It’s Go Time
on Repealing the Tax on Nonprofit Transportation Benefits!
The burdensome and unfair tax on nonprofit transportation benefits will stay on the books into the New Year unless Congress takes action this week to repeal it. Even if the tax is eliminated retroactively sometime in the future, refunds to nonprofits could take months or years. No payment later will replace the food, health care, or other services for the children, seniors, and veterans whom nonprofits are unable to serve because they had to divert limited resources to pay taxes.
Tell your Representative and Senators now that their failure to repeal the tax is harming their constituents, the people you serve. Take two minutes today and call (202-225-3121), email your Representative and Senators, and/or tweet this message: “Your community nonprofits and your constituents we serve are counting on you; repeal the #nonprofit #transportationtax immediately.”
Your efforts will back up the nonprofit community letter sent to congressional leaders last month urging them to include repeal of the transportation tax in any and all bills moving through Congress right now. They know repeal is the right thing to do; we all need to convince them to do the right thing right now!
The Hectic Week Ahead
By the end of this week, Congress hopes to enact all 12 appropriations bills to fund the government (before the December 20 expiration of the current funding bill), approve many or perhaps just a few tax provisions, and extend several expiring programs – all while the House votes to impeach the President and pass trade bills. The appropriations news is the most promising; leaders reached agreement in principal on the details for spending $1.3 trillion in federal funds. Notably, the opposing camps apparently signed off on a border wall plan that doesn’t approve new money, but turns a blind eye to the President’s diversion of funds from other programs to advance his highest domestic priority. An observation making the rounds on Capitol Hill is the acknowledgement, “We have an agreement in principle, but it certainly isn’t a principled agreement.” Should any or all of this fail to materialize, lawmakers are expected to approve another stopgap funding measure that would run until mid-February.
Tax provisions remain unresolved as of this writing and time is short (please see and act on Action Alert, above). Although there is unanimous agreement in support of repealing the tax on nonprofit transportation benefits, haggling over many other tax provisions is blocking movement for any, including increasing earned income tax credits (Democratic priority), renewing expired business tax breaks and disaster relief (bipartisan), and fixing several dozen technical mistakes in the 2017 tax law (Republican priority). Failure this week to reach agreement on a large or even small tax bill would mean that these issues likely will not be resolved, or repealed, until after the 2020 elections.
Public and Government Scrutiny Grow on Proposed .org Registry Sale
Opposition continues to grow over the proposed sale of the nonprofit .org registry to a for-profit private equity firm. Announced in November, the new business, Ethos Capital, is seeking to purchase the Public Interest Registry that provides the .org domains most nonprofits use from its current owner, the nonprofit Internet Society. Concerns include that prices for nonprofit website addresses ending in .org may soon increase dramatically and censorship of nonprofit voices could occur. A letter to the Internet Society in opposition to the sale so far has surpassed 18,000 signers. Opponents have published reasoned analyses in publications worldwide, including the Los Angeles Times and NonProfit Times. Prominent articles have appeared in Chronicle of Philanthropy, CNN Business, Financial Times, and Politico, to name only a few. On December 5, a coalition of concerned organizations, including the National Council of Nonprofits, hosted a nonprofit community call with the parties to the purchase agreements; many additional questions were raised by the responses given. Several state Attorneys General have jurisdiction over the proposed sale and this week numerous U.S. Senators and staff will begin seeking answers. More are expected to announce inquiries in the coming weeks. Learn more about what the sale of .org could mean for your nonprofit.
- Public Comments on Controversial IRS Proposal to Eliminate Confidential Disclosures to the IRS: More than 8,300 individuals and organizations submitted public comments in response to controversial proposed regulations from the Internal Revenue Service that would remove the longstanding requirement that non-charitable tax-exempt organizations, such as Section 501(c)(4) social welfare organizations, disclose – on a confidential basis – the names of their donors and amounts given. Charitable nonprofits would continue to submit the Form 990 Schedule B Schedule of Contributors, as required by law. Many of the public comments expressing support used identical form language calling for protection of their privacy. The National Council of Nonprofits, submitted opposing comments, stating: “The proposed regulations are misguided because they invite bad actors to infiltrate and exploit the nonprofit community to perpetrate excess benefit transactions, engage in unlawful partisan activities, and open the way for disguised foreign interference in American elections and public discourse.”
- Update on E-Filing: The IRS on Friday clarified new filing requirements and due dates for tax-exempt organizations. (See IR-2019-206.) The new e-filing requirements, enacted this summer as part of the Taxpayer First Act, are in effect for most nonprofits in tax years beginning after July 1, 2019, meaning that most e-filings of Form 990 from charitable nonprofits and Form 990-PF from private foundations won’t be due before Dec. 15, 2020. The statute granted a one-year extension to smaller nonprofits submitting Form 990-EZ , but they may file online voluntarily. In 2020, the IRS will continue to accept paper forms that have not yet been converted to electronic format, such as the Form 990-T used for reporting unrelated business taxable income.
- Third Party Gifts Not Charitable Contributions: The Internal Revenue Service will publish on Tuesday, December 17, proposed regulations to clarify that taxpayers may not receive a tax benefit if they receive a good or service from a third party in return for making a charitable contribution. The draft includes two safe harbor provisions for certain state and local tax credit (SALT) benefits. One would allow businesses to receive SALT credits under certain conditions for payments and the other is further clarification from the final regulations on SALT deductions and state tax credit caps. Public comments will be due January 31.
- SNAP Benefits Limited: The U.S. Department of Agriculture (USDA) released its final regulations removing Supplemental Nutrition Assistance Program (SNAP, commonly referred to as food stamps) benefits for nearly 700,000 adults. The new rule will limit the ability of states to waive work requirements for able-bodied adults regardless of the absence of work opportunities. Under current law, adults without dependents are limited to three months of benefits if they do not meet a 20-hour work requirement, but states with high unemployment rates or that lack sufficient jobs may request a waiver to lift that requirement. Thirty-six states have received waivers. The final rule makes it harder to receive waivers - a county's unemployment rate must be 6 percent or higher to qualify. The National Human Services Assembly reacted with this statement: “SNAP is directly responsible for lifting more than 3 million people out of poverty each year ... This new rule will have a negative impact on the lives of hundreds of thousands of individuals living in communities lacking sufficient employment options, who are striving to reach their full human potential.”
- Calculating “Regular Pay” for Overtime Purposes: The U.S. Department of Labor has published final rules for determining "regular rate" of pay, the base hourly rate that is used for calculating time-and-a-half overtime pay for eligible employees. Specifically, the proposed rules (and DOL's two-page summary) clarify that employers (including nonprofits) do not need to include certain payments as part of the "regular rate" of pay, such as payments for unused paid leave; the cost of providing wellness programs and other similar employee benefits; and most reimbursed expenses. The new rule is intended to complement the Overtime Final Rule that on January 1 raises the minimum salary threshold for white-collar employees to $684 per week ($35,568 per year).
- Universal Charitable Giving Act: Representative Mark Walker (R-NC) re-introduced the Universal Charitable Giving Act (H.R. 5923) on Giving Tuesday. The bipartisan legislation provides for above-the-line deductions for charitable donations of up to $4,000 for individuals or $8,000 for couples that take the standard deduction on their tax forms. The North Carolina Center for Nonprofits expressed support for the legislation, stating, “By encouraging all Americans to give more generously to support the work of charitable nonprofits, the Universal Charitable Giving Act would strengthen nonprofits’ capacity to provide essential services in communities across North Carolina.”
- Census Concurrent Resolution Introduced: Senators Schatz (D-HI), Murkowski (R-AK), and others introduced a bipartisan resolution to encourage “individuals, families, and households across the United States to participate in the 2020 Census to ensure a complete and accurate count.” More than 100 state and local organizations, mostly nonprofits and including many state associations of nonprofits, signed on in support of the measure. “The Census is mandated by the Constitution and plays a vital role in our democracy, ensuring that every person is counted and receives the representation and services they deserve,” said Senator Schatz.
Washington State Sets Country’s Highest Overtime Threshold
This month the Washington State Department of Labor & Industries released its long-awaited final rules increasing the minimum overtime threshold over an 8-year period to more than $80,000 per year. The new threshold for determining which white-collar employees may be exempt from overtime pay ultimately will be set at a level of 2.5 times the state minimum wage, which will be $13.50 per hour in 2020 and adjusted for inflation thereafter. The department predicts the minimum annual salary for exempt employees will be $83,356 by 2028. By comparison, the federal overtime threshold next month increases to $35,568 per year. In announcing the news of the overtime threshold hike to the nonprofit community, Laura Pierce, Executive Director of Washington Nonprofits explained: “We face rising labor costs and funding levels that are not keeping pace. On the positive side, this could move us toward better compensation in the sector and less burnout.”
Other states are actively adjusting their own overtime thresholds at levels higher than the federal government. California and New York have adopted minimum thresholds of about $62,000 and $58,000 respectively. Maine sets the minimum salary threshold at $36,000 per year based on a multiple of the state minimum wage (which is rising to $12 per hour in January). A final rule in Pennsylvania would raise the threshold to $45,500 by 2022, but may be on hold as the Governor negotiates a minimum wage hike in the Commonwealth.
States Upholding Nonprofit Hospital Tax Exemptions
State agencies and courts are upholding and clarifying nonprofit hospital tax exemptions as Congress investigates nonprofit billing practices. The Connecticut Governor and Attorney General and the Connecticut Hospital Association settled a multi-year lawsuit over a provider tax on hospitals that the hospital association argued was illegal. The State, to avoid up to $4 billion in liabilities for imposing that tax, agreed to pay the hospitals $1.8 billion and cut hospital user fees from $900 million to $820 million over six years. In Brooklyn, New York, the property used by a for-profit dialysis center that was leased by a nonprofit hospital qualified for tax exemption because the services were aligned with the nonprofit’s charitable purpose, according the New York State Appeals Court. On the West Coast, the Washington State Department of Revenue updated regulations to provide property tax exemption for nonsectarian corporations and amended the definition of hospitals, among other changes. At the federal level, Senate Finance Committee Chairman Grassley (R-IA), recently sent letters to health care systems in Tennessee and Virginia as he probes aggressive debt collection practices by the nonprofit hospitals.
Taxes, Fees, PILOTs
A recurring series on efforts to restrict or protect nonprofit tax exemptions, presented as a warning and guide for nonprofits throughout the country:
- Taxes: A stormwater “service charge” levied on residents, including nonprofits, in Harper Woods, Michigan, was found to be an unconstitutional tax by the Michigan Court of Appeals. The service charge was more akin to a tax than a user fee, according to the court, and therefore violated the state constitution for being applied without voter approval.
- Fees: A new “charitable donations program” in Buffalo, New York, is acting as a buffer to postpone a ticket sales fee affecting both for-profit and nonprofit organizations proposed by the City. More than a year ago the Mayor proposed assessing a fee ranging from $.50 to $3.50 per ticket sold at five major venues, including those owned by charitable nonprofits. The operators of the venues opposed the fee, calling it an illegal tax, and the Mayor announced the donations program instead. Private foundations and families related to the various venues agreed to contribute between $200,000 to $1.5 million each this year to avoid the ticket surcharge.
- PILOTs: City officials in Hazleton City, Pennsylvania received its first payment in lieu of taxation (PILOT) from the Hazleton Housing Authority. The Housing Authority is the only nonprofit that has made the voluntary payment of $52,000, despite being a nonprofit protected by the state constitution from having to pay property taxes. “It’s a complicated situation. Most of the nonprofits that you see simply don’t have the resources to do a PILOT,” said State Senator Yudichak, who doesn’t expect state legislators to force nonprofits to pay since they provide services and give back in other ways.
Virginia Preserves Donor Confidentiality from Public Disclosure
The private fundraising foundation of the public George Mason University is not required to publicly disclose donor records, the Virginia Supreme Court recently ruled. The justices held that private foundations, no matter how closely intertwined with the university they serve, are not public bodies for the purposes of Virginia’s Freedom of Information Act. “Had the General Assembly intended the unreserved inclusion of nonprofit foundations, that exist for the primary purpose of supporting public institutions of higher education, as public bodies under VFOIA, it could have so provided, but it has not,” they wrote.
Nonprofits Consider Alternatives for Student Debt, Education
The astronomical $1.6 trillion in student debt, now second only to debt for home mortgages, is weighing down individuals, families, and the economy. Many charitable nonprofits are taking on the issue, including looking at ways to help their employees know about debt relief, notably Public Service Loan Forgiveness, alternative educational opportunities, and protections for borrowers.
During the recent Week of Action on Student Debt in California, borrowers, advocates, and nonprofits across the state, including CalNonprofits, the state association of nonprofits in the state, united “to demand consumer protections against predatory student loan servicers and share[d] resources that can offer immediate support for borrowers.” The in-person and online event to “Free My Future” and #ProtectBorrowers was a mixture of online resources featuring CalNonprofits’ Nonprofit Student Debt Toolkit, a short survey, an opportunity to tell your story, a tele-town hall, a social media toolkit, and even a live comedy show, all of which culminated in a Student Loan Debt Summit and livestreamed workshop. A coalition of advocates are also supporting the Student Borrower Bill of Rights (AB 376) to set standards, ban abusive practices, create special protections for military families, teachers, public service workers, people with disabilities, and older Americans, establish a Student Loan Borrower Advocate, and demand transparency.
In Massachusetts, nonprofit employees in human services have the opportunity to participate in a Tuition Remission program through the Providers’ Council, a state association of nonprofits in the Commonwealth. The program “allows employees to take courses without paying tuition at state-supported public colleges and universities,” and was originally “initiated to help human service employees gain access to college education to advance their careers in the field of human services.” More than 3,700 workers from 400+ organizations have participated in the program through more than 22,000 classes since its inception in 2000. “We know from talking with our members that they are always looking for quality, low-cost educational benefits that they can share with their employees,” said Providers’ Council President and CEO Michael Weekes. “Educational opportunities are key to retaining staff and even attracting new workers to our sector, and Tuition Remission helps reduce the financial bite of completing a degree or gaining new skills.” See the Council’s FAQs for more information on eligibility.
Through these and other innovative programs, nonprofit workers can look beyond their paychecks for student debt relief while also advancing their educations.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.