all tax breaks and spending hikes to be offset with other measures to prevent the bill from adding to the federal budget deficit.

If Congress takes no action this year, the estate tax returns in 2011 at an exemption level of $1 million and a rate of 55 percent. The House-passed extension would cost nearly half a trillion dollars and the Lincoln-Kyl approach is estimated to cost $60 billion more than that. Senators Lincoln and Kyl have promised to make up the $60 billion through tax-law changes within the estate tax, but a previously reported proposal to limit donations to nonprofits from estates does not appear to be one of their "pay fors."

IRS Provides Details on Small Employer Health Credit

The Internal Revenue Service issued new guidance this morning to help small employers determine whether they are eligible for the credit for providing health insurance for their employees. See the National Council web page on the Small Employer Health Credit.

Colorado Enhances Government-Private Partnership

Nonprofits in Colorado will soon have additional opportunities to deliver public services through contracts with state government agencies, thanks to a law signed by the Governor last month. The new statute allows 501(c)(3) nonprofits to submit unsolicited proposals to perform services for a state agency. The agency will evaluate the proposal based on several factors, such as innovation and efficiency, cost-savings, potential contribution to the agency's mission, and the capabilities of the submitting nonprofit. The legislation is the product of the Legislature's Long-term Fiscal Stability Commission, on which Colorado Nonprofit Association President and CEO Renny Fagan served as a member.

Minnesota Governor's Cuts Exceeded Authority, New Budget Deal Reached

Minnesota Governor Tim Pawlenty exceeded his constitutional authority in the method he used to make budget cuts, the State Supreme Court ruled this month. At the end of Minnesota's 2009 legislative session, Governor Pawlenty employed a rarely invoked budgeting authority to "unallot" funds the Legislature had appropriated. The court's decision focused on one program (food for the disabled), but may open the door for challenges on another $2.7 million he unalloted in 2009. The decision's timing threw the state's budget into confusion, requiring the Legislature to remain in session until completing action this morning.

Payments In Lieu of Taxes (PILOTs)

PILOTs on nonprofits have become very hot issues, especially in northeastern cities. State constitutions often provide that nonprofit property will be exempt from taxation, yet local governments seeking more revenue have been turning to nonprofits to get them to make "payments in lieu of taxes." PILOT proposals have been brewing in Boston (MA), Framingham (MA), and St. Louis (MO). Here are the latest additions to the growing list:

Albany, NY: The City Council unanimously approved an ordinance to create a Commission on Public-Private Budgetary Cooperation. The new Commission is charged with reviewing the "fiscal impact of tax-exempt entities on the city's tax base," and with making recommendations "regarding financial contributions to be made by tax-exempt entities in support of essential city services."

Springfield, MA, Council President is asking the Mayor to pursue voluntary payments from what he called the "mega nonprofits" in the city.

Speaking Out Against the Baltimore Bed Tax

Nonprofits in Charm City are not taking the Mayor's bed tax lying down. Last month, the Mayor of Baltimore proposed a Bed Tax of $350 per year on universities and hospitals in the city. Darryl A. Jones, Sr., CEO of the Maryland Association of Nonprofit Organizations, forcefully makes the case against another fee on nonprofits in an article he co-wrote for the Baltimore Sun.

Connecticut Nonprofits Sponsor Candidates Forum

The Connecticut Association of Nonprofits and seven other organizations sponsored a well-attended gubernatorial candidates forum last week. While the debate focused on issues related to poverty, education, and jobs, the impact and importance of nonprofits was a recurring theme. One candidate stressed that nonprofits need to have a seat at the table, and said it is not fair to give state workers, who provide similar services, a 6 percent increase while the nonprofits receive less. Others emphasized the important work of nonprofits and the need to contract more services to the sector. Connecticut Nonprofits Executive Director Ron Cretaro is quoted in the local media as saying the forum was a "good airing of a lot of issues that are important to us."

Bringing Government and Business to the Nonprofit Table

Understanding the "new normal" in economics, explaining the role of nonprofits in the Utah economy, and discovering how businesses, nonprofits, and government can work together are only a few of the topics covered this month at the second annual "Economic Summit for Nonprofits," sponsored by the Utah Nonprofit Association. The UNA, working in partnership with the Nonprofit Academy for Excellence at the University of Utah and Wells Fargo Bank, brought together representatives of 100 organizations to share knowledge, success stories, and lessons learned from the recession. Lt. Governor Greg Bell and Salt Lake Mayor Peter Corroon spoke at the summit, demonstrating the commitment of the public sector in strengthening the ability of Utah nonprofits to serve their communities.

Other News

Nonprofits and the IRS: Change Agents

IRS Commissioner Doug Shulman made a compelling case for our community that we think bears repeating:

"Like the IRS, a non-profit's mission is not to achieve bottom-line results for shareholders. Indeed, we have a different stakeholder to whom we are accountable to the public. Our respective missions are the same: to serve the public by promoting the public's interests and welfare. And when you think about it, we are both agents of lasting change … change for the better … change that will benefit our nation, its people and institutions ... and change for the public good." Read his full remarks.

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 hurting 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.