The New Overtime Rule and Nonprofits
The U.S. Department of Labor Overtime Final Rule, set to take effect on January 1, 2020, will require the payment of overtime to virtually all workers earning less than $684 per week ($35,568 per year) regardless of their job duties or executive, administrative, or professional status. The new regulation also raises the salary threshold for highly compensated employees who are exempt from federal overtime pay requirements from $100,000 per year to $107,432 per year and allows employers to satisfy up to 10 percent of the standard salary level by using nondiscretionary bonuses and incentive payments. View the National Council of
Nonprofits’ resource page and read the new analysis, Understanding the New Overtime Final Rule.
On Tuesday, November 5 at 3:00 pm Eastern, the networks of the National Council of Nonprofits are hosting a national presentation to help all in the charitable community understand what the Overtime Final Rule means to nonprofit operations and missions, and what nonprofits should be doing now to prepare. We will be joined by officials from the U.S. Department of Labor and experts from groups representing workers and employers who will present their unique perspectives and answer questions from nonprofits. Register now!
The Legislative Agenda in Washington
While the impeachment inquiry and incursion into Syria are the lead news stories at the top of every hour, Congress continues to work, mostly behind the scenes, to address essential spending and tax law fixes. A temporary continuing resolution that has funded the government since the beginning of October is set to expire on November 21, but there is still no resolution on the biggest stumbling block to fully funding the federal government – whether to fund the President’s promised southern border wall. Senate Majority Leader Mitch McConnell (R-KY) announced his intent to bring up two House-passed spending packages this week. The plan is to begin floor debate on some of the least controversial bills dealing with
funding for Agriculture-FDA, Commerce-Justice-Science, Interior-Environment, Military Construction-Veterans Affairs, and Transportation-HUD. Failure to appropriate funds for government departments will cause a partial or complete federal government shutdown the week before Thanksgiving.
Nonprofits continue to encourage Congress to pass tax legislation as soon as possible that repeals numerous new taxes on tax-exempt organizations, including the unrelated business income tax on nonprofit transportation benefits, such as transit passes and parking. Lawmakers reportedly are trying to negotiate an end-of-year tax bill that addresses taxes on nonprofits, as well as fix dozens of mistakes (known as technical corrections) in the 2017 tax law and renewal of expired business tax breaks (commonly called “extenders”). Separately, several Republican Senators are urging Majority Leader McConnell to bring to the
floor for debate and vote a bipartisan retirement security bill that passed the House by wide margins earlier this year. One or more nonprofit-related provisions could be added to that bill as an extra incentive to get reluctant Senators to take action.
- Halting Public Charge Regulations: Three federal courts issued rulings pausing the U.S. Department of Homeland Security’s (DHS) public charge regulation that was scheduled to take effect last week. The public charge rule would have allowed immigration officials to give greater weight to applicants' medical history, income levels, and dependency on public assistance in determining whether to grant lawful immigration status. Many nonprofits expressed concerns that the new public charge rule would discourage immigrants from using public benefits, such as the Supplemental Nutrition Assistance Program
and Medicaid, due to fear of being deported. The National Council of Nonprofits submitted comments opposing the regulation “because the rule would violate core American principles, operate as an unfunded mandate by imposing billions of dollars of costs onto charitable nonprofits, and negatively affect the operations of charitable nonprofits.”
- Narrowing SNAP Eligibility: Three proposals to change the Supplemental Nutrition Assistance Program (SNAP), commonly referred to as food stamps, would make it more difficult for persons to qualify for food aid. The proposals would apply stricter work requirements, eliminate automatic enrollments for welfare benefit recipients, and change how utility costs are considered for benefits. The U.S. Department of Agriculture made the proposals to restrict flexibility of states in administering the programs. Feeding
America opposed the regulations, stating, “If the three proposals become final and are implemented, millions of SNAP participants will have their benefits reduced or cut altogether – particularly seniors, people with disabilities, and working families – and 500,000 children will lose access to school meals.” Public comments on the proposed rule on utilities are due December 2.
- Challenging Regulations Curbing SALT & State Tax Credits: Bipartisan opposition is growing against regulations adopted in June that limit the tax deductibility of donations to certain nonprofits that generate both state tax credits and federal charitable deductions. Intended to block efforts by some states to enable taxpayers to work-around the $10,000 cap on state and local taxes (SALT), the rules also reduced the tax advantages of many state tax-credit programs designed to promote
giving to charter and religious schools, among other favored charitable missions. Recently, Senator Lindsey Graham (R-SC) asked Treasury Secretary Mnuchin to create a carve-out or safe harbor in the regulations for donations to the South Carolina Research Authority. Separately, Senate Democrats have announced plans in the coming weeks to challenge the SALT and state tax credits regulation through the Congressional Review Act, a process
that permits Congress to consider and possibly block new regulations.
- Fixing the Public Service Loan Forgiveness Program: Recently introduced federal legislation (R. 4674) would strengthen the Public Service Loan Forgiveness (PSLF) program, among other things. PSLF allows borrowers to earn forgiveness of the balance of their student loan debt after working in public service, including at 501(c)(3) nonprofits, for at least 10 years while making qualifying payments. The new legislation seeks to improve the federal student loan system by simplifying the repayment process, making borrowing less expensive, removing penalties, and expanding the program to individuals who may have previously been denied forgiveness. Additionally, more workers at certain employers, including Veteran Service Organizations and nonprofit hospitals, could qualify under the bill. The Coalition to Preserve PSLF announced its support, stating, “We are grateful to see that this legislation preserves [PSLF]. Additionally, we support the provisions that improve the administration of PSLF and thus ensure that our government upholds its
promises to our public health, education, and safety professionals.”
- Declining to be counted in 2020: Although just about everyone in America (98 percent) has heard of the 2020 census, 16 percent express some uncertainty about responding to the decennial survey, according to new survey data released by the Pew Research Center. Among those unlikely to participate are younger people age 18 to 29 (34 percent), African-Americans (26 percent), Hispanic residents (21 percent), and those with family income less than $30,000 per year (24 percent). A fair, accurate, and complete count of every person in the country is essential to apportionment and redistricting purposes, as well as
allocation of $800 billion in federal funds, and planning and investment decisions made by nonprofits, businesses, and governments. The Pew report concludes, “The lower the self-response rate, the more the Census Bureau spends on sending employees to knock on the doors of nonresponding households, and the responses could be less accurate.”
Most Honorable Mention
Recognizing the Importance of Nonprofit Nonpartisanship
The News Tribune in Missouri’s capital of Jefferson City recently received more than two dozen awards from the Missouri Press Foundation, including eight first-place finishes in categories of excellence, coverage of government, and community service (covering nonprofits), among others. But to us, the most distinguished award is the News Tribune’s “honorable mention for an editorial supporting the Johnson Amendment, a federal tax code ban on religious and other nonprofit organizations
endorsing/opposing political candidates.” Whether to repeal the law protecting nonprofit nonpartisanship was a hot topic in the senatorial campaign last year, and the newspaper took a strong position in support of keeping the law intact. “Repeal of the Johnson Amendment would allow political organizations/donors to use churches as dark-money pipelines, because they, as 501(c)(3) organizations, don’t have to disclose their donors,” the September 2018 editorial explained. The paper’s editorial board correctly observed, “Without it, religious organizations would be subject to political influence, which would distract — even undermine — their core mission. If churches are allowed to become
intertwined with politics, their followers could lose faith in them.” They concluded, “Repealing the Johnson Amendment would be bad for politics, bad for churches and bad for America.” The vast majority of nonprofits, including houses of worship and foundations, wholeheartedly agree.
State Legislative Update
Charitable Giving Incentives
Nonprofits in multiple states are converting their concerns over the likely impact of the 2017 federal tax law on charitable giving by advocating for improved tax incentives at the state level. Earlier this year, Arizona lawmakers enacted a non-itemizer deduction for donations to charitable nonprofits that allows “taxpayers to increase standard deduction by 25 percent of the charitable donations that would have been claimed as an itemized deduction,” according to the Arizona Department of Revenue.
A bill under active consideration in North Carolina would, among other things, extend the federal IRA charitable rollover to state taxes. The legislation would end state taxation of donations to nonprofits through individual retirement accounts, simplify the process for donors, and allow them to contribute more fully to nonprofits in their communities. Also active is a bill in New Jersey that would create a non-itemizer deduction to allow all taxpayers, regardless of whether they itemize or take the standard
deduction, to claim charitable contributions on their tax forms. Specifically, the bill would permit a taxpayer to deduct from state income taxes the amount of charitable contributions made to a “qualified New Jersey-based charitable organization” equal to the amount that is allowable as a charitable deduction under federal income taxes. The NJ Center for Non-Profits is actively advocating for the giving incentive, pointing out, “Demand for the programs and services provided by charities continues to grow,
while needed resources lag behind” (as outlined in the Center’s recent report).
Taxes, Fees, PILOTs Update
A recurring series on efforts to restrict or protect nonprofit tax exemptions, presented as a warning and guide for nonprofits throughout the country:
- Property Tax: Clinics at an Arkansas nonprofit hospital are exempt from property taxes because they were used “in furtherance of the hospital’s charitable mission,” according to the Arkansas Court of Appeals. The judges ruled that seven parcels consisting of clinic buildings, parking lots, and a vacant lot qualified for the exemption and that state precedent upheld that payments for medical services do not negate charitable missions. “There is no dispute that the hospital is technically a charitable organization, that the hospital and its clinics are open to the
general public, and that no one is refused services due to inability to pay,” reads the decision. The tax assessor had denied the tax exemption because the clinics charged for services.
- Hotel Taxes and Fees: A nonprofit hostel in Philadelphia, Pennsylvania is facing a $500,000 retroactive tax bill for unpaid hotel taxes, fees, and interest for 2008 through 2013. Former Mayor Rendell called the bill “manifestly unfair” because “there’s just no legitimate argument that [the nonprofit hostel] functions like a hotel or would be subject to the hotel tax.” The board of directors raises monies to fund and maintain the previously abandoned mansion, while the $25 per night fees for service paid by patrons go to day-to-day operations.
AGs Protect Against Deceptive Practices
The New York Attorney General filed a lawsuit against NYCharities.org and a related individual earlier this month alleging the giving platform failed to distribute $750,000 to charitable nonprofits across the state. The state Charities Bureau of the AG’s Office had investigated after receiving more than 125 complaints from nonprofits that had not receive the disbursements made to them by people using the NYCharities.org website. “I will not allow greed to profit off of the generosity of New Yorkers without a fight,” said Attorney General James. On the other coast, California Attorney General Becerra secured cease and desist orders against three organizations – Catholic Medical Mission Board, Inc., Food for the Poor, Inc., and MAP International – that a judge found had made deceptive solicitations. The judge also ordered the three entities to pay nearly $1.5 million in penalties. The organizations had deceived donors by implying that up to 99 percent of cash donations would go to charitable programs, when in truth 40 percent
actually went to administration and fundraising. Becerra stated, “[This] announcement should serve as a reminder: charities that mislead generous donors will face serious consequences.… My office will not tolerate accounting gimmicks, and we will hold accountable charities that engage in deceptive solicitations.”
The following is an Advocacy in Action excerpt from the new report: Nonprofit Impact Matters, page 36.
Advocacy is far easier (and more fun) than most people realize. Your nonprofit doesn’t have to hire a lobbyist or devote staff to full-time hobnobbing at the statehouse.
First, become informed about the issues that can help or hinder not only your organization, but also the broader nonprofit community of which you are a part. You can turn to state associations of nonprofits to learn more about pressing policy issues in your state.
To start, nonprofit staff and board members can begin each morning by asking themselves this simple question: “Who can I talk to today to advance my nonprofit’s mission?”
When you speak with a journalist about a community problem, that’s advocacy. Talking with members of a civic club to recruit volunteers for a community project is advocacy. So is visiting with the mayor to share new data about your nonprofit’s positive impact. Advocacy is simply promoting the nonprofit’s mission through engagement with others.
Advocating to change laws and policies is simply a natural extension of direct service and can be a positive multiplier. Food banks provide food for people in crisis—and advocate for public policies that ensure people have access to wholesome, affordable meals all the time. Conservation groups clean trails—and advocate for laws that encourage people to donate land for preservation. Habitat for Humanity helps people build individual homes—and advocates for federal programs that support quality, affordable homes for all Americans. Often, the “who can I talk to today?” is an elected official or government policymaker.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.