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The Race to Appropriate
The budget optimism of midsummer has shifted to the harsh realities of partisanship and the calendar as Congress returns to address major spending disputes before the new fiscal year begins in three weeks. In July, the House, Senate, and President reached agreement on a two-year budget deal that set higher spending levels for both defense and domestic programs. Hope ran high since the House had already passed most of its 12 spending bills and the Senate finally had clear spending targets to meet. The differences between the two chambers, however, will be exposed this week. On Thursday, the Senate Appropriations Committee is scheduled to allocate funding levels for each of its 12 bills and consider its initial four spending bills. Committee Chairman Shelby (R-AL) announced over the summer that he was considering shifting up to $5 billion in domestic spending that was part of the two-year agreement and dedicate it to the President’s top priority, building a wall on the southern border. If the Senate takes this controversial move, it would undermine any remaining hope of completing FY 2020 appropriations on time, guaranteeing a short- or long-term stopgap spending bill in order to avoid another partial government shutdown.
Federal FastView
- Trying Again to Undo Donor Disclosure: The Internal Revenue Service on Friday announced proposed regulations seeking once again to end the requirement that non-charitable nonprofits disclose to the tax agency the names of donors and amounts given. The Internal Revenue Code expressly mandates that organizations tax-exempt under Section 501(c)(3) – charitable nonprofits and foundations – disclose their donors to the IRS. Several decades ago, Treasury extended that requirement to organizations exempt under different subsections of 501(c), including (c)(4) social welfare nonprofits, (c)(5) unions, and (c)(6) chambers of commerce. After the Citizens United decision allowing those non-charitable groups to become more active in partisan politicking, partisans have been funneling more money through them and calling on the IRS to change the rules so their actions would not be disclosed. In July 2018, the IRS announced that these non-charitable groups would no longer be required to make the disclosures. Last month a federal court struck down that notice because the agency failed to follow administrative procedures, including accepting public comments. The new proposal is designed to follow statutorily mandated procedures before achieving the same end result. Under the proposed regulations, filing requirements for Section 501(c)(3) organizations and Section 527 political organizations remain unchanged, and all organizations are required to keep the contributor information and make it available to the IRS upon request. Public comments are due on or about December 9, 2019.
- Improving the Student Loan Forgiveness Program
 The Education Department approved barely one-percent of applications for a student loan forgiveness program that Congress had expanded to make it easier for individuals to qualify, according to a report from the Government Accountability Office. The Public Service Loan Forgiveness program is designed to forgive federal student loans for borrowers who work for certain public service employers, including charitable nonprofits, for at least 10 years while making 120 timely payments via eligible repayment plans, among other requirements. Seeing that the Education Department was ruling most applicants ineligible under the PSLF, Congress in 2018 enacted a temporary expansion of the program. The GAO analysis, however, finds that the Department implemented an needlessly convoluted approval process that led to the excessive turn-down rate. GAO made four recommendations to overcome the bureaucratic challenges, recommendations that the Department has agreed to implement.
- Costing Out Tax Cuts: Extending many of the temporary provisions in the 2017 federal tax law would increase the federal budget deficit by over $1 trillion between 2020 and 2029, the Congressional Budget Office estimated in a report released last week. The provisions scheduled to expire include individual tax rates and brackets, the increase in the standard deduction, limits on state and local tax deductions, and the size and refundability of the child tax credit, among others.
2019 Election Season Has Begun
Election Day
Tuesday, September 10, 2019
⇒ Voters in Connecticut will be picking winners of the Democratic and Republican primaries for offices in 21 municipalities.
⇒ In North Carolina, voters will participate in two special elections to fill two vacant congressional seats, as well as some mayoral primaries.
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With all the media attention on the 2020 presidential race, it is easy to overlook the thousands of other federal, state, and local races that will be decided next year – and in 2019. Indeed, several states are holding elections this year (including elections this Tuesday). In less than two months, on November 5, voters in Kentucky, Louisiana, and Mississippi will elect their Governors, Lieutenant Governors, Attorneys General, and Secretaries of State. Ballotpedia reports that more than 500 statehouse seats will be on the ballot as well in Louisiana (House and Senate), Mississippi (House and Senate, New Jersey (General Assembly), and Virginia (House and Senate). The National Conference of State Legislatures reports that by the end of 2019, voters in nine states will have decided the fate of 25 ballot measures, including several governing future election petition drives, continuity of state government, affirmative action, and more. While charitable nonprofits cannot engage in activities in support of or opposition to candidates for public office, they can and do promote nonpartisan voter registration and get-out-the-vote activities, and raise the public’s awareness of critical ballot measures. See this Advocacy in Action article for ideas on taking advantage of the upcoming elections, while staying nonpartisan. And take action by becoming a community partner for #NationalVoterRegistrationDay and get #VoteReady for September 24.
Census and the States
Southern States, Nonprofits Begin Census Engagement
Lawmakers in a few states in the South are beginning to provide funding and other resources to increase the census count in their states. Alabama and Georgia have appropriated $1 million and $1.5 million, respectively, for census outreach, and Virginia Governor Northam recently authorized up to $1.5 million for the state Complete Count Commission. Arkansas Governor Hutchinson issued an executive order to create a statewide Complete Count Committee consisting of 30 volunteer members.
But state support is not universal across the South. Due to a lack of formal creation at the state level in Kentucky, the Count Me In 2020 KY Nonprofit Coalition, including the Kentucky Nonprofit Network, has led the charge in the commonwealth because “[n]onprofits also understand more than most that cities and counties will look to our sector to meet the needs of citizens in the event of funding cuts to programs based on census-derived data.” The Texas Legislature refused to provide funding and resources for census work by denying hearings for bills to earmark funds. Nonprofits and local governments responded by creating local commissions and are leading Get Out the Count efforts with little financial support. Local nonprofits are educating children and parents at schools about why the census matters and to dispel fears of filling out the questionnaire. “We know this is going to be an enormous challenge and working with these students is just one of the approaches we’re doubling down on – but it’s an extremely important one,” said Dallas NAACP President Aubrey Hopper.
More States Help Taxpayers Work Around SALT Limits
The Georgia Department of Revenue announced plans to allow certain taxpayers to continue benefitting from state tax credits for charitable donations despite the federal limit on state and local taxes (SALT) and recent rulemaking by the IRS. Under the proposed plan, “charitable contributions” could be paid to the state by a pass-through entity and its members/partners would be entitled to claim the payments as charitable contributions for federal income tax purposes. The plan would amend the state’s qualified education donation tax credit, qualified education expense credit, and qualified rural hospital organization expense tax credit, limit the value to the amount expended or $10,000, whichever is less, and be effective for the 2019 tax year. Any partner or member taking the tax credit would have to claim the federal charitable contribution deduction received as state taxable income. Should the plan be implemented, the Peach State would join five others (Connecticut, Louisiana, Oklahoma, Rhode Island, and Wisconsin) that already permit SALT workarounds for pass-through entities. Treasury and the IRS have not publicly taken a position on the pass-through entity workarounds.
Taxes, Fees, PILOTs Update
- Sales and Use Tax: The Nome City Council in Alaska approved an ordinance to impose its 5 percent sales and use tax on remote sellers and marketplace facilitators that have gross revenue of more than $100,000 or 100 separate transactions in the locality. Alaska is one of five states without a state sales and use tax, but more than 100 local jurisdictions do impose such taxes. The threshold set by the City is less than the 200 separate transaction threshold approved by the U.S. Supreme Court’s decision in South Dakota v. Wayfair, which allows jurisdictions to require out-of-state sellers to collect and remit sales tax on their behalf.
- Property Tax: City officials in New Orleans are once again targeting nonprofit property owners to generate revenues. Property assessments have increased for thousands of properties in the city, and lawmakers are looking at removing property tax exemption for nonprofits to avoid more tax increases for homeowners. The New Orleans Baptist Association responded that there is “a need for increased administration and enforcement of existing exemptions rather than the removal of said exemptions.” The statement continues, “We ask that the city not add any burden to the good work done by many to address the needs of our city.” The Louisiana Constitution (Article VIII, Section 21) guarantees nonprofit property tax exemption, so it is unclear how, short of a constitutional amendment, city leaders intend to tax nonprofits.
Messaging Matters in Advocating for Missions
The Seattle Human Services Coalition scored a major public policy victory recently as a result of coordinated action, effective grassroots, and skillful application of research-based messaging. That latter tool, and its utility for other nonprofits and missions, is the subject of this article dedicated to demonstrating why and how nonprofits advance their missions through advocacy, every day.
As reported recently by the National Human Services Assembly, the Seattle coalition members faced the reality that rising costs of living and doing business in Seattle is a significant challenge for the human service sector, affecting everything from staff recruitment and retention to service delivery. These challenges are exacerbated by contracts for providing services on behalf of the city that do not account for increasing costs due to inflation. The normal approach, asking elected officials to appropriate cost-of-living adjustments, met with mixed results as decisions that carried very real human consequences were boiled down into fiscal or line-item debates.
The human service providers determined that the long-term sustainable solution would be an automatic annual inflation adjustment for all city human service contracts. But how could they convert the discussion into anything but the typically dry conversation about who is and who isn’t deserving of increased funding? The coalition turned to the National Human Services Reframing Initiative for guidance.
The Reframing Initiative seeks to build broader and deeper public support for human services so that everyone has the opportunity to reach their full potential. It implements an evidence-based communications strategy for building public understanding of the subsector and the will to support the important work taking place in the diverse communities served. In the Seattle campaign, that meant crafting reinforcing messages using reframing strategies and principles. The Seattle coalition had previously hosted a National Reframing Initiative training, so local human service providers were already grounded in the evidence-based communications recommendations that ultimately informed the campaign message development.
“Maintain what we have built together,” which is the campaign’s main theme, relies on building a narrative about well-being that the initiative pioneered. It emphasizes “we” language to convey the sense of shared responsibility and benefits that would cascade throughout the campaign’s messages. Coalition members, like the Seattle-King County Coalition on Homelessness, organized groups representing different human services, as well as recipients of services, to meet with City Council members and present comments at committee meetings.
In July, the Seattle City Council unanimously passed and the Mayor signed an ordinance requiring an automatic inflation adjustment on all human service contracts issued by the City of Seattle Human Services Department. Importantly, the law applies to contracts funded by the city, as well as those funded by state or federal “pass-through” dollars.
Congratulations to the Seattle human service providers who put their concerns in terms that local policymakers could understand. For the good of all they (nonprofits and elected officials alike) serve.
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Matters.
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