Opportunity to Take a Stand
Nonprofit Integrity vs. Partisanship
For more than 60 years, an important provision in the federal tax code has successfully protected charitable nonprofits, religious congregations, and foundations from being torn apart by the divisiveness of partisan politics. Yet high-ranking elected officials are now trying to repeal or substantially weaken the longstanding legal provision, sometimes called the “Johnson Amendment,” that has shielded the 501(c)(3) community from politicians and their operatives seeking political endorsements, political contributions, and more. If they prevail, it would politicize and polarize the integrity, independence, and effectiveness of charitable organizations. This severe threat requires strong, unified
That’s why a nationwide campaign has been launched to protect the 501(c)(3) community from corrosive partisan politics. Charitable nonprofits, private foundations, religious groups, and their vast numbers of for-profit supporters are invited to join the initial 1,200+ organizations from coast to coast that already have signed the Community Letter in Support of Nonpartisanship. See who has stepped forward to send a clear signal to Congress and the Administration that partisan politics has no place in the 501(c)(3) community by clicking on “Signers” at www.GiveVoice.org. Join others from across the country to show that we intend to resist any and all efforts to weaken or repeal this longstanding protection in federal tax law that keeps 501(c)(3) organizations away from partisan political acts like endorsing, opposing, or contributing to
political candidates that will surely divide and polarize houses of worship, beloved charities, and valued foundations that were established for the common good, not for political gain. Learn more by going to www.GiveVoice.org and Protecting Nonprofit Nonpartisanship.
President's Budget to Include Significant Cuts to Domestic Programs
Trump administration officials appear to be in the process of giving credence to early concerns that federal spending priorities will likely shift in favor of defense and infrastructure at the expense of domestic programs, many of which are performed by charitable nonprofits. The President announced last week that he plans to increase defense spending by $54 billion and pay for it by cutting an equal amount from domestic spending. Media reports have indicated that President Trump's budget could call for the elimination of the Corporation for National and Community Service, the federal program that supports AmeriCorps and Senior Corps, among other cuts. A White House memo lists numerous other programs targeted for
elimination or significant cuts, including the Corporation for Public Broadcasting and the National Endowments for the Arts and the Humanities, according to The New York Times. Details of the President's budget are expected to be released later this month.
- Short-Form Data Reveal Errors by IRS: The IRS released publicly available data of over 105,000 tax exempt organizations approved under the streamlined Form 1023-EZ application. The data are available in spreadsheet format and will be updated quarterly. An initial review by a law professor found that the IRS is issuing charitable tax-exempt status to hundreds if not thousands of applicants not entitled to use the form. For instance, several hundred groups claiming to be
“churches” received determination letters from the IRS declaring that donations they receive are tax deductible. Yet the 1023-EZ instructions state that the form may not be used by individuals asserting that they are establishing churches. This latest evidence reinforces concerns that the IRS has created an express lane to tax-exempt status, rubberstamping approvals without first ensuring that filers follow the law or are entitled to exemption. The National Council of Nonprofits originally objected to the Form
1023-EZ because the IRS dropped the normal due diligence steps that usually weed out the entities that are not eligible for exempt status under the law.
- Government Grants and Regulatory Reforms On Hold: While the Trump administration promises to reduce regulations and regulatory costs, all indictations are that nonprofits with government grants and contracts should expect an increase in compliance standards and enforcement actions. Several new Cabinet members have identified the need for government to focus on the elimination of waste, fraud, and abuse by anyone. During the last month of the Obama administration, several federal agencies hired hundreds of workers to fill new investigative and auditing positions within
their respective agencies. Also, the number of false claims reported by alleged whistleblowers has been growing for several years — 66 percent during the previous eight years. These factors appear to add up to little regulatory relief for nonprofits.
Connecticut Nonprofits in a Property Tax Showdown
Connecticut has become ground zero for immediate action on proposals to change the rules on tax exemption on the property owned and used by charitable nonprofits. One bill would retroactively (back to October 2016) repeal the exemption for property owned by hospitals in the state. The legislation would also allow municipalities to levy a property tax on nonprofit hospitals. Hospital leaders testified in unity against the measure, emphasizing their purpose as a safety net for communities and the need
for legislative and budgetary policies that advance and not undermine their missions.
A separate measure, heard last Friday, would authorize local governments to decide whether to tax property after it changes ownership or use. A mayor and other supporters compared nonprofit property tax exemption to developers asking for a tax abatement and how negotiations must take place. The CT Community Nonprofit Alliance responded in its written and oral testimony that “this proposal would be a cataclysmic change in state policy.” The state association of nonprofits continued, “It would
stop some nonprofits from expanding – put differently, it would prevent them from meeting a rising demand for life-sustaining services.”
California Speaker Establishes Select Committee on the Nonprofit Sector
The California Assembly is taking a major step in recognizing the contributions and impact of charitable nonprofits and philanthropy in the state, as evidenced in the announcement by Speaker Anthony Rendon of the creation of the first-ever Select Committee on the Nonprofit Sector. The Select Committee, to be led by Assemblymember Monique Limón of Santa Barbara, will provide a structure for developing and implementing more effective collaborations between California’s elected officials, government agencies, philanthropic leaders, and nonprofit organizations. It is designed
to help create new strategies, innovative policies, and meaningful programs to improve the economic and social well-being of millions of Californians, reports the California Association of Nonprofits (CalNonprofits). The state association’s CEO, Jan Masaoka, heralded the announcement of the Select Committee: “Our state’s nonprofit and philanthropic sectors not only represent the dreams and aspirations of California's varied communities, they are robust with human capital, financial capacity and innovative potential.” She stated further, “Government, nonprofits and
philanthropy working together can identify and advance partnerships and solutions that will benefit all Californians.” Joining CalNonprofits in the advocacy efforts for the Select Committee are the League of California Community Foundations and Southern California Grantmakers.
Immigration Focus Leads to Employment Status Legislation in the States
As immigration policies and enforcement practices are under review and revision at the federal level, several states are considering mandating that some or all private employers (including nonprofits) utilize the federal website E-Verify to check the eligibility of potential employees to work in the United States. A series of bills in Texas (HB 1453/SB 85, SB 23, SB 254) would require state contractors to utilize the E-Verify system. The Iowa Legislature is considering a broad bill that imposes state penalties on employers that hire undocumented aliens; an E-Verify mandate would be imposed on all businesses that receive “economic development incentives” from any state agency. Florida and North Carolina have bills to mandate usage of E-Verify by most employers in their states. Missouri legislation would not only require businesses to use E-Verify, but also impose harsher penalties on companies – including potential suspension of its business license – for hiring
employees not authorized to work.
Respectful Rebuttal as Effective Advocacy
When journalists get the story wrong, it may be a normal instinct to fire off a rash social media post, submit an incendiary letter to the editor, or convene a news conference to set the record straight. Each may be an appropriate reaction in certain circumstances, but consider the measured approach of the state association of nonprofits in Colorado.
Recently, the Denver Post ran an article about the Colorado tax checkoff program through which taxpayers can designate a portion of any tax refund be paid to one of twenty charitable nonprofits listed on the tax form. The gist of the article was that politics rather than merit determined which nonprofits made the list and that extensive reporting systems were not in place to track how organizations spent the donated money. All in all, the article painted a negative picture of the Legislature and the broad nonprofit community.
The Colorado Nonprofit Association, as would be expected, went out of its way to set the record straight. Through a brief op-ed in the paper, “Criticism of tax return donation program is unfair,” Renny Fagan, President and CEO of Colorado Nonprofit
Association, rebutted the more outrageous assertions in the original article. He removed any doubt that advocacy before the Legislature is a necessary and appropriate activity for charitable nonprofits – refuting the implication that lobbying legislators regarding the checkoff program was somehow untoward.
Fagan further pointed out that the Denver Post writers impugned not only the integrity of nonprofits, but also demonstrated the newspaper's ignorance of the regulatory regime in the state. He wrote:
“The overarching connotations of this article are harmful to the nonprofit community as a whole — a sector so crucial to maintaining the high quality of life in our state. We strongly believe the message of “donor be aware” rather than “donor beware” must be defined and at the forefront of media coverage. By visiting the secretary of state’s website, donors can easily search for charities online and learn about an organization’s main sources of revenue, how donations are used, and whether funds are spent for lobbying.”
But as is often the case, newspapers rarely give equal space to individuals who object to articles (the Post article ran in excess of 1,500 words while Fagan’s response ran only 330 words). In a longer message posted on the state association’s website and delivered to members across the state, Response to The Denver Post, the Colorado Nonprofit Association went beyond the inaccuracies in the article to provide guidance to the public that may have been misled by the Post.
He addressed the underlying question of the checkoff program by observing that the “Colorado Nonprofit Association believes the program could be improved and expanded further to continue to benefit organizations across the state, thus expanding options for taxpayers.” The state association had convened several stakeholder meetings to discuss changes to the tax checkoff program, including consideration of the approaches of many other states. Fagan showed that the association “has continued in 2017 to remain engaged
in discussions to evaluate opportunities for nonprofits to participate in the program in fair and equitable ways without incurring unreasonable state administrative costs.”
Importantly, Fagan made clear that “Colorado’s nonprofits are trustworthy, ethical and work hard to follow the many laws governing their tax-exempt status and solicitation of donations.” In both his op-ed and broader message, the state association CEO demonstrated a mastery of the facts and a demeanor that shows how to disagree without being disagreeable. In other words, he modeled the way for effective public discourse from the perspective of an organization deeply rooted in the community.