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Proposed Electioneering Rules for 501(c)(4) Social Welfare Groups Under Attack
The Chairman of the House Ways and Means Committee is leading an effort to the block implementation of proposed regulations from the Treasury Department that would redefine what constitutes electioneering activities of 501(c)(4) social welfare organizations under the Internal Revenue Code.Legislation by Chairman Dave Camp (R-MI) would prohibit the modification of the rules for one year, thus freezing in place the standards and definitions for determining whether a 501(c)(4) organization crosses the line from promoting social welfare to engaging in too much partisan electioneering. The legislation adds Camp’s name to the list of individuals and groups that oppose draft regulations released in November that would restrict the types of political activities that 501(c)(4) social welfare organizations could engage in without running the risk of losing their tax-exempt status.Conservative and progressive groups alike are panning the proposed regulations. Readers are encouraged to read the proposed regulations and tosubmit comments (to IRS REG-134417-13) byFebruary 27, 2014.
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Strong, Bi-Partisan Support Expressed in Senate for Charitable Giving Incentive
A third of the US Senate has taken a public position insupport of the charitable giving incentive in federal tax law in a letter delivered last week to Senate tax committee leaders. Senators Ron Wyden (D-OR), who is expected to be the next Chairman of the Senate Finance Committee, and John Thune (R-SD), who also serves on the Committee, wrote the letter and called on their colleagues to sign on. The message in support of the work of charitable nonprofits in communities is clear: “The charitable deduction is unique. It is the only provision that encourages taxpayers to give away a portion of their income for the benefit of others. For this reason, it is not a loophole, but a lifeline for millions of Americans in need.” Thirty-three Senators from more than half the states signed the Wyden-Thune letter: Alaska (Murkowski); Arkansas (Boozman), California (Boxer); Colorado (Udall); Florida (Nelson); Hawai`i (Hirono, Schatz); Idaho (Risch); Illinois (Kirk); Indiana (Coats); Kansas (Roberts, Moran); Louisiana (Vitter); Maine (Collins); Maryland (Mikulski); Massachusetts (Markey); Michigan (Levin, Stabenow); Minnesota (Klobuchar); Mississippi (Cochran, Wicker); Missouri (Blunt); Nebraska (Heller); New Hampshire (Shaheen); New York (Schuster, Gillibrand); North Dakota (Hoeven, Heitkamp); Oklahoma (Inhofe); Oregon (Wyden); South Carolina (Scott); South Dakota (Thune, Johnson).
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The State of the States
As the Governors See It
Governors across the country are announcing their plans and priorities this month as their legislatures convene for the 2014 session. Here are recurring themes and trends of interest to nonprofits:
- “Comeback State”: Many Governors used their State of the State address to define 2014 as a “comeback” year of recovery from the Great Recession. But as the Washington Post reports, “in many cases, the ‘comebacks’ will manifest as an absence of further cuts, rather than a return to pre-recession spending levels. Thirty states are collecting less revenue than they did before the recession hit.”
- Tax Reform: A handful of Governors are hoping positive signs in their states’ economic outlooks will make tax cuts possible in 2014. Citing a more comfortable economic outlook than in years past, the Nebraska Governor proposed $500 million in tax relief, particularly in property taxes. Similarly, the Governor in Wisconsin proposed cutting property and income taxes for the third time in less than a year. Governors in New Jersey andIowa also spoke in favor of property tax relief. Conversely, Rhode Island’s Governor wants to keep tax rates the same and increase overall spending levels.
- Social Services: Some governors spoke of the need to reinvest in programs that suffered secere cuts during the recession. The CaliforniaGovernor remarked on the significant economic growth the state has experienced and recommended a $154.9 billion spending plan that would increase funding for social services and schools. The Governor of Michigan also touted the state’s improving economy and promised to increase funding for Great Start early childhood education and Meals on Wheels, programs which support the work of many nonprofits in communities.
- Education: Governors from many states made new investments in education a top priority in their State of the State addresses. Several pledged support for early education: the Governor of New York announced proposals for full funding of a statewide pre-kindergarten; the KansasGovernor proposed full funding for all-day kindergarten while simultaneously fighting a state court case that mandates additional education funding; and Missouri’s Governor proposed tripling pre-school funding. In higher education, Governors in Missouri, Rhode Island, and Iowarecommended freezing tuition rates at public institutions. Similarly, the Arizona Governor wants to stabilize university tuition rates, and is pushing again for a controversial program that would tie base funding for public schools to performance measures. Governors in Alabama, Washington, and Georgia are calling for raising teacher salaries.
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Maine Nonprofits Call for Return of Full Charitable Giving Incentive
The Maine nonprofit community came out in full force at a public hearing last week in support of a bill that would exempt charitable deductions from the $27,500 cap on itemized deductions enacted late in the session last year. If enacted, the new legislation would be retroactive to January 1, 2013. The Maine Association of Nonprofits (MANP) estimates that application of the cap to charitable giving will result in reduced donations by at least $20 million per year, a conservative estimate according to many of the speakers at the hearing. To learn more about efforts to protect Maine’s charitable giving incentive, see the nonprofit sign-on letter with 83 nonprofit signatories and testimony ofMANP and the National Council of Nonprofits.
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Taxes, Fees, and PILOTs
- Taxes: To lower the tax rate for for-profit businesses, proposed legislation in New Hampshire seeks to apply the state’s business enterprise tax base to larger nonprofits. The proposal, which targets mostly nonprofit hospitals and colleges, would extend the tax to nonprofits that accept fees for services and collect more than $2 million in annual revenues. Mary Ellen Jackson, Executive Director of the New Hampshire Center for Nonprofits, has expressed opposition to the bill because it ignores nonprofits’ contributions to society and the “long-held” agreement between government and nonprofits.
- Tax Exemptions: A Nebraska State Senator introduced a bill to eliminate property tax exemptions for religious organizations, arguing that churches should pay property taxes and that the legislation would increase state revenue. Religious nonprofits have opposed the legislation, saying it ignores the important contributions of churches to their communities.
- PILOTs: Wisconsin policymakers are considering legislation that would require municipalities that negotiate payments in lieu of taxes (PILOTs) from nonprofits to share the revenues with “overlying” taxing bodies, such as school districts and state and county governments. Municipalities oppose the legislation and believe it infringes on local authority. “[The other taxing bodies] are not coming here and cleaning our streets, removing snow ... why should they get a piece of the revenue?,” one City Administrator asked.
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Government-Nonprofit Contracting News
New Mexico Withholds Contract Payments to Nonprofit Mental Health Providers
New Mexico is withholding payments to fifteen mental health services providers and has transferred their caseloads to Arizona providers based on allegations of fraud that state officials have not substantiated to the public. The accusations of fraud are reportedly based on findings by a private consulting firm which also manages the New Mexico Health Care Exchange; state officials have so far refused to make the audit findings public. The State Attorney General’s Office, which is investigating the findings, found no fraud in its first review of one of the organizations and cleared it to reopen. Unfortunately, that nonprofit has already gone out of business because of the state’s actions and is still owed $400,000 for services it provided under contracts with the state. The situation raises serious questions about the need for government to follow the same transparency expectations it has for nonprofits and to exercise due process for nonprofits contracting with governments to provide services. State legislators reportedly are considering how to protect service providers from unfair attacks.
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Additional State and Local Issues
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Putting Policy In Nonprofit Perspective
 State of the State addresses give Governors the opportunity to tick off the things they have done and offer a to-do list for their legislators to act on. (See related article, above.) Donna Murray-Brown, President and CEO of the Michigan Nonprofit Association, took the opportunity of the Michigan Governor’s recent address to provide insights to nonprofits in the Wolverine State and hand out a few to-do items as well.
First, Donna offered perspective on which all nonprofits should agree: “No matter your political persuasion, and whether you agree or disagree with the progress Michigan has made over the last few years, one thing is certain: all sectors must all work together to realize the hopes and dreams we have for the residents of Michigan.” Reflecting on the significant economic impact provided by the nonprofit community, she observed, “It is becoming clearer and clearer that real progress is inextricably connected with the work nonprofits do every day to meet the needs of the community.”
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Murray-Brown moved past the statement of fact and provided a call to action: “We must enhance our narrative of our work beyond ‘it’s the right thing to do,’ to ‘our work is imperative to creating a thriving state, and we too have proven results!’” Donna provides six to-do items that all nonprofits, in Michigan and beyond, can take to heart to improve our public policies, our own performance, and our communities. These include continuing to collaborate; leveraging technology as a strategy for mission attainment; recognizing that diversity, inclusion, and equity are key principles to meeting mission; and nonprofits must hone their public policy and advocacy skills to block threats to our work.
We are inspired by the optimism of this nonprofit leader in one of our nation's most economically challenged states. As advocates for your mission, we hope that all readers can say the same thing about their work as Donna Murray-Brown did in her conclusion: “These are exciting times in the state of Michigan. It will require much to accomplish the goals we set for ourselves, yet we can and will succeed. We are truly the change we have been looking for! Now, let’s get to work!”
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