Push Back Against Johnson Amendment Misinformation
Legislation to repeal or weaken the Johnson Amendment, as well as President Trump’s recent Executive Order on the subject, are based on misinformation that has been spread by special interests seeking to undermine the law that for more than 60 years has protected charitable nonprofits, houses of worship, and foundations from demands for political endorsements and campaign contributions. Indeed commentators and politicians continue to repeat unsubstantiated claims, misrepresent the law, and paint a picture of discord far removed from reality and the attitudes of the vast majority of charitable nonprofits, including houses of worship, and foundations. Misstating the facts and law are one thing, but if Congress takes action based on falsehoods, then the nonprofit and foundation communities and the people and communities we serve will suffer.
All individuals and organizations committed to nonprofit nonpartisanship – and the effectiveness and community unity it generates – need to take actions to get informed and lift their voices. Here are four (of many) actions you can take now:
- Get the Facts – Learn the truth about the Johnson Amendment by reading the items highlighted in the sidebar of the current and past editions of this newsletter, studying the analyses provided in the May 8 Special Edition of Nonprofit Advocacy Matters, and going to www.GiveVoice.org.
- Sign the Letter – Join more than 4,500 organizations – charitable nonprofits, religious institutions, foundations, and for-profits from across the country – by signing the Community Letter in Support of Nonpartisanship and showing that we intend to resist any and all efforts to politicize our sector by weakening or repealing this longstanding protection in federal tax law that keeps 501(c)(3) organizations away from endorsing, opposing, or contributing to political candidates.
- Spread the Word: Forward this message to three or more colleagues and encourage them to also sign their organizations onto the Community Letter. Click here for an easy way to do it.
- Make the Calls – Call your Representative and two Senators and tell them to preserve current law that protects charitable nonprofits, including houses of worship, and foundations, as well as the millions of people we serve every day. Letters are good, personal meetings are great, but a phone call from you now is quick, easy, and effective.
Budget Process Commences, Add-Ons Unclear
Congress approved a $1 trillion omnibus spending bill that keeps the federal government operating through September, and now attention shifts to deliberations over the spending plan for fiscal year 2018 that begins October 1. The contents of the budget resolution for FY18 are important because, with one party controlling Congress and the White House, special budget reconciliation rules allow the majority party to push through more legislation that is not subject to a filibuster in the Senate. The House Budget
Committee is expected to mark up its FY2018 budget resolution shortly after Memorial Day. The Senate Budget Committee reportedly is waiting to begin work on its version of the resolution until after the White House releases its full budget request in late May. Republican leaders have laid out their plan to include a budget reconciliation instruction that calls on the tax committees to prepare a comprehensive tax reform bill that can be considered in the Senate without Democratic support. House Speaker Ryan recently suggested that the FY2018 budget resolution may also propose changes to Medicare. The conservative House Freedom Caucus is debating whether to insist that the budget include reconciliation instructions that go beyond tax
reform to also include taking on overhauling the welfare system which is one of the six planks of House Republicans’ “A Better Way” agenda.
- Swipe Fee Protections Under Attack: The House Financial Services Committee approved a comprehensive rewrite of the Dodd-Frank Act that would repeal a measure that limits how much banks can charge nonprofits and merchants for debit card transactions, a charge known as interchange or “swipe” fees. If Congress enacts the Financial CHOICE Act, the costs for electronic processing of debit card payments and donations would likely rise by as much as 45 percent.
Credit card payments would not be affected. The Merchants Payments Coalition is leading advocacy efforts in opposition to the swipe fee provision in the pending bill.
- 2020 Census Imperiled: John H. Thompson, a thirty-year veteran of the U.S. Census Bureau and director since 2013, announced his resignation. The announcement comes after an April congressional budget allocation for the 2020 Census that critics say is woefully inadequate and a week after a prickly hearing at which Thompson told lawmakers that cost estimates for a new electronic data collection system had ballooned by nearly 50 percent. The leadership and funding uncertainty for the 2020 Census raise concerns by many in the nonprofit and philanthropic communities.
“Institutions across the country (e.g. local and state governments, businesses, nonprofits, and foundations) rely on census data to allocate funding, define where services are delivered, and to decide where to promote economic development,” writes Forefront, the Illinois association of nonprofits and foundations. “Inaccurate census data threatens to disenfranchise those undercounted groups and regions, undermining the basic political equality that is central to our democracy.” Learn more about challenges to 2020 Census funding and the consequences of undercounting populations.
Community Development Block Grants
Is the $3 billion Community Development Block Grant (CDBG) program the “heart, lungs, and backbone of cities and counties” or is it a spending program that is ineffective and needs to be eliminated? That is the essential issue being debated by supporters and opponents of this Housing and Urban Development program started in 1974. The CDBG program provides flexible dollars that local governments use to help ensure decent affordable housing, provide services to the most vulnerable in communities, and create jobs through the expansion and retention of businesses – services often provided through contracts
with charitable nonprofits. President Trump has proposed no funding for the CDBG in his FY2018 “skinny budget,” claiming the CDBG “is not well-targeted to the poorest populations and has not demonstrated results.” The U.S. Conference of Mayors disagrees and sent a letter in support of CDBG highlighting its services in every state to low- and moderate-income people, seniors, new homeowners, local police departments, and afterschool programs. The Urban Institute recommends addressing criticisms of the program by increasing funding while changing the eligibility rules so that CDBG funding would be spread across fewer communities, thereby providing greater assistance to the low- and moderate-income neighborhoods that receive the assistance.
State Budgets Passing But On Shaky Footing
Legislatures across the country are cobbling together state budgets for the coming fiscal year, but the challenge remains daunting for at least 29 states that have lowered their current fiscal year revenue estimates. The Connecticut Governor announced a mitigation plan to make up for a $390 million deficit for Fiscal Year 2017. The plan uses reserve funds, revenue transfers, and rescissions of previously appropriated funds to numerous social services programs performed by nonprofits, as well as withholding local aid. In Wyoming, policymakers are confronting the drop in revenues from oil, gas, and coal by instituting a hard hiring freeze affecting nearly all of its state agencies. Also struggling from lower oil prices, the North Dakota Legislature passed a two-year budget to reduce spending to $13.6 billion, an amount close to what it was six years ago. However, some lawmakers are wary that the reduced budget is
unstable and may lead to higher property taxes. New Mexico faces a lawsuit and special session over its $6.1 billion budget and the Governor’s subsequent line-item vetoes of $779 million in spending. (See article, below.) The Pennsylvania Department of Revenue is reporting a greater than $1 billion revenue shortfall, the largest in the Commonwealth since the Great Recession, due to timing of corporate tax revenues,
weak business taxes, and lower consumer-spending. Pennsylvania policymakers may have to reduce spending or increase taxes to achieve a balanced budget.
New Mexico Government Spending, Tax Showdown
Oral arguments are scheduled today, May 15, before the New Mexico Supreme Court in a case drawing in all three branches of government for an exercise in constitutional checks and balances. The lawsuit comes after the Democratic-controlled Legislature sent the Governor a $6.1 billion budget package increasing spending and raising several taxes. Governor Martinez rejected the tax hikes and cut $779 million, including defunding the Legislature and higher education. The state supreme court is being asked to
determine whether Republican Governor Martinez acted constitutionally when she line-item vetoed certain portions of the budget. In a related development, the Governor has called a special session of the Legislature starting May 24 to find a resolution of the showdown and balance the budget. The Governor’s tax reform proposals to close tax loopholes will be on the agenda. Nonprofits are gearing up to fight one provision that would partially repeal the nonprofit exemption from gross receipt taxes. A separate section of the
Governor’s bill would impose a new sales tax on government contracts for services provided by nonprofits and others.
Oklahoma Advocacy Averts a Cap on Charitable Deductions
In the face of unprecedented advocacy efforts from chartable nonprofits, including religious organizations, the Speaker of the Oklahoma House pulled a bill from floor consideration that would have imposed a $17,000 cap on all itemized deductions, including charitable deductions. The measure had been added in a committee in an effort to raise $166 million in additional revenue to help close the state’s budget deficit. Marnie Taylor, president of the Oklahoma Center for Nonprofits, the organization leading the advocacy efforts, expressed the key points: “We feel very strongly that we should not continue to balance our budget on charity – either by shifting the burden to nonprofits or taking away the very incentives that encourage people to donate to charity. The optics of this are terrible for Oklahoma…. I know that our Legislature can find better ways to increase revenue to support core services without damaging the charitable sector that fills the ever-increasing gaps in service.” A new version of the legislation is expected soon, reportedly with a
carve-out to ensure that charitable deductions are not included in any cap on itemized deductions
Taxes, Fees, PILOTs
- Property Tax & Fees: Two bills in Maine are challenging the property tax exemption of land trusts in the state. The first seeks to change the law to eliminate the property tax exemption for organizations that hold land primarily for conservation or public access purpose. The second measure would eliminate the property tax exemption for land trusts by specifying that holding land primarily for conservation or public access purposes is not a benevolent and charitable purpose. The
bill would also allow municipalities to impose new “service charges” on nonprofit property owners with property valuations of more than $10 million. The Maine Association of Nonprofits is leading the opposition to both bills.
- PILOTs: A bill in the Massachusetts Legislature would empower local governments to send invoices to tax-exempt charitable organizations for annual payments in lieu of taxes (PILOTs) based on revenue, expenses, and other currently unknown factors. Churches and houses of worship would be exempt from the new tax levy. A separate proposal would require the Commonwealth of Massachusetts to reimburse local municipalities for a portion of the lost revenue from government-owned properties.
Read more on the status of the legislation.
Government-Nonprofit Contracting Reform Update
New York Nonprofit Contractors Take on City Hall
New York City nonprofits providing services on behalf of local government are fed up with late payments and underpayments, and they aren’t going to take it anymore. That was the message recently at an open forum sponsored by The Clark Foundation, an organization dedicated largely to helping lift people out of poverty. Speakers identified challenges such as payments for services that only cover 87 percent of costs, forcing nonprofits to raise funds from philanthropy or otherwise subsidize the government. Doug Bauer, head of The Clark Foundation, relayed how the City had owed one nonprofit $44 million for more than a
year after services had been delivered. Bauer characterizes the financial problems nonprofits with government grants and contracts face as “a quiet crisis that can no longer be quiet.” The problems continue to worsen as cuts in government funding are accompanied by rising costs. But, these issues are not unique to New York City — it is a quiet crisis across the country.
Communities Rely on the Nonpartisan Work of 501(c)(3) Organizations
For the past couple of months, the network of the National Council of Nonprofits has been proactively listening to the public and the nonprofit community about the potential impact if legislative attempts are successful in politicizing 501(c)(3) organizations by allowing them to endorse or oppose candidates for public office. During this time, as more than 4,500 organizations (so far) have signed the Community Letter in Support of Nonpartisanship, we also have received more than a thousand comments from community leaders expressing their deep opposition to the proposals to repeal or weaken the Johnson Amendment. Below are
just four of these heart-felt comments from charitable nonprofits dealing with challenges at the frontlines in our communities:
“We accomplish so much more because our board meetings are not filled with disruptive arguments about which political candidate to endorse. And we don’t have people questioning our motives and whether funds they donate to our missions will be redirected to a politician’s election campaign. Protecting nonpartisanship protects charitable organizations and our communities from partisan politics and division that causes strife among and within those safe places.” Alliance for Strong Families and Communities, Milwaukee, WI
“Nonprofits need to serve their constituents first and foremost in an unbiased manner, not be pawns of or beholden to a political party. This political independence keeps organizations open to all administrations, and more genuinely open to new ideas and policies, as well as objectively critical of policies which undermine their organization's mission and the wellbeing of their constituents.” Hamtramck Community Initiative, Hamtramck, MI
“As a community foundation, we focus on philanthropy in its broadest form. We encourage all people to be engaged within our community, and to give back financially and with their time. Being nonpartisan enables us to be independent and work closely with people on all sides of the political aisle. Additionally, we - as with all 501(c)(3) organizations - are governed by a board of volunteers. Under current law, our volunteer board members work together for common purpose without permitting partisan elements to enter the conversation. If the protection that the law provides were to be diminished in any way, the focus of a common purpose for the common good could easily dissipate.” Oak
Park-River Forest Community Foundation, Oak Park, IL
“We intend to advance the Gospel in our ministry of healing, reconciliation, and renewal. Neither major political party currently does that or promises to do that. Therefore, we do not want any of our moneys going to the support of a political party. We cannot financially or ethically afford that kind of investment.” St. Francis Spirituality Center, Tiffin, OH
Appendix 2 of the written testimony of the National Council of Nonprofits submitted for the record of the May 4 House Oversight Hearing provided some of the comments by nonprofits from the 16 states represented on the subcommittees conducting the hearing. The 100+ comments explain how repealing or weakening current law on nonpartisanship would adversely affect their organizations and communities. These represent a small sampling of voices we have heard from grassroots nonprofits in every state.