Threat Renewed Against Nonprofit Nonpartisanship (the Johnson Amendment)
Congressional leaders are now negotiating whether to attach devastating language to the upcoming “must-pass” spending bill that would undermine the effectiveness and culture of every charitable nonprofit, house of worship, and foundation. A broad coalition of concerned Americans fought back efforts to politicize the charitable community last year, but the challenge is returning this month with a vengeance. As recently as last week at the National Religious Broadcasters convention, powerful politicians and well-funded special interest groups reiterated their goal of repealing the Johnson Amendment, the longstanding law that protects charitable, religious, and philanthropic organizations from demands from candidates for public office and their operatives for endorsements and other partisan activities. Their most likely approach: using the “must-pass” omnibus appropriations bill as the vehicle on which to attach an extraneous legislative rider that would politicize 501(c)(3) organizations.
Take these quick and easy actions now to encourage Congress to protect nonprofit nonpartisanship and preserve the Johnson Amendment.
Omnibus Spending Bill Evolving Behind Closed Doors
All eyes in Washington are watching whether Congress can enact legislation to keep the federal government open and funded through the current fiscal year before the latest temporary spending authority expires on March 23. Since conventional wisdom views this “must-pass” legislation as the last major bill that will be enacted before the mid-term elections, Representatives and Senators are expected to try to attach their pet policy proposals as “riders” to the bill, any one of which could cause the process to collapse once again. In February, Congress passed the Bipartisan Budget Act that, among other things, set spending levels for the current fiscal year that expires September 30. Appropriators have been
working busily to divvy up the additional money approved in that bill, while congressional leaders have been negotiating behind the scenes about which of the hundreds of proposed policy riders to include. Among these are a proposal to repeal or block enforcement of the Johnson Amendment that protects nonprofit nonpartisanship, numerous riders for and against gun control, competing ideas on how to shape immigration policies and protect Dreamers in the DACA program, efforts to block federal funds for the nonprofit Planned Parenthood, curbs on environmental protections, and numerous proposals to ease campaign finance rules. The bill could also include language to correct one or more drafting errors in the new tax law.
- Working Off of SNAP: The U.S. Department of Agriculture announced that it is looking for innovative ideas to promote work and self-sufficiency among able-bodied adults participating in the department’s Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. Current law limits able-bodied adults to only three months of eligibility in a 36-month period unless they satisfy work requirements or are exempt due to age, inability to work, or have young children. The federal law allows states to seek waivers of the time limit if unemployment is high or the area does
not have a sufficient number of jobs to provide employment. In the view of Agriculture Secretary Sonny Perdue, however, “Too many states have asked to waive work requirements, abdicating their responsibility to move participants to self-sufficiency.” Purdue is asking the public “to submit comments or ideas on helping able-bodied SNAP participants find work and become self-sufficient.” Public comments are due by April 9, 2018.
- Reforming the Federal Budget Process: In large part because it hasn’t properly followed the statutory budget and spending process in more than twenty years, Congress created a “Joint Select Committee on Budget and Appropriations Process Reform” as part of the Bipartisan Budget Act last month. The bipartisan, bicameral Joint Select Committee is made up of 16 members appointed by the House Speaker, the Senate Majority Leader, the House Democratic
Leader, and the Senate Democratic Leader. The Joint Select Committee has until November 30 to hold public hearings and report recommendations and legislative text on how best to improve the budget and appropriations processes and ensure that Congress follows regular order to fulfill its constitutional duty of funding the federal government.
- Withholding Calculator Released: The Internal Revenue Service released a new income tax withholding calculator to help employees assess their tax withholdings for 2018. For employees who need to change their withholdings, the IRS also released a new Form W-4. Nonprofits are encouraged to share these resources with their employees so they can make necessary adjustments to the amount of taxes withheld from their paychecks under the new
federal tax law. The IRS also published a new set of frequently asked questions on tax withholding.
- Reforming Regulations with Nonprofit Input – Updated Schedule: The U.S. Small Business Administration’s Office of Advocacy is hosting Regional Regulatory Reform Roundtables across the country in an effort to hear directly from small businesses, including charitable nonprofits, about what regulations concern them the most. The Advocacy Office is working to compile information for its forthcoming report on existing small business regulatory burdens, identifying specific recommendations for regulatory changes based upon first-hand accounts from smaller organizations across the country. The next roundtables will be held in Detroit, MI on March 13, Houston, TX on March 19, and San Antonio, TX on March 20.
Understanding Charity Care
Hospitals and health centers are grappling with “charity care,” the care provided for free or reduced prices to low income patients, under federal and state laws. The federal Affordable Care Act mandates that nonprofit hospitals assess the healthcare needs of their communities at least every three years and adopt strategies to address any identified needs. Last month, two senior Republican Senators wrote the IRS, the government entity charged with monitoring the charity-care provision of the ACA, asking whether nonprofit hospitals are complying with rules and benefiting their communities.
Senators Hatch (R-UT) and Grassley (R-IA) expressed concerns over “allegations of nonprofit hospitals cherry-picking patients and disregarding many others on the basis that they were low-income patients.” They requested extensive information about how the IRS defines charity care, its process for evaluating hospital compliance with the ACA transparency requirements, and additional information about several pending and closed investigations.
Hospital charity care is also a hot topic at the state level. The Pennsylvania Department of Human Services published a Bulletin to remind hospitals of the charity care program and “reinforce the responsibility of hospitals to actively engage patients when determining eligibility….” It also provided a five-step procedure that requires hospitals to annually attest to compliance, post adequate notice of the charity care policy, and provide patients with information regarding charity care, among other things. Lawmakers in Oregon recently attempted to streamline their state’s charity care services by providing a common form describing how to qualify for the care. In California, four hospitals are asking to reduce how much charity care they must provide due to a decrease in the number of uninsured patients under the Affordable Care Act. The federal ACA doesn’t define how much free or reduced-cost care is required, leaving it up to the states to decide.
New Jersey Enters SALT Workaround Fray
Legislators in New Jersey have introduced the most robust bill yet to avoid the consequences of the new federal tax law’s $10,000 cap on how much individuals can deduct for state and local taxes (SALT) paid. While some states have been looking to California’s approach of creating state “excellence funds,” the Garden State is considering authorizing municipalities, counties, and school
districts, via ordinance or resolution, to create one or more charitable funds “for specific public purposes,” which must be “materially narrower” than the local unit’s general purpose. Anyone may donate to the charitable fund and receive a tax credit against property tax liability, if the donation is made to an entity where the property is based and the property is properly designated. The bill has passed the Senate and has strong leadership support. For more information, view Analysis and Committee Statement from the Center for Non-Profits in New Jersey.
Lawmakers in at least eight states are considering, or have considered, legislation to allow taxpayers to make charitable donations to government “charities” and treat the payments as charitable deductions under the new federal tax law. But no one knows yet whether the Internal Revenue Service will recognize the workaround payments as charitable. To resolve this question, Representative John Faso (R-NY) is asking the U.S. Treasury Department’s Office of Tax Policy to determine whether state workarounds of the federal cap on SALT deductions, if passed and implemented, would be legal.
Faso, who voted against the Tax Cuts and Jobs Act reportedly because of the SALT issue, is asking for an opinion letter on whether “such payments or contributions meet the test for a charitable deduction” and whether the “IRS has begun evaluating the validity of these and similar proposals.” The other states contemplating SALT workarounds are Connecticut, Illinois, Nebraska, New York, Virginia, and Washington State.
Vermont Charitable Giving Incentive at Risk
As predicted, state governments are opening their tax codes to accommodate for, adjust to, and attempt to overcome the federal tax law. And as always, an open state tax code can be a very dangerous thing for charitable nonprofits. Consider the current state of play in Vermont. There, the Governor is calling for elimination of the state itemized deduction for charitable giving and replacing it with a five-percent tax credit. The House passed the Governor’s package of tax reforms
last week after adding a cap on the tax credit at donations of $10,000 (for a maximum $500 credit). Under current state law, an upper-income taxpayer who donates $100,000 can reduce state tax liabilities by $9,400 (9.4% tax bracket); under the proposal, the tax savings for that same $100,000 donation would be capped at $500. The switch on charitable giving policy comes as part of a state tax reform effort that lowers rates and makes other changes to conform to the federal tax law.
States Work to Adjust Taxes to New Federal Tax Law
In an effort to fill state budget deficits and anticipate revenue changes, governors and legislators are pushing state tax reform and other spending and revenue measures. Adjusting to the interplay of federal and state tax laws, some states (Georgia, Idaho, Iowa, and Nebraska) are looking to reduce income tax rates while other states are looking to adjust estate tax exemptions (Connecticut and Georgia) and personal exemptions (Michigan). Additionally, the bills in Georgia and Nebraska would increase the standard
deduction, and the Iowa legislation would eliminate the alternative minimum tax and amend the sales and use tax for sales to certain nonprofits, which legislative leaders claim would provide $1 billion in tax relief.
Taxes, Fees, PILOTs Update
Maine Governor Continues Assault, Misinformation on Nonprofits
In his last State of the State address, Maine Governor LaPage continued his seven-year attack on nonprofits. Directly targeting charitable nonprofits exempt from property taxation under state law, LePage alleged that nonprofits are the “real culprit” for rising property taxes. In a call to reduce those property taxes, the Governor boasted he “proposed allowing municipalities to collect property taxes or fees from large [nonprofit] entities,” while
lamenting he had “been met with staunch resistance.” To back up his allegations, Governor LaPage presented a memo to the Legislature stating that “property tax exemptions within municipalities total more than $18 billion – shifting over $330 million property taxes to local homeowners.” The Maine Association of Nonprofits quickly pointed out that the Governor’s memo “provides misleading data and conclusions” by including in his calculation $11.8 billion
worth of property owned by federal, state, and local governments which are unlikely to pay property taxes. Jennifer Burns Gray of the Maine Association of Nonprofits stated the views of many when she said, “Taxing nonprofits takes money away from programs and services that make our communities more desirable places to live, work, and raise a family.”
Partisan Speech is Partisan Speech. Period
The Office of the Texas Attorney General is demanding that local school districts stop engaging in partisan electioneering and supporting political candidates for office. In letters sent last month, the Attorney General’s office alleges that the Brazosport, Holliday and Lewisville districts are violating state law by using taxpayer money to distribute messages advocating for specific candidates and policies to their staffs. Citing various communications in which paid staff of the school districts appear to endorse candidates for public office, the letters warn, “Like all state authorities, school districts ‘may not use state or local funds or other resources to electioneer for or against any candidate, measure, or political party.’” Citing state law, the letters emphasize that school district employees “’may not knowingly authorize the
spending of public funds for political advertising,’” which includes “a communication supporting or opposing a candidate for nomination or election to a public office or office of a political party, a political party, a public officer, or a measure that appears on an Internet website, among other things.”
The targeting on partisan speech is noteworthy because the Texas state law at issue is remarkably similar to the language in federal tax law, known as the Johnson Amendment, that also prohibits endorsements of and opposition to candidates for public office by charitable nonprofits. Both the Texas statute and the Johnson Amendment prevent certain organizations from engaging in partisan politicking for or against candidates. Yet, last year, the Texas Attorney General joined with the state’s Governor in sending a letter to Republican congressional leaders expressing strong support for legislation that would significantly weaken the Johnson Amendment.
Building Relationships Through Nonprofit Days at the Capitols
An experienced lobbyist once advised: “You never want to have to ask a stranger for a favor; so get on up to the State House and meet some new friends before you need something.” That excellent, proactive advice explains the thinking, and benefits, of Nonprofit Days at State Capitols hosted by state associations of nonprofits across the country. While each event reflects the State House culture and experiences of nonprofits, the common denominator is the same – create opportunities for officials of charitable nonprofits to introduce their organizations to policymakers and make sure the value and impact of nonprofits are fully appreciated by the elected officials who make decisions affecting the
nonprofits’ work, support, and sustainability.
Here are just a few examples of state associations helping nonprofits put advocacy in action.
The Maine Association of Nonprofits recently celebrated its 15th annual Nonprofit Day at the State Capitol, a collective day of action to raise awareness for how #NonprofitsWorkforME. The state association gathers charitable organizations from many missions and parts of the state to increase policymaker awareness of
nonprofits and their vital contributions to Maine’s economy and way of life, strengthen relationships between nonprofit leaders and public officials, and prepare to participate fully in the formation of public policy that impacts the communities they serve. A unique feature of the Maine Nonprofit Day is the opportunity it provides for a wide range of nonprofits to set up tables to present their missions and impact to legislators. This year many legislators – Republicans, Democrats, Independents, and Unenrolled – stopped by the displays to say hello and learn about Maine’s vital nonprofit sector.
At the beginning of February, a month into the legislative session and before the Governor’s budget was released, Kentucky Nonprofit Network (KNN) hosted its annual Kentucky Nonprofit Day at the Capitol. Its declared purpose: “to create visibility for the sector and help nonprofits connect with policymakers.” KNN structures the annual event to give
nonprofits the opportunity to learn from and educate state government officials and network with nonprofits from across the Commonwealth. Activities included a legislative breakfast/lunch, rally and awards program in the Rotunda, committee meetings, gallery passes for the House and Senate, and more.
The messaging for the Utah Nonprofits Association (UNA) annual event couldn’t be more direct and inviting: the “Nonprofit Day on the Hill is Your Chance to Share your Mission. It Starts with a Conversation …” Participants were encouraged to “begin building relationships with legislators and join with other nonprofits to
advocate for our sector.” And not willing to treat the day of advocacy as an one-off event for nonprofit professionals, UNA followed it up with the launch of its Advocacy and Civic Engagement course, designed to guide participants in the development of best practices for organizations and to guide individuals in “becoming a forceful advocate” for their missions.
Toward the end of February, the Minnesota Council of Nonprofits (MCN) held its 2018 Session Line-Up meeting at which nonprofits heard directly from leaders of the legislative caucuses as they shared their priorities for the legislative session, identified issues that they think will dominate the debate, and gave their ideas on how nonprofits can be a
resource to decision makers and their staff. Key to the planning of the event was the opportunity for frontline nonprofits to get their questions on the legislative table at the beginning of session. MCN came through on its promise of the event as “a time for us to build connections, show up and use advocacy as a powerful catalyst for change.” As in previous years, MCN lined up as speakers the Governor and the House and Senate Majority and Minority Leaders.
At the end of February, Washington Nonprofits hosted its 5th Annual Nonprofit Legislative Reception at the Governor’s Mansion. The event was conducted in partnership with Philanthropy Northwest, the Washington State Community Action Partnership, and the United Ways of the Pacific Northwest, a combination that reinforces the message to government officials that the
nonprofit sector is a collaborating community and trusted partner with government. Governor Inslee and Mrs. Inslee both mingled with nonprofit attendees and shared appreciation for the work of nonprofits in the state.
And finally, this past week the CT Community Nonprofit Alliance hosted its first of two week-long Nonprofit Alliance Weeks at the Capitol 2018. This longstanding event takes advantage of the layout of the Capitol campus that enables nonprofits to set up tables or booths in the primary corridor between
the legislators’ offices and the legislative chambers. Over the course of the week, dozens of nonprofits are given the opportunity to have a presence on the Capitol grounds for a day. Most importantly, lawmakers know it is Politics 101 to stop to chat with and learn from their constituent nonprofits.
In each of these gatherings, the stories told, data shared, and relationships developed lay the groundwork for future advocacy, enabling the participating nonprofit professionals to talk with friends in government, rather than ask favors from strangers.
Read more examples of Advocacy in Action, a regular feature of Nonprofit Advocacy Matters.