Threat Level Rising (Even Higher) on Nonprofit Nonpartisanship
Activists seeking to “destroy” or weaken the law that protects nonprofit nonpartisanship appear to be ratcheting up their rhetoric and efforts to politicize the charitable sector in advance of the November elections. On August 27, President Trump hosted a meeting with around 100 supporters from the evangelical community and reportedly urged them to take to their pulpits this fall to call on parishioners to vote for conservative candidates. The news media reported that during the closed-door meeting the President claimed falsely that he had “gotten rid” of the Johnson Amendment before he urged preachers to
engage in partisan electioneering in violation of the Johnson Amendment. That longstanding law says that charitable nonprofits, houses of worship, and foundations cannot receive tax-deductible donations tax-free if they endorse or oppose candidates for public office. Also last week, a candidate for the U.S. Senate from Missouri announced that repeal of the Johnson Amendment is a key campaign promise.
Within the next two weeks, a House-Senate conference committee is expected to meet to resolve whether the bill that funds the Internal Revenue Service will include House-passed anti-Johnson Amendment language that would effectively prohibit the IRS from enforcing the Johnson Amendment against churches for even the most egregious violations, including spending charitable assets to support political candidates. The Senate did not include this language or other controversial riders in its version of the appropriations measure. The broad nonprofit community needs to deliver a loud and persistent message to Members of
Congress insisting they support of the Johnson Amendment and reject the attempts to politicize charitable nonprofits, houses of worship, and foundations.
Take Action Now!
Call Your Members of Congress Today
Your Representative and two Senators return to Washington, DC today. Call their offices now (202-225-3121) and deliver this message:
“Partisanship has NO place in charitable organizations – whether churches, charities, or foundations. Oppose all efforts in conference to include a controversial anti-Johnson Amendment rider to the Financial Services spending bill, H.R.6147.”
Go to the Take Action page to learn what more you can do to protect nonprofit nonpartisanship and keep the rancor of partisan politicking out of the nonprofit community.
Congress Returns for Dash to the Elections
In the busy month of September, Congress has 11 legislative days to complete all 12 appropriations bills to fund the federal government in the new fiscal year and the Senate to consider the nomination of Judge Brett Kavanaugh to be a Supreme Court Justice. The new federal fiscal year and the Court’s fall term both start on October 1. The Farm Bill and a bipartisan opioid agreement are also on the must-pass list for this month. House and Senate leaders are attempting to enact most or all of the trillion dollars in spending legislation by combining them into multi-bill packages, nicknamed “mini-busses.” The
Senate stayed in session for part of August to complete its action on an $857 billion bill to fund the Defense Department and provide appropriations for many social programs in the Departments of Health and Human Services, Labor, and Education. During August, appropriators worked quietly to complete negotiations on a separate mini-bus bill that likely will be released this week. Another four-bill mini-bus, which includes the anti-Johnson Amendment rider, may formally go to conference committee during the second week of September. Leaders are hoping to avoid having to enact a stopgap funding bill, known as a Continuing Resolution or “CR,” that would provide temporary appropriations until after the elections. It is unclear whether
the President would sign a CR, making good on his promise to shut down the government if Congress doesn’t provide what he considers sufficient funding to build a U.S.-Mexico border wall.
- Assessing Census Security: In a new report, the Government Accountability Office found that the U.S. Census Bureau has only a few months to fix thousands of computer security vulnerabilities that may put personal citizen data at risk. Ahead of the 2020 census, the Bureau began testing all 44 key systems necessary to support the new option of allowing citizens to send their responses over the internet, an approach intended to save the government billions of dollars. A two-year test, set to be completed in April 2019, has found close to 3,100 security issues and weaknesses, the report said. In total, 43 security issues were classified as being either a “high” or “very high” risk.
- Mandating E-Verify: A bill recently introduced in the Senate would mandate that all employers must use the Electronic Verification (E-Verify) system to ensure all new hires are U.S. citizens or authorized to work in the country. Currently, the system is voluntary for employers, although some states have considered mandating its use. The legislation, the E-Verify System Act of 2018 (S.3386), would allow employers to compare Form I-9 information to federal records at the Department of Homeland Security and Social Security Administration, as well as use facial verification and other personal information to
determine legal work status.
- Seeking Return of Net Neutrality: Twenty-two states and the District of Columbia have filed a lawsuit against the Federal Communications Commission seeking reinstatement of the net neutrality rules adopted under the Obama Administration. The FCC voted in June to remove the net neutrality regulations that had prohibited internet service providers from controlling internet traffic, also known as paid prioritization. The states, led by New York, argue that without the regulations, consumers will be harmed and public safety could be in jeopardy, and that the FCC could not preempt state and
local laws protecting net neutrality. Separately, last week the California Legislature passed a bill – now awaiting the Governor’s approval or veto by the end of September – that would reinstate a form of net neutrality within its borders.
- Listening Sessions on Overtime Regulations Announced: The U.S. Department of Labor (DOL) announced in its regulatory agenda that it would release a proposed rule on the white-collar overtime exemption in January 2019. Under the federal Fair Labor Standards Act (FLSA), employers are required to pay employees overtime pay for work over 40 hours unless individual employees qualify as executive, administrative or professional workers (white collar) under DOL regulations. New rules promulgated by the Obama Administration were enjoined by a court and later withdrawn by the current Labor Department. (Review background on
the overtime rule.) In advance of revised proposed rules, DOL has announced that it will conduct public listening sessions to gather views on its overtime regulations. The listening sessions will be conducted in Atlanta, GA (9/7), Seattle, WA (9/11), Kansas City, MO (13), Denver, CO (9/14), and Providence, RI (9/24). Nonprofits are encouraged to reserve a space and attend one of these events.
SALT Workaround Proposed Regulations Cause Surprise, Concern
Nonprofits across the country responded with surprise, and many with concern, to the news that the U.S. Treasury Department and the IRS proposed regulations that seek to reverse prior decisions and change the tax treatment of state tax-credit programs that promote giving to various charitable organizations. The proposal reportedly was drafted to target new tax laws in Connecticut, New Jersey, and New York that seek to convert some state and local tax (SALT) payments that are capped at $10,000 under the 2017 federal tax law into uncapped charitable deductions. As written, however, the draft regulations appear also to apply to many programs in the 32 states and the District of Columbia that provide a state or local tax credit when a taxpayer makes a donation to certain nonprofits. Among these are Arizona, Georgia, and South Carolina that allow taxpayers to take a 100
percent state tax credit for donations to charities supporting private schools. Iowa, Kentucky, Maryland, Montana, and North Dakota provide tax credits ranging from 20 percent to 40 percent for donations to qualified endowed funds.
The draft of the proposed regulations was informally released on Thursday, August 23 with an effective date four days later. Some organizations in states with tax-credit programs immediately reached out to their past supporters urging them to take advantage of the giving incentive before the window closed at the end of the 27th. Other organizations alerted their members to the proposed changes and offered analysis. Liz Moore of the Montana Nonprofit Association wrote to explain that “in Montana, many contributions associated with the Montana Endowment Tax Credit are from donors who will not
itemize, so this won’t impact them.” She went on to stress, “It will however impact our larger donors,” which led her to write: “MNA will be submitting public comment and we encourage you to do the same.” Comments should be submitted electronically, via the Federal eRulemaking Portal (REG-112176-18) by October 11. See tips for submitting public comments.
How Will States and Nonprofits Fare After Wayfair?
States are beginning to take advantage of the Supreme Court decision in South Dakota v. Wayfair, Inc., which allows them to collect sales taxes for online purchases of goods and services from sellers that don't have a physical presence in the state. It is important for nonprofits to recognize that states are not consistent in whether or which nonprofits they exempt from sale taxes, so the question of whether an individual nonprofit must collect taxes when it sells to buyers out-of-state or pay taxes on purchases it makes in other states is about to change radically. More than half of the states with sales
taxes have taken steps to implement the new freedom to tax out-of-state sales. In South Dakota, the impetus of the suit, the Governor has called a special session of the Legislature to begin September 12 to finalize and clarify lingering litigation issues. Nevada has issued guidance prospectively, applying sales and use taxes on remote sellers not already registered with the state. Maryland has issued an emergency regulation to begin
collection and remittance on October 1 and, in North Carolina, the Department of Revenue issued a directive making state collection mandatory for out-of-state sellers meeting a certain threshold. Most states with laws similar to the one in South Dakota will begin implementing the law effective October 1. States that have not already taken action will likely legislate in this area next year, giving nonprofits both opportunities and challenges as state tax codes are opened to make changes.
Federal-State Tax Conformity
State Revenues Vary Due to Federal Tax Law Changes
States are beginning to feel the financial impacts on revenues and budgets under the new federal tax reform law. Thirteen states have already taken action to conform state tax laws in part or in full to the 2017 federal tax law. However, the federal tax changes affect states differently, depending on state tax structures. North Dakota projects that individual taxpayers will pay $4.8 million more in state income taxes, but businesses will pay $9.7 million less, resulting in $4.9 million drop in overall tax revenues for 2018. That
loss reportedly will grow to $28.9 million from 2019 to 2021. Virginia is seeing its revenues increase by $555 million for Fiscal Year 2018. One-fifth of that amount ($120 million), however, came in early payments because of a tax holiday in the Commonwealth.
Court Blocks Texas Sick Leave Ordinance
A pair of city ordinances in Texas requiring businesses to provide paid sick live are in limbo as the Attorney General joined a lawsuit claiming state law preempts local law by prohibiting cities from requiring employers to pay more than the federal minimum wage. The City of Austin passed an ordinance that would require private employers with more than 15 workers to provide up to eight days of paid sick leave and smaller employers to provide up to six days. The City of San Antonio passed a similar law shortly
thereafter. Austin claims that paid sick leave is not a wage and therefore does not fall under the state law. The Austin ordinance has been enjoined by the Texas Court of Appeals pending a challenge by the Texas Association of Business and others.
Government-Nonprofit Grants and Contracting Reform
- California: A bill awaiting the Governor’s signature would create a State Grants Administrator position inside the Governor’s Office of Planning and Research to help organizations find out how to apply for state grants. See the nonprofit sign-on letter and fact sheet to understand how nonprofits could take advantage of the improved access to information.
- Connecticut enacted a package of reforms to laws affecting human service providers. The legislation removes a staff-visits requirement for group homes, allows waiver of licensing fees, and removes notarization and other redundant licensure requirements, among other things.
- New York City: A series of proposed ordinances address government-contracting issues. On the positive side, a measure would require the Procurement Policy Board to create a process to inform vendors, including nonprofit organizations, of any late payments and establish a reporting system that keeps the Mayor’s Office and City Council apprised of payment backlogs and progress in paying the City’s bills. Less positive are two measures seeking regulatory overkill. One proposal would mandate new and duplicative reporting requirements. The other would require any nonprofit organization (but not require for-profit entities) that contracts with the City for $150,000 or more to submit the compensation amounts of the three highest paid employees and its Form 990.
Registering to Vote
Pencil Us In: National Voter Registration Day – September 25
On September 25, hundreds of nonprofits across the country will be working on a nonpartisan basis to help people register to vote. As the conveners of communities, nonprofits are vital in raising awareness, providing resources, and being a conduit for civic engagement. Nonprofit VOTE provides guidance on how nonprofits can help make sure that every citizen’s voice is heard in each election. We encourage your nonprofit to sign up as an official partner of National Voter Registration Day on September 25 and host a nonpartisan voter registration drive. Registrants receive access to a communication toolkit, social media assets, checklists, factsheets, posters, stickers, and much more.
Asking What Defenders of Free Speech Think
A recent occurrence in Missouri underscores the continuing importance of engaging with local publications to protect and promote sound public policy.
The question of whether to repeal or retain the longstanding Johnson Amendment recently became a political campaign issue in Missouri. (NOTE: We’re intentionally not naming specific candidates because our focus here is on the merits of the underlying public policy, not the political campaigns or the candidates.)
What’s important is how the local newspapers have responded to the policy debate. As champions of free speech, they are quick to cry foul on any infringement of the First Amendment. In Missouri this past week, as in communities from coast to coast over the past 18 months since the first salvo to “totally destroy the Johnson Amendment” was shot, the independent media have stood steadfastly on the side of maintaining the Johnson Amendment and dispelling the notion that it somehow infringes individual rights.
The editors at the St. Louis Post-Dispatch were quick to evaluate the impact of the challenge to the Johnson Amendment in constitutional terms. “Separation of church and state is among the most brilliant and crucial founding principles of this nation.” They stressed, “You don’t need to look far into history, or the present world, to see how mixing faith and politics distorts both.” Indeed, they observed that “people fixated on immediate partisan goals and emboldened by the self-certainty of religious faith have become impatient with the constitutional long-view.” They explained
that “constitutional scholars, on the other hand, have long defended the importance of that wall of separation.”
In the editors’ view, “What [the candidate is] suggesting, in the guise of protecting religious freedom, is that taxpayers should be forced to fund a religious political movement for the benefit of the party he happens to belong to.” The Post-Dispatch editors are not buying the free-speech claims of anti-Johnson Amendment activists, writing convincingly: “[Charitable] organizations have always been free to engage in any politicking they want — they just can’t expect to have that politicking effectively subsidized by the taxpayers via tax exemption.”
The editors at the capitol city newspaper, the Jefferson City News Tribune, expressed similar concerns. Their editorial, Keep faith in the Johnson Amendment, laid it out succinctly:
“The anti-Johnson Amendment sentiment caters to some religious groups, particularly evangelical Christians, who oppose the amendment, saying it limits their free speech. It doesn’t limit their speech. What it says is if you play politics, you can’t be exempt from taxes. You can’t have it both ways. Many religious leaders recognize having it both ways would not be in their best interest, and that the Johnson Amendment actually protects them. Without it, religious organizations would be subject to political influence, which would distract — even undermine — their core mission.”
They rightly concluded: “Repealing the Johnson Amendment would be bad for politics, bad for churches and bad for America.”
We note that these papers are not outliers. In November, the editors of the Kansas City Star, the largest newspaper in Missouri, corrected misstatements of those attacking the Johnson Amendment, writing, “The First Amendment guarantees free speech, not tax-free speech.” Then, as is now the case with the anti-Johnson Amendment rider in the financial services appropriations bill, legislation would remove the protections of nonpartisanship just for “churches.” The Star editors rejected the idea: “We think carving out a First Amendment tax break for clerics is
When the staunchest defenders of free speech – the independent news media – reject the false claim of free-speech infringement, that’re really saying something. All of us, as nonprofit advocates, need to make sure our colleagues, our communities, and our elected officials and candidates for public office take notice.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.