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Congress Needs to Know
What Is Your Experience with the Tax on Nonprofit Transportation Benefits?
When a House committee took action last month (see article below), lawmakers expressed a strong interest in repealing the new 21-percent tax on nonprofit transportation benefits, such as parking and transit passes. However, there appears to be no sense of urgency in Congress, and the tax on nonprofits could continue to divert dollars from missions as Representatives and Senators set this issue aside while haggling over other controversial tax policy disputes. They need to learn, most particularly from real-world examples, how their inaction is harming the work of nonprofits serving their constituents.
If you have not done so already, please complete this quick survey asking how much your nonprofit paid in taxes, what it cost your nonprofit to calculate the tax liability, and how that money could have been better spent advancing your mission in your communities. Help repeal this unfair tax by sharing data that will make the case and prove that nonprofit assets are better spent on mission than on taxes. Take the Survey!
Momentum Building to Repeal Tax on Nonprofit Transportation Benefits
The House Ways and Means Committee met last month and approved legislation, H.R. 3300, that, among other things, would repeal the tax on nonprofit transportation benefits. The bill passed out of Committee with only Democratic votes, but the markup of the legislation demonstrated near universal agreement that the tax on nonprofits was a mistake that must be corrected. Representative Brady (R-TX), the former Chairman of the Committee who ushered the 2017 tax law through the House, offered an amendment to H.R. 3300 that would have struck everything except the repeal of the tax on nonprofit transportation benefits. When all the votes were counted, every Republican voted for the language to repeal the new tax (Tax Code Section 512(a)(7)). Read the testimony of the National Council of Nonprofits, the CT Community Nonprofit Alliance, and other organizations. The next major step will be action by the full House, but the current bill as passed out of the tax committee is just one of many pieces of legislation on the table for a negotiated tax package. Take the quick survey to provide data that will show Congress that action to repeal the transportation benefits tax on nonprofits is urgently needed.
U.S. Supreme Court Removes Citizenship Question from 2020 Census (For Now)
 Last Thursday, the U.S. Supreme Court ruled that Commerce Secretary Ross did not provide accurate legal justification for his decision to insert the citizenship question on the 2020 U.S. Census. While the Court’s decision in Department of Commerce v. New York blocked the citizenship question from being on the 2020 Census, it also seemed to leave open the remote possibility that a citizenship question could be added again. That theoretical possibility, however, faces several significant legal and practical hurdles, including that the federal government repeatedly told the U.S. Supreme Court and other courts that the final decision had to be made by June 30 so the census forms could be printed in time.
Tim Delaney, President & CEO of the National Council of Nonprofits, stated: “Nonprofits across the country celebrate the U.S. Supreme Court’s decision that effectively keeps the untested and unnecessary citizenship question off the 2020 census questionnaire.” He pointed out further, “The Supreme Court’s correct result in this landmark case, however, only provides the opportunity for a fair, accurate, and complete count. It does not guarantee it. There still is much work to be done to prepare for the actual 2020 census – and nonprofits play a critical role ensuring that everyone is counted.” For more insights, read Tim Delaney’s article in last Friday’s edition of Nonprofit Quarterly, What the US Supreme Court Citizenship Case Means for Nonprofits. And see In Focus, below, for how your nonprofit can help ensure that the 2020 census produces the quality data you need.
Nonprofit Relief Act Introduced to Remove Tax Barriers for Nonprofits
Congresswoman Carolyn Maloney (D-NY) and House Majority Whip Jim Clyburn (D-SC) introduced the Nonprofit Relief Act (H.R. 3323) that would repeal the new tax that requires nonprofits to treat every unrelated business revenue stream as a separate “trade or business” that may not be aggregated with their other profits and losses in calculating tax liabilities. The bill also would extend the paid leave tax credit available to for-profit businesses to tax-exempt organizations and change the tax treatment of mileage reimbursements to volunteers, so they are no longer subject to federal and state income taxes. “The Nonprofit Relief Act would fix new and longstanding tax law policies that hurt the ability of charitable nonprofits to advance their missions in communities throughout America,” said Tim Delaney, President and CEO of the National Council of Nonprofits, upon introduction of the bill. “We appreciate the respect that Congresswoman Maloney and Majority Whip Clyburn have for the work nonprofits perform daily in every congressional district.” See the news release.
Federal FastView
- Mandating E-Filing of Nonprofit Tax Returns: The House of Representatives and the Senate approved and sent to the President the Taxpayer First Act, a bipartisan bill designed to modernize the Internal Revenue Service. The measure would require tax-exempt organizations to electronically file tax forms 990, 990-EZ, and 990-PF. Currently, only the largest and smallest nonprofits are required to file their IRS annual reports electronically. The mandatory e-filing requirement would take effect for tax years after signed into law. Nonprofits with revenues below $200,000 and assets of less than $500,000 would have an additional two years before the electronic filing requirement is implemented. Additionally, the Act would require the IRS to provide notice before automatically revoking nonprofits’ tax-exempt status for failure to file 990s for three consecutive years. The President is expected to sign the legislation.
- Streamlining Grants Compliance: Today the Office of Management and Budget released its 2019 Compliance Supplement, which should lessen the burdens on nonprofit compliance with federally funded grants. OMB used the 2019 supplement to eliminate overly burdensome compliance requirements. The new framework is designed to allow nonprofits and other grant recipients, program managers, and auditors to focus on the areas of highest risk. This year, for the first time, instead of agencies requiring auditors to review a maximum 12 compliance areas, the Supplement provides instructions to review up to six of the most critical compliance review areas based on program needs.
- Expanding 501(c)(3) Status to Include Nonprofit Newspapers: Entities organized and operated exclusively for “the publication (including electronic publication) of written news articles” could be classified as charitable under Section 501(c)(3) under the newly proposed Saving Local News Act of 2019. The legislation would make clear that advertising revenues would not be treated as unrelated business taxable income for nonprofit newspapers. Rep. DeSaulnier (D-CA) introduced the legislation, stating, “This bill would allow papers to renew their focus on quality content and flourish unencumbered by ever-increasing demands for greater profits.”
In Focus
Census Data: It Matters to Nonprofits
The U.S. Census Bureau is considering making significant changes to its census data products that could significantly reduce the amount and quality of information that is made publicly available. These data products are often used for research, evaluation, and advocacy for the rights of vulnerable communities. Indeed, in its brief before the Supreme Court, the National Council of Nonprofits highlighted the need for quality data as a major reason for opposing the inclusion of the untested citizenship question. If your organization regularly uses data from the census or the American Community Survey, we encourage you to take this opportunity to explain what data you use in your work to inform the Census Bureau as it makes decisions about which data to make available.
To provide feedback, send an email to censusdata@lists.datasociety.net by July 10, 2019, including answers to any or all of the following questions:
- What people or organizations do you rely on for census data analysis?
- Are there research reports from the Census Bureau or based on census data that you use on a regular basis to inform your decision-making?
- What questions are you seeking to answer with census data to inform your decision-making?
- Which variables, demographic subgroups, and levels of geography (block, tract, county, etc.) are most essential to your analyses, and why? (Please see the following downloadable spreadsheet provided by the Census Bureau for more detail on specific tables.)
Some States Stepping Up with Census Funding; Others Not
The 2020 census begins in nine months and lawmakers in several states are investing dedicated funding for efforts to secure a fair, accurate, and complete count so everyone is counted. Michigan Nonprofit Association will receive $5 million directly from the State for its census complete count campaign under the spending bill signed into law last week. Lawmakers in Delaware recently appropriated $650,000 for a complete count. Massachusetts legislators are debating two budget bills (H.3801 / S.2235) to determine whether $2 million or $2.5 million should be used for a complete count committee. Additional funds are also appropriated in the bills for other census-related activities. In Illinois, Forefront, the state association of nonprofits, helped lead the charge to help secure a new $29 million appropriation for census outreach across the state. Also, the Illinois Governor signed an executive order establishing a Census Office and a Census Advisory Panel that will divvy up funds for local groups, particularly in hard-to-count communities. Meanwhile, the National Council of State Legislatures reports that 18 states still have not even created a Complete Count Commission, putting their states at greater risks for undercounts that could cost their taxpayers, businesses, governments, and nonprofits significant federal funding for the next decade and loss of vital data needed for quality decision-making.
Wayfair and Tax-Exempt Organizations One Year Later
One year after the landmark decision in South Dakota v. Wayfair, which recognized the power of states to impose sales taxes on sellers outside their jurisdictions, most states with a sales tax have taken action to extend their tax to reap the new source of revenue. Of the states with a sales tax, all but three (Florida, Kansas, and Missouri) have set some economic nexus standard to require out-of-state sellers to collect and remit sales tax. Nonprofits selling goods and services, such as books, or event tickets for conferences, out of state may be required to collect and remit these taxes, depending on the volume and how state laws are structured. Additionally, states are beginning to pass and implement marketplace facilitator or provider requirements for online marketplaces like Amazon, Etsy, and eBay, that nonprofits often use to purchase goods. Nonprofits buying goods and services from marketplace sellers or other out-of-state retailers may see an increase in costs as these taxes are imposed.
States Look to Further Tax Reforms in 2020
State lawmakers are already preparing for tax reforms in 2020, after two years of policy changes forced by the 2017 federal tax law and the Wayfair decision. Two former state senators in Kansas have been tapped by Governor Kelly to review, and recommend changes to the tax code after the Governor vetoed two federal conformity bills this year. The former legislators, one Republican and one Democrat, are charged with leading a panel to provide a bipartisan perspective for future policy changes. In Utah, the Tax Restructuring and Equalization Task Force began a state tour last month to hear ideas on reducing government spending, overall tax burdens, and tax credits and possible cuts. The ten elected representatives and four tax experts that make up the task force will then present agenda items on how to expand the tax base to account for the state’s high population growth.
States Enacting Employment Law Changes
States in the Northeast are enacting new laws to increase wages and expand employee protections. Starting today in New Jersey, employees will see a new minimum wage of $10 per hour, expanded family leave for employers with 30 or more employees, while a ban on salary history inquiries for job applicants is awaiting the signature of the Governor. Similarly, today the District of Columbia minimum wage rises to $14.00 per hour and the District begins collecting taxes from all private sector employers to fund the local paid family leave benefit. Beginning in 2022, workers in Connecticut will be entitled to up to 12 weeks of paid family and medical leave under a law recently signed by the Governor. Unlike leave programs in other states, some of which are partially funded by a surcharge on employers (such as in DC), Connecticut’s plan is paid for by a 0.5% payroll tax levied on all employees. A bill in New York that has passed both the Senate and Assembly would increase protections for employees who have been sexually harassed. The legislation would lower the legal standard for proving a harassment claim, prohibit nondisclosure agreements and mandatory arbitration related to discrimination, and require employers to provide employees notice of their sexual harassment prevention training in writing in English and employees' primary language. It also would extend the statute of limitations for claims resulting from unlawful or discriminatory practices constituting sexual harassment to three years.
New York Holding Firm in Support of Nonprofit Nonpartisanship
The New York Senate and Assembly have approved a bill (A. 623 / S. 4347) to “enshrine in state law the 65-year balance achieved under federal tax law by the ‘Johnson Amendment,’ whereby religious and 501(c)(3) nonprofit corporations are granted tax-exempt status but may not endorse or oppose a candidate for political office.” The joint news release from the bill sponsors explained: “The bill would codify the Johnson Amendment into state law for any New York corporation, association, trust, fund, foundation, or limited liability organized and operated for religious, charitable, scientific, public safety, literary, or educational purposes as defined by section 501(c)(3) of the internal revenue code, and would continue that requirement in New York even if the Amendment were to be repealed in the future at the federal level.”
Messaging Matters
Effective advocates know that rallying the public requires more than speaking in generalities or uttering unfathomable dollar figures without context. Laurie Wolf, President and CEO of The Foraker Group, the state association of nonprofits in Alaska, demonstrated Friday how to explain amorphous budget problems in human terms so people are inspired to take action. Here’s some of her message, Foraker responds to $680 million cuts in FY2020 state budget, annotated with an Advocacy in Action eye toward what all nonprofits can learn from this excellent messaging.
The Problem
Laurie’s message to Alaska nonprofits announced the news: “Governor Dunleavy used his line-item veto to cut over $400 million from the FY2020 state budget, adding to $280 million in cuts already made by the legislature. These cuts represent some of the largest we have seen to health and human services in our state’s history.”
Numbers alone don’t move people. Are those cuts truly significant? Will there be any change in everyday life of people? Laurie explains …
What the Cuts Mean
“These cuts will mean the loss of essential services, and our most vulnerable will be the most harmed. More people will go without homes, without food, and without healthcare. Our children will be less protected. Our families and our seniors will be more stressed. Our environment will be harmed. Simultaneously, we will be less informed as the state pulls away from public radio and television. We will also be less able to express ourselves as artists, and the organizations that celebrate and create opportunities for artistic expression will no longer be funded. These budget cuts erode the very nature of the way we understand the multi-sector commitment that has worked in Alaska since statehood.”
Why It Matters to Everyone
Laurie recognized that many “Alaskans might believe they will be unaffected by these cuts,” so she translated the abstract budget numbers in ways that make the problem relevant to everyone in their daily lives. “If you are upset and concerned by seeing people living on the streets, be prepared to see more,” she writes. “If you like quality-of-life experiences in your community, be prepared for less. If you are troubled by the rate of property taxes, be prepared for those to go up as costs shift to local governments.”
Nonprofits as Part of the Solution
”If you are leading or working in a nonprofit today, know that your work matters. Know that we see you saving lives and caring for people with real challenges. Know that we see you celebrating artists and creating vibrant communities. Know that we are with you as stewards of our environment and its resources. Know that we are tuning in, listening to our radios, and watching TV. You are our lifeline in an emergency, and we will navigate the path forward together.”
And the Call to Action
“We share your sadness that Alaskans in every community will be hurt by these decisions. Today and every day to come, we are standing with you. Together let’s raise our voices. Let’s pull together in this stressful time. Let’s stand up for the Alaska where we all benefit. As nonprofit leaders, let’s show our fellow Alaskans what kind of Alaska we want to live in together.”
The overarching theme of The Foraker Group’s work is this rallying cry: “Alaska only truly works when we work together – nonprofits, business, and government.” In her message to nonprofits in Alaska – a message that is truly relevant to all nonprofits – Laurie is stressing that nonprofits are essential, are key problem solvers in their communities, and have a key role to play. For the benefit of all.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.
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Why the Supreme Court is blocking a citizenship question in the 2020 Census — for now
