Repeal in Three Weeks, or Else
On April 15, tens of thousands of nonprofit organizations will be forced to make payments to the IRS on an unjust and indefensible tax – the unrelated business income tax on the expenses of nonprofits that provide employees with transportation benefits, such as transit passes and parking. Nonprofits must pay this new 21 percent tax not only on the amount that they pay directly, but also on the amount that employees voluntarily have withheld from their own paychecks for parking or transit under qualified plans. The quotes in the sidebar to the right make clear that neither the administration nor congressional leaders intend to address this tax problem anytime soon, meaning
that charitable nonprofits, houses of worship, foundations, and nonprofit associations will have to divert scarce resources away from their missions – first to calculate and then to pay the tax. In Just Three Weeks! That is, unless nonprofits demand that Congress set aside partisan business as usual and repeal the nonprofit transportation tax.
Join with your nonprofit colleagues throughout the country in telling Representatives and Senators: Don’t hold community nonprofits hostage to partisan bickering; repeal the nonprofit transportation tax before April 15. There are several easy ways to deliver this message; please do several or all of them – Today!
- Sign your organization onto the nonprofit community letter: Hundreds of national, state, and local nonprofit organizations are signing onto the letter to tax committee and congressional leaders urging immediate action to repeal the nonprofit transportation tax before April 15. The deadline for signing is close of business, Wednesday, March 27 – two days away.
READ THE LETTER | SIGN YOUR ORGANIZATION ONTO THE LETTER
- Call, write, and tweet your Senators and Representative to tell them the transportation tax on nonprofits is unfair and burdensome, and must be repealed before April 15. Go to this TAKE ACTION page for text, links, and background.
- Forward this message to your Treasurer/CFO, board members, colleagues, and clients. Ask them to take action to help keep your organization’s resources dedicated to your mission, where they can do the most good.
The Spring Congressional Agenda
The Take Action item, above, makes clear what the networks of the National Council of Nonprofit consider the highest priority for Congress in the coming weeks – repeal of the nonprofit transportation tax. Lawmakers have other topics top of mind, not the least of which is how they (or, their party) will respond to the initial reports about Special Counsel Mueller’s Report to the Attorney General and what it means for their legislative and oversight agendas.
The President submitted his budget proposals to Congress this month, calling for increased military spending and money to build his southern border wall, while proposing severe cuts to domestic programs. Although not likely to adopt many of the President’s budget requests, House Majority Whip Hoyer (D-MD) announced recently that the House will attempt to complete floor action on all 12 appropriations bills by the end of June. The Senate reportedly is inclined to work faster on spending matters than in years past. Senate Majority Leader McConnell (R-KY) has made clear that his highest priority is confirmation of President Trump’s judicial nominees, going so far as to suggest that he’ll alter the Senate rules to override procedural objections from Democrats. Separately, McConnell may soon bring up for a vote the “Green New Deal,” environmental proposals popular with progressives in Congress, but a package he derisively calls an
example of "garden-variety 20th-century socialism."
- Digging into the Impacts of the 2017 Tax Reform: The House Ways and Means Committee has scheduled a hearing on Wednesday, March 27, entitled, "The 2017 Tax Law and Who It Left Behind." The Committee has invited tax law professors, a labor economist, and a union official to testify. As is typical, the Committee has invited any individual or organization not scheduled to appear at the hearing to “submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.” Many organizations are expected to submit information to
the Committee on the new tax on nonprofit transportation benefits, the impact of the tax law on charitable giving, and other issues. Go here to read instructions for submitting a statement.
- New Speech, Disclosure Mandates on Higher Education: The President signed a new Executive Order last week seeking to require U.S. colleges and universities to protect free speech on their campuses or risk losing federal research funding. The order provides that it is federal policy to “encourage institutions to foster environments that promote open, intellectually engaging, and diverse debate, including through compliance with the First Amendment for public institutions and compliance with stated institutional policies regarding freedom of speech for private institutions.” According to reports, the order is the result of complaints of stifled conservative speech on campus in recent years. The American Council on Education, which represents more than 1,700 college presidents, said the order “is neither needed nor desirable, and could lead to unwanted federal micromanagement of the cutting-edge research that is critical to our nation’s continued vitality and global leadership.” The Executive Order also imposes new disclosure mandates intended to
“increase institutional accountability and encourage institutions to take into account likely future earnings when establishing the cost of their educational programs.”
- DOL Proposed Overtime Rule: On Friday, March 22, the U.S. Department of Labor formally published proposed regulations to update the minimum salary threshold that partially determines whether executive, administrative, and professional employees are exempt from overtime pay. The draft rules call for increasing the threshold from $455 per week ($23,660 per year) to $679 per week ($35,308 per year). The minimum compensation amount for “highly compensated
employees” would increase from $100,000 to $147,414 annually. Learn more about the proposals in this National Council of Nonprofits initial analysis. Nonprofits are encouraged to submit comments by May 21, 2019.
Nonprofits Pushing State Charitable Giving Incentive Bills
New Jersey, currently without a state charitable giving incentive, is on the verge of creating a non-itemizer deduction to allow all taxpayers, regardless of whether they itemize or take the standard deduction, to claim charitable contributions on their tax forms. Specifically, the bill would permit a taxpayer to deduct from state income taxes the amount of charitable contributions made to a “qualified New Jersey-based charitable organization” equal to the amount that is allowable as a charitable deduction under federal income taxes. The NJ Senate is scheduled to vote on the
legislation today, March 25. Lawmakers have called the state charitable deduction “an emergent priority because there are individuals who can reduce their tax burdens and help out charities at all income levels.” The NJ Center for Non-Profits is actively advocating for this type of giving incentive, pointing out, “Demand for the programs and services provided by charities continues to grow, while needed resources lag behind” (as outlined in the Center’s recent report). Similarly, lawmakers in Arizona continue to move legislation establishing its own non-itemizer charitable deduction. Demonstrating the need for the bill, a report by an institute at Arizona State University estimates charitable giving in Arizona will decrease by $272.7 million every year because of the federal tax law that passed in 2017.
Nonprofit Property Tax Exemptions Under Attack
Policymakers across the country are targeting nonprofits with bills that would remove property tax exemptions. A measure under consideration in Montana would allow local governments to establish "Public Safety Districts" and levy so-called “fees” on properties that are tax exempt, thereby attempting to evade the state prohibition against imposing a “tax” on charitable properties used for charitable purposes. The Montana Nonprofit Association explains, “In essence this is a fee which would be assessed on nonprofit organizations should a local government decide to do so in order to fund public safety services - which is what property tax does.” Legislation in New York would shift the burden of proof from the state government to the nonprofit organization to show annually, by “clear and convincing evidence,” that it qualifies for property tax exemption. Similarly, the
Oregon Legislature is looking to force nonprofits to file additional information returns that identify the basis for exemption. Rhode Island legislators have a history of introducing anti-nonprofit property tax bills; this year is no exception. Two bills, one targeting higher education and the other aimed at hospitals, would authorize cities
and towns to tax the property of certain nonprofit institutions, including vacant lots, parking lots not used exclusively for nonprofit vehicles, and property not wholly and exclusively utilized for the purposes for which the nonprofit was incorporated.
States Consider Rejecting Taxes on Tax-Exempt Organizations
A year after the federal tax law went into effect, states continue to look for ways to shield constiuents from the aftershocks of the law. Under the Tax Cuts and Jobs Act, nonprofits would be subjected to a new 21 percent tax on unrelated business income tax (UBIT). Under Section 512(a)(6), nonprofits are directed to compute UBIT for each “separate” “trade or business.” As discussed previously, Section 512(a)(7) imposes the tax on nonprofit transportation
benefits, such as parking and transit passes. Lawmakers in Georgia, Hawai`i, Illinois, and Minnesota are considering bills to decouple their state laws that automatically add state taxes on top of federal taxes to avoid nonprofits facing both the
federal tax and state tax. The Georgia bill would be retroactive to the beginning of 2019. Jon Pratt of the Minnesota Council of Nonprofits testified, “The two federal changes in UBIT laws from the 2017 federal tax bill do not ensure that money and resources are used for the right purposes. Instead, they divert money and resources away from each nonprofit’s mission. If Minnesota wants to maintain its strong and thriving charitable sector, the state should not conform to these two provisions.”
America Goes to the Polls
Nonprofit VOTE recently released its America Goes to the Polls report, highlighting voter turnout in each state in the 2018 elections. “The November midterm election shattered records for voter turnout,” says Brian Miller, Executive Director at Nonprofit VOTE, “but beneath the record-setting turnout is a vast gap in turnout between states that speaks volumes about the impact state policies play in voter turnout.” The report notes that states with policies such
as same-day registration, automatic voter registration, and vote at home generally had higher voter turnout rates. The report expresses the view that the success of civic engagement at the polls was helped in part by the largest National Voter Registration Day ever, held in September 2018. That event saw 4,087 nonprofit community partners across the country mobilizing on-the-ground registrations to help 865,015 people with new or updated registrations. To learn more, read the report or join a free
webinar on Tuesday, April 2.
Making Sure Everyone Counts
How do you get the wide-ranging charitable nonprofit community to get its collective head around an issue that happens only once a decade, yet affects every single person in the United States, trillions of dollars in spending, and democracy itself? If the issue is the 2020 Census and you are concerned about the nonprofit sector’s engagement, you do it the nonprofit way: by convening many smart people from across the state to identify problems, solutions, and the need to mobilize.
Last week, Maryland Nonprofits, the state association of nonprofits, hosted “Everyone Counts: What You Should Know About the 2020 Census,” an event where speakers from nonprofits and governments presented on their roles, visions, and the
overall need for a fair, accurate, and complete count in 2020. The event opened with a nonprofit leader seated in the audience who framed the 2020 Census, “I want to be in that number,” set to the tune of an old hymn. The speakers proceeded to identify different aspects of why the census is important, how the different parts interconnect, and what community leaders, particularly nonprofits, can do. A researcher from the GW Institute of Public Policy at George Washington University presented a breakdown of the data that nonprofits can use to justify the need for a fair, accurate, and complete count. Namely, for every person who is not counted, the individual states will lose anywhere from $533 to $2,309 annually. When a state receives less funding than appropriate because a person is uncounted, it does not mean the person doesn’t exist and has no needs; rather, it means that fewer dollars are spread delivering services to more people. In other words, nonprofits will have to do that much more for so many more for so much longer (a decade) with so much less. Yes, nonprofits have “skin in the game” to make sure that every person is counted.
Two nonprofit leaders drove home the point of how nonprofits can get involved and why they should be the ones educating the public to participate in the census – beyond the dollars previously discussed. Simply put, nonprofits are on the ground in the communities and have relationships with the people they serve. While a government enumerator knocking on the door may be scary to various constituencies, nonprofit staff and leaders are already in these communities day in and day out, understanding the complexities of the people they serve. Many people may still be fearful due to other factors, such as real or perceived repercussions from filling out the form. One nonprofit leader, who works with people who may not have a
stable living environment, said that some individuals may be wary of admitting they live in temporary housing because they fear they could lose some health benefits or perhaps get a friend in trouble with a landlord. Another participant said the current questions on race and ethnicity create confusion and concern within certain populations, so inclusion of the controversial citizenship question on the census questionnaire would be another layer of difficulty and depress participation. The bottom line: Nonprofit leaders are well – and perhaps best – positioned to listen, anticipate, and adjust to these concerns.
Partnerships matter. A member of the Maryland Department of Planning and a representative from local grantmakers spoke about the importance of partnerships between the nonprofit and grantmaking communities with local government officials. Through joint efforts, nonprofits were able to apply for and receive funding for education and get-out-the-count efforts in their communities.
Finally, a U.S. Census Bureau attendee who wasn’t on the agenda, but was invited to share a few words, offered his insights. This being the official’s third Census, he focused on how much he appreciated being able “to be in the room.” Recognizing the depth of knowledge that had just been shared by others, he expressed interest in what nonprofits and community leaders are saying about the difficulties and importance of the census, so he can
adapt his work. He closed out the program discussing the format of the online questionnaire and the ability for people to answer the census survey via phone and hard copy.
Approaching the census from different angles, this forum spotlighted the importance of information, collaboration and partnership for the beast that is the census. Each person plays a role, sees the activities and challenges differently, and comes to the table with unique insights and experiences. Together, nonprofits and government can succeed in achieving a fair, accurate, and complete count in 2020. Take the first step by participating in Census Day 2019.
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