While Democrats and Republicans escalate the blame game relating to the failure of the Joint Select Committee on Deficit Reduction to reach agreement on a plan to reduce the budget deficit by $1.2 trillion, the direct, if not immediate, impact is clear: automatic spending cuts to domestic and security programs will begin in 2013 unless Congress can agree on some modifications. Under the Budget Control Act enacted in August, $600 billion will be cut over the next ten years from both defense programs and from domestic programs, with the notable exceptions of most entitlement program spending and programs that directly help poor and disadvantaged residents. More urgently, however, the lack of an agreement by the so-called Supercommittee throws into doubt the ability of Congress to resolve several contentious issues before the end of this year, including extension of unemployment benefits, continuation of a payroll tax cut, enacting nine spending bills to fund government operations, and renewal of dozens of business and nonprofit tax provisions that are set to expire December 31.
Federal Charitable Giving Incentive
The Supercommittee’s inability to reach agreement also means the failure of a proposal that was actively being considered: virtual elimination of the charitable giving incentive. As was reported by the Washington Post, National Journal, and Chronicle of Philanthropy, members of the Supercommittee were promoting a proposal by an economist to cap the value of all itemized deductions (e.g., for charitable giving, mortgage interest, and state and local sales taxes) at two percent of adjusted gross income (AGI). If adopted, that would mean that someone earning $75,000 could only receive a tax reduction of $1,500, which for most people would be consumed entirely by their mortgage interest and/or their state and local taxes – thus eliminating any incentive to give to charity. With leadership by the State Associations and many national organizations, including an active role by the National Council of Nonprofits, more than 4,000 nonprofit organizations signed the Nonprofit Community Letter telling Congress that nonprofits cannot withstand any weakening of the charitable giving incentive, and governments at all levels cannot continue to cut public programs and expect nonprofits to fill in their gaps and pick up their slack. Nonprofits need to continue to educate federal policymakers because this issue likely will return.
Veterans Hiring Credit Enacted
President Obama signed the "VOW to Hire Heroes Act" that will provide tax credits to nonprofit and other employers for hiring unemployed veterans. The law provides nonprofit employers a tax credit of as much as $6,240 for hiring a disabled veteran or a $3,640 credit for any veteran who had been out of work for more than six months. The hiring incentive is 65 percent of the value of the for-profit tax credit, which is contrary to earlier reports of equal treatment. Nonprofits can apply the credit against employer payroll taxes.
Bill to Streamline, Expedite PRIs Introduced
Legislation to facilitate and promote the use of program-related investments (PRIs) by private foundations was introduced this month by Representatives Aaron Schock (R-IL) and Jared Polis (D-CO). The Philanthropic Facilitation Act (H.R. 3420) would expedite IRS approval for foundations to invest in for-profit businesses where (1) the primarypurpose of the investment is to promote charitable purposes, (2) profits are not a significantpurpose for the investment, and (3) no investment is made for the purpose of influencing legislation. The bill specifically directs the IRS to develop a “safe harbor” procedure through which businesses, such as low-income limited liability corporations (L3Cs), could seek pre-authorizations. The petition for the safe harbor and certain annual information would be available for public inspection.
Late Contracts Hurt Taxpayers, Service Recipients
State agencies were late 90 percent of the time when submitting for approval contracts with nonprofits in the first six months of 2011, according to a new report from the New York State Comptroller Thomas DiNapoli. Likewise, state agencies were at least six months late in approving nine out of 10 contracts worth $50,000 or more during 2010, often after the services were rendered by nonprofits. “Delay only costs taxpayers money and hurts New Yorkers who rely on these services. The state should ensure it gets not-for-profit contracts approved on time and address other longstanding issues that continue to harm the not-for-profit sector,” said DiNapoli. The Comptroller has submitted legislation to improve the grant contracting process and made specific recommendations for administrative reforms that track proposals by the National Council of Nonprofits and other contracting experts.
Connecticut Cabinet on State and Nonprofit Partnerships Begins Work
Connecticut Governor Dannel P. Malloy has taken another step forward in making American history by appointing the nation’s first state Cabinet on Nonprofit Health and Human Service. The cabinet features the Governor-appointed Liaison to Nonprofits (the first such position in the country), Commissioners from the state’s eight health and human service agencies, the vice chair of the House Appropriations Committee, a representative from the Office of Policy, and nine nonprofit leaders. Announced in spring of 2010, the cabinet was the first of its kind created to examine and enhance the effectiveness, transparency, and efficiency of partnerships between the state and nonprofit health and human service providers.
New Jersey Online Nonprofit Assistance Launched
As the result of legislation championed by the Center for Non-Profits, New Jersey has launched its Nonprofit Information Center, a new website that serves as a one-stop, online portal to assist nonprofits in identifying funding sources and volunteer opportunities available through the State. It includes a directory of State departments and agencies that provide resources to assist nonprofits in their daily operations, and, as the site states on its homepage, “this portal will save your organization time and money – resources that can more appropriately be devoted to your organization’s core mission.“
Nonprofit Awareness Month
Every resident of the state “benefits from nonprofits’ vital contributions of strengthening our social fabric, public policy, culture, sense of community,” wrote Alabama Governor Robert Bentley in proclaiming November 2011 to be Nonprofit Awareness Month. The proclamation from the state’s highest elected official carries with it significant public acknowledgement of the impact of the nonprofit community. The proclamation underscores economic impact: “nonprofits provide more than 227,000 jobs in Alabama and contribute $12.4 billion to the state’s economy.” And it highlights the role of advocacy: “nonprofits play a central role in the democratic process by educating the public about vital issues in their communities and our state and by providing a means for individuals to deliberate on and advocate for public policies and decisions that affect them.”