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Call Your Senators Now
The Health Care Reform Vote Matters to Nonprofits, and America
 Partisanship – putting political party above policy and practicality – has nearly destroyed the health care insurance and delivery system in this country. The Senate is scheduled to vote on its bill to repeal and replace Obamacare this week, a bill that no Democrat will support and many Republicans find unacceptable, but necessary for process and political reasons. In 2017, as was the case when the Affordable Care Act (ACA) was passed in 2010, partisans posture to score political points, while Americans seek leadership that solves real problems. Nonprofits, as the grownups in our communities, need to speak up. Now.
As discussed in two articles, below, a bill to overhaul the American health insurance system was not made public until Thursday, yet may be voted on this week. The charitable and philanthropic communities have a major stake in what the ultimate law says and does. Charitable nonprofits make up ten percent of the private workforce and often struggle to provide quality, affordable health insurance to their workforce. Nonprofits address the most pressing needs of individuals and communities every day; loss of health insurance by millions of our fellow citizens would likely increase the demands for the services nonprofits provide. And changes in health care policy could ease or exacerbate state and local budget challenges that further increase the resource challenges that nonprofits have been experiencing for years.
In short, a Senate vote that could make or break the healthcare insurance system could also make or break the ability of charitable nonprofits to serve their communities. Our recommendation to readers: Call your Senators (202-224-3121) now and urge them to vote NO on this bill this week, and insist that good public policy is elevated above partisan positioning. We all know that a better bill can be crafted in July, or over the August recess, if the partisans will acknowledge their past mistakes and commit to a responsible future. Act now, not because you are a Democrat or a Republican, but because our ability to serve our communities is a higher calling that deserves to be heard.
Senate Health Care Reform Bill Released, Up for Fast Action
Senate Republican leaders released a discussion draft of legislation designed to repeal and replace the Affordable Care Act (Obamacare) and hope to secure final passage of the bill as early as this week. See discussion of the bill contents, below. The bill offers modifications to some of the most controversial pieces of the House-passed American Health Care Act, but it is unclear whether the discussion draft can get the 50 votes necessary to pass. The measure is being brought to the Senate floor under a special budget procedure that permits it to pass with a simple majority vote with no possibility of a filibuster. All Senate Democrats are expected to vote against the Senate bill (as did all Republican Senators when the ACA was debated in 2010), meaning that 50 of the 52 Republican Senators are needed to pass it, with Vice President Mike Pence breaking a tie. At least five or more Republican Senators have said publicly they could not support the bill in its current form, criticizing it either for being too aggressive in reducing government support of health care or for not going far enough in repealing Obamacare as Republicans have been promising for the past seven years. Each has said he is willing to negotiate terms of the legislation, suggesting that some portions may change before a final vote is taken.
The nonpartisan Congressional Budget Office (CBO) is expected to release its analysis today, June 26, identifying the costs of the Senate bill and how it compares to the House-passed American Health Care Act, which CBO determined would reduce federal spending by $119 billion while leaving 23 million more Americans without health insurance. Since rumor has it that the House could accept the Senate-passed bill and approve it quickly on Friday, the stakes are extremely high. And the rhetoric of the different camps is aggressive. Liberal Center for American Progress issued a report asserting that the Senate bill would cut benefits so much that it could “result in 18,100 to 27,700 additional deaths in 2026.” Conservative Freedom Works criticizes the bill for not permanently repealing several of the ACA taxes and delaying the end of Medicaid expansion until the next presidential administration, thus leaving room for retention by a subsequent Congress. Libertarian Cato Institute criticizes the Senate bill because it maintains ACA provisions that “drive up premiums” and fails to make market-based reforms while maintaining subsidies that mask the problems.
What It Does
Summary of the Senate Bill
Like the American Health Care Act (AHCA), which the U.S. House of Representatives passed this spring, the Senate Better Care Reconciliation Act of 2017 would cap and cut Medicaid and add to the number of uninsured individuals. Combined, these provisions could reduce payments to many nonprofit health care service providers while creating a rise in the need for a wide variety of services provided by nonprofits for those who find themselves uninsured. The Senate discussion draft would phase out Medicaid expansion under the ACA more slowly – yet deeper – than the AHCA, affecting the health care and finances of the 31 states that adopted the additional federal funding under the ACA. As currently written, the discussion draft would address the following issues:
- Medicaid: Give states the option of changing Medicaid into a “block grant” program or putting caps on federal spending based in part on how many people live in each state. The bill would reduce eligibility for those with income of 350 percent of the poverty level, down from the current-law level of 400 percent. The measure would permit states to receive waivers to avoid certain coverage standards under the ACA to give states more flexibility in deciding insurance rules for their state; however, states would not be able to opt out of regulations governing pre-existing conditions. Finally, the legislation would also transition away from a health care inflation index to the general economic index, a change that could significantly reduce future costs while expanding the gap between actual costs and what the government will reimburse.
- Mandates: Eliminate the individual and employer mandates for obtaining/providing health insurance coverage.
- Taxes: Repeal the health insurance tax, Medicare surtax (by 2023), Flexible Spending Account tax, the 3.8 percent tax on investment income, the 0.9 percent tax on people who earn more than $200,000 a year, the Chronic Care tax, and tax credits for plans that cover abortions, plus delay the Cadillac tax on expensive insurance plans until 2026.
- Premiums: Permit insurers to charge older Americans premium prices five times (rather than three times) higher than younger people. Unlike the House bill, the Senate bill would not allow insurers to charge sick people more, but a six-month “lock out” provision may be added that delays when their policy takes effect..
Learn more from this section-by-section analysis by the National Association of Enrolled Actuaries.
Forces for Partisanship Coming Out in Force
The threat of legislation to politicize charitable nonprofits, houses of worship, and foundations remains very much alive as politicians and advocacy groups attempt to increase pressure to tamper with the Johnson Amendment. Last week, Vice President Pence reiterated to a Focus on the Family convention that the Trump Administration remains committed to repealing the Johnson Amendment, the 53-year-old tax law that protects 501(c)(3) organizations from demands by politicians, operatives, and donors for endorsement of candidates or diversion of assets to political campaigns. Separately, a group of 47 organizations submitted a letter to Republican leaders calling on them “to prioritize hearings and votes on” the bills that would weaken the Johnson Amendment. Signers included advocacy organizations such as the Alliance Defending Freedom and Family Research Council, but not a single religious denomination. To date, churches, synagogues, mosques, and other houses of worship have come out in opposition to weakening the protections of nonpartisanship, as shown by the letter by 99 religious and denominations organizations that “strongly oppose any effort to weaken or eliminate protections that prohibit 501(c)(3) organizations, including houses of worship, from endorsing or opposing political candidates.”
Federal FastView
- Contributing to Tax Reform: The Senate Finance Committee is asking experts and stakeholders “to provide ideas, proposals, and feedback on how to improve the American tax system.” In a statement inviting public comment, Committee Chairman Orrin Hatch (R-UT) said, “Members from both parties have acknowledged the shortcomings of our current tax system and the need for meaningful reforms to encourage economic growth and alleviate many of the burdens imposed on hardworking taxpayers…. As we work to achieve those goals, it is essential that Congress has the best possible advice and insight from experts and stakeholders.” Specifically, Hatch seeks advice and recommendations in any of four key issue areas: middle-class tax relief; strengthening businesses; removing impediments to savings and investments; and updating the international tax system. Submissions may be made to the Senate Finance Committee at taxreform2017@finance.senate.gov. The deadline for input is July 17, 2017.
- Giving Incentives Proposed: Four members of the Senate Finance Committee have introduced the bi-partisan Charities Helping Americans Regularly Throughout the Year (CHARITY) Act of 2017, a bill designed to promote giving to the work of charitable nonprofits. Among other things, the bill would improve transparency by requiring all nonprofits to file their tax forms electronically; make donor advised funds eligible for tax-free distributions from individual retirement accounts of individuals aged 70½ or older; simplify and reduce the excise tax on investment income of private foundations; increase the volunteer mileage rate; and create a new mechanism for some businesses to donate all of their after-tax profits to nonprofits without incurring a tax penalty. Importantly, the bill opens with expressing a strong Sense of the Senate that “encouraging charitable giving should be a goal of tax reform” and that “Congress should ensure that the value and scope of the deduction for charitable contributions is not diminished during a comprehensive reform of the tax code.”
- Ruling on Church-State Separation: A state may not deny a church an otherwise available public benefit or payment because of its religious status, the U.S. Supreme Court ruled today. In a 7-2 ruling in a case involving the State of Missouri and Trinity Lutheran Church of Columbia, Chief Justice Roberts wrote, “The free Exercise Clause ‘protects religious observers against unequal treatment’ and subjects to the strictest scrutiny laws that target the religious for ‘special disabilities’ based on their religious status.” At issue in the case was Missouri's decision to bar the church from receiving funds in a state program that reimburses nonprofits for resurfacing their playgrounds.
- Reviewing the Travel Ban EO: Also today, the Supreme Court allowed a part of the President’s travel ban to go into effect while agreeing to hear the government’s appeal of lower-court decisions to block the travel restrictions from going into effect. The case involves the President’s Executive Order issued in March. In an unsigned order, the Court permits the travel ban to apply to individuals from six Muslim-majority countries who do not have a bona fide relationship with a person in the United States. Three Justices, including the newest member of the Court, Neil Gorsuch, reportedly wanted to lift the entire ban.
Delaware Charitable Deduction At Risk
Legislation under serious consideration in Delaware would repeal the charitable deduction under state law, along with other itemized deductions. The repeal of giving and other incentives is part of a broader bill to partially overhaul the personal income tax law and close a larger-than-expected state budget deficit. The Delaware Alliance for Nonprofit Advancement (DANA) explained in a recent Action Alert on the issue that other states have seen the adverse impact of capping or eliminating the charitable giving incentives. Hawai’i, which capped giving deductions for higher income taxpayers in 2011, removed the cap two years later due to the devastating reduction in charitable giving. It was recently reported that Michigan lawmakers are reviewing legislation to restore the charitable tax credits they eliminated in 2011. DANA reports, “It turns out the drop in individual giving resulted in government having to pick up the tab to pay for services at a higher cost to taxpayers – don’t let that happen in Delaware.” See the summary, “Incent Community Investment in Nonprofits – don’t take it away.”
Taxes, Fees, PILOTs
Massachusetts Considers Linking Nonprofit Salaries and Property Tax Exemptions
Legislation in Massachusetts would give local governments the power to tax the property of charitable nonprofits and perhaps foundations that legislators believe pay their executives too much. Specifically, the bill in the House would create a new “large public charity” category under the law and allow towns to charge educational, medical, and other nonprofit organizations half of the property tax liability for three years and then 25 percent in perpetuity if organizations pay their five highest-earning employees more than a cumulative $2.5 million. Those organizations would also be subject to property taxation when they purchase new property, on a sliding scale that settles at 25 percent of the total tax liability. In addition, the measure would require nonprofits of any size to annually report every employee’s salary to the Attorney General to create and update a database of all nonprofit employees’ salaries.
The legislation is strongly opposed by several significant nonprofit membership associations, including Providers’ Council and the Massachusetts Nonprofit Network (MNN). At a legislative hearing this month, Michael Weekes of the Providers’ Council stated emphatically that “nonprofits should not be forced to make payments [in lieu of taxes] as many, particularly in human services, are working for the public benefit.” He concluded that the pending legislation would “shatter the social compact that government and nonprofits have worked so long to build.” Jim Klocke of MNN laid out five reasons that nonprofits oppose bills to tax tax-exempt organizations, including expressing concern that the legislation violates donor intent and imposes financial burdens on a sector that is experiencing severely constrained resources.
Demonstrating Nonprofit Impact in St. Louis
Outraged by allegations by a St. Louis, Missouri Alderman that nonprofits in the City weren’t paying their fair share to support public safety, nonprofits came out in large numbers at a public hearing to push back against a proposal to remove the nonprofit exemption from a local payroll tax. One parochial school pointed out that the City saves the cost of educating every child the school serves. The executive director of a child services nonprofit rejected the notion that the tax-exempt organization was a burden on the City, stressing instead that her organization is "on the front lines of crime fighting along with law enforcement" by serving children affected by abuse and neglect. A Catholic service provider reported that its afterschool and summer programs help reduce crime by keeping young people away from risky behavior, and by offering training to police officers on how to effectively deal with an immigrant population. The bottom lines for many of the nonprofit representatives at the hearing were that "nobody wants to donate to an organization so they can pay administrative costs and taxes," and that the tax proposal would be taking money away from the people we serve" — families and individuals "struggling day to day."
Nonprofit Show and Tell on Advocacy Day
 The lead in the television news report tells the story: “Hundreds of people, each bearing the logos of their respective nonprofits, took to the steps of Legislative Hall in Dover with one goal: to unite their voices and be heard.”
On the day in question, June 8, organizations from across the state came to Dover, Delaware to participate in this year’s Nonprofit Advocacy Day. In fact, more than 250 nonprofit leaders, staff, volunteers, and clients came together to show their solidarity and unite their voices to demonstrate the real and immediate impact of their work.
The program opened with a rally on the Capitol steps. Participants were greeted with a Proclamation of Nonprofit Day signed by the Governor and Lieutenant Governor and a Concurrent Resolution from a State Senator and Representative. The nonprofit supporters next heard presentations on effective advocacy strategies and fanned out to meet with their legislators.
The Delaware Alliance for Nonprofit Advancement (DANA) organized the event and its timing could not have been more appropriate. State policymakers are confronting a significant budget deficit and are considering spending cuts and changes in tax law to enhance revenues (see state policy article, above).
Lawmakers took notice and said so. One Representative stated, "This day is essential for each nonprofit to showcase their individual need. It makes legislators really look at these cuts and say 'Is this what we really want to cut?'. You have to put a face to those cuts. So, it's good that they are here so that they're telling their story."
At the end of the day, DANA President and CEO Sheila Bravo summed it all up: "Our government officials can actually see how we are such an important part of the Delaware economy, and certainly the quality of life."
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