Continue Advancing Your Mission Through the August Recess
Public policymakers at all levels of government are back home this month, closer to you the people they represent. Take advantage of their proximity to meet in their offices, host an event at your facilities, or catch them at public events around town. Check out this recording on setting up and conducting meetings. What should you talk about? Any topic that advances your nonprofit’s
agenda. For Members of Congress, we suggest these action items:
- Repeal the Tax on Nonprofit Transportation Benefits.
- Cosponsor the Nonprofit Relief Act, H.R. 3323.
- Support the Universal Charitable Deduction.
Learn more about each issue by following the links or read about how to advance your nonprofit’s mission during the August recess.
The Budget Deal Was the Easy Part of the Negotiations
It turns out, reaching agreement to spend more money and postpone a debt ceiling reckoning was the easy part of federal budget and spending negotiations this summer. Come September, Congress will have only 16 days in session to convert the broad budget agreement approved in July into 12 detailed appropriations bills and pass them before the 2020 fiscal year begins on October 1. Partisans are just as adamant as before about the controversial issues that have led to government shutdowns and delayed decision-making. As in December and January, when the country saw the longest government shutdown in history, the President wants money to build his southern border wall. The House has refused, but the Senate may attempt to divert $5
billion in spending intended for health and education programs to pay for wall construction. The House, for its part, wants to use a spending bill to block enforcement of the new “public charge” regulation (see below). Similar disputes exist in each of the 12 appropriations bills that must be enacted by the end of September to prevent another government shutdown or stopgap spending bill.
- Limiting Benefits for Immigrants: Foreign citizens who use noncash benefits like the Supplemental Nutrition Assistance Program and Medicaid may now be considered “public charges” and denied approval for visas or green cards, according to a final regulation to be published this week by the Department of Homeland Security. Under the previous rule, non-citizen individuals who seek adjustment of immigration status or a visa, or who are applicants for admission to the country, must establish that they are not likely to become a "public
charge" (i.e., a burden on taxpayers). The new rule expands the number of federal programs that, if utilized, count against a family when the government considers their public charge status in the context of seeking admission to, or permanent legal residence in, the United States. Nonprofits and advocates have opposed the regulatory change out of concern that it will have a chilling effect on some immigrants by discouraging them from seeking medical coverage or care. The National Council of
Nonprofits submitted comments opposing the proposal “because the rule would violate core American principles, operate as an unfunded mandate by imposing billions of dollars of costs onto charitable nonprofits, and negatively affect the operations of charitable nonprofits.”
- Blocking Donor Disclosure Rule (for now): A federal judge has ruled that certain non-charitable nonprofit groups must continue to disclose the identity of their large donors to the Internal Revenue Service. Last summer, the IRS issued Revenue Procedure 2018-38, which allowed various types of nonprofits required to file a Form 990 informational return – including section 501(c)(4) social welfare organizations and section 501(c)(6) professional and trade
associations – to stop disclosing their large donors ($5,000 or more) on Schedule B of the Form 990. The rule did not apply to 501(c)(3) charitable, religious, and philanthropic organizations, which still have to disclose their donors to the IRS. Last month, the U.S. District Court judge blocked the regulations because the IRS failed to comply with the notice and comment mandates under law. The IRS could again revoke the disclosure rules, but only after following the regulatory process. The lawsuit was filed by the Governors of Montana and New Jersey.
- Opposing SALT and State Tax Credit Regulations: Democratic Representatives and Senators introduced identical resolutions (H.J.Res 72/S.J.Res. 50) seeking to revoke the Treasury and Internal Revenue Service rule restricting the deductibility of certain state-supported charitable donations. The rule, finalized in June, limits the federal tax
benefits taxpayers may receive when donating to government-run nonprofits and claiming the payments as charitable deductions, rather than tax payments, to avoid the $10,000 cap on state and local tax (SALT) deductions under the 2017 federal tax law. The new rule also limits the federal deductibility of the state tax credits received for donations to many non-governmental organizations. The congressional resolutions state that “Congress disapproves the rule” and seeks to render it unenforceable and without effect. Should Congress pass the resolution, President Trump would have to sign off on it, which is unlikely. Three states (Connecticut, New Jersey, and
New York) have passed state workaround legislation and filed a lawsuit against Treasury and the IRS challenging the regulations.
In Focus: Nonprofits and the 2020 Census
Can Nonprofits Promote Census Engagement?
By now, everyone knows that charitable nonprofits have vital interests at stake – including dollars, data, and democracy – to make sure the 2020 census produces quality counts. But as 501(c)(3) organizations, can they advocate for and otherwise promote a fair, accurate, and complete count? A related question concerns whether such activities constitute prohibited partisan electioneering: since various partisans have tried to turn the 2020 census into a political weapon, can charitable organizations promote participating in the census without risking their tax-exempt status?
The short answer to both questions in most cases is an emphatic YES – nonprofits can most definitely engage in census-related activities! In general, promoting the census and get out the count (GOTC) efforts are pure forms of civic engagement that are unrestricted by either the limits on lobbying activities (which concern only activities “to influence legislation”) or the prohibition on partisan, election-related activities (which concerns participating in “any
political campaign on behalf of (or in opposition to) any candidate for public office”).
Advocacy is fine: The federal tax laws regulating lobbying by charitable nonprofits do not apply to informing the public or distinct populations about the census, participating in complete count commissions or committees, or speaking out in support of a fair, accurate, and complete count. Plus, charitable nonprofits can actively lobby at the federal, state, and local levels for full or better funding and processes for the 2020 census – just keep track of your lobbying time for reporting purposes.
Nonpartisanship is fine: The longstanding Johnson Amendment in federal tax law does require nonprofits to remain nonpartisan, which means they may not endorse or oppose candidates for public office. But promoting the census, such as by engaging in GOTC efforts or encouraging people to be counted, would not be partisan, election-related activities. Just because some politicians and their operatives have tried to misuse the 2020 census for their partisan gain, their self-serving actions cannot diminish the rights of charitable nonprofits to work in support of a fair, accurate, and complete
count. Federal law requires every person to fill out the census questionnaire. There would be no violation of the Johnson Amendment’s mandate for nonprofit nonpartisanship under 501(c)(3) when nonprofits encourage people to fulfill their legal obligation to complete the census form. Partisans may want one group of voters or another to be dissuaded from completing census questionnaires, but that’s not how the law or nonprofits see things. Everyone counts, so everyone must be counted.
States Embrace, Expand, or Expel Wayfair
Forty states now have laws imposing sales and use taxes on sellers outside their states, a swift response as states seek to cash in on the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair. That case overturned precedent that a seller must have a physical presence in the state to be subjected to its taxation. The actions in these states may translate into an estimated 4.5 percent increase in sales and use tax revenues this fiscal year, according to the National Conference of State Legislatures. Conversely, lawmakers in New Hampshire, one of five states without a general sales tax, have passed a law prohibiting any other state from imposing sales taxes on its residents without first providing 45 days’ notice. The law, which will likely be challenged in court, also seeks to allow New Hampshire businesses to deduct reasonable tax compliance costs from the amount of tax remitted to other jurisdictions.
The exception to the trend in following Wayfair is the State of Kansas, which is seeking to levy sales and use taxes on all out-of-state sellers, regardless of the amount of sales in the state. The U.S. Supreme Court decision recognized the validity of South Dakota statute that imposed the taxes on remote sellers partially because the law “affords small merchants a reasonable degree of protection” under thresholds of $100,000 in revenues or 200 separate transactions. Most of the new nexus parameters in the various states set similar thresholds or provide additional protections for small
businesses. The new regulation in Kansas, however, contains no thresholds, thus requiring out-of-state businesses, including nonprofits, to comply with new accounting, collection, and remittance rules. Legal challenges are also expected regarding the Kansas approach, but in the meantime, for-profit businesses and nonprofit organizations must be aware of any business dealings – even a single ticket or book sale to someone within the Sunflower State.
States Undertaking Tax Review Process
Policymakers in at least two states are taking advantage of the break between legislative sessions to review and reconsider tax policies and priorities. Oregon Governor Brown signed legislation this year to study the statutory definition of tax expenditures and the effect of automatic sunset clauses. The law requires the Legislative Revenue Officer and Department of Revenue to submit a report with recommendations by February 1, 2021. A task force in Utah has completed an eight-city public listening tour to gather information and hear feedback on what should and should not
be included in state tax reform next year. The Utah Nonprofits Association has been tracking the work of the task force and is inviting nonprofits across the state to sign onto a letter making tax reform recommendations. The letter urges the task force to “mitigate the effects of tax reform on Utah’s charitable nonprofits” by adopting the following recommendations: (1) protect existing state charitable nonprofit tax exemptions; (2) continue providing resources to charitable nonprofits working with the state; (3) decouple the state unrelated business income tax (UBIT) from the
federal UBIT; and (4) create a non-itemizer charitable tax deduction. The letter from the nonprofit state association explains, “Tax reform will drive future economic growth, determine what services the state provides, impact how taxpayers spend their money, and directly influence the resources available to our charitable nonprofits to complete their missions in service of Utah’s communities.” The letter asks the task force “to ensure that unfair tax burdens are not placed upon us so that Utah continues to be the top giving state in the nation.”
Alaska, North Carolina State Budgets Still Stalled
Alaska and North Carolina are entering their second months without state budgets, creating crises for many of their residents and leaving some nonprofits without appropriated funds for critical work in their communities. In Alaska, letters from the state went out to more than 13,500 low-income seniors alerting them they will no longer receive monthly cash-assistance checks of up to $250 because the Governor vetoed funding for the program. The University of Alaska system is consolidating its three universities into one and the newly appointed director of Kodiak College has resigned before her post officially began. North Carolina Governor Cooper vetoed the state budget last month and legislators have thus far failed to override his veto. No new funding or budget provisions can take effect until a final version is enacted, placing more than $117 million of appropriations for the work of 207 nonprofits on hold. The North Carolina Center for
Nonprofits has compiled a list of these appropriations earmarked for education, health, human services, justice, and other services provided by those nonprofits. “While some analysts decry these earmarks as ‘pork,’ legislators are quick to point out the investment in nonprofits providing critical services for their communities,” says David Heinen, Vice President for Public Policy and Advocacy for the state association of nonprofits. The analysis then lists three
positives and three negatives of earmarked appropriations for nonprofits, including unpredictability and unsustainability as a source of funding in the con column.
From Building a House to Building Community
On June 12, 2019, Habitat for Humanity launched its ambitious nationwide Cost of Home campaign to engage its local affiliates and many others in advocacy efforts to secure affordable housing for 10 million individuals over the next five years. The motivation for the campaign is simple: “families all across the United States are paying too high a price to cover the cost of home.” In order to make systemic reforms and policy advances, the campaign is targeting four key areas of change: supply and preservation of homes; access to credit; land use; and communities of opportunity.
The primary strategies are to get legislation passed in line with Habitat's public policy agenda and to build its network’s advocacy capacity.
So far, the campaign has had multiple successes across the country. Much can be learned about effective advocacy by taking a closer look. Here, using one of their four priorities, we’ll consider the underlying problems, identify relevant solutions, and review how advocates are getting them implemented.
Improving the Housing Supply
Across the country, low-to-moderate income families do not have access to affordable housing. Housing experts believe that homeowners and renters should spend no more than 30 percent of their income on housing. Yet today, nearly 19 million people in America pay half or more of what they earn to pay for housing. The Cost of Home campaign starts with the view that there simply are not enough homes available to meet the demands of individuals and families seeking lower-cost homes. Therefore, “Increasing the supply and preservation of affordable homes” is one of the top priorities for Habitat’s campaign, which promotes local, state, and federal policies that fund and expand new affordable housing projects, as well
as increases access to available homes. They will also be advocating for ways to create funding sources to preserve and repair older homes to make them safe, respectable, and cost-effective.
The Twin Cities Habitat for Humanity successfully advocated for a substantial increase in funding for constructing affordable housing in the region. Twin Cities Habitat, in coalition with other housing groups, was able to secure $21.1 million for the Minneapolis Affordable Housing Trust Fund (AHTF). The Fund provides gap funding for affordable and mixed-income rental housing, housing production, and preservation efforts for the city, supporting the production of 500 to 800 homes in the city.
Read the full article, Cost of Home Campaign: Welcoming Families Home Through Public Policy, for more insights for turning policy priorities into action and impact.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.