Nonprofit Policy News | February 23, 2010

February 23, 2010

This edition of the Nonprofit Policy News offers the most current information about various federal, state, and local policy matters of interest to nonprofits. For questions regarding any items mentioned in this newsletter, contact David Thompson at DThompson@councilofnonprofits.org or (202) 962-0322 x 113.

Jobs Creation Proposals

The Senate voted on a bi-partisan basis last night to proceed to the $15 billion jobs creation legislation that includes as its centerpiece a provision that would allow employers to skip paying the 6.2% Social Security taxes for the rest of the year for any person they hire who has been unemployed for at least 60 days. Because the tax forgiveness program focuses on the payroll taxes that all employers pay, nonprofits would be eligible to participate. Senate Philanthropy Caucus Chair Chuck Schumer (D-NY) and Senator Orrin Hatch (R-UT) proposed the bi-partisan measure.

As a result of yesterday's procedural vote, the Senate is on track to approve the Hiring Incentives to Restore Employment Act (HIRE Act) this week. The bill is a scaled-down version of an $85 billion package of tax incentives crafted by leaders of the Senate Finance Committee. Those other provisions, which include renewal of the IRA charitable rollover, are scheduled to be considered in the coming weeks.

Earlier this month, President Obama announced his more expansive proposal to spur hiring by employers, which also includes nonprofits. As part of the President's job-creation plan, businesses and nonprofits would get a $5,000 payroll tax credit for every new employee they hire in 2010. In addition, if a nonprofit or for-profit organization increases the hours or wages of employees earning less than $106,800, the employer would also be reimbursed for the additional Social Security taxes incurred. The National Council expressed gratitude to the White House for recognizing the vital role nonprofits play as employers and engines of economic growth in communities across the country.

The House passed its version of a jobs creation bill last year, the Jobs for Main Street Act, which does not include incentives for hiring new workers.

Health Care Reform

In the month since Sen. Scott Brown (R-MA) was elected to fill the seat of Sen. Edward Kennedy, President Obama and Democratic leaders have struggled to come up with a strategy for completing action on health care reform. More on the political maneuvers and machinations below, but first the very good news about the bill the Senate passed on Christmas Eve.

Because you raised your voices to protest the injustice of government providing relief to for-profit businesses but excluding nonprofit employers, the Senate bill includes a provision that helps all small employers (defined as fewer than 25 employees and average wages below $50,000) provide insurance to their employees.

  • In Phase I (2011-2013), small nonprofit employers could take a credit (in the form of 25% of the employer contribution) and apply that credit to taxes withheld through payroll (and employees would still get full credit for taxes withheld from their pay).
  • In Phase II (2014-onward), the amount would increase to 35%.


The Senate bill treats for-profits and nonprofits differently in these respects: for-profits get a higher rate for the credit during both phases (35% in Phase I and 50% in Phase II), but nonprofits can claim the credit each pay period whereas for-profits must wait until year-end to claim the credit, and then, only if they are profitable. (This chart compares the House and Senate versions.)

But wait, there is more good news: President Obama's health care proposal released yesterday morning is based on the Senate bill that includes this relief for nonprofits. Since that package is reportedly the shared view of the President and congressional Democrats, this means the odds are in favor of keeping the relief in the final bill, assuming one can be signed into law.

This brings us back to the political process. On Thursday, February 25, President Obama is hosting a televised health care summit where Republican and Democratic leaders and congressional experts will talk through the issues and see if they can find common ground. The President is treating the event as the last clear chance for Republicans to help shape the final legislation. Absent significant changes, Democrats are reportedly planning to follow a complex procedural process whereby the House would approve the Senate-passed bill, and then the House and Senate would enact amendments to that bill as part of the budget reconciliation process where filibusters are not allowed and only 51 votes are needed.

Supreme Court Decision: Citizens United v Federal Election Commission

The U.S. Supreme Court's recent landmark decision in Citizens United v. Federal Election Commission (No. 08-205; decided January 21, 2010), concerning the application of certain election laws to corporations, does NOT change how other laws limit the election-related activities of charitable nonprofit organizations with tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. The National Council prepared a brief analysis to help charitable nonprofits understand important aspects of the Court's decision. Key tax laws still limit election activities by charitable nonprofits. Federal law declares that charitable nonprofits and foundations may not "participate in, or intervene in (including publishing or distributing statements), any political campaign on behalf of (or in opposition to) any candidate for political office" at the federal, state, and local levels. 26 U.S.C. § 501(c)(3). However, charitable nonprofits can get involved in elections in a variety of perfectly legitimate, legal, and important ways, as spelled out in our analysis.

Obama Announces Deficit Commission, Everything on the Table

President Obama signed an executive order on February 18 creating the National Commission on Fiscal Responsibility and Reform, which is charged with developing recommendations that would significantly reduce the deficit by 2015. The panel will have the authority to make recommendations dealing with any part of the tax and spending provisions that make up the federal budget, which could entail policies regarding tax-exemptions, giving incentives, and spending for programs in which nonprofit organizations participate. The bi-partisan commission will be made up of 18 members, including 12 sitting members of the House and Senate and six named by the President. Commission co-chairs are former Clinton White House chief of staff Erskine Bowles and former Senator Alan Simpson (R-WY). The recommendations by the commission for shrinking the deficit, which are to be submitted to Congress by December 1, must be supported by at least 14 commissioners. House and Senate Democratic leaders have pledged to bring the recommendations up for a vote this year.

Tax Trouble in Paradise

The news from Hawaii last week presented double trouble for nonprofits: a legislative committee began consideration of a bill sponsored by the Speaker of the House to abolish the exemption from the state's general excise tax, while the Honolulu City Council Budget Committee discussed raising the minimum property tax fee that all organizations pay, including nonprofits. The Hawai'i Alliance of Nonprofit Organizations has been active on both issues. To the City Council, Executive Director Lisa Maruyama wrote: "Nonprofits are tax-exempt because they provide a social good in education, health and human services, housing, support to the elderly and other critical services that government would otherwise have to furnish." Testifying before the House Finance Committee. Lisa explained, "Nonprofits are able to provide these services more cost-effectively than the state, but taxing them would add tremendously to their costs, resulting in a cutback to services." The National Council shares HANO's concerns and submitted a statement to the House Committee pointing out that the proposed bill would "only serve to further erode the social safety net at a time when it is stretched desperately thin and needed more than ever." In both cases the elected officials deferred their decision, but reconsideration remains possible.

Oregonians Vote to Increase Taxes

On January 26, Oregonian voters approved two ballot measures that will effectively solve the state's budget deficit. The first hikes taxes on the state's wealthiest residents by two percent (from 9% to 11%), while the second raises the state's minimum corporate income tax, which had not been increased since 1931. Originally passed by the Oregon Legislature, the increases were opposed by several anti-tax and business organizations. These organizations worked to force the measures to be approved by the voters. The voters of Oregon passed both ballot measures, which will bring in an estimated $727 million. The Oregon vote may lead other states to consider similar revenue-raising ballot measures to capitalize on populist anger at the federal bank bailout. DEMOS offers a quick analysis as well as quotes and letters from around Oregon.

State Budgets an 'Invitation to Disaster'

New York Times' columnist Bob Herbert recently outlined how state budget deficits are the worst since the Great Depression. Herbert warns that as a nation, "We're all but ignoring the fiscal train wreck that is coming from states with budget crises big enough to boggle the mind." At least 41 states have significant deficits in their current year budgets, according to the Center on Budget Policy and Priorities. For example:


Right On Message

When the Minneapolis City Council tried late last year to impose a "streetlight" fee on churches and other nonprofits in lieu of a tax, one local nonprofit leader spoke for all of us when he testified: "Nonprofits have tax exemption for a reason - they provide service to the community that lessens the burden on government. We are partners with government and the community. But as these additional fees and assessments get assigned, it comes out of our donated dollars and resources." Couldn't have said it better ourselves.

Valuable new resource from The Nonprofit Quarterly

The Nonprofit Quarterly has a new micro site: The State We're In, that examines the variables "in individual state economies that most impact the work of nonprofits and the health of the communities they serve." The site offers profiles of conditions on the ground in 14 states written by various nonprofit leaders. The unique perspective is a "must-read" resource for all nonprofit leaders.

Adding to Our Voice

We are pleased to announce the addition of three new members of the National Council's Team.

Note to Readers
Next month the National Council will unveil a new website along with a new policy newsletter. Watch this space!


The National Council of Nonprofits publishes Nonprofit Policy News as a service to the state associations and our members. The Nonprofit Policy News presents important information needed by all nonprofits. Therefore, we make it available to all who sign up for it, irrespective of membership in our network. We do, however, encourage all nonprofits to join their state association so the voices of nonprofits can be united at the national, state, and local levels.