Opposing a Citizenship Question in the 2020 Census
The board of the National Council of Nonprofits added this statement to the Public Policy Agenda last week: "The National Council of Nonprofits opposes inclusion of a citizenship question on the 2020 Census questionnaire because of the likelihood that, among other things, it will suppress participation and lead to an unfair, inaccurate, and incomplete count."
The board acted in response to the U.S. Department of Commerce’s recent announcement that it plans to insert a question about citizenship status into the 2020 Census – something that has not been asked since 1950. The U.S. Constitution requires that every “person” in the United States be counted, not just citizens. The concern by many – including 17 states, the District of Columbia, the U.S. Conference of Mayors, and six cities participating in one lawsuit, plus California, the NAACP, and others in additional lawsuits – is that a citizenship question will lead to an undercount by provoking fear and mistrust in communities with immigrants and other people of color. Having a fair, accurate, and complete count is highlighted twice in the Public Policy Agenda because undercounts “can lead to inadequate representation and funding, which in turn put more pressure on nonprofits and foundations, state and local governments, and businesses in undercounted areas to do even more to address unmet needs.”
The National Council of Nonprofits invites other nonprofits to adopt this new statement. Please feel free to adopt or adapt all or parts of our Public Policy Agenda, which provides integrated positions on local, state, and federal issues of concern to all 501(c)(3) organizations.
Backpedaling on Spending?
To cut domestic spending, some of the more fiscally conservative House Republicans have been exploring ways to re-open the omnibus spending bill that the president signed into law only weeks ago. Those voices grew louder after the Congressional Budget Office issued a report estimating that, because of the huge tax cuts enacted in December and the increased defense and domestic spending authorized by the bipartisan budget approved in February and appropriated by the omnibus spending bill enacted in late March, the federal deficit will exceed $1 trillion by 2020.
One method being discussed to claw back funds is invoking a seldom-used provision of the Congressional Budget and Impoundment Control Act of 1974 that allows appropriated funds to be impounded. It would require the president to propose and then Congress to pass a bill rescinding appropriations the White House does not want to spend. Few believe it has much chance, and some speculate that House Majority Leader Kevin McCarthy (R-CA) is exploring the rescission option publicly to shore up his support from House conservatives and President Trump in the race to be the next Speaker of the House to replace Speaker Paul Ryan (R-WI), who announced last week that he plans to retire at the end of his term.
Mandatory e-Filing, and More
Last week, the House tax committee favorably reported a dozen bipartisan bills to restructure the Internal Revenue Service and improve the IRS's interactions with taxpayers. Two bills are of particular importance for tax-exempt nonprofits:
H.R. 5443, Mandatory Electronic Filing (e-filing) of the Tax Returns of Tax-Exempt Organizations.
The National Council of Nonprofits submitted comments in support of the bill’s language, which includes a two-year hardship delay for smaller organizations to comply. Our statement explains that mandatory electronic filing of Form 990s and other forms will likely improve accuracy and timeliness, thereby protecting public trust in the integrity of charitable nonprofits. The related provision directing the U.S. Treasury to make that information available to the public in machine readable format will promote transparency, which is essential for continuing trust.
In addition to supporting mandatory e-filing, our formal comments alerted Congress to the serious problems caused by the IRS’s truncated Form 1023-EZ and its negligent screening process that have proven to be ineffective, with the IRS granting tax-exempt status to ineligible organizations and perhaps bad actors that seek to exploit improper tax-exempt status for personal gain. Former Presidents of the National Association of State Charity Officials also submitted comments expressing concerns about Form 1023-EZ.
H.R. 2901, Volunteer Income Tax Assistance Permanence Act of 2017. This bill authorizes and makes permanent the low-income tax preparation program in which many local United Ways and other nonprofits participate, thus removing any doubt about the program’s viability.
- Work Requirements Executive Order: President Trump signed an Executive Order last week directing federal agencies to enforce or add work requirements for public assistance programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. Agencies must submit recommendations within 90 days. Ten states have or are seeking approval for work requirements under Medicaid waivers.
- Supreme Court Loosens Interpretation of FLSA Overtime Rules: The U.S. Supreme Court issued an opinion earlier this month holding that the Fair Labor Standards Act (FLSA) exemptions from overtime would no longer be "narrowly construed" against employers seeking to classify employees as exempt from overtime. The FLSA requires most employers to pay workers one-and-a-half times their usual rate of pay when they work more than 40 hours in a week unless they are "exempt" from the overtime requirement. The FLSA exempts employees who are paid on a salary basis at not less than $455 per week ($23,660 per year), and meet the duties test as an executive, administrative, or professional employee. Early analysis of the Supreme Court case suggests that nonprofit employers may have more flexibility in classifying workers as exempt, but should confer with professional advisors.
- Federal District Court Dismisses Telemarketing Lawsuit Against Nonprofits: To protect people from unwanted telemarketing, the federal Telephone Consumer Protection Act (TCPA) prohibits placing automated telephone calls to cellular telephones without the “prior express consent” of the recipient. A person who voluntarily enrolled in the American Heart Association’s texting program to receive health reminders, such as CPR information, later sued AHA, another nonprofit, and a corporation alleging that she received unwanted texts that she viewed as a disguise to sell advertising space to corporate branding partners. The federal judge dismissed the lawsuit. An appeal has been filed.
SALT Deduction Cap Reaches Further Than Expected
Data from 2015 indicate that the new federal tax law imposing a $10,000 cap on the amount that individuals can deduct for the state and local taxes (SALT) they paid will affect more than just the states implementing or considering SALT workaround legislation. Filers in 19 states and DC averaged deductions more than the cap will allow this year. The new data show that filers in states that do not have a high deduction average may be affected more by the cap than filers in states that do have a high deduction average.
Attempting to enable their residents to circumvent this new $10,000 limitation, lawmakers in eight states (California, Connecticut, Illinois, Nebraska, New Jersey, New York, Virginia, and Washington State) are considering, or have considered, variations of this state legislative “workaround” – their residents could pay amounts equal or close to equal to their state and local taxes to designated government-run charitable funds, thereby enabling state taxpayers to deduct all or most of these contributions as “charitable donations” on their federal tax returns. It remains an open question whether such workarounds will be deemed lawful by the IRS. To date, New York is the only state to have enacted a new law to implement a workaround, creating two new state-operated Charitable Contribution Funds, one for health care and the other for education.
Charitable Giving Incentives
Legislation pending in several states would allow taxpayers to claim a new or expanded tax benefit for their charitable contributions:
- California: A bill revised last week would allow individual taxpayers to claim a “California Universal Charitable Credit” against their personal income tax liability for the amount donated to a qualified charitable organization, up to $500 for individuals and $1000 for couples. Qualified charities would be limited to 501(c)(3) organizations incorporated in California, and the Franchise Tax Board would post a list of certified charitable organizations on its website.
- Colorado: Currently, non-itemizers can claim deductions for contributions above $500. The non-itemizer deduction bill would remove the $500 floor.
- Minnesota: Legislation would expand the ability of taxpayers to utilize the state's non-itemizer deduction law by removing the current $500 floor and 50 percent limit for claiming a deduction on charitable giving.
- New Jersey: A new bill, S2302, recognizing that “New Jersey is one of only a handful of states that tax personal income, but do not provide charitable contribution deductions,” would allow taxpayers to take a deduction equal to the amount of their charitable contributions.
On/Off Switch Flipped Repeatedly on State’s Tax Overhaul and 2019 Budget, Ending On
After Kentucky Governor Bevin vetoed the state budget and revenue bills last week, Kentucky’s General Assembly voted by wide margins on Friday to override his actions and thus enact those bills. The new budget law maintains a 6.25 percent cut to most state agencies, yet provides increased funding for education and programs for children, health, behavioral health, disabilities, and aging. The new revenue law, introduced to respond to federal tax reform, overhauls the state tax system by switching to a flat 5 percent tax rate for personal and corporate income taxes, a change from the current brackets ranging from 2-6 percent and 4-6 percent respectively. The new law also expands sales tax to services and labor, plus eliminates all itemized deductions except for social security income, mortgage income, and, most importantly, charitable giving. Time will tell who was correct: the legislative branch, which projects that the bill will generate an estimated $487 million or the executive branch, which warns it could result in a $50 million shortfall.
Foundations in Crosshairs for State Oversight
Wisconsin lawmakers are calling for stricter accountability and transparency of public and private foundations after a foundation affiliated with the University of Wisconsin – Oshkosh filed for Chapter 11 bankruptcy. The UW-Oshkosh Foundation fell into financial problems after five development deals resulted in $14.5 million in debt, and the University of Wisconsin System refused to fill the financial hole. The Legislative Audit Bureau has recommended more accountability and oversight of “similar, private nonprofit foundations associated with UW campuses,” including requiring university chancellors to file annual financial statements and independent reviews of foundation reports.
Government-Nonprofit Contracting Reform
Maryland Passes Law Mirroring the Federal Uniform Guidance Requirement to Pay Indirect Costs
Maryland nonprofits are eagerly awaiting the Governor’s signature on a bill that unanimously passed the General Assembly. Maryland Nonprofits worked closely with the bill’s sponsor to ensure passage of SB 1045, which requires state agencies to reimburse nonprofits for indirect costs the incur when performing work under grants/contracts paid with state funds or a combination of state and other nonfederal funds. Like the federal OMB Uniform Guidance requires for federal grants, the new Maryland law will require state agencies to pay a nonprofit’s federally approved indirect cost rate, if one exists. If not, then a nonprofit with an indirect cost rate established with a nonfederal entity using the federal cost principles can use this rate for reimbursements. Nonprofits that have not negotiated a rate based on the federal cost principles will be paid at least 10 percent of modified total direct costs in accordance with the Uniform Guidance. This bill ensures that nonprofits are reimbursed for services closer to their actual costs. Plus, by aligning with the Uniform Guidance, it streamlines and simplifies the process for state agencies to reimburse nonprofits for indirect costs by creating a single standardized set of rules.
Show and Tell
Charitable giving incentives are vital to the work of nonprofits, which is why efforts are underway in several states to protect – and expand – tax provisions that encourage people to give more to nonprofit work. The Minnesota Council of Nonprofits (MCN) is among many state associations leading the charge in advocacy to strengthen charitable giving incentives in their state, having recently led a sign-on letter encouraging legislators to remove a floor and a cap on the current incentive (see story above).
While petitions and sign-on letters seem almost ubiquitous these days, many people never have an opportunity to see what happens to a letter after they sign it. MCN posted a video of their public policy team, Rebecca Lucero and Taylor Putz, arriving at the state Capitol to deliver the letter to legislators. Bravo to MCN for not just telling signatories that the letter would be delivered to the Capitol, but also showing them that delivery was made. The video and tweet provided a way for MCN to directly thank signers and invite more signers to join while engaging viewers on how easy and fun advocacy can be.