The U.S. Supreme Court and the 2020 Census
The U.S. Supreme Court will hear oral arguments tomorrow, April 23, on whether the 2020 census can ask people whether they are U.S. citizens. In what the New York Times calls “the highest-profile case of this Supreme Court term,” the justices must consider significant questions of constitutional and administrative law regarding the timing and justifications for the decision by Commerce Secretary Ross to include the citizenship question, announced nearly a year after a statutory deadline. Ross’ stated rationale, agreeing to a Justice Department request to add the question to aid enforcement of the
Voting Rights Act, was awarded “Four Pinocchios” by the Washington Post’s Fact Checker, who lays out how Secretary Ross’ claims, including sworn testimony before Congress, do not align with indisputable facts.
The Court’s decision on the citizenship question could have a profound impact on nonprofits for the next decade. That’s why the National Council of Nonprofits, wrote this amici curiae brief, joined by the National Human Services Assembly and YWCA USA: to alert the justices that “[t]he undercount resulting from the citizenship question will hurt … charitable nonprofits throughout the country in significant ways. Chief among those are a loss of funding for their work, a loss of data and effectiveness, and a loss of faith in democracy and government.”
Focus Shifts to Spending Priorities
The impact of divided government will be on full display in the coming weeks and months as Congress and the Administration undertake their constitutional duty to fund the federal government. The issues could not be more contentious, beginning with how much can be spent. The Budget Control Act of 2011 mandates that the spending caps for fiscal year 2020 will automatically fall by $125 billion from the fiscal 2019 level unless Congress and the President take action to raise them. In his budget requests to Congress, the President called for significant hikes in defense spending while shifting most of the looming cuts to domestic
programs, including those that often hire charitable nonprofits to perform services. The plan approved by the House Budget Committee would block the scheduled automatic cuts, reject the President’s proposed large increases for defense spending, and maintain nondefense spending at higher levels. The full House does not need to pass that bill because the House instead adopted what is known as a “deeming resolution” (H. Res. 293) that approves the higher spending levels. Recognizing the harshness of the automatic
cuts, the Senate Budget Committee Budget Resolution adheres to the lower spending levels mandated in the Budget Control Act of 2011, but creates an infrastructure for adjusting the levels if an agreement on revised funding is reached.
- Streamlining the IRS: Earlier this month, the U.S. House of Representative passed the Taxpayer First Act of 2019 (H.R. 1957), a bipartisan bill to reorganize the Internal Revenue Service’s customer services, enforcement procedures, management of information technology, and use of electronic systems. One provision would require virtually all nonprofits to file their Form 990s electronically. The bill would also make permanent the Volunteer Income Tax Assistance matching grant program
through which nonprofits and other organizations help underserved taxpayers file their taxes.
- Improving Public Service Loan Forgiveness: Senators Gillibrand (D-NY) and Kaine (D-VA) introduced legislation (1203) to expand eligibility for the Public Service Loan Forgiveness (PSLF) program, a program that enables employees at charitable nonprofit and governmental employers to have their student loans forgiven after ten years, in some circumstances. The “What You Can Do for Your Country Act of 2019” would shorten the timeframe for securing forgiveness, include more types of loans and repayment plans, and assure repayment. The bill would also direct the Department of Education to
provide clearer information and guidance, and simplify the application and certification process for borrowers.
- Revising Overtime Rules: The U.S. Department of Labor is proposing changes to the rules governing overtime pay and inviting all interested persons to provide their insights. Significant proposed regulations would increase the salary threshold for exemptions from the federal Fair Labor Standards Act (FLSA) overtime pay requirements from the current level of $455 per week ($23,660 per year) to $679 per week ($35,308 per year). Learn more about the overtime proposed regulations by reviewing the updated analysis by the National Council of Nonprofits. Another set of proposed rules would change how employers determine “regular rate” of pay, which is the base hourly rate nonprofits, foundations, and other employers use for calculating time-and-a-half overtime pay for eligible employees. Nonprofits and all interested persons are encouraged to review both sets of proposed rules and offer public comments. The deadline for commenting on the overtime rule is May 21, 2019 and on the “regular rate” rule is May 28, 2019.
Abdication of Oversight of Non-Charitable Nonprofits
The story of monied interests, intrigue, and governmental dysfunction at the heart of the politicization of non-charitable nonprofits is a critical reminder of why the broad charitable nonprofit community steadfastly supports the Johnson Amendment, the law that protects 501(c)(3) organizations from partisan political influences. Journalist Maya Miller, writing for ProPublica, tells the full story in How the IRS Gave Up Fighting Political Dark Money Groups (April 18, 2019).
The IRS has essentially abdicated its administrative and enforcement responsibility with respect to organizations exempt from taxation under Section 501(c)(4) of the federal tax code: “Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare” (emphasis added). Although the statute says “exclusively,” the IRS’s regulations have long allowed these “social welfare organizations” to “engage in some political activities, so long as that is not its primary activity” (emphasis added). The Supreme Court’s 2010 decision in Citizens
United opened the door for individuals seeking to influence elections to pour unlimited millions of dollars into 501(c)(4) social welfare organizations, which can keep donor identities secret.
In 2013 a strong conservative backlash against the IRS began once it was revealed that the agency used political-sounding names of organizations, such as “Tea Party,” as a factor in determining which applicants for social-welfare status deserved extra scrutiny. Congress accelerated the cutting of the IRS’s budget, leading to reduced staff and greater processing backlogs. In response, the IRS took several steps to address the open hostility from Congress and elsewhere, such as creating a six-step screening process for complaints and initiating rulemaking to clarify the definition of “political activity.” But those efforts appear to have actually generated further congressional interference,
including action by Congress to prohibit the rulemaking so the loophole could remain in place. As a result of the many challenges, Miller of ProPublica finds, the IRS is expected to complete few audits or enforcement actions, state charity regulators will have to fill the void, and partisans seeking to influence elections in anonymity may continue to do so for the foreseeable future.
A bright side of this story of the corrupting influence of money in politics is that taxpayers are not being forced to subsidize the partisan political views of the donors; donations to 501(c)(4) social welfare organizations are not tax deductible as charitable contributions. From the perspective of charitable nonprofits, houses of worship, and foundations, the Johnson Amendment is the bulwark against the flood of billions in dollars devoted to partisanship rather than mission, and the gross politicization of 501(c)(3) organizations.
All 50 state legislatures have convened for the 2019 legislative session and more than 20 have already adjourned for the year. Here is a roundup of recent developments on issues of importance to charitable nonprofits.
Charitable Giving Incentives: The Mississippi Governor signed legislation creating the Endow Mississippi Program that grants a 25 percent tax credit for qualified contributions of up to $200,000 to qualified community foundations. Sitting on the desk of the Montana Governor is a bill overwhelmingly approved by the Legislature that would extend for six years the Montana Charitable Endowment Tax Credit. The giving program provides a tax credit of 40 percent (for individuals) and
20 percent (for corporations) for the amount donated to permanent endowments of Montana charitable organizations, not just for community foundations as in Mississippi and a few other states. A newly introduced bill in North Carolina would create a charitable giving tax credit for taxpayers who do not itemize deductions on their state taxes. The credit is modest: it is capped at $100 for individuals and $200 for couples.
Taxes on Tax Exempts: The Hawai`i Legislature passed and has sent to the Governor a bill to decouple the state’s unrelated business income tax (UBIT) from the federal tax on nonprofit transportation benefits. An Illinois version of legislation to decouple UBIT on transportation and parking benefits from state law is pending in the House, having unanimously passed the Senate earlier this month. Similarly, the proposed budget for Minnesota contains language protecting nonprofits from extension of the federal tax to state law. These states are following the lead of New York and North Carolina, which revised their state laws last year to prevent further increases of taxes imposed on nonprofits in their states.
2020 Census: Anticipating a loss of $170 million in federal funds if census participation falls short, Nevada’s Governor has budgeted $5 million in state funds to promote the census. Legislation in Connecticut would establish a grant program to assist municipalities in developing and implementing census outreach programs. In testifying in support of the measure, the CT
Community Nonprofit Alliance explained: “All local and state leaders, including nonprofits, have a responsibility to ensure a complete count in Census 2020. Dedicating additional resources for this pursuit is an investment in the future of Connecticut.” Bills in the Florida House and Senate seek to create a statewide complete count committee to develop and recommend a census outreach strategy. Sabeen Perwaiz of the Florida Nonprofit Alliance has been barnstorming the state making the case for funding of
census efforts and for nonprofit engagement in census outreach.
Taxes, Fees, PILOTs
- State and Local Taxes: Suffolk County, New York, is the first in the state to adopt a charitable gift fund to allow taxpayers to make a “charitable contribution” equal to their property taxes and claim a federal tax deduction. The fund is designed as a way for county taxpayers to avoid the increased tax burden imposed in the 2017 federal tax law that caps at $10,000 the deductibility of state and local taxes (SALT). Nearly half (46.3 percent) of taxpayers in Suffolk County itemize deductions on their federal tax returns, with an average deduction of $31,251, far in excess of
$10,000 cap. The IRS proposed regulations last year limiting the benefit of these workarounds; the regulations have not yet been finalized.
- Property Tax: Some charitable organizations in Oregon may be required to file information returns with the state explaining the basis for property tax exemption under a bill (SB 210) pending in the Legislature. Nonprofits, while exempt from property tax in the state, would have to submit paperwork to prove their eligibility for tax exemption by explaining the basis, uses, and number of days the property is utilized for charitable purposes. The burdensome mandate is like government
“looking for coins in the couch,” according to Jim White, executive director of the Nonprofit Association of Oregon.
- Real Estate Excise Tax: Two proposals pending in the Washington State Legislature (HB 2156 / SB 5991) would change the current flat state real estate excise tax rate from 1.28 percent to a structure of marginal rates ranging from .9 percent to 3 percent. The tax is levied upon sale of properties. The legislation does not contain exemptions for nonprofits. The changes could impact nonprofit decision making for purchasing or selling land or buildings, or accepting real estate and buildings as
BAM!, That’s What We’re Talking About
Regular readers of Nonprofit Advocacy Matter know that each edition closes with a story of nonprofits marshalling their advocacy rights and powers to advance their missions. Hence the section title, Advocacy in Action. Now comes a comprehensive collection of materials and instructions on what this section is all about, the Build a Movement – or BAM! – from Washington Nonprofits.
Build a Movement: Tools to Use Public Policy to Achieve Your Nonprofit’s Mission provides a wealth of materials, including background information, learning guides, and a document vault with dozens of templates and sample messages to help every nonprofit of every mission move into advocacy efficiently and effectively.
As Washington Nonprofits explains, Build a Movement! “uses the metaphor of a house to explain the ways to engage advocacy in the life” of nonprofit organizations. At the very foundation, there is Everyday Advocacy, that is essentially upkeep that every organization should consider to be “nimble, resilient, and ready to serve.”
Adapting to circumstances is where Urgent Advocacy come in. The training materials in this room of the house help nonprofits respond to the “reality that it is sometimes a crisis or sudden opportunity that brings nonprofits to policy work.”
And then there is Step-It-Up Advocacy for those occasions when lobbying is called for. This section of teaching materials explains the superpowers that charitable nonprofits possess, the laws that govern the process, and cheat sheets on how to comply with reporting requirements.
The materials astutely point out that fixing policies is not just a question of lobbying a lawmaker. State legislation of course can have significant positive or negative impacts on the work of nonprofits. And so can local ordinances, state regulations, judicial determinations, and oversight. All are part of the climate affecting nonprofits and their missions.
Build a Movement! is tailored specifically to the laws and realities of Washington State. So no one should simply print out individual templates and run with them. The cultural, legal, and mission differences can matter.
We’ll conclude the description with the summary in the BAM! materials: “Build A Movement! invites you and your colleagues to take action on policy issues that matter to your mission. In its purest form, government is intended to represent the will of the people. This toolkit will support you as you build a movement of people and policy that propels your work to the destination you envision for your organization. ‘Raising the roof’ refers to the tradition of barn-raising — working together to achieve things we can’t do alone.”
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.