Changes Coming for Nonprofits in the New Congress and New Administration
The first 100 days of a new Administration are often marked by a flurry of activity. With one party about to be in control of the White House, the U.S. Senate, and the House of Representatives, significant executive and legislative changes are a near certainty. Many of these changes will affect the ability of nonprofits to advance their missions. To help nonprofits and grantmakers prepare to take swift action to defend against shared threats, the National Council of Nonprofits analyzed six federal issues of sector-wide importance that likely will be taken up in the coming weeks and months. That analysis, published in the
Chronicle of Philanthropy as “Nonprofits Need to Stand Together to Push for Smart Public Policies,” identifies specific challenges and opportunities in budget and spending decisions, tax reforms (including threats to charitable giving incentives), efforts to repeal and replace the Affordable Care Act (Obamacare), independent private control of endowments, preserving nonprofit nonpartisanship, and perhaps positive reforms to regulations and federal grantmaking rules. Readers are encouraged to share the analysis with board members, staff, and other stakeholders so all can be prepared to take collective action on
these issues that affect all nonprofits and grantmakers.
The First 100 Days
The 115th Congress convened January 3 and Donald Trump will be sworn into office late next week as the 45th President, two events that signal the end of federal gridlock and guarantee to bring changes to federal policymaking. Here’s a look at the much-heralded first 100 days, a time of intense legislative and executive activity:
- Confirmations: In addition to its lawmaking role, the Senate will be busy conducting hearings and floor debates on scores of nominees for executive-branch jobs that require Senate confirmation. Several nominees have already proven to be controversial, making it hard to predict when the Senate will complete the process that takes up considerable floor time.
- Affordable Care Act Repeal: A budget resolution introduced in the U.S. Senate on the first day of the session started the process for repealing the Affordable Care Act (ACA). The resolution, which both the House and Senate are expected to approve quickly, directs four congressional committees to craft legislation by January 27 to repeal many of the major components of the ACA. That legislation will be taken to the floors of the House and Senate in a measure called the Budget Reconciliation bill, which requires only a majority vote rather than the usual 60 votes needed to overcome a filibuster
in the Senate. Congress and the White House have not yet worked out details on what provisions they would create to replace a repealed ACA, and some Republican Senators are expressing concern about proceeding with repeal votes before a replacement plan is prepared.
- Tax Reform: Federal tax reform is expected to begin in earnest in early February. Most observers presume the bill will seek to lower individual and corporate tax rates, increase the standard deduction, and repeal the federal estate tax, among other things. The tax outline offered by Speaker Ryan is considered the best indicator of what the legislation will contain. That plan offers support for charitable giving incentives, but an unclear position from President-elect Trump keeps preserving the charitable deduction high on most nonprofits’ policy agendas.
- Spending: Before adjourning for 2016, Congress passed a short-term Continuing Resolution (CR) that funds the federal government through April 28. The new Congress must pass a spending bill by that date, presumably one that runs through the end of the 2017 fiscal year (September 30, 2017). It is unclear, however, whether wholesale cuts are contemplated in April, or whether those will be put off until the next fiscal year.
- Debt Ceiling: Congress and the Administration ostensibly have only until March 15 to address whether to increase the debt limit, which was extended through the budget deal brokered in October 2015. The Treasury Department, however, can use accounting tools to avoid defaulting on the government’s obligations until mid-summer of 2017. The bipartisan Committee for a
Responsible Federal Budget is a good resource on this issue.
- Blocking Future Regulations: Late Thursday, the House passed a measure that would require Congressional approval of major federal regulations before they take effect. The legislation, the “Regulations from the Executive in Need of Scrutiny Act of 2017 or (REINS Act), was drafted to “increase accountability for and transparency in the federal regulatory process,” but has raised concerns among environmental and other advocates that the measure could hamper the work of various federal agencies. The bill would require the House and Senate to accept or reject within 70 legislative days rules that
have an economic impact of more than $100 million. A version of the same bill passed the House last July by a vote of 243-165.
- Repealing Nonpartisanship: Rep. Walter Jones (R-NC) reintroduced legislation to repeal the 62-year-old tax-law provision that prohibits 501(c)(3) organizations from engaging in partisan, election-related activities. The proposal, which was a recurring topic in the 2016 election campaigns, is opposed by many charitable nonprofits because of concern that it would politicize the sector, subject nonprofits and foundations to demands for campaign contributions, and damage public trust in the work of nonprofits. See the National Council of Nonprofits' Public Policy Agenda and advocacy rights video.
- Standard Mileage Rates: Beginning on Jan. 1, 2017, the standard mileage rates for the use of a vehicle will be 53.5 cents per mile for business miles driven, down from 54 cents for 2016, the Internal Revenue Service announced last month. The IRS also lowered to 17 cents the standard rate per mile driven for medical or moving purposes, down from 19 cents last year. The volunteer mileage rate for miles driven in service to charitable nonprofits remains unchanged at 14 cents per mile because the rate is fixed in
- Loan Forgiveness Program in Turmoil: The American Bar Association filed a lawsuit last month against the U.S. Education Department seeking to reverse the Department's decision to retroactively refuse to honor loan forgiveness commitments it made under the Public Service Loan Forgiveness Program to individuals who have dedicated their careers to public service. The suit claims the Department of Education approved public service work prior to changing the eligibility requirements, and that individuals made decisions based on the approval that were then retracted. Read the ABA complaint.
Legislatures Convene Facing Growing Revenue, Budget Challenges
The majority of state legislatures convene this month, and weakening revenues will demand the attention of most early in their sessions. At least half the states ended their last fiscal year with budget deficits due to lower than projected tax revenues, and at least 24 states report FY17 general fund revenues below projections. Nineteen of those were forced to consider mid-year reductions in the past six months. These data points lead CQ’s John Haughey to predict, “Plugging budget holes while cutting taxes will be most state legislators’ biggest 2017 issue, pitting supporters of public services, state/municipal
workers and educators, among others, against taxpayer advocates and business interests.” The Hill newspaper reports that legislators in even conservative states are considering a range of ways to boost revenues, including higher gas taxes, sales tax on internet purchases, new fees, and lotteries.
Nebraska, which is facing a nearly $900 million budget deficit, is considering across-the-board spending cuts in many state agencies, dipping into the rainy-day fund, and debating a shift in the tax code, shifting perhaps from the income tax to sales or property taxes. In Alaska, the Governor’s proposal to close a $900 million budget gap includes cuts to state agencies, furloughs for government employees, limiting infrastructure projects, and reducing payouts of oil dividends from the Permanent Fund. Oklahoma likewise is dealing with a near-billion dollar deficit due largely to low oil prices and prior tax cuts, while Iowa is looking at spending cuts of about $100 million. And despite significant revenue and spending challenges, there is no apparent solution to the partisan gridlock in Illinois, which has not had a state budget for two years, leading to the failure of state departments to pay bills to nonprofits for services
provided more than a year ago.
In Focus: Tax Cuts
Heeding the Lessons of the Kansas Tax Experiment
Nonprofits in Arizona heard the warning of the former Kansas budget director, “Don’t do what Kansas did.” Duane Goossen, Director of the Kansas Division of the Budget for 12 years under Democratic and Republican administrations, was speaking about the “Kansas experiment” of cutting the income tax by 25 percent and eliminating income taxes for nearly 200,000 small businesses. The Arizona Republic quotes Goossen as saying, “It’s a Dumpster fire, it’s a real crisis” that has caused significant reductions in state tax revenues in Kansas
and forced nine rounds of state spending cuts in the last five years. Asked about comparisons between the two states, Arizona Governor Ducey commented that Kansas is not an appropriate analogy because the state economics are so different, preferring to look for models to Florida, Tennessee, and Texas. Governor Ducey reportedly is likely to proposed eliminating the state income tax to trigger economic and job growth.
Charity Regulators Seek to Ramp Up Enforcement
Colorado’s Attorney General announced she is seeking an additional $350,000 per year to add to the existing charity regulators in her office’s consumer protection division and transform that beefed up group into a separate nonprofit oversight unit. Renny Fagan, president and CEO of the Colorado Nonprofit Association, observed, “While the attorney general is seeking to create this unit, it’s really to catch up to the workload they have rather than to respond to more frequent cases of fraud.”
Taxes, Fees, PILOTs
Pennsylvania Communities Targeting Nonprofit Hospitals for New Revenue
Hospitals in Erie County, Pennsylvania are facing property taxes and demands for payments in lieu of taxes (PILOTs) to the county. The Millcreek Community Hospital lost its tax exemption after the Board of Tax Assessment Appeals unanimously decided it did not meet the five criteria for tax exemption under a Pennsylvania Supreme Court case. The hospital property is assessed at $18.9 million, subjecting it to a potential tax of more than $424,000. Saint Vincent Hospital is seeking approval to continue its
PILOT for the next five years. Saint Vincent has been in PILOT deals with the county since the 1990s. The current agreement would commit the hospital to paying about $727,000 per year, apportioned to the school district, city, and county.
North Carolina Mandates Work, Volunteering Requirements for Food Benefits
As of January 1, 23 counties in North Carolina have started requiring food stamp recipients to document work, volunteering, or education activities of at least 20 hours per week or lose their food stamp benefits. The state’s 77 other counties will start following the state mandate beginning in July. The requirement affects approximately 115,000 people and applies to adults under 50 who do not have children. County social services departments are working to educate recipients about the requirements, and one county has started an employment and training pilot program with community nonprofits. People who
lose their food stamp benefits will likely turn to food banks and other nonprofits, placing more strain on resources.
NY and DC Advance Employment Standards Changes
With federal employment standards holding steady or on hold, state and local jurisdictions continue to set their own rates. In late 2016, the State of New York announced its plan to increase the state minimum wage from $9 per hour to $15 per hour over the next six years for most employees. At the same time, the State announced a schedule for raising the minimum salary-level component of the exemption from overtime from the current New York level of $675 per week to up to $1,125 per week ($58,500/annually) in
parts of the state over the same period. On December 20, the District of Columbia City Council passed a measure that mandates paid family leave of eight weeks for a child’s birth, adoption, or placement of a foster child, six weeks to care for an ailing family member, and two weeks of personal sick time. The legislation pays for the benefit, estimated to cost $250 million annually, through a payroll tax increase of 0.62 percent. It is unclear whether the Mayor will sign the bill, having expressed opposition to the measure’s price tag and concern that Maryland and Virginia workers, rather than DC residents, would
be the primary beneficiaries.
A Video Says a Thousand Words and Makes a Budget Impasse Come to Life
Illinois is currently starting its second straight session without a state budget. Stranded by the State, a documentary by In These Times, a Chicago-based nonprofit magazine, and Kartemquin Films, tackles the real effects that result from the financial crisis
caused by the Illinois 2016 budget impasse. Each episode uses film to advance advocacy focusing on a different area affected by the crisis, such as higher education, social services, at-risk youth, homelessness, adult literacy, senior food programs, and immigrant services.
The videos “explore the impact of toxic swaps as well as potential revenue-based solutions to the budget crisis” by bringing to the forefront the people who are often forgotten when budgets are created. The stories feature those who must rely on services that nonprofits provide and highlight students who rely on state grants to attend college, a young man who would potentially be in a mental hospital without human services support, and other often-forgotten demographics and communities.
Through the power of video and strong stories, Stranded by the State turns amorphous political science theory of a Illinois budget impasse into tangible stories that viewers can relate to and understand. The series incorporates data to the situations and demonstrate how the investment in services saves taxpayers in the long run by protecting people who are vulnerable from using more expensive services, such as incarcerations, emergency housing, and emergency room visits. Using the power of video storytelling, Stranded by the State shows that budget indecision and artificial austerity measures affect the state and country at large and cost taxpayers more.