The Taking and Giving of Federal Appropriations
As Congress is getting down to work on spending bills for fiscal year 2019 that starts in October, the Administration is calling on lawmakers to vote on rescinding (taking back) $15 billion in appropriations from prior fiscal years. The House is expected this week to take up the President’s so-called rescission package that, among other things, would cancel $7 billion in unspent Children's Health Insurance Program balances, as well as programs in the Departments of Agriculture, Commerce, Energy, HHS, HUD, Justice, Labor, Transportation, and Treasury. Under law, the President notifies Congress of his intent to not spend
certain funds and Congress has 45 days to approve the action. While successful rescission of the proposed $15.3 billion is in doubt, many believe the bill before the House this week is only the first of many rescissions measures that Congress will be asked to approve in the months leading up to the elections.
The proposal to cancel past appropriations comes at a time of renewed hope that Congress will get much of its appropriations work done in advance of the next fiscal year that starts on October 1. For the past many years, Congress has had to rely on stopgap spending bills at the end of September, known as continuing resolutions, to keep some or all of the federal government open. Senate Budget Committee Chairman Mike Enzi (R-WY) got the Senate off to a good start last month by forgoing a formal budget process and instead filing the topline spending numbers that allow appropriators to begin work immediately. The House
typically works quickly to approve each of the dozen appropriations bills at the subcommittee and full committee levels, but there rarely is the bipartisan give-and-take that Senators are promising in advance of floor action this year.
Not seen in a generation, Senators are seeking to follow “regular order,” the procedure for appropriations and other legislation that used to be the norm. Last summer, Senator John McCain (R-AZ) famously lamented the absence of regular order, saying that as a result, "We've been spinning our wheels on too many important issues because we keep trying to find a way to win without help from across the aisle." In its purest form, regular order means each of the 12 appropriations subcommittees crafts a spending bill based on agreed-upon spending levels, approves the measure, and sends it to the full
committee for debate and votes. This approach enables the subcommittees with the expertise in their areas to make spending decisions based on the priorities of the majority, but also with input from all members of each subcommittee. Often in the past, subcommittee bills passed with wide support, as opposed to party-line votes. A perfect example of the breakdown of “regular order” was seen in March when Congress enacted the Consolidated Appropriations Act for 2018 (bipartisan spending bill) that in one 2,232-page piece of legislation cobbled together by congressional leaders with little committee input to fund all federal
departments and agencies. Regular order, when followed, allows Congress to break the budget into bite-sized pieces and facilitates oversight, according to the Brookings Institute. It may be too much to ask that lawmakers ignore the looming elections and focus on their jobs and procedures developed over 200+ years. Recently, seeing regular order in action has been as rare as seeing a
unicorn, but one can still hope.
Congressional Census Scrutiny Stifled, at First
A House hearing to get a Progress Report on the 2020 Census last week produced headlines mainly for what didn’t happen. Much to the outrage of Republicans and Democrats alike, the Justice Department witness failed to show up to explain why the Administration is including a citizenship question on the 2020 Census questionnaire. Committee Chairman Trey Gowdy (R-SC), visibly angry that DOJ failed to appear, agreed to issue a subpoena to compel testimony, scheduling a hearing for the one witness for Friday May 18. While the witnesses who did appear spoke mostly to the Census Bureau’s efforts and
shortcomings in preparing for the 2020 Census, including serious questions about failures to test adequately and cyber security, the citizenship question remained at the center of the participants’ attention. Witness Justin Levitt from Loyola Law School in Los Angeles testified, “The addition is counterproductive and potentially pretextual — and in the current political climate, likely explosive.” The National Council of Nonprofits submitted a statement identifying the many reasons that charitable nonprofits and
foundations care that the census count is fair, accurate, and complete, emphasizing how a flawed count will harm all businesses, governments, nonprofits, and residents, and expressing strong opposition to the inclusion of a divisive citizenship question.
Uncapped Charitable Deduction Bill Introduced
A bipartisan bill to expand charitable giving incentives was introduced last week by Representatives Chris Smith (R-NJ) and Henry Cuellar (D-TX). If enacted, the Charitable Giving Tax Deduction Act (H.R. 5771) would enable all taxpayers to deduct charitable donations from their taxes, regardless of whether they itemize. The amount a taxpayer could deduct would not be capped, unlike similar universal, also known as non-itemizer, deduction bills introduced by Representative Walker (R-NC) and Senator Lankford (R-OK) last year.
In introducing the legislation, Representative Smith said, “Americans have been generous patrons of charitable causes, and we want to ensure that everyone has the support they need to continue their generosity to charitable and philanthropic causes.” Representative Cuellar added, “This bipartisan bill not only encourages us to help our fellow neighbors, but it also makes sure that taxpayers can receive their due deduction for charitable giving if they choose not to itemize. I am glad to support this legislation that will encourage charitable actions.”
- Tax Reform Hearings Announced: The House Ways and Means Committee and Tax Policy Subcommittee are conducting a series of hearings on the new federal tax law to discuss “how tax reform is growing the U.S. economy, creating jobs here at home, and increasing paychecks for hard-working Americans.” The full committee kicks off the series on Wednesday, May 16, at 10 am. Individuals and organizations are invited to submit written testimony by May 30 to the Committee as it considers additional tax-law changes this session.
- Reimbursement Rate Increase for Volunteers: U.S. Representative Rick Nolan (D-MN) introduced legislation to increase volunteer mileage rate from 14 cents to 54.5 cents per mile to bring parity with business rates. Nolan stated that “many volunteer drivers are simply unable to continue their charitable and much needed work” because of the inequality and unfairness that “discourages charity” and “doesn’t nearly reflect the true cost volunteers incur.”
- Combined Federal Campaign Survey: The Combined Federal Campaign (CFC), the largest workplace campaign for charitable donations by federal workers, saw a drastic decline in giving and large fee increases, according to reports for 2017. Total giving dropped by 40 percent to $101 million, and some nonprofits are reporting that the distribution fees exceeded 25 percent of the total raised, with some expenses deferred to 2018 and 2019 to be deducted from future donations. If your organization participates in the CFC, United Way Worldwide asks you to fill out a 5-minute survey to help determine costs and benefits of the program to charitable organizations.
- Nonprofit Search Tool Upgraded: The Internal Revenue Service has posted a new tool on its website intended to provide easier and more complete access to publicly available information about exempt organizations. The Tax Exempt Organization Search, which replaces EO Select Check, makes images of newly-filed Form 990s available and allows users to search multiple data files for information in one inquiry. See the IRS announcement (IR-2018-116) and frequently asked questions.
States Respond to Federal Tax Reform Revenue Windfalls
The new federal tax law has created certain windfalls for many states due to the repeal of personal exemptions and other changes that are leading to state taxation of higher levels of adjusted gross income, resulting in increased state tax revenues. In the short term, state and local governments saw tax revenues spike abnormally, by 9.4 percent and 8.9 percent, respectively, in the fourth quarter of 2017. According to two new reports, both increases resulted largely from taxpayers rushing before year end to take advantage of the deductions then-available for state and local taxes (SALT) and mortgage-interest that are now capped
under the new federal tax law.
The new federal tax law resulted in increased state taxes because most states use federal definitions of income, creating increased state taxes and leading some states to consider reopening their tax codes for changes. Some states have cut state taxes to avoid higher tax bills on residents. Six states (Georgia, Idaho, Kentucky, Michigan, Minnesota, and Nebraska) passed laws cutting income tax rates, among other provisions. Citing ongoing economic recovery after the failed tax experiment from a few years ago, however, lawmakers in Kansas rejected a bill at the end of session that would have provided an estimated $80 million cut to taxpayers. Iowa
Governor Reynolds has indicated support of a tax overhaul to provide $2.16 billion in tax relief over six years by reducing marginal tax rates, collapsing tax brackets, repealing federal deductibility, and decoupling state law from the new federal $10,000 SALT deduction cap. North Carolina is set to begin its legislative session and face an estimated $600 million surplus to distribute over the biennium. Rather than tax cuts, state employees, teachers, and retirees may be the beneficiaries of the windfall.
States Work to Limit the UBIT Damage
Some states are looking to decouple aspects of state tax law from the federal tax code in order to protect nonprofits from adverse effects of the unrelated business income taxes (UBIT) under the new federal tax law. Section 512(a)(6) of the federal law directs nonprofits “with more than 1 unrelated trade or business” to compute unrelated business income separately, but the Treasury Department and IRS to date have failed to provide clarification on how to determinate what constitutes a trade or business. A bill in final negotiations in the Minnesota Legislature would retain the prior law for state UBIT purposes and relieve nonprofits of having to calculate profits and losses in individual trades or businesses. New federal Section 512(a)(7) requires nonprofits that provide transportation and parking benefits to employees to pay a 21 percent income tax on these expenses. In response, the North Carolina Center for Nonprofits is asking lawmakers to not automatically follow the new law and instead relieve nonprofits of a state three-percent UBI tax on transportation
New York Considers Strong Nonpartisanship Protections
In what could become a model for other states, bipartisan legislation in New York would apply the federal law protecting nonprofit nonpartisanship (the Johnson Amendment) to all New York charitable and philanthropic organizations. Specifically, the House and Senate bills would amend the New York not-for-profit corporation law to provide that a covered corporation shall not participate in, or intervene in, any political campaign on behalf of or in opposition to any candidate for public office. According to Doug Sauer, CEO of the New
York Council of Nonprofits, “If passed, our state would be the first in the nation to take action to protect the nonprofit community from efforts by the Trump administration and Congress to erode the protections nonprofits enjoy as non-partisan organizations.”
New Jersey Second State to Adopt SALT Workaround
The New Jersey version of the state and local tax (SALT) deduction workaround approach was signed into law on May 4, making it the second state (behind New York) to circumvent a $10,000 cap on state and local tax deductions under the new federal tax law. The New Jersey version authorizes localities to establish charitable funds for specific public purposes. It permits anyone to donate to the charitable fund (either by or on behalf of a local property owner) and receive a 90 percent tax credit (or whatever lower percentage the local government
determines) to be applied against the property tax bill of the parcel(s) indicated. There must be an annual donation cap and the plan must set an annual limit on tax-credit funding equal to 90 percent of the annual donation cap. For more information read the Governor’s news release, as well as the Analysis and Committee Statement of the Center for Non-Profits. The IRS has yet to determine whether it will treat these workaround plans as permissible under the federal tax code. Proposed workaround legislation in five other states have failed, and measures in California remain active.
States Act to Secure Complete Census Count
Although the U.S. Constitution places responsibility for a fair, accurate, and complete census count squarely on Congress, several states are taking it upon themselves to step up to the challenge of making sure every person in their states is counted. Maryland has created a Census Grant Program to provide matching funds next year for census promotion and outreach activities by nonprofits and local governments. Georgia, Minnesota, and Oregon have likewise provided funding to support census activities in their states. A Utah House resolution urges Congress to properly fund the 2020 Census, expressing “concern that rural and marginalized communities are at risk of being undercounted." Worried that the controversial citizenship question could stifle participation and reduce accuracy, the Illinois House recently approved a resolution requesting that the US Census Bureau not reinstate the citizenship question to the 2020 Census. Further, governors in several states, including California, Kentucky and Mississippi, are following the advice of the National Conference of State Legislatures and creating state-level complete count
committees or commissions to encourage individuals, communities, civic organizations, faith-based groups, and the media to support the census and promptly complete the census on time.
Taxes, Fees, and PILOTs
- PILOTs: A local coalition in Philadelphia is opposing a proposal to raise revenues via property tax increases and instead is calling for payments in lieu of taxation (PILOTs) from nonprofits to fund the school system and education expenses. The coalition claims the proposal would raise $250 million annually, compared to the mayor’s proposed $800 million tax hike over five years, by imposing PILOTs on large tax-exempt institutions, namely universities and hospitals, and ending a 10-year real estate tax abatement on new construction.
- Property Taxes: The Connecticut General Assembly provided a last minute temporary fix for nonprofits in Norwich facing property tax exemption revocations by the local tax assessor. The bill approves a 30-day extension for nonprofits that had received tax exemption in 2017, but failed to file timely statements. The law orders the assessor to approve the exemptions after $30 in late fees are paid and verification of
exemption eligibility is determined. The CT Community Nonprofit Alliance, the state association of nonprofits, and the Community Foundation of Eastern Connecticut are co-sponsoring a public forum on May 21 at 5:30 to explain state laws and tax-exempt practices by localities.
Celebrating and Supporting Older Americans
Commemorative days can be so ubiquitous, and sometimes silly, that the public often fails to take notice. May began with World Laughter Day (May 1), followed by Star Wars Day (May the Fourth be with you), and includes Geek Pride Day (May 25). The month of May also includes more weighty recognitions, including World Red Cross Day (May 8), Mother’s Day (May 13), and, of course, Memorial Day (last Monday in May). So what do any of these days have to do with a column dedicated to Advocacy in Action? Quite a lot when viewed across the whole month.
May marks Older Americans Month, when we celebrate the many ways in which older adults make a positive impact on our communities. The theme this year is Engage at Every Age, which emphasizes that you are never too old (or
young) to take part in activities that can enrich your physical, mental, and emotional well-being -- including using experiences and knowledge to advocate for nonprofit missions!
National, state, and local organizations across the country organize activities as part of the national celebration that began in 1963 as Senior Citizens Month. The National Indian Council on Aging (NICOA) will use Older Americans Month 2018 to focus on how older adults are engaging with friends and family, and through various community activities. The San Diego County Library celebrates Older Americans Month in May with a
variety of special programs, including practical self-defense, history classes, and Medicare Q & A. The YMCA of Western Monmouth County, New Jersey, offers tips during the month to encourage older adults to live healthier lives.
The month is the ideal time to release relevant data. For instance, the month-long commemoration is supported by the U.S. Administration on Aging, which is part of the Administration for Community Living. It just released its annual 2017 Profile of Older Americans, reporting that one in seven Americans is 65 or older and in two years will number more than 56 million people. It also provides tip sheets on wellness and volunteering.
The month is also a time for advocacy. Ellie Hollander of Meals on Wheels America wrote, “Let's truly honor Older Americans in May by restoring and protecting federal funding for programs that provide them with the nutrition they need to keep them healthy.”
Leading Age is using the month to focus on a different issue area each week. In the first week of the month, the organization – which is dedicated to freeing America of ageism – engaged in social media and other activities to raise awareness about its grassroots advocacy for older individuals. Other weeks will prioritize wellness, women’s health, dementia friendly communities, and long-term care.
The commemoration of Older Americans Day may be in its 55th year, but the impact and opportunity for engagement it provides is even more vibrant than in its younger years.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.