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The Labor Department Needs to Hear from Nonprofits, Now!

Last year at this time, nonprofits were scrambling to comply with pending overtime regulations that would have doubled the minimum salary threshold for determining who is considered a white-collar worker and exempt from overtime payments. A federal judge recently struck down the Obama Administration overtime final rule, and the U.S. Department of Labor is now asking for public input by way of comments to its Request for Information (RFI) about future overtime regulations.

Nonprofits need to speak up to help ensure that any future overtime regulations from the Labor Department reflect how work is actually performed in the wide range of nonprofit workplaces. Readers are encouraged to review the RFI and submit comments to the Labor Department by the close of the public comment period on Monday, September 25. For more information, see the following resources:

Resources

• Comments submitted by the National Council of Nonprofits, September 15, 2017, recommending, among other things, that the Department of Labor: “Act with urgency to increase the amount of the current salary level test that, having been unchanged for 13 years, is stuck below the poverty rate for a family of four,” and “apply the same FLSA standard to nonprofit workplaces as it applies to for-profit and government workplaces – it is unacceptable to treat nonprofit employees as second-class citizens by creating a carve-out or sub-minimum salary level for nonprofits only or nonprofits and small businesses.”
• Nonprofits Have a Big Stake in Overtime-Rules Debate, Jennifer Chandler and David L. Thompson, Chronicle of Philanthropy (paywall), September 1, 2017, explaining why it is in nonprofits’ best interest to submit comments to the U.S. Department of Labor on the overtime RFI.
• Labor Department Reopens White-Collar Salary Exemption for Comments, National Council of Nonprofits, August 2017, providing background on current law and annotations that explain several of the questions presented in the Department of Labor’s RFI. 
• Taking the Mystery Out of Filing Comments on Proposed Rules, National Council of Nonprofits, July 22, 2015, providing tips for filing comments to proposed rules that apply equally to responding to the Request for Information.

Unstable Terrain on Capitol Hill as Congress Faces Multiple Heavy Lifts

The already uncertain ground in DC roiled even more the first week of September when Congress returned from its long August recess. With conservative House Republicans insisting on spending cuts in exchange for their support for a package to increase the debt ceiling and provide hurricane relief funding, President Trump upended things by overruling Republican congressional leaders and cutting a deal with Democrats on not only those two items, but also a spending measure to keep the federal government open and extending the federal flood control program through December. The deal on raising the debt ceiling and spending authority expires on December 8, but it provides Congress needed space to work on other issues, including reauthorization of the children’s health insurance program (CHIP), which expires on September 30. That is also the deadline for the Senate to use budget reconciliation to repeal and replace the Affordable Care Act with only 51 votes, as some still seek to do. Plus, the deal provides two more months to resolve significant differences on appropriations. While the House went through the motions of passing an omnibus spending bill last week, which included a policy rider weakening the Johnson Amendment, the Senate essentially shrugged, knowing it will develop its own spending bills.

Pushing the debt ceiling and appropriations deadlines to December 8 also gives Republican majorities more time to develop their comprehensive tax reform package. House Ways & Means staff reportedly have been scurrying to meet the Chairman’s deadline of releasing details the last week of September. But for Republicans to pass a major tax bill without a filibuster in the Senate, they first must pass a budget resolution for Fiscal Year 2018 with budget reconciliation instructions for tax reform. Accomplishing that task has proven elusive so far, having been postponed multiple times in the House, reportedly because the majority does not yet have the votes to pass the budget resolution on the floor, with House conservatives leery of providing votes for an unseen tax package.

The surprising upheavals continued throughout last week, when President Trump initially decided to terminate the Deferred Action for Childhood Arrivals (DACA) immigration policy, yet kicked it over to Congress to solve within six months, and then reportedly struck another deal with Democratic leaders to extend protection to those covered by DACA.

IRS Issues Tax Relief in the Wake of Hurricanes

The IRS has announced special measures designed to encourage Americans to increase charitable giving in the wake of the devastation left by hurricanes Harvey and Irma in Texas, Florida, Puerto Rico, and the U.S. Virgin Islands. Among those measures is the ability of employees to forgo the dollar value of their vacation, sick, or personal leave for cash payments that their employer makes (before January 1, 2019) to charitable organizations providing relief for victims of the disasters. For tax-exempt organizations in the affected areas, the IRS also announced extended filing deadlines. The National Council of Nonprofits developed a webpage of tips and resources on “Disaster Recovery – What Donors and Nonprofits Need to Know.”

Federal FastView

• IRA Rollover Takes Another Turn: The Public Good IRA Rollover Act was introduced last Thursday to expand the tax-free distributions from individual retirement accounts (IRA) for qualified charitable distributions to donor advised funds, private foundations, supporting organizations, and other entities. The bipartisan legislation also would eliminate the $100,000 per year cap on qualified charitable distributions from an IRA and allow for qualified distributions to certain pension plans.
• Nonprofit Postal Rates: The United States Postal Service filed a proposed change to the formula for calculating nonprofit mail rates with the Postal Regulatory Commission on July 31. According to the USPS, the adjustment would be “revenue neutral” for the USPS, but increase rates for nonprofits by 6.9 percent for each piece of Enhanced Carrier Route Nonprofit mail and 3.3 percent for Regular Nonprofit mail, while decreasing the counterpart Commercial rates by only minimal amounts: 0.27 and 0.47, respectively. More than two dozen groups have submitted comments in opposition to the proposed new formula and rates, including the YMCA, which provided important historical perspective.

In Focus

2020 Vision

Results of the U.S. 2020 Census will influence individuals, communities, governments, for-profit entities, and nonprofit organizations throughout the next decade. Data obtained will inform decision makers in all sectors and lead to allocation of political power and financial resources. If the data are wrong, there will be inequitable distribution of resources for basic community needs, such as education, food and income security, health care, housing, transportation, and much more. The allocation of $600 billion in federal funds hinges annually on the decennial data, including funding for state and local governments, as well as for nonprofits to deliver services to individuals and communities.

The Census Project coalition is working to ensure Congress properly funds the upcoming census. The Census Bureau, which should be ramping up now for the task ahead, faces another significant cut to its budget. Many in Congress want to shift to only electronic collection of data. That, however, likely will lead to significantly undercounting certain populations, especially those in low-income and rural communities. The last American Community Survey estimates that less than half of households with annual income less than $20,000 have internet access. Those numbers are reinforced by the Pew Research Center, which found that only 53 percent of adults making less than $30,000 per year have internet access. This disproportionate lack of access to the internet will result in disproportionate undercounts of individuals who cannot participate in the electronic collection of census data. Thus, the form of collecting the data will have a significant effect on the substance of the data.

State Legislation in 2017

So far this year, state legislators have introduced more than 11,660 pieces of state legislation that refer to nonprofits in one way or another. Twenty-four percent of those were enacted. The legislation touches all types of nonprofits and all kinds of activities, from agriculture to transportation, and education to environmental, and housing to health. Resolutions were also passed celebrating Nonprofit Days in California and Delaware, plus commending the Mississippi Center for Nonprofits’ training and professional development work for nonprofits.

More than a third of the “nonprofit” bills introduced addressed some aspect of taxing nonprofits – whether property tax, sales tax, or use tax. Why are the states, and their political subdivisions like cities, trying to tax tax-exempt nonprofits? The next articles offer context.

State Budget Woes Continue

Many states continue to experience significant fiscal challenges. Those challenges, as reported by Governing, include deep holes from multibillion-dollar deficits (such as in Alaska, Connecticut, Illinois, and Pennsylvania), "the growth of [states’] fixed costs is outpacing their annual revenue growth,” and “some states are struggling under the weight of a systemic financial imbalance that prior budgets have papered over with one-time fixes. It’s becoming harder and harder each year to ignore the underlying problems as slow revenue growth and spending pressures mount.” Those factors, in turn, often exacerbate another force that makes matters worse: extreme partisan politics (something one state legislator described as the “Washingtonization of the states”).

The new fiscal year started on July 1 for most states (April 1 in New York; October 1 in Alabama and Michigan). Eleven states began their current fiscal years without final budgets in place. And as the following sampling reveals, serious budget woes continue in many states:

• Connecticut: Almost three months into the new fiscal year, the state still has no budget. The governor’s recent budget proposal relied largely on tax increases to address the projected $3.5 billion deficit. It had appeared his budget would pass on a straight party-line vote (Democratic) last Friday, when suddenly three Senators and six Representatives dramatically flipped positions to vote for and help pass the Republican budget that relies heavily on budget cuts and injects the legislature into approving all future union contracts. The governor quickly declared he would veto it.
• Illinois: The state went without a budget for two years until July 2017. That impasse created a massive backlog of $15.3 billion in unpaid bills owed to, among others, “health-care providers and other state contractors [including nonprofits] that have had to lay off staff and borrow because they’re waiting to be paid.” Last week the governor agreed to issue bonds for $6 billion to refinance some of the state’s debt at a lower interest rate.
• Kentucky: Earlier this month the governor “asked most state agencies to slash their budgets by more than 17 percent to cope with an anticipated $200 million revenue shortage.” That’s on top of “massive cuts” from recent budgets. One legislator observed, “The cuts are huge and I don’t see how they can be carried out without diminishing services to the public,” while the head of a state regulatory agency warned, “We can’t keep doing our statutory duties any longer with more cuts.”
• Maryland: To begin preparing for a projected $750 million deficit next year, Maryland’s Board of Public Works voted to reduce state spending by $61 million for the current fiscal year.
• Oklahoma: The governor called the legislature into special session on September 25 to address a $215 million budget shortfall this year.
• Pennsylvania: Last Friday, the governor announced that the Commonwealth was delaying payments of more than $1.7 billion it owed for Medicaid services already provided and to school districts for public pensions because of a projected $2.2 billion budget hole. According to the Associated Press, “It is the first known time that Pennsylvania state government has missed a payment as a result of not having enough cash.”
• Wyoming: Facing a current $30 million shortfall in Medicare funding that is likely to grow as the state’s population ages, officials “say there are no good options to address the situation without harming other programs or potentially hurting already cash-strapped hospitals and nursing homes” in the rural state. In addition, next year the state will have an education funding deficit of up to $530 million.

City Fiscal Pressures Increase

City revenues still have not fully recovered to where they were before the Great Recession 11 years ago. A new National League of Cities report, City Fiscal Conditions 2017, shows fiscal contraction in cities, with several factors signaling an economic “slowdown on the horizon,” stating that “costs that can no longer be delayed, such as those for infrastructure and for employees and retirees, as well as cuts from federal and state partners, will continue to contribute to the fiscal uncertainty facing cities.”

Taxes, Fees, PILOTs

• PILOTS: Many of the nonprofits that Boston, Massachusetts targeted to make “voluntary” payments in lieu of taxes (PILOTs) continue to refuse to yield to the city’s pressure, the city has acknowledged in a new report. Massachusetts law exempts nonprofits from property taxes. Yet in 2011, Boston began sending mock tax assessments to 49 larger nonprofits, seeking payments based on a formula the city invented: 25 percent of the assessed property value minus what the city determines to be the value of the organization’s “community benefits.” Only 13 of the targeted organizations paid the full amount of the imitation tax bill. Educational institutions were least likely to succumb, with nine schools and colleges providing no payment and nine, including Harvard and Boston College, paying less than the full amount. Medical institutions tended to pay, with 13 of the 16 targeted medical institutions paying about 92 percent of what the city “assessed.” Among the 10 cultural institutions on the list, three paid between 6 and 40 percent of what the city wanted, and four, including the Museum of Fine Arts and the New England Aquarium, paid zero. Overall, nonprofits gave Boston $32.4 million in FY 2017.
• PILOTs: The Minnesota Council of Nonprofits participated on a special committee of the Citizens League considering whether nonprofits should make voluntary contributions to St. Paul, Minnesota. The group gathered data to inform their discussions and the general public. The final report, “Saint Paul PILOT/SILOT Project,” recommends that “the City of Saint Paul and its tax-exempt organizations do what has always worked best in Saint Paul: sitting down together to negotiate a uniquely-Saint Paul partnership and strategy that provides for the future health and vitality of all of the organizations and individuals in Saint Paul” because their “fates remain intertwined and their successes remain dependent on each other.” The report also “identifies the key questions that should be considered, and provides a guide for developing solutions and working together.” 

Take Advocacy Action Next Week

While we normally use this space to share advocacy stories that have already happened, today we want to share two opportunities to advocate quickly and easily for your nonprofit's mission and your community next week:

Monday, September 25 is #MissionMonday, when individuals across the country associated with charitable nonprofits, foundations, and places of worship will join forces to keep partisan electioneering away from nonprofits. Join us on social media to let the world – and especially your federal Senators and Representatives – know how the Johnson Amendment and nonpartisanship allow your nonprofit to advance its mission. This day-long social media event isn’t about repeating the same policy talking points. It should be personal. If your nonprofit was suddenly thrust into partisan politics, how would your community be affected? We ask that you (1) sign on to the Thunderclap and (2) make up your own messages calling on Congress to preserve nonprofit nonpartisanship. Feel free to include photos and mention your federal officials’ handles in your posts. Let’s stand up together to protect nonprofit missions. See you on #MissionMonday!

The following day, Tuesday, September 26, is National Voter Registration Day, a nonpartisan event to encourage voter registration. Last year, millions of Americans didn’t vote because they missed a registration deadline or didn’t know how to register. The reasons for missing the deadline are many: some are not aware that they must register to vote before they can cast a ballot; life changes such as turning 18, changing your name, moving, etc., require a voter registration update. Americans can register at hundreds of events across the nation and online at www.NationalVoterRegistrationDay.org, where you also can see the vast number of nonpartisan partners in this civic engagement activity. Supporters can also follow National Voter Registration Day activities through social media on September 26 at hashtag #NationalVoterRegistrationDay.

Federal Issues

• Congressional Action
• IRS and Hurricane Disaster Relief
• Federal FastView
  • IRA Rollover – Proposed Expansion
  • Nonprofit Postal Rates
• In Focus: 2020 Census

State and Local Issues

• State “Nonprofit” Legislation
• State Budget Woes Continue: AK, CT, IL, KY, MD, OK, PA, WY
• City Fiscal Pressures Increase
• Taxes, Fees, PILOTs: MA, MN

Advocacy in Action

Survey Period Extended

Are You Benefitting from Federal Grants Reforms?

Late in 2014, the Office of Management and Budget (OMB) streamlined federal grants law via its Uniform Guidance, which provides, among other things, that nonprofits are entitled to be reimbursed by local, state, and federal governments for the indirect costs they incur when federal money is in the funding stream. Two and a half years later, it’s time to ask: Is it working? If your nonprofit has government grants and/or contracts, please take a few minutes to share your experiences through this confidential Nonprofit Uniform Guidance Implementation Survey. The survey closes on September 22.

Worth Quoting
On nonprofit nonpartisanship
“[A]ltering the Johnson Amendment … would create perilous inconsistency between federal and state laws” because “electioneering is not considered a charitable purpose under common law, and many state charities regulators would consider expenditure of charitable funds on such purposes to be inappropriate, possibly illegal.” - Karen Gano, Board President of the National Association of State Charity Officials (NASCO), and Tim Delaney, President & CEO of the National Council of Nonprofits, in Congress, Defend the Common Law and Common Sense of Nonpartisanship, The Hill, September  7, 2017. NASCO members – state charity regulators across the country, including those in state Attorney General Offices, Secretary of State offices, and other state offices charged with preventing the misuse of charitable assets – are the state law enforcement officials with the greatest knowledge about charitable nonprofits.

“Why, when there are so many issues at stake today did I choose to write about this one? It is because undermining this provision of the tax code would put the very credibility and integrity of our houses of worship at stake. And then all the other pressing issues will become subject to a partisan political climate masquerading as religious freedom. The Johnson Amendment protects us from this facade.” – Jennifer Copeland, Executive Director of the N.C. Council of Churches, in Protect Johnson Amendment, Durham (North Carolina) Herald-Sun, September 17, 2017. She continued, “Weakening or repealing current law will fundamentally change the character of our institutions. Our churches will be viewed as conduits for political campaigns; our congregations will be divided along party lines; and our programs meant to provide necessary charity for people in need will be seen as Republican or Democratic, instead of as serving all who are in need.”

“Without the Johnson Amendment, wealthy special interests would have a significant incentive to try and funnel their campaign contributions through churches like mine in order to benefit from our tax-exempt status. The Johnson Amendment is an essential levee that keeps the murky tides of secret money from flooding into our sanctuaries.” - Rev. Timothy McDonald III, writing in Destroying the Johnson Amendment Helps Special Interests, Not Churches, Huffington Post, September 7, 2017. Rejecting efforts to repeal or weaken the Johnson Amendment, Rev. McDonald concludes: “Let us live in our faith as citizens without becoming cashiers for the tawdry transactions of political machines. Most importantly, let us remember to never turn our pulpits over to the service and glory of anyone before God.”

On tax reform

“When Congress reforms the tax code” it should make “the charitable deduction universally available to Americans of all income levels – whether or not they itemize” because “[c]haritable giving is not just the province of the rich.” - Adam Meyerson, President of The Philanthropy Roundtable, in Tax Reform and Philanthropy’s 3 Percent Solution, Washington Examiner, September 12, 2017. 

On payments in lieu of taxes (PILOTs)

“It’s the implication that those institutions that don’t cut a check in the full amount have shirked their responsibility that is galling.”

- Boston Herald editorial, Hub Hits Up Nonprofits, September 11, 2017, commenting on Boston’s “voluntary” program that uses public shaming to induce nonprofit hospitals, universities, and cultural institutions to make payments in lieu of taxes (PILOTs) to the city’s general treasury. 

“I think here in Union County, we get a great deal in exchange for granting that exemption. How do we begin to put a price tag on what Bucknell University brings to our county in terms of jobs and more? The nonprofits like museums and civic organizations add to the richness and the fabric of our communities.” 

- John Showers, Union County, Pennsylvania, Commissioner, quoted in $467M in Tax-free Properties in Union County, The Daily Item, September 10, 2017, making the case for nonprofit property tax exemptions. 

Worth Reading

Nestled in House Spending Bill: Campaign Finance Deregulation, Cezary Podkul, Wall Street Journal, September 9, 2017, identifying several policy riders inserted in the House omnibus appropriations bill that “could reshape campaign finance rules ahead of next year's midterm elections,” including one that would effectively prohibit the IRS from enforcing the Johnson Amendment against even the most egregious violations by churches.

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