Repeal of Nonprofit Transportation Tax on the Agenda
Whether and, if so, when will Congress repeal a provision of the 2017 federal tax law that imposes a new 21-percent income tax on nonprofits for the expenses they incur providing transportation benefits (parking and transit passes) to their employees? Urgency surrounds those questions because hundreds of thousands of nonprofits across the country will have to start making payments under this “unrelated business income tax” in the coming weeks if the levy is not repealed in time.
Earlier this month House Majority Whip Clyburn (D-SC) introduced H.R. 1223, the “Stop the Tax Hike on Charities and Places of Worship Act,” to repeal the nonprofit transportation tax. At a news conference, Whip Clyburn explained, “Congress must repeal this new tax, and we should do so
without adding another dime to the debt or an additional burden on America’s working families.” Also speaking at the news conference, David L. Thompson of the National Council of Nonprofits addressed the inappropriateness of taxing tax-exempt organizations (“the very definition of an oxymoron”) and, stressing the nonprofit sense of urgency, concluded, “tick tock, the tax meter is running; this tax must be repealed as soon as possible.” See letter of the Council of Nonprofits and Together SC.
NONPROFIT ACTION NEEDED
With payments coming due for this unfair tax in only a couple of weeks, it is imperative that every Representative and Senator know of the pain the tax is causing and take action to repeal it right away. Everyone concerned about nonprofit missions – including staff, board members, donors, volunteers, and clients – needs to Take Action now to prevent the unnecessary diversion of charitable assets away from mission to pay this tax. Please take five minutes now to make a difference!
Supreme Court to Rule on 2020 Census Citizenship Question
The U.S. Supreme Court announced that it will expedite consideration of whether the government can include a question about citizenship in the 2020 Census. The Trump Administration announced in March 2018 that it planned to ask every person taking the census whether they are U.S. citizens. At least seven lawsuits have been filed challenging inclusion of the citizenship question, arguing that it is unconstitutional, a violation of mandated administrative procedures, and an attempt to suppress the actual count by intimidating immigrants and people of color. In January 2019, a federal judge in New York ruled against inclusion of the citizenship question, writing, that the “decision to add a citizenship question to the 2020 census — even if it did not violate the Constitution itself — was unlawful for a multitude of independent reasons and must be set aside.” Normally, an appeal of a federal district court decision must be taken to the court of appeals. Yet the Supreme Court allowed extraordinary direct appeal, apparently because of the time pressure. The Census Bureau needs a final resolution before July 2019, when it begins printing millions of census questionnaires to ensure the 2020 Census starts on time in
April 2020. Many nonprofits oppose 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. Read more at 2020 Census resources page.
- Early Results of Post Tax Act Giving: Donations declined last year by 2.3 percent to nonprofit organizations with operating budgets of less than $1 million, according to Charitable Giving Report: How Fundraising Performed in 2018 from the Blackbaud Institute for Philanthropic Impact. Overall, charitable giving grew by 1.5 percent when donations to very large organizations and megagifts from billionaires are factored in. Considering that the inflation rate in 2018 was 2.44 percent, aggregate giving failed to keep up with inflation. The report provides an early but partial look at giving in the first year under the federal Tax Cuts and Jobs Act, the 2017 law that nearly doubled the standard deduction and capped deductions for state and local taxes. The combined effect of the changes is expected to result in tens of millions fewer taxpayers itemizing their deductions and no longer getting a tax benefit for giving to the work of charitable organizations in communities.
- Dueling Estate Tax Bills: Senators recently introduced competing bills to repeal or expand estate taxes. The Tax Cuts and Jobs Act doubled the exemption thresholds for the estate and gift taxes to approximately $11 million. Two companion bills (S. 215 and H.R. 218) titled the Death Tax Repeal Act of 2019, introduced by Senator Thune (R-SD) and Representative Smith (R-MO), respectively, would repeal estate
taxes for future decedents and exempt generation skipping transfers from the tax. Conversely, Senator Sanders (I-VT) introduced a measure that would increase estate taxes by placing an additional 77 percent tax on any estate worth more than $1 billion.
- Update on Maintaining State Offices for National Service: Concerned about reports that the Corporation for National and Community Service (CNCS) plans to close most of its local operations, 36 Members of Congress wrote a letter asking the federal agency to “actively engage with Congress and stakeholders … to develop a modernization plan that reflects stakeholder input, real local needs, and strengthens national service for the future.” CNCS’s Transformation and Sustainability Plan
would shutter 46 state offices and replace them with eight regional hubs. The letter expresses the view of the signers that the elimination of state offices “will not contribute to the success of national service, but rather undermine support for AmeriCorps and Senior Corps grantees and volunteers.”
States Learn, Act on Lessons from the Federal Government Shutdown
The impact of the 35-day federal government shutdown varied across the country as many states and cities struggled to identify and take appropriate responses. The threat of a future shutdown has led some state legislatures and local governments to consider possible state- or local-level safeguards. For this last partial federal government shutdown, Minnesota already had the power to put together a statewide contingency and response team to plan for the federal government shutdown, as it has done for past federal shutdowns, because the state treats "shutdowns like we would any natural
disaster.” Arizona officials have found ways to keep the Grand Canyon open regardless of federal operational status. California officials are now planning ways to keep Joshua Tree National Park open to prevent vandals from committing any more damage if federal employees are absent because they are furloughed again. Currently, lawmakers in Oregon and Maine are looking at providing state unemployment benefits for federal employees during any future shutdowns. One bill in the New York Assembly would trigger an automatic 60-day extension for tax filings while waiving
penalties and interest in the event of another shutdown. Similarly, cities are exploring ways to protect their residents in future shutdowns through assistance programs, municipal payment deferments, and personal loans to workers.
Preserving Nonprofit Nonpartisanship in New York
Lawmakers in New York State have introduced legislation to preserve nonprofit nonpartisanship, regardless of what Congress and the White House say about the Johnson Amendment. Specifically, the legislation updates the existing state-law prohibition on 501(c)(3) organizations endorsing candidates for public office. House and Senate bills go further by adding the protection: “The provision of this paragraph regarding political campaign activity shall be interpreted in the same manner as Section 501(c)(3) of the United States
Internal Revenue Code has been interpreted as of the effective date of the chapter of the laws of 2019 that amended this paragraph.” In other words, Congress or the Administration may one day act to politicize charitable nonprofits, houses of worship, and foundations for partisan gains, but the state legislation, if enacted, would keep New Yorkers firmly on the side of nonpartisanship.
Taxes, Fees, PILOTs
- Fees: A bill in South Carolina would authorize local governments to impose fees on nonprofit hospitals and higher education institutions and permit local governments to petition the Department of Revenue to remove nonprofit status for purposes of state income taxes for failure to pay the fees. It would also require withholding of state appropriations if a higher education institution refuses to pay the fees.
- Parking Taxes: Nonprofits, including churches, are now being assessed taxes for parking by the City Council in Grand Island, Nebraska. For-profit businesses in the city previously paid an assessment to allow for free parking downtown for visitors. Nonprofits were exempt from the occupation tax, which covered the parking costs, but the city is now taxing all employers, including tax-exempt nonprofits and houses of worship, via a special assessment based on square footage owned. “It is hard on nonprofits to have an additional assessment when it probably isn’t in their budgets and
they don’t have the income to offset that at least the initial year,” stated Dana Jelinek, Executive Director of the Grand Island Area Habitat for Humanity.
- PILOTs: The Board of Selectmen in Milton, Massachusetts voted to send letters to the three largest nonprofit landowners in the community seeking voluntary payments in lieu of taxes (PILOT). Unlike in many other communities, the local government appears to recognize that it lacks the authority to mandate payments and must seek cooperation with area nonprofits. The “charge” of the PILOT Committee acknowledges: “Once an organization is granted an exemption, the Town cannot legally require that
organization to pay a property tax or bind that organization to give up the rights to these legal exemptions.”
- Sales Taxes: Food and drink sales and property rentals by charitable nonprofits in Colorado may be exempt from sales taxes in certain circumstances, according to the state Department of Revenue. A private charity in the state received a letter ruling earlier this month that provided for the exemption under state law, exempting food and drinks sales made at fundraising events from sales tax. The exemption is capped at 12 events per year and $25,000 in sales. Rental property must be charged separately from catering services and rental of the property must not be a requirement for catering
services in order to receive the exemption.
Montana Public Campaign Disclosures Law Preserved
The U.S. Supreme Court declined to consider a challenge to Montana’s campaign finance law, leaving strong disclosure provisions in effect. The “Disclose Act,” enacted in 2015, expanded the groups that must disclose election-related financial information, particularly for electioneering communications. Opponents sought to have the law struck down, claiming it burdens free speech, but a lower court ruled the new law constitutional. Governor Bullock spearheaded the law claiming that both Republicans and Democrats
“have problems both inside and outside our parties.”
In Case You Were Curious
The States’ Beef with the Southern Border National Emergency Declaration
The lawsuit filed by 16 states challenging President Trump’s declaration of a national emergency raises the question among many (mostly lawyers) asking what grounds the states have for challenging what appears to be a fight between two federal branches of government – the Executive vs. Congress. According to Governing’s Liz Farmer, the answer is economic: the plan to pay for wall construction would
divert up to $6 billion in federal funding from spending on other programs and projects in the states. The largest share of the money to fund wall construction reportedly will be taken from 2019 military construction projects and National Guard anti-drug trafficking interventions. California stands to lose nearly $900 million in spending and Maryland more than half a billion dollars. “If the president is essentially stealing money that's been allocated to go to the various states for various purposes but no longer will, we're being harmed, our people are being harmed,” said California
Attorney General Becerra when he announced the lawsuit by the 16 states. As nonprofits have found repeatedly, when the federal government shifts or underfunds priorities in the states, the cascading effect of spending cuts often affect funding for programs provided by charitable organizations performing services on behalf of governments.
Telling the Story of Nonprofit Impact Through Data
Individual nonprofits know they deliver positive impact in communities, but can falter in explaining it to lawmakers, donors, community leaders, and volunteers. Yet, advocating for successful public policies and community support often demands clear data on giving, employment, and volunteerism in the communities that charitable nonprofits serve. The good news is that impact reports provide an easy way for nonprofit leaders to share what they do and who they serve as they navigate conversations with stakeholders.
Here are some excellent recent examples:
Quick, easy facts and figures can help nonprofit leaders share information fast with key stakeholders so they have a better picture of what matters. The Colorado Nonprofit Economic Impact Study, a report published by seven groups, including the Colorado Nonprofit Association,
provides four important numbers for easy understanding of complex subjects: economic impact, overall gross domestic product, number of nonprofits, and number of jobs. The report breaks down those numbers to allow the reader to see where they are going and how they got there.
The North Dakota Association of Nonprofit Organizations provides a different kind of road map in its North Dakota Nonprofit Sector Impact report. Through simple infographics, the state association of nonprofits shows nonprofits at work, nonprofits in community, and nonprofits by the numbers indicating mission area, revenue size, volunteer hours, and annual wages. The 50,000-foot view map shows how nonprofits fit into the overall makeup of the state by comparing the nonprofit sector to the manufacturing sector, while also showing the often-unrecognized impact on the state’s economy and quality of life.
The Maine Association of Nonprofits finds the sum of nonprofits’ impact in its Adding Up Impact report. The numbers include building additional economic opportunity, stimulating economic development, increasing personal income tax revenues for state and local governments, employing 1-in-6
workers in the state, and contributing approximately $12.6 billion per year to the state’s economy. A comprehensive dive into how nonprofits partner with and connect to the community, coupled with stories from frontline nonprofits, show how the sum of the factors equal big impact.
In New Jersey, the Center for Non-Profits, the statewide umbrella organization for the charitable community, conducted a statewide survey to prepare its annual nonprofit report, New Jersey Non-Profits 2019: Trends and Outlook. The annual survey provides “new insights about how nonprofits are faring,” giving nonprofits across the state a framework for explaining how to map where to go in the future, aiding in planning and communications “in a time of public policy volatility and steadily escalating need.” Specifically, the report identifies funding gaps and other
challenges nonprofits face, and actions taken to overcome them; the public policy issues on the minds of nonprofits; and the overall outlook for the year. The Center’s full report is scheduled for release later today, February 25, 2019.
Knowledge of the impact nonprofits have in the communities they serve enables leaders to tell their individual and collective stories. Sharing the impact with those in the communities, particularly those who affect public policy, allows for deeper relationships, stronger partnerships, and a smoother road for even greater impact.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.