Still Time to Take Action
Help Keep Politics Out of Charitable Nonprofits
A core principle of charitable nonprofits – nonpartisanship – is under attack in Washington, DC, and all who are concerned about the wellbeing and effectiveness of the nonprofit community are asked to take two minutes to express support for a protection that has defined the sector for generations. Sign the Community Letter in Support of Nonpartisanship now!
Bills pending in Congress would repeal or significantly weaken the current law’s longstanding protections by inviting charitable and philanthropic organizations to endorse or oppose candidates for elected office and divert some of their assets away from their missions to instead support partisan campaigns. This legislation would subject charitable nonprofits and foundations to demands for political endorsements and campaign contributions (diverting donors' money away from mission-related work to benefit politicians) and damage public trust in the work of nonprofits. Further, it’s completely unnecessary. Nonprofits - and their individual staff, board members, and volunteers - already have many legal avenues to
freely express their views on a wide range of public policy issues through existing laws that allow for advocacy of our missions to policymakers.
We urge charitable nonprofits, private foundations, religious groups, and for-profit supporters to sign the Community Letter in Support of Nonpartisanship that 2,000+ organizations from coast to coast already have signed. Learn more by going to www.GiveVoice.org and Protecting Nonprofit Nonpartisanship.
Health Insurance Repeal and Replacement Advancing in the House
On March 6, Speaker Ryan and House Republican leaders unveiled the American Health Care Act (AHCA), legislation intended to repeal and replace the Affordable Care Act (also known as “Obamacare”). The bill has been approved by three House committees, and the full House could vote on it by the end of this week. The Congressional Budget Office (CBO) has estimated that the legislation would reduce federal deficits by $337 billion and increase the number of uninsured people to an estimated 24 million by 2026.
President Trump has endorsed the legislation, but many House Republicans have expressed concerns while several GOP Senators have opposed the bill from the beginning.
Some of the key issues of the AHCA that would potentially affect nonprofits include:
- Caps on Medicaid: The AHCA would establish a limit on the amount the federal government reimburses the states, shifting from a percentage of costs incurred to a lower fixed amount paid per Medicaid recipient. Over time, this would shift more of the funding burden onto each state, with vastly different health care for Americans depending on where they live.
- End of Medicaid Expansion: Under the AHCA no new enrollment would be permitted beginning in 2020. Currently 32 states and DC have opted for Medicaid expansion. The CBO projects that under the legislation no new states would expand and some of the expansion states would no longer offer the additional insurance coverage. Coupled with a greater share of the enrollees’ costs, an estimated 5 million fewer people would be enrolled.
- Establish Refundable Tax Credit: The legislation replaces insurance subsidies under the ACA with refundable tax credits ranging from $2,000 to $4,000. The credits would increase by age and phase out by income level. The CBO estimates that the new tax credits would be smaller than the premium subsidies under the current law. It further finds that because of the elimination of cost-sharing subsidies under the legislation, the share of the costs for medical services borne by lower-income individuals would increase and fewer would obtain coverage. Conversely, tax credits for higher earners would be larger than under the ACA.
President Proposes Spending Priorities for Congress to Consider
The White House released a preliminary budget blueprint for Fiscal Year 2018, which begins on October 1, that has been called “draconian” and “dead on arrival” by some in his own party. The budget proposal, which is essentially a request for funding by Congress (which has the “power of the purse” under the Constitution), seeks $54 billion in increased defense spending and calls for an equal level of spending cuts in domestic programs that often support the work of charitable nonprofits on behalf of governments in communities across the country. The President is asking
Congress to cut the Department of Housing and Urban Development by 13 percent, the Department of Health and Human Services by 18 percent, the State Department by 28 percent, and the Environmental Protection Agency by 31 percent. The blueprint proposes to
eliminate funding for several programs, including the Corporation for National and Community Service, the Corporation for Public Broadcasting, the Institute of Museum and Library Services, the Legal Services Corporation; the National Endowment for the Arts, the National Endowment for the Humanities, and the United States Interagency Council on Homelessness.
The so-called “skinny budget” only contains top-line spending requests; the more detailed budget proposal that contains policy specifics, data tables, and itemized spending levels for all programs, is not expected until May. Congress must enact twelve spending bills by September 30 or pass a stopgap funding measure known as a "continuing resolution" (CR). The federal government is operating in the current FY 2017 fiscal year under a CR that expires on April 28, meaning that Congress must address immediate decisions on spending to keep the federal government open through September 30 before turning to the proposals President Trump published last week.
- Contributing Centennial Celebrated: A resolution celebrating the 100th Anniversary of the Charitable Deduction was introduced in Congress on Friday by Representatives John Lewis (D-GA) and Pat Tiberi (R-OH). House Concurrent Resolution 34 provides a historical timeline of the deduction, enacted into the federal tax code in 1917, and highlights the benefits to the arts, humanities, religious institutions, education, human services, environment, health programs, and many other subsectors, as well as recognizing the empowerment and force of
individual philanthropy. The resolution specifically “reaffirms the importance of encouraging rather than diminishing philanthropic services which respond to the needs of communities.”
- Targeting Planned Parenthood: It has been widely publicized that the American Health Care Act pending in the House would completely defund Planned Parenthood for one year. The day after the AHCA was introduced, President Trump offered a deal to the nonprofit health provider: that if it stopped performing abortion services, the organization could maintain federal funding. Cecile Richards, President of Planned
Parenthood, responded that “no federal funding goes towards abortion in the first place,” which is in fact the current law under the Hyde Amendment. Richards stated that the “defunding” of non-abortion services would “block millions of people” from access and preventative care. The Congressional Budget Office projects that 15 percent of people live in areas without health care clinics or have no medical practitioners who serve low-income populations.
More States Consider Minimum Wage Hikes
Several more states are considering minimum wage increases. A Nevada bill would raise the state’s minimum wage by $1.25 per hour until it reaches $15 per hour for employers that do not offer health insurance and $14 per hour for employers that do provide health insurance. A separate Nevada bill proposes a state constitutional amendment to increase the minimum wage to $9 per hour, and in 2022, an additional $.75 per hour per year until reaching $12 per
hour. That proposal also calls for removing provisions authorizing an employer and employee to waive the minimum wage requirement in a collective bargaining agreement. New Mexico and North Carolina propose to increase pay from $7.50 per hour to $9.00 per hour over the next year, and $7.25 per hour to $15 per hour by 2022, respectively. An earlier North Carolina bill would have reached the higher rate one year faster.
This month, the Arizona Supreme Court unanimously upheld a voter-approved measure raising the minimum wage to $12 per hour by 2020. The Arizona Chamber of Commerce and Industry challenged the law, arguing in part that the state would be forced to spend more money on contracts, including services provided by charitable nonprofits. The court rejected the argument. Regardless, due to a voter initiative, employment costs will increase in Arizona, and nonprofits will likely need to seek philanthropic support to cover expenses not reimbursed by the governments. See the Open Letter from the California Association of Nonprofits for the role philanthropy can play in helping nonprofits transition to higher labor standards.
Property Tax Exemptions in the Courts
Courts in Michigan and New Jersey have temporarily stymied the trend to remove property tax exemptions from nonprofit entities. Upholding the tax-exempt status of a health care provider, the Michigan Tax Tribunal found in favor for nonprofit property tax exemption. The locality had rejected the nonprofit’s property tax exemption claiming that the organization was ineligible due to its high costs, low proportion of uninsured patients, and apparent growth-through-acquisition strategy. The Tax Tribunal rejected each of the rationales, which may dampen the efforts of other
Michigan localities to seek new tax revenue from nonprofits. Similarly, the New Jersey Tax Court overturned a county board’s findings and upheld the tax exemption for religious and charitable use of properties under state law. Contrary to rulings from another New Jersey Tax Court judge, the court in the recent case concluded that “despite evidence indicating that religious activities on the subject church property had diminished … the church continued to make actual use of the property in furtherance of its religious purposes.”
Additional Taxes, Fees, PILOTs
- Property Tax: Two bills in Connecticut are aimed at diverting resources of hospitals to fund local government operations. One bill would eliminate hospitals’ real property tax exemption and theoretically offset the hospitals’ liabilities under a new property tax scheme; a plan the hospitals do not believe will end in their favor. A separate measure would change the fixed-amount hospital tax to a levy charged every quarter, resulting in a
- Property Tax: In a string of revenue bills, the Mayor of Providence, Rhode Island proposes to tax certain nonprofit hospital and college properties. Parallel city-backed state legislation would remove property tax exemption for property not essential to the institution’s mission, identifying classrooms and hospital rooms as exempt but vacant lots, parking garages, and undeveloped property as taxable.
- PILOTs: The Mayor of New Britain, Connecticut has a budget problem and is turning to local nonprofits for help. But in a region of the country where antagonism has been growing due to aggressive government demands and the occasional threats against longstanding property tax exemptions, the Mayor’s approach is unusual: she is asking politely. Mayor Erin Steward has sent letters to 30 nonprofit service providers thanking them for their work to improve the wellbeing of the local community. She lays out the budget challenges of the City, and then asks: “Any donation your
organization is willing to make to the city of New Britain to offset any further tax increases on our residents and businesses would be greatly appreciated.”
Tax-Break Transparency Lacking in the Cities
Nonprofits facing demands from local governments to make payments in lieu of taxes (PILOTs) will be interested to learn that cities typically fail to disclose the value and beneficiaries of tax breaks they give to businesses for economic development purposes. New accounting rules require states and localities to disclose revenue loss due to tax holidays and incentives, yet access to the revenue data from cities is extremely limited, according to the organization Good Jobs First. Its new report, “Show Us the Subsidies,” considers a program to be transparent only if the data were available on a
public webpage and included the recipient companies’ names. The study found that 50 of the largest local governments fail to disclose basic information needed for transparency, such as who was benefiting and the amounts paid or claimed for the benefit. Over half of the localities fail to disclose any basic information about any of their incentive programs.
New York Donor Disclosure Law Challenged
The newly revised New York advocacy disclosure law is unconstitutional and harmful to nonprofits, according to a law suit filed this month by the Nonprofit Coordinating Committee of New York and the Lawyers Alliance for New York. The suit, filed against the New York State Attorney General, challenges the disclosure requirements under the law because they require 501(c)(3) nonprofits to report donations simply because the entity provided some assistance to 501(c)(4) entities. The disclosure is required even if the support is not connected to lobbying or political speech, the primary focus of
the advocacy disclosure law. By challenging the statute, the parties are seeking to protect nonprofits from overbroad laws requiring nonprofits, especially advocacy organizations, technical assistance providers, and community foundations, from identifying donors whose contributions have no connection to lobbying activities.
Government-Nonprofit Contracting Update
- Knowing When to Say When: Why would a nonprofit choose to give up $12 or $13 million of its $16 million budget? The reason for Catholic Charities of Omaha, Nebraska is to eliminate government grants and contracts. The charity arm of the Archdiocese of Omaha announced last year that it was getting out of addiction treatment, citing failure of governments to pay the full cost of services and government regulations, including a local ordinance that imposes employment standards contrary to the organization’s mission.
- Audit Mandate Under Review in North Carolina: Every North Carolina nonprofit that performs services pursuant to state or local government grants or contracts would be required to have a full financial audit conducted at least once every four years, under legislation proposed this month. Under the bill, the Office of the State Auditor would direct the audits proposed under the bill and would be authorized to have nonprofits pay for the costs of audit work. Currently, nonprofits are required to get audits only if they receive at least $500,000 in state grant funds.
Making the Case for the NEA
The Trump budget proposal calls for elimination of numerous programs, including the National Endowment for the Arts (NEA). Supporters of the NEA are mobilizing to convince Congress to ignore the President’s suggestion to defund this vital program.
The American Alliance of Museums immediately emphasized that the NEA and other programs “play an essential role in helping museums make the arts and the humanities accessible to all Americans,” and vowed “to work with our allies to build on Congress’ tradition of strong bipartisan support for these agencies.”
The League of American Orchestras and others are calling on individuals and organizations to urge their U.S. Representative to sign onto the Congressional Arts Caucus letter in support of NEA funding. The League reassures and inspires its members by pointing out that leaders in Congress have voiced bipartisan support for the NEA, both in the past two years of funding proposals, and in public statements made in recent weeks.
Americans for the Arts helps arts advocates make the case by presenting the impact of the NEA in its Action Center:
- “For more than 50 years, the NEA has expanded access to the arts for all Americans, awarding grants in every Congressional district throughout all 50 states and U.S. Territories as well as placing arts therapists in 12 military hospitals to help returning soldiers heal from traumatic brain injuries.”
- “The NEA is also an economic powerhouse, generating more than $600 million annually in additional matching funds and helping to shape a $730 billion arts and culture industry that represents 4.2% of the nation's GDP and supports 4.8 million jobs.”
And in an example of prefect timing, arts advocates from across the country convene in Washington, DC for the annual Arts Advocacy Day on March 21. The day of advocacy brings
together a broad cross section of America's cultural and civic organizations, along with more than 500 grassroots advocates from across the country, to underscore the importance of developing strong public policies and appropriating increased public funding for the arts.
The arts community is neither monolithic nor of only one mind. But when their impact and value are questioned – as elimination of the NEA and similar programs are proposed – groups with many perspectives come together to advance a common mission.