Negotiations Stall on Funding Homeland Security, Another Government Shutdown Looms
There are less than five days left in the temporary continuing resolution that funds the operations of nine federal departments and numerous agencies, yet no deal is in sight on the key issues that caused the 35-day government shutdown in December and January. Seventeen congressional negotiators have the task of reaching a spending agreement that also addresses the President’s demand for $5.7 billion to pay for building a southern border wall. As of this writing, negotiators reportedly are hung up over the amount that may be spent on a border wall, however defined, and limits on immigration enforcement
detention beds. Partisan rhetoric and finger pointing escalated over the weekend, which can mean either that the parties are seeking the leverage of public opinion to force a deal or are adjusting themselves to the inevitability of another government shutdown. Only time will tell which is the actual motivation.
The outcome of the negotiations and the likelihood of another shutdown are of grave concern to charitable nonprofits throughout the country because of the serious adverse effects on their missions, their communities, and the people they serve. The shutdown demonstrated how much the nonprofit community and federal government interact, and how much the public and government alike rely on nonprofits to fill the gaps. An important lesson learned by the public as a result of the 35-day shutdown is that nonprofits are integral to a properly functioning society and economy. In return, charitable organizations have both the opportunity and responsibility to help ensure that politicians never treat the lives and livelihoods of Americans
as a bargaining tactic.
TAKE ACTION NOW
Everyone committed to the work of charitable nonprofits in communities – including staff, board members, donors, volunteers, and clients – need to lift their voices to ensure our elected officials know the human cost of their political games. Increasing the pressure on your federal officials is the best way to get them to end senseless shutdowns that will again hurt everyone across the country. Go to the Take Action page and make the call, send the email, and tweet that shutdowns are completely unacceptable and should never be an option.
For more information about the work of charitable nonprofits to lessen the pain caused by the government shutdown, see A Thank You to Nonprofits and Reporting from the Front Lines of the Federal Government Shutdown.
Policy Traffic Backed Up at the Wall
Legislative action largely has been placed on hold so far this year as Congress and the Administration have tried to resolve the issues that led to the longest government shutdown in American history. Once that crisis is resolved, policymakers must turn quickly to the very long list of priority policy matters that have backed up during the standoff. Among the issues affecting the work of charitable nonprofits caught in the policy traffic are tax reforms (including repeal of taxes on tax exempts), spending decisions and the return of sequestration, addressing the debt ceiling to avoid another government shutdown, and priority must-pass legislation such as extending the Violence Against Women Act, SNAP reauthorization and more. Read the entire blog article.
- Anti-Johnson Amendment Bills Reintroduced: A Senator and several Representatives have renewed their efforts to weaken the Johnson Amendment, the longstanding federal law that protects charitable nonprofits, house of worship, and foundations from being pulled down into divisive partisan, election-related activities, such as using charitable assets for political contributions and endorsing candidates for elective office. Two bills, S. 330 and H.R. 949,
would substantially weaken the law by allowing 501(c)(3) organizations to endorse candidates for public office and engage in partisan electioneering activities. Recently, more than 130 national nonprofit organizations delivered a letter in support of the Johnson Amendment to the Chairs of the House and Senate tax committees reiterating the importance of the longstanding protection and urging them to “uphold the Johnson Amendment and reject legislation that would compromise the integrity of our nation’s houses of worship and other charitable nonprofits.”
- 2020 Census: Last Friday a federal district court judge in DC denied a request to block the citizenship question from being included in the 2020 Census. Unlike the six other lawsuits concerning the 2020 Census, the plaintiffs in this case alleged that the Commerce Secretary erred by adding the citizenship question before conducting a privacy impact assessment (PIA) required by the E-Government Act of 2002. The judge disagreed, finding that the Act requires the government to conduct a PIA before actually collecting information, not before deciding what questions to ask. The citizenship
question remains very controversial and hotly contested in the courts, with a resolution expected in early summer.
- Maintaining State Offices for National Service: Lawmakers and nonprofits are taking action to block a plan by the Corporation for National and Community Service (CNCS) to close its 46 state offices and shift agency operations to eight large multi-state regions. The federal agency devoted to promoting and supporting volunteering is set to implement its Transformation and Sustainability Plan this spring. Representatives McCollum (D-MN) and Underwood (D-IL) are circulating a "Dear Colleague" letter in the House seeking support for stopping the closure of AmeriCorps and Senior Corps
- Federal Government Streamlines Grants with Document Vault: As of February 2, 2019, the federal government activated its online System for Award Management (SAM), implementing a new process for grant applicants designed to reduce duplicative grant compliance efforts. Registration in SAM has been required when applying for federal awards and must be updated annually. Separate from this, nonprofits also had to submit separately with each grant application common federal government-wide representations and certifications. Now, SAM includes a centralized repository where nonprofits can submit
these common certifications once during the SAM registration or renewal process in lieu of providing them with each grant application. This is part of the federal government’s continuing efforts to reduce duplication in the grant process. By January 1, 2020, all grant applications should have phased out collecting these attestations individually.
The Federal Government Needs to Hear from You
Public Comments Coming Due
While many people focus solely on what Congress and the White House legislate, the regulations implementing legislation can make or break nonprofits. Currently, two significant regulatory actions are open for public comment and need your attention. Without nonprofit input, bureaucrats will likely rely on academic studies, special interest advocacy, and perhaps partisan preferences. Charitable nonprofits, particularly those that will be directly affected by the proposed regulations, can influence the final regulatory products by telling the government what’s good and what’s bad about proposed rules, and how to fix the drafts to better suit the work and missions of organizations in the real world. It’s been
said that “elections have consequences”; equally true is that “silence has consequences” when it comes to the rulemaking process.
- Parking Tax Preliminary Guidance: Preliminary guidance issued by the Internal Revenue Service in December (Notice 2018-99) proposed to clarify when nonprofits must pay a 21 percent unrelated business income tax on employer expenses related to employee parking. The notice, which is subject to public comment, instructs organizations to apply a complicated four-step calculus for putting a value on taxable parking spaces. A separate notice (Notice 2018-100) allows
for tax penalty waivers for nonprofits that failed to submit quarterly estimated tax payments on those transportation benefits. The IRS has given no guidance or relief for the application of the tax on other transportation benefits, such as subway or bus passes. Nonprofits affected by the income tax on parking expenses are invited to submit comments to the IRS by February 22.
- Tax for Highly Compensated Employees: The Internal Revenue Service published a 96-page notice (Notice 2019-09) explaining when nonprofit employers must pay the new 21 percent tax on annual compensation in excess of $1 million for their highest-paid staff. The preliminary guidance clarifies that (1) nonprofits should use the calendar year ending within the nonprofits' fiscal year to calculate the tax; and (2) nonprofits generally will not be able to avoid the tax by splitting highly-compensated employees' pay between multiple related organizations, among other things. The IRS is
accepting comments from the public through April 2.
The government recommends submitting individualized comments to regulatory proposals. The comments don’t have to be complex or written in a special format or legal style. Comments “can express simple support or dissent for a regulatory action.” The government website, Regulations.gov, advises that “a constructive, information-rich comment that clearly communicates and supports its claims is more likely to have an impact on regulatory decision making.” See Taking the Mystery Out of Filing Comments on Proposed Rules for tried and true tips.
States Clarifying Spending Priorities
Based on State of the State speeches and early legislative action, governors and legislators consider education and tax policy to be their top priorities this year. Governors in Georgia, Pennsylvania, and South Carolina want to bolster teacher salaries; California Governor Newsom and Colorado Governor Polis are focusing on early education. Iowa Governor Reynolds proposes using a $185 million budget surplus to increase government spending on education and other priorities. Governors in Florida, Maryland, and South Carolina are looking to various tax cuts and additional tax reform, while key legislators in New Mexico and Utah are considering their own tax policy changes. Arkansas Governor Hutchinson’s proposed
“2-4-5.9” tax cut plan is already moving through the Legislature despite January revenues coming in 5 percent lower than a year ago. The three top Texas lawmakers – Governor, Lieutenant Governor, and House Speaker – agreed early to a 2.5 percent cap on property tax hikes by localities, including school districts, making increased education at the local level more difficult. Finally, many states will likely see boosts in rainy day funds and municipal spending this year.
Preserving and Promoting Charitable Giving Incentives
Despite challenges at the federal and state levels, nonprofits and lawmakers in several states are working to preserve existing and promote new charitable giving incentives. Maryland and Minnesota have joined Kansas, New York, and Virginia in considering legislation to allow individuals to elect to itemize charitable contributions as deductions on their state tax filings regardless of whether they elected to itemize on their federal tax filings. Legislation in Arizona would establish a non-itemizer charitable deduction, retroactive to 2018. In Hawai`i, legislation has been introduced to decouple
state law from the federal unrelated business income tax on nonprofit transportation benefits, and thus cancel an automatic tax hike for nonprofits. A bill in Pennsylvania would provide an inheritance tax exemption for transfers of property to or for the use of charitable purposes. The New York Assembly will consider legislation to grant a tax credit for volunteering 25
hours or more per year at certain charitable nonprofit organizations in the state.
In North Dakota, advocacy by charitable nonprofits eliminated legislative threats seeking to weaken the endowment tax credit program in the state. One bill would have diminished incentives by expanding the scope of the endowment tax credit, but reducing the amount of the tax credit from $5,000 to $500. A separate measure was amended to strip out a provision that changed the endowment and planned gift tax credit to a deduction.
In Focus: Nonprofit Property Tax Exemption
While decisions at the federal level are causing states to revise their income and sales taxes, numerous bills are pending in legislatures across the country to revise or undermine the exemption from property taxes that charitable nonprofits receive in all 50 states. A very troubling bill introduced in Montana last week seeks to delay for ten years the effective date of any newly recognized
property tax exemption, thereby forcing a nonprofit purchasing property in the state, or a new nonprofit startup, to pay property taxes for a decade. The Montana Nonprofit Association is actively opposing that measure, as well as a bill that would revoke the property tax exemptions of nonprofits that pay executives more than $250,000.
A bill in Connecticut would allow municipalities to impose service charges on nonprofits, apparently in a constitutionally suspect attempt to circumvent property tax exemptions. Two bills in the Rhode Island Legislature look to impose property taxes on larger nonprofit institutions in the state. One measure would authorize municipalities to tax nonprofit properties, including all property of nonprofit hospitals, colleges, or universities within a city
or town that is vacant, used for parking, or not “wholly and exclusively utilized for the purposes set forth in their respective charter, or applicable provisions of general or public laws.” Separately, a legislator is seeking to impose a municipal payment, or fee, equal to 65 percent of property taxes, on a nonprofit hospital that has converted from a for-profit hospital.
Not all legislative action is hostile to nonprofits. Arizona lawmakers are considering a constitutional amendment to clarify, but not alter, the property tax exemption for charitable nonprofits and other organizations. A Georgia legislator is proposing a ballot question to extend the ad valorem tax exemption to buildings used by a nonprofit charitable institution for primary or incidental purposes. Legislation in Maryland would extend the property tax exemption to nonprofit museums that are open to the public and do not charge an admission fee. A reform bill in Tennessee would expand the nonprofit property tax exemption to apply to properties of specific educational institutions and children’s hospitals, among other things.
Gearing Up for Census 2020
The 2020 Census is only 14 months away, and many states are finally taking steps to ensure that their residents are counted. An effort is underway in Arizona to appropriate $5 million for census outreach and communication activities. Connecticut is also seeking to expand participation in the 2020 Census through legislation to establish a grant program to assist municipalities in developing and implementing census outreach programs. An Illinois bill would create
the 2020 Census Grant Program to issue matching grants to local governments and nonprofit organizations. It would also establish the 2020 Census Grant Program Panel and require the Governor to include $33 million for the 2020 Census Grant Program in his budget. Nationwide, nonprofits are reaching out to their elected officials to engage and ensure the 2020 Census is fair, accurate, and complete.
Keeping the Game Fair So All Can Play
Changing the rules halfway through the game and not defining those new rules creates an unfair playing board for everyone involved – the referees, the players, and the spectators. The Oklahoma Center for Nonprofits recently saw this happening with proposed rules before the Oklahoma Ethics Commission and called a timeout before significant harm could occur.
Currently, grassroots advocacy in Oklahoma, clearly defined and encouraged for charitable nonprofits, provides a level playing field for advocates, law enforcement for oversight, and the public. The Ethics Commission, which oversees lobbying in the state, drafted rules to change the terms from grassroots lobbying to “indirect lobbying” without explanation or providing a definition. The proposed rule would have required organizations engaging in “indirect
lobbying” to disclose the funding source for any indirect lobbying communications. Additionally, organizations that spent above a certain threshold would have to file reports with the Commission and possibly disclose donor information in those reports.
Marnie Taylor, President and CEO of the Oklahoma Nonprofit Center, explained the challenges that the new rules of the game would impose. “We were very clear with the Ethics Commission,” she wrote, “that we were 100 percent on board with the idea of transparency in communications.” The state association of nonprofits teaches “all nonprofits that they should always disclose that they are behind specific communications, particularly those with regard to advocacy.” The proposed rule raised serious concerns, however, regarding “burdens placed on nonprofits in the reporting process, as well as the potential that donor information could be made unnecessarily public.” Taylor explained,
“The IRS has a number of very strict guidelines for nonprofit advocacy and lobbying,” and the proposed new rules in Oklahoma would add “several conflicting layers on top of them.”
Ultimately, the Ethics Commission saw the wisdom shared by Taylor and others and rejected the proposed rules that “would have had a chilling effect on nonprofit grassroots advocacy.” The Commission expressed its gratitude for the Center explaining the concerns about how the rules change would have impacted nonprofits in the state.
A conversation between the nonprofit players and the referees was one of the main factors for keeping the rules as there are: fair for all and not sidelining those who want to play.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.