Biden Proposes Major Spending and Tax Plans
Over the past three weeks, the Biden Administration has released extensive plans for rebuilding the nation’s infrastructure, paying for the rebuilding program, and spending priorities for fiscal year 2022. As previously reported, the President is proposing an infrastructure package, the American Jobs Plan, that calls for spending $2.3 trillion on transportation, water, housing, high-speed broadband access, job training, and much more. To pay for the Jobs Plan, the Treasury Department released a summary of the Made in America Tax Plan, a proposal to raise $2.5 trillion through corporate tax hikes, primarily by increasing the business tax rate from 21% to 28%. Republicans generally reject the infrastructure plan as a wish-list of spending priorities and assert that the tax hikes are an “economic blunder.”
Most recently, the White House released the President’s Discretionary Spending Request for FY 2022, one of the components of his budget request to Congress. The request to Congress calls for discretionary spending of $1.52 trillion, which includes $769 billion for non-defense spending, a 16% increase from enacted spending for the current fiscal year. See the White House news release for a summary. The President is seeking a 10% increase in IRS funding to beef up enforcement of wealthy taxpayers and corporations. The released information does not include tax reform proposals, which the White House promises will be announced soon “as part of a comprehensive, fiscally responsible plan to meet the Nation’s challenges.” Nonprofit advocates are waiting to see whether the Administration will propose capping the value of itemized deductions (including charitable deductions), as was proposed during the campaign last year and included in several budgets of former President Obama.
- PPP Funds Running Low: The money available for Paycheck Protection Program loans is likely to run out in the first week of May, sources inside the Small Business Administration are acknowledging. Congress appropriated nearly $300 billion to restart the PPP and expand the loan/grant program in laws passed in December and March, and most recently extended the application period through May. However, loan applications will be rejected once the money is loaned out unless Congress provides more funding, which is not currently being discussed.
- Shuttered Venue Program Delayed: The Shuttered Venue Operators Grant (SVOG) program opened for applications on April 8, but was shut down shortly afterwards due to “technical difficulties” that prevented the platform from accepting applications. Unsuccessful applicants reportedly complained that they could not upload supporting documents for their applications. The SBA’s application page states: “Due to technical difficulties, SBA has temporarily suspended the SVOG application portal. SBA is working closely with the portal vendors to reopen as soon as possible. SBA will share advance notice of the time and date before the reopening so all applicants can be prepared and to ensure equitable access. Applicants may continue to register for a new account.”
- Some Nonprofit Jobs Restored: Nonprofit organizations added nearly 81,000 jobs in March, with more than half of the gains seen in educational institutions, according to the latest report from the Center for Civil Society Studies at Johns Hopkins University. Despite these gains, the report finds that, as of March 2021, the nonprofit workforce remained down by nearly 830,000 jobs compared to February 2020 levels.
- Partial Guidance for Ban on State Tax Cuts: The Treasury Department recently provided guidance explaining that states can conform their tax codes to recent federal tax-law changes without running afoul of the provision in the American Rescue Plan Act that prevents use of new COVID funds to provide tax cuts. The law provides that states cannot use the ARPA funds to “either directly or indirectly offset a reduction in the net tax revenue… or delay the imposition of any tax or tax increase.” Acknowledging that confusion is great, Treasure reiterated in the latest statement that it “will issue comprehensive guidance to implement the statutory framework.” Seventeen states have joined multiple lawsuits challenging what they claim is an unconstitutional infringement on their taxing authority.
- Nonprofits Endorse Charitable Giving Bills: More than 400 charitable nonprofits have signed onto a statement expressing strong support for “the bipartisan Universal Giving Pandemic Response and Recovery Act (S. 618 and H.R. 1704), as introduced, and urge Congress to include this bill in the next COVID-19 relief/recovery package or tax package.” The statement explains, “this legislation will further incentivize all taxpayers to give to charity – regardless of their income or whether they itemize – helping to spur even more giving as communities continue to fight and recover from COVID-19 and its economic effects.” See the Charitable Giving Coalition summary. All charitable nonprofits are invited to sign onto the endorsement list.
- COVID-19 Community Corps Established: The U.S. Department of Health and Human Services recently announced the formation of the COVID-19 Community Corps to mobilize doctors, community leaders, businesses, and citizens to build vaccine confidence and uptake. According to HHS, “The Community Corps will be comprised of trusted voices in communities across the country, and the Administration will regularly share updated public health information and resources for them to use with their communities to help get friends, family, and followers vaccinated.” Nonprofits and individuals are encouraged to sign up to become a member of the COVID-19 Community Corps.
Nonprofits and COVID-19 Vaccinations
Two national webinars recently hosted by the National Council of Nonprofits explore the role of charitable nonprofits in helping people get vaccinated with the COVID-19 vaccine and address questions related to getting back to in-person operations. View the webinars:
Advancing the WORK NOW Act
A policy priority of the broad nonprofit community in any future infrastructure or COVID-recovery bill is passage of the WORK NOW Act, a $50 billion grant program to promote the creation of nonprofit jobs. The Work Opportunities and Resources to Keep Nonprofit Organizations Well Act, or simply the WORK NOW Act (S. 740 and H.R. 1987), was introduced in March by Senator Amy Klobuchar (D-MN) and Representative Linda Sanchez (D-CA). If enacted, the new program would provide grants to help nonprofit organizations retain their employees, scale their service delivery, and provide unemployed people with new jobs serving their communities. The WORK NOW Act would inject $50 billion into frontline nonprofits to enable them to pay the wages, salaries, and benefits of either existing employees or new employees. Most of the funds would be allocated through state, Tribal, and local governments; the Treasury Department would distribute the remainder through grants to national and regional nonprofit intermediary organizations.
Senator Klobuchar introduced the WORK NOW Act, stating, “We need to help charitable nonprofits keep their doors open, scale their invaluable services, and provide opportunities for unemployed Americans to return to work serving their communities.” Representative Sanchez said, “Nonprofit organizations provided some of the most essential services throughout this pandemic,” and stressed, “As they handle the increased demand and adhere to social health guidelines, these organization need help expanding services and hiring, training, and retaining employees.” All of the sponsors and cosponsors agree that the WORK NOW Act would ensure that “nonprofit organizations continue to meet the needs of our community and will help get Americans back to work.” See letter to congressional leaders in support of the WORK NOW Act.
Take Action: Contact your Representatives and Senators and urge them to cosponsor the WORK NOW Act (S. 740 and H.R. 1987) and to insist that it be included in any COVID-related stimulus legislation in 2021.
States Consider Whether to Curb Donor Disclosures
At least ten states have considered legislation this year to restrict the power of state and local governments to require charitable nonprofit organizations to report on a confidential basis the names of donors, as they already report to the IRS on Schedule B of the Form 990. Promoters of the bills claim donor privacy; opponents object to the infringement of normal law-enforcement authority. Lawmakers in South Dakota enacted two laws (HB 1079 and SB 103) that will prohibit the executive branch from requiring any filing or report by a nonprofit or charitable trust “that is more stringent, restrictive, or expansive than that required by state or federal law” or provide the state with “personal affiliation information” of any member, supporter, volunteer, or donor to a nonprofit in the state. Legislation under consideration in Arkansas, Iowa (HF 309 / SSB 1036), North Carolina (SB 685), Oklahoma (on the Governor’s desk), Tennessee (HB 159 / SB 1608), and West Virginia are substantively similar to one or both of the South Dakota laws. A separate measure in North Carolina (SB 636) would prohibit nonprofits from disclosing donor’s identities without the consent of the board of directors, a prohibition that may hamstring nonprofits from expressing appreciation for event sponsors and other actions. Bills in Nebraska and New York (A.1141 / S.4817 / A.11154) have failed to move, and a measure in Wyoming died due to legislative deadlines.
Localities Eagerly Await Federal Aid
Local governments anticipate a large influx of federal funding from the American Rescue Plan to plug budget deficits, jumpstart local economies, and begin infrastructure plans delayed in the wake of the pandemic. Approximately $130 billion available under the state and local funding program in the federal legislation can be used for a broad range of spending priorities, including affordable housing, homelessness, broadband expansion, child care, and job training. The Mayor in Madison, Wisconsin plans to apply an equity lens in making spending decisions to focus on equity concerns and social justice reforms. The Mayor of Dayton, Ohio is looking to use the one-time funding for immediate needs that will not result in unsustainable expenses going forward.
Nonprofits are eligible recipients of state and local funding under the American Rescue Plan and have been alerting state and local officials to partnership opportunities. Maryland Nonprofits, the state association of nonprofits in the state, recently wrote to county and municipal leaders “to encourage their support of local nonprofits” and partnership with community foundations. The letter states, “Nonprofits are on the front lines of providing COVID-19 relief, reaching deeply into their communities with food distribution, rental assistance programs, support for seniors and people with disabilities.” It explains, “At the same time, nonprofits are businesses that have lost significant revenue due to COVID and have the same pressures of other businesses of meeting payroll, managing facilities, and putting safety measures in place.”
North Carolina Lawmakers Take Up TABOR
A bill (S.717) filed last week in North Carolina proposes to place a constitutional amendment on the November ballot to restrict state spending by way of an arbitrary formula based on state population growth and inflation. The proposed amendment, known as the Taxpayer Bill of Rights, or TABOR, would impose limits on how much the Legislature could spend and require that tax revenues beyond the spending allowance be placed in the state’s saving reserve fund or given back to taxpayers. The proposal, if approved by voters, would also require super majorities of the legislature to approve any future spending above the formula or tax hikes. The amendment would need super majority approval in both chambers to put the measure on the ballot and a majority of voters would need to vote in favor in the fall to become law.
Nonprofits have gone on record opposing TABOR and other gimmicks that restrict the ability of lawmakers to address immediate and future needs. Colorado is the only state that has fully implemented a version of TABOR. The Colorado Nonprofit Association, the state association of nonprofits, has stated, “TABOR has undermined the ability of Colorado nonprofits to meet current demands for services and respond to future changes in economic conditions, population growth, and the costs of delivering public services.”
Advocating Ahead of the Curve
Normally, we dedicate this section of the biweekly newsletter to highlighting recent examples of nonprofit professionals “walking the walk”” of advocating for their missions. In this edition, however, we’re taking a prospective approach. That’s because the Internal Revenue Service is seeking recommendations from the public about which regulatory matters need fixing. The invitation is worth accepting for the good of the nonprofit sector and the public good.
In Notice 2021-28, the IRS and Treasury Department formally invited the public to submit recommendations for items to be included on the 2021-2022 Priority Guidance Plan. That’s essentially the government’s regulatory “to do” list for tax matters. Specifically, the Treasury Department's Office of Tax Policy and the IRS use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. In their view, the “published guidance process is most successful if the Treasury Department and the Service have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the tax laws.”
So what’s in it for nonprofits? Quite simply, the public-recommendation process gives nonprofits the opportunity to identify current tax rules and regulations that need revision or clarification; raise questions that can lead to guidance with better, more nonprofit-specific examples; and promote voluntary compliance by removing ambiguity. But that’s not all – you also get to offer solutions!
Here’s an ideal opportunity for you and other nonprofit advocates to identify and propose solutions to problematic rules, guidance, and processes at the IRS. For example, the National Council of Nonprofits will be submitting recommendations on a number of items ranging from details on the Form 990 informational tax return to the Service’s application form for tax-exempt status – Form 1023-EZ – that fails to provide adequate information to ensure that only eligible organizations attain tax-exempt status and the privilege of receiving tax-deductible donations. Is there a regulatory matter in the tax arena that needs fixing? You can use this invitation from Treasury and the IRS to ease compliance burdens, promote tax administration and enforcement, and truly make a difference.
You are encouraged to submit recommendations for guidance electronically via the Federal eRulemaking Portal at Regulations.gov (type IRS2021-0004 in the search field on the regulations.gov homepage to find this notice and submit recommendations). The deadline for submitting public recommendations is Friday, May 28, 2021.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Updates.