Congressional Democrats Closing in on Spending and Revenue Priorities
After a tumultuous week of intense negotiations, House Democrats now appear ready to pass two major components of President Biden’s domestic policy agenda: the bipartisan physical Infrastructure Investment and Jobs Act, H.R. 3684, and the newly released social infrastructure bill, the Build Back Better Act, H.R. 5376. Because Democratic leaders are utilizing the budget reconciliation process, the latter measure can be enacted without Republican support. The nearly 1,700-page Build Back Better Act includes hundreds of new spending priorities and a few revenue measures designed to ensure the bill does not add to the deficit. Negotiations on the bill continued through the weekend, but here is where selected nonprofit priorities stand in the current draft of the legislation: Read the initial overview.
Spending - $1.85 Trillion: The legislation proposes providing universal pre-kindergarten for three- and four-year-olds, covering the costs of child care above 7% of income for working families, and extending the expanded child tax credit and the earned income tax credit for another year. It would add Medicare coverage of hearing services for seniors, extend home care services for older individuals and people with disabilities, and dedicate $150 billion in housing aid toward public housing, rental assistance, down payment support, and building new affordable rental and single-family homes. It would also provide $555 billion for climate programs, including $320 billion in expanded tax credits for clean energy. The legislation includes significant increases in the maximum level of civil penalties for violation of federal safety, wage, and labor laws. An additional $100 billion was added for immigration programs, but it is uncertain whether those funds can be included in legislation utilizing the budget reconciliation process.
Revenues - $1.995 Trillion: After rejecting several other proposals, such as increasing the tax rates for corporations and upper-income individuals, the negotiators settled on three new taxes. The bill would levy a new 15% tax on profitable companies with financial statement income over $1 billion. There would also be a new 1% tax on stock buybacks. The legislation would impose a surtax of 5% on individuals with adjusted gross income over $10 million, and an additional 3% on aggregate gross income over $25 million. Finally, the measure would increase funding for the Internal Revenue Service enforcement efforts to collect at least $400 billion in unpaid taxes (the so-called "tax gap" of what is owed versus what is paid).
What’s Not Included: Equally important to nonprofits is what provisions are not in the reconciliation legislation. While negotiations are ongoing, the latest draft of the bill omits language granting 12 weeks of paid family and medical leave, providing free tuition at community colleges, hiking individual and corporate tax rates, and adjusting the current $10,000 cap on the deductibility of state and local taxes.
Guidance Emerging on Workplace Vaccination and Testing Requirements
Employers throughout the country are awaiting publication by the Occupational Safety and Health Administration (OSHA) of its emergency temporary standard, the set of guidelines the government will use to enforce the requirement announced by President Biden in September that for-profit and nonprofit entities with 100 or more employees ensure that all workers are vaccinated or regularly tested for COVID-19. The National Council of Nonprofits and many organizations have submitted questions and background materials to OSHA in an effort to secure as much clarity as possible while seeking to lessen unintended consequences of the requirements. Experts speculate that the government will publish the emergency temporary standard this week. Various sources report that the standard will allow employers to require unvaccinated employees to pay some or all of the costs of weekly testing and masks required under the standard, although the rule may be different for individuals entitled to a religious exemption or to an accommodation. Employers also may be ordered to pay when testing costs are subject to a union bargaining agreement.
In advance of the OSHA standard, other federal entities are answering key questions. Last week, the Equal Employment Opportunity Commission updated its guidance on religious objections to COVID-19 vaccine mandates. The materials instruct employees that “they need to notify the employer that there is a conflict between their sincerely held religious beliefs and the employer’s COVID-19 vaccination requirement.” The employer then has the duty to investigate, but if the employer “shows that it cannot reasonably accommodate an employee’s religious beliefs, practices, or observances without undue hardship on its operations, the employer is not required to grant the accommodation.” The EEOC guidance explains many of these concepts and steps in six questions and answers. See also the newly updated Frequently Asked Questions from the Safer Federal Workforce Task Force.
- Conversions from LLCs to Charitable Nonprofits: Last week, the Internal Revenue Services issued new guidance setting standards for limited liability companies (LLCs) to be recognized as 501(c)(3) tax-exempt entities. The standards include a variety of provisions that LLCs must include in their articles of organization and operating agreements to achieve 501(c)(3) status. While LLCs have been able to be recognized as 501(c)(3) entities in the past, the new guidance provides clearer standards for their tax exemption.
- Visa Delays Hindering Cultural Missions: The ebbing of COVID-19 restrictions and the return to live performances are revealing flaws in immigration procedures that significantly impede nonprofit missions. As reported in the New York Times last month, orchestras and other international arts organizations have confronted visa delays and other immigration impediments that force the nonprofits to cancel live performances or expend considerable resources to secure substitute performers. “When arts organizations can’t rely on the process to work, it makes it very expensive and somewhat risky,” said Heather Noonan of the League of American Orchestras. For months, the League, the American Alliance of Museums, the Association of Art Museum Directors, and other cultural organizations have been calling on the federal government to reinstate the traditional expedited option for nonprofit entities seeking to further the cultural and social interests of the United States.
ARPA Funds and Governmental Capacity
The roll out of state and local funds under the American Rescue Plan Act has been relatively swift, but many of those governments are acknowledging they lack capacity in many areas, according to a new report from the Government Accountability Office. While most states (44 of 48) reported that they plan to add new staff or have reassigned existing staff to help them manage, more than a third (17 of 48) reported they had less than sufficient capacity to report on their use of allocated ARPA funds consistent with federal requirements. Limited capacity has made it difficult for 13 of the reporting states to disburse the funds, and 10 haven’t been able to apply appropriate internal controls and respond to inquiries about requirements. The Treasury Department reportedly is developing materials to address key internal processes and control activities to monitor spending of the Coronavirus State and Local Fiscal Recovery Funds, but those are not yet available.
Advocacy Tip: To charitable nonprofits promoting community investments, these data provide a partial explanation of why some state and local governments are slow to respond to inquiries and proposals. Nonprofit advocates can’t allow claims of “limited capacity” to be used as excuses for governments spending ARPA funds solely on internal government accounts. All government officials need to be reminded that the American Rescue Plan Act expressly provides that state and local governments may use their allocations of ARPA funds to provide assistance to nonprofits. See the updated Special Report Strengthening State and Local Economies in Partnership with Nonprofits for tips, talking points, principles, and examples of successful government-nonprofit partnerships for the public good.
Special Sessions Spotlight Vaccination, Masking
Several states have gone into special session to consider legislation to prevent or restrict vaccination mandates and masking requirements imposed by the federal government. More than 120 bills were introduced within 48 hours in two states alone, and nonprofits and for-profit employers are urging lawmakers not to create additional conflicts and confusion with federal guidance and orders. In Tennessee, many of the proposed measures have been combined into an omnibus bill that, if enacted, would prohibit nonprofits, businesses, and governments from requiring their workers or customers to be vaccinated for COVID-19 and from taking adverse action to compel proof of vaccination. The measure would create a private right of action for terminated workers and ensure they remain entitled to unemployment benefits even when they voluntarily quit. Perhaps in recognition of the likely untenable conflict employers will face, the legislation includes a waiver provision, but only for employers that face the loss of federal funding for complying with the Tennessee prohibitions.
The Wyoming Legislature is considering measures to prohibit certain employers from requiring a COVID-19 vaccination as a condition of employment, with exceptions, and providing “reasonable accommodation measures.” Two other bills (H.B. 1009 / S.F. 1009) would impose a 50% severance pay requirement on employers and amend the workers compensation program to provide a presumption that an injury caused by a mandated or required COVID 19 vaccination is compensable. Going the other direction, one would expressly confirm the eligibility for unemployment benefits of workers who voluntarily quit their jobs because their employer failed to comply with federal COVID-19 prevention requirements. Last week, Iowa Governor Reynolds signed a bipartisan vaccine mandate bill that provides a waiver procedure to exempt employees based on health or religious considerations. It also extends unemployment benefits to employees terminated for failure to get vaccinated, but makes clear that an employer’s contribution rate or experience rating would not be affected and no penalties would be imposed. Florida’s Governor has called a special session later this month to consider legislation on blocking vaccine mandates.
The 2021 Elections, Ballot Measures and Nonprofits
Tomorrow, November 2, is Election Day in a few states and multiple jurisdictions throughout the country, and the outcomes can significantly impact nonprofits and the communities they serve. In total, 556 seats at the state and local levels are on the ballots, not including municipal office, school board members, special elections, and ballot initiatives. Two governorships – in New Jersey and Virginia – will be decided. Voters will also pick mayors in 28 communities, including Atlanta, Boston, Cleveland, New York City, Pittsburgh, and Seattle. Campaigns there and elsewhere have focused on infrastructure, public health, public safety, and recovery from the pandemic.
Voters in six states (Colorado, Maine, New Jersey, New York, Texas, and Washington) will consider 24 ballot measures on issues seeking to make constitutional and statutory changes, as well as a bond issue. Charitable nonprofits cannot take sides or engage in partisan political campaigns for or against candidates for public office, but they can express views and engage on ballot proposition measures. Numerous state associations of nonprofits have taken leadership roles in advocating on many of the ballot proposals. Colorado Nonprofits published a ballot guide that opposes Amendment 78, which would slow down distribution of federally-funded grants and contracts with nonprofits by requiring the Legislature to be involved in the allocation of those funds. The Center for Non-Profits in New Jersey expressed support for Ballot Question 2, a measure to allow charitable organizations that run games of chance to use the proceeds from those games for general purposes. Nonprofit New York has endorsed the Yes on 1, 3, and 4 Campaign in support of measures to improve redistricting, eliminate voter registration deadlines, and implement no-excuse absentee voting. Learn more about the role of nonprofits in elections in Nonprofits Take Note: The Elections Are Coming! The Elections Are Coming!
Nonprofit Jobs Vacancy Crisis
Businesses, the news media, and Congress are taking notice of the growing vacancies at employers across the country, including charitable nonprofits, and the resulting consequences on communities nonprofits serve. A nonprofit human service provider in Illinois explained the challenge in personal terms: “we’re providing really quality and really critical services to some of the kids in our community who need them most. And when we don’t fulfill that need, it has a dramatic impact on the rest of our community, on the rest of our wellbeing.” Job vacancies at nonprofit residential homes for disabled individuals in Maine are so severe that some facilities have closed, forcing them to turn away children and others in need while adding to already long waiting lists. Crain’s Cleveland Business recently detailed the challenges charitable organizations in Ohio are facing in competing for employees as other industries are increasing wages and paying sign-on bonuses. The article chronicles the “immense” challenge for human service providers that typically are paid by fixed government grants and contracts that often don't cover the cost to deliver services. "There's no way to pass on the cost to customers the way that Amazon or Target or Walmart can,” said Rick Cohen of the National Council of Nonprofits, noting that that for-profit businesses “can increase the price of a few products by 50 cents here or a dollar there. ... There just isn't a way for nonprofits to do that." These concerns are dramatically demonstrated in preliminary results from an ongoing nationwide survey (see information, below) showing that four-in-five respondents (79.6%) cite salary competition as a major cause for jobs remaining vacant. Fully a quarter (25%) report lack of available child care as a reason why individuals are not able to take jobs.
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A Campaign for Respect. And More!
What nonprofit hasn’t wistfully pondered the dream: “We want our sector to achieve the recognition, respect, and support we deserve”? Wistful no more, a relentless group of New Yorkers is doing something about it through the launch of a campaign entitled Nonprofits Make New York
Nonprofits from across New York City have come together through a coalition, Nonprofits Make New York, to change the way corporations, elected officials, and everyday New Yorkers view nonprofits. Led by Nonprofit New York, the coalition’s core message is that “New York’s nonprofit sector is essential in shaping the community, culture and economy – it’s plain and simple.” The coalition wants the nonprofit sector to achieve the recognition, respect, and support that nonprofits deserve. And coalition members believe they can make that happen only if New Yorkers – residents, business leaders, and government officials – come together as neighbors and show support for the local nonprofits that shape our everyday lives.
Hence the Nonprofits Make New York campaign. But this is no mere PR effort; there’s a meaningful and action-oriented advocacy agenda. The campaign materials explain, “New York City is in a crucial moment of transition and as we close out 2021, we need to rebuild in ways that
- center racial equity,
- focus on sustainability,
- demand real impact, and
- ultimately help make New York City a more just and equitable city.”
The plan is to take to Twitter (#NonprofitsMakeNewYork), sharing data and upbeat messages, publish op-eds, and our personal favorite, asking the question, “So, how many nonprofits did you come in contact with today?” See this powerful website for more information and ideas.
The philosophy of the Nonprofits Make New York campaign explains why it matters to the local nonprofits, and to all of us: “There is no going back to the’ old’ normal that was deeply flawed and inequitable – New York’s nonprofits will be essential in this next phase of the city.”
Read more examples of Advocacy in Action,
a regular feature of Nonprofit Advocacy Updates.