Legislative Affairs Report

Legislative Affairs Report

As presented at the NEAHP Board of Directors Meeting on September 8, 2017 by Richard P. Solomon, CFRE

1. AFP Calls on Senate Finance Committee to Approve Charitable Giving Incentives (from AFP, 7.19.17)

The Association of Fundraising Professionals (AFP) has submitted recommendations to the Senate Finance Committee to strengthen philanthropy in America by creating a universal charitable deduction and expanding the IRA Rollover provision.

In June, Senate Finance Committee Chair Orrin Hatch (R-Utah) asked for comments and ideas from various “stakeholder groups” regarding tax reform. With reform potentially having a huge impact on charitable giving, AFP highlighted two provisions in its comments that will further incentivize Americans to support their favorite charities.

The first proposal is the universal charitable deduction, which would allow all taxpayers, regardless of whether or not they itemize their taxes, to take a deduction for their charitable giving during the year.

“Enacting the universal charitable deduction is critical as Congress considers tax reform because several of the more popular tax provisions being debated would negatively impact charitable giving,” said Jason Lee, interim president and CEO of AFP.

AFP’s comments pointed to research from Independent Sector and the Lilly Family School of Philanthropy at Indiana University showing how different reform proposals would decrease giving. Expanding the number of taxpayers who can take the standard deduction would reduce giving by almost $11 billion a year. Adding another proposal, reducing the highest marginal tax rate to 35 percent, brings the reduction in giving every year to $13 billion.

However, including the universal charitable deduction with the other two provisions results in overall giving increasing by almost $5 billion annually. “The powerful effect of the universal charitable deduction is enough to overcome any losses in giving through the other two provisions,” wrote Lee in AFP’s comments. He also noted that if the universal charitable deduction were approved by itself—without the other two provisions—giving would increase by over $12 billion a year.

The second proposal AFP recommended concerns enhancements to the existing IRA Rollover. Made permanent in 2015, the rollover allows taxpayers age 70½ or older to transfer (“roll over”) funds directly from their IRAs to charitable organizations and not be taxed on the amount (up to $100,000).

AFP recommends removing the $100,000 cap on rollovers from an IRA; allowing rollovers to occur when a donor is age 59½ or older; and permitting the creation of planned gifts through a rollover.

“There are trillions of dollars in IRA assets right now, many of them in excess of what individuals need for retirement,” said Lee. “Expanding what donors can do with the rollover—and in particular, allowing the creation of planned gifts with these funds—could unlock billions of dollars in additional charitable giving every year.”

In its comments, AFP noted that Americans remain strongly supportive of philanthropy and especially the charitable deduction. A survey of voters by Independent Sector in 2016 found that 75 percent wanted to see the charitable deduction expanded, and 79 percent believed that all taxpayers should be able to take advantage of the charitable deduction.

“America’s experience and history with philanthropy is unique among the nations of the world—and charitable giving incentives are unique in that they encourage people to give their money away for a good cause,” said Lee. “Whether it’s the charitable deduction or the IRA Rollover, these incentives involve a selfless, generous motivation: giving to a cause that might never directly benefit the donor personally, but improves countless communities across the country.”

2. Charities Coax Lawmakers to Rethink Tax Plan (Dow Jones Newswires, 8.6.17)
By Richard Rubin Published August 06, 2017 Features Dow Jones Newswires

WASHINGTON – Charities stand to lose billions in donations if Republicans advance their tax overhaul, prompting the nonprofits to carefully attempt to persuade lawmakers to reshape their plan.

As a result of a proposal to double the standard deduction and prevent people from deducting state and local taxes from federal taxable income, fewer taxpayers -- 5% instead of 30% -- would have a financial incentive to itemize their deductions, including their charitable gifts, according to several estimates.

Moreover, each deduction would be worth less to individuals if marginal tax rates are reduced, as Republicans want.

For example, a married couple with costs of $7,000 in mortgage interest and $6,000 in local taxes would exceed today's $12,700 standard deduction. That couple would have an incentive to itemize and deduct every dollar of charitable contributions. If the standard deduction climbed to $24,000 or more and state and local taxes stopped being deductible, the same couple would likely claim that standard break rather than itemize.

People don't donate only for the tax deduction. But according to an Indiana University study, these backdoor limits on charitable deductions could reduce giving by $13 billion, or 4.6%, annually. That is about four times the Salvation Army's 2015 annual revenue.

Many nonprofits -- including universities, museums and foundations -- don't want to be seen opposing a doubled standard deduction, which could lower taxes for millions of middle-class households and make the tax code simpler.

"What I have most encouraged them to do is to offer a solution and not position themselves as adversaries of tax reform," said former GOP congressman Phil English, a lobbyist at Arent Fox LLP, whose clients include Catholic Charities. "If they appear to be against tax reform, per se, they are running the risk of being adverse to many of their own donors."

Instead, nonprofits are pitching an alternative: what they call a "universal" tax deduction for charitable contributions. That switch would let taxpayers deduct donations even if they don't itemize.

"We don't think that anybody should have their charitable giving taxed. Anybody," said David Wills, president emeritus of the National Christian Foundation, who was part of a group including prominent right-leaning donors and foundations that met with members of Congress and Vice President Mike Pence last month.

That idea of personal choice appeals to Republicans, said Rodney Prunty, president and chief professional officer of the United Way of Racine County, Wisconsin. Mr. Prunty said he has been encouraging his representatives -- including the local congressman, House Speaker Paul Ryan -- to be wary of changes that could undermine charitable giving.

Rep. Kevin Brady (R., Texas), chairman of the tax-writing House Ways and Means Committee, said his panel is taking a "very serious look" at a universal deduction. "We want to encourage Americans, who are incredibly generous already, to give more, to give earlier in life, and to continue to grow," he said last month.

But a universal deduction could be expensive. Measured against today's tax code, that change would lower government revenue by $191 billion over a decade and deliver some of the biggest benefits to high-income households, according to an analysis by the Tax Foundation, a Washington, D.C.-based think tank that favors a simpler tax system with lower rates.

That would force even more trade-offs. Lawmakers are already scouring the code for revenue-raising provisions to pay for lower tax rates.

Sen. John Thune (R., S.D.), a member of the Finance Committee and GOP leadership, said he wasn't sold on doubling the standard deduction and said the idea needs more study. "It's a fairly interesting and simple way to allow people to get a significant break in their tax liability, but it does have some implications," he said. "I can see why it would have a lot of appeal, but I think from the charitable community, what that's likely to do is to create fewer itemizers and if you're not itemizing, there's a lot less incentive."

Elsewhere in the tax debate, many charities are choosing to stay on the sidelines when it comes to the estate tax, because lawmakers are unlikely to be swayed on that issue. Republicans' wish to repeal it would depress charitable bequests, which are tax-deductible. Other policy questions in the nonprofit sector could emerge, including tax rules for foundations and limits on political activity by churches, and those could divide charities. What unites them is protecting the income-tax deduction.

"It's really the heart and soul of our sector," said Vikki Spruill, president and chief executive officer of the Council on Foundations, an industry association. "As government resources become more scarce, philanthropy will not be able to fill the gap, and so we are concerned that we might have sort of a two-pronged problem."

David L. Thompson, vice president of public policy at the National Council of Nonprofits, said charities aren't "telling Republicans not to do what's orthodoxy."

"Our message is, those policy decisions have consequences," he said.

3. Nonprofit Leaders Making Their Voices Heard on Tax Issues (from Chronicle of Philanthropy, 8.8.17)
By Alex Daniels, Richard White/Chronicle of Philanthropy

WASHINGTON

As the momentum grows for Congress to take up a major tax measure, nonprofit leaders are trying to make sure lawmakers hear their concerns about keeping incentives for giving. At the same time, two influential scholars are also urging Congress to find other ways to make sure more private money flows to charity — largely by forcing fast-growing donor-advised funds to distribute a set amount of funds.

Nobody is ready to predict whether Congress will really take on taxes anytime soon, but the next few weeks are considered pivotal if lawmakers hope to complete a measure before the 2018 campaign season begins.

The latest indication of what direction policy makers will take came shortly before they left Washington, when congressional leaders and White House officials issued a joint statement on taxes. There was no mention of the treatment of charitable giving in the slim, two-page document, but that didn’t mean charities won’t be affected. One sign of that: Lawmakers said they wouldn’t include a border-adjustment tax, a levy on imported goods that could generate an estimated $1.2 trillion in revenue over 10 years.

If lawmakers follow that course, they will have to hunt for other ways to fill that trillion-dollar hole — including possible changes in the rules on charity tax breaks. "I doubt anyone in the nonprofit sector has a position one way or another on the border-adjustment tax," said Steve Taylor, senior vice president at United Way Worldwide. "But the fact it is no longer in play does increase pressure on charitable-giving incentives."

Expanding the Deduction

Last year in preparation for a full-blown tax debate, House leaders outlined a plan that preserved the tax deduction for charitable giving. But to provide broad tax relief, their blueprint would nearly double the standard deduction that everyone is eligible to take to avoid itemizing their returns. By doing so, lawmakers predicted about 95 percent of taxpayers would claim the standard deduction rather than itemize, essentially stripping the charitable deduction of its ability to prod most Americans to be generous.

In response, charity leaders last month took a message to Vice President Pence and key lawmakers: Keep the higher standard deduction, they said. But to ensure the charitable deduction still packs a punch, allow everyone to take a deduction for charitable gifts, regardless of whether they itemize.

While the idea of extending charity tax breaks to every American has strong populist appeal, it probably will not be an easy sell — especially as lawmakers seek ways to ensure a new tax code brings in just as much money to the Treasury as the current one.

Expanding the charitable deduction has a $13 billion annual price tag in terms of lost tax revenue, according to a study by the Lilly Family School at Indiana University, which was commissioned by Independent Sector, a membership organization of nonprofits. The extra giving charities could expect: $12 billion a year, a relatively small sum compared with the more than nearly $282 billion raised from individuals last year, according to "Giving USA."

But those numbers may not show the full extent of the loss of tax revenue.

Another study, conducted last year by the Urban Institute, found a slightly less rosy picture. Absent any other changes in tax policy, extending the charitable deduction would cost $134 billion in lost federal revenue over 10 years.

But when coupled with other aspects of the House tax plan currently in play, such as a reduction of income-tax rates, expanding the deduction could be more costly. Researchers at the Lilly school peg its 10-year cost at $215 billion. And researchers at the Tax Foundation, a policy-research organization, estimated it would cost $515 billion over the same time period, using slightly different assumptions on what a final tax measure looks like.

Floors or Caps

If lawmakers are desperate to find ways to pay for tax cuts, nonprofit advocates worry they’ll end up devising ideas that don’t take into account how policy changes will affect charitable giving.

One way to limit the expense is to cap the dollar amount of charitable and other deductions people can claim or to allow only gifts above a certain percentage of a person’s income to qualify for a deduction. Former President Obama unsuccessfully pushed for a cap on all tax deductions during his tenure. And President Trump during his campaign called for a lid on charitable deductions. The idea of a floor — a minimum of income that must be donated to qualify — has been discussed for years but is not currently part of the House plan. Jamie Tucker, director of public-policy strategy at Independent Sector, fears that lawmakers will resurrect both options.

"It’s something we understand could come back," he said. "The specter of floors or caps is a concern."

An income threshold for charitable deductions would hit nonprofits that rely on small and middle-income donors especially hard, including national organizations, said the United Way’s Mr. Taylor.

On average, the 7.2 million people who give to United Way through on-the-job campaigns contribute about $154 a year. Nonprofits need to show members of Congress that changes in the tax code can put risk human-service nonprofits’ ability to function at risk, Mr. Taylor says. "Once Congress understands that a floor knocks out deductions for donations made from working-class donors who are scraping by and giving whatever they can, that will persuade Congress to step back from the idea of a floor," he predicted.

Failure to Spur Giving

When lawmakers return to Washington next month, many charity policy experts believe they will incorporate into current deliberations aspects of the last effort at a major tax overhaul. That attempt, a bill drafted three years ago by then House Ways and Means Chairman David Camp, contained many provisions hotly debated by charities, including a cap on executive compensation, restrictions on how to value appreciated assets donated to charity, and a requirement that donor-advised-fund account holders direct their money to charity within five years.

If Congress turns to Mr. Camp’s draft, two law professors who have pushed for a donor-advised-fund payout requirement, Ray Madoff of Boston College and Roger Colinvaux of the Catholic University of America, see an opportunity to press their point.

In a letter last month to Sen. Orrin Hatch, the Utah Republican who chairs the Senate Finance Committee, Ms. Madoff and Mr. Colinvaux wrote that the failure of donor-advised funds to spur more giving suggests people are stockpiling assets in their accounts rather than directing them to charity. They noted that even as the funds have grown rapidly ¬and are now worth some $80 billion, according to some estimates, the overall giving rate in America has not budged beyond 2 percent of disposable income.

"Given the substantial sums flowing into DAFs, the significant tax benefits allowed for these contributions, and the ultimate purpose of charitable tax benefits to get money to organizations engaged in charitable work, we believe that Congress should impose a maximum time period," Mr. Colinvaux and Ms. Madoff wrote. The two professors did not call for a specific time limit, but suggested that 10 years would be "reasonable."

A Call to Slow Down

Community foundations, many of which offer donor-advised funds, have aggressively pushed back against the idea of a mandated payout.

Jeff Hamond, a former Senate aide who directs the Community Foundation Public Awareness Initiative, a coalition of foundations, has coordinated a letter-writing campaign from community-foundation leaders across the country to drive the message that the donor-advised funds they oversee usually go to needy charities in a tight time frame.

"Our concern is we don’t want to change the rules for 100 percent of donor-advised funds to get at a problem that a very small percentage of funds exhibit," he said.

Steve Maislin, president of the Greater Houston Community Foundation was one of several dozen community-foundation leaders to cosign a letter to Texas representatives. His main message to them: Take your time.

He fears lawmakers will rush to close a deal on the broad parameters of a comprehensive tax deal without taking into consideration how nonprofits will fare.

"When momentum builds up and there’s a focus on bigger-picture issues, there’s not always an incentive to slow down and make sure there aren’t any unintended consequences," he said in an interview. "Sometimes our part is less visible and significant, but whatever direction they go, we want them to consider what the impact will be on charitable giving."

4. Voices to Protect Johnson Amendment Grow Louder (from Independent Sector, 8.25.17)
By Jamie Tucker, Independent Sector

Throughout the August recess period, nonprofit voices have been amplified across the country to protect the Johnson Amendment, a 63-year old law that prohibits 501(c)(3) organizations, including houses of worship, from engaging in partisan political activity. President Trump and some in Republican congressional leadership, including House Ways and Means Chairman Kevin Brady (R-TX) have pledged to repeal or modify the Johnson Amendment as part of comprehensive tax reform. Efforts are also underway through the appropriations process to limit the government’s ability to enforce the law. However, the charitable and religious communities have not backed down, using this recess period to appeal more directly to lawmakers about the law’s importance.

On August 23, the National Association of State Charity Officials (NASCO) sent a letter to congressional leaders expressing strong opposition to efforts to repeal of weaken the Johnson Amendment, stating doing so “would adversely impact our member offices’ ability to protect the integrity of charitable assets and charitable solicitations.” NASCO’s stance is both powerful and noteworthy, because the group state level charity regulators are very selective with their public positions.

The NASCO letter followed a communication sent by over 4,000 religious leaders also calling for the Johnson Amendment to be protected. While some supporters of repeal have framed their support in terms of religious liberty, the letter from the religious community argues that “changing the law would threaten the integrity and independence of houses of worship,” adding “we must not allow our sacred spaces to be transformed into spaces used to endorse or oppose political candidates.”

Independent Sector and our partner organizations oppose repeal of the Johnson Amendment, and we need your help to ensure that this critically important law remains part of our tax code.

5. IRS revokes nonprofit status from hospital under the ACA's 501(r) requirements for first time (from Fierce Healthcare, 8.21.17)
by Paige Minemyer

The Internal Revenue Service has revoked the nonprofit status of a hospital for the first time since new charity care reporting requirements went into effect late last year. The name of the hospital is redacted from the text of the tax status letter (PDF). The letter is dated Feb. 14 but was released on the IRS website earlier this month. An IRS spokeswoman also declined to name the hospital, according to an article from the Healthcare Financial Management Association (HFMA).

The IRS deemed the hospital “egregious” for its failure to meet the requirements, concluding that it had “neither the will, the resources, nor the staff to follow through” with them. The reason for the revocation, according to the letter, is that the hospital did not make its community health needs assessment widely available to the public online, though it offered physical copies on request.

“The hospital indicated to the IRS that it might have acted on some of the recommendations included in the Implementation Strategy Report, but that a separate written implementation policy was neither drafted nor adopted,” according to the letter. The hospital responded by saying that, as a small rural facility, it lacked the staff needed to keep up with the 501(r) requirements. It also said it had no need for the tax exemption and indicated that it believes it missed out on certain payment arrangements because of its 501(c)(3) status.

The IRS reviewed 692 hospitals in fiscal 2016, which ended late last month, and of those, 166 were referred for a closer “field examination.” The increased scrutiny is specific to 501(r) mandates included in the Affordable Care Act, which require hospitals to formulate clear written financial assistance policies for patients and make reasonable efforts to determine whether patients are eligible for assistance prior to taking any collection actions. The IRS is supposed to review each hospital every three years.

Although some industry experts are concerned that other hospitals may be vulnerable to IRS enforcement under the new requirements, Jan Smith, a tax senior manager in Crowe Horwath’s Healthcare practice, told the HFMA it's unlikely many hospitals will lose their nonprofit status.

“If hospitals are making a good-faith effort to comply, I would be surprised if the IRS would revoke their tax status at this stage of 501(r) examinations,” Smith told the association.


 

The following article is not related to Legislative Affairs……….

6. Facebook will now prompt you to create a charity fundraiser for your birthday 2 weeks in advance (from Venturebeat.com, 8.16.17)
By Paul Sawers@psawers

For many, Facebook is pretty much the only way to “remember” friends’ and family members’ birthdays.

Unless you’ve chosen to hide your big day through the app’s settings, you’ll likely be inundated with well-wishes on your birthday each year. According to Facebook product director Mike Nowak, 45 million people mete out birthday wishes on the social network every day.

Put simply, Facebook is a big deal for birthdays.

With that in mind, Facebook has announced a handful of new tools to help you mark your own and your friends’ birthdays.

While Facebook has embraced charitable donations for a number of years already and also supports personal fundraisers to cover things like medical bills and tuition fees, the company is now making it easier to dedicate your birthday to a charitable cause. Two weeks before your birthday, you’ll be prompted to set up a fundraiser for your big day — to be clear, this isn’t about funding your big party, it’s about raising money for 750,000 nonprofits in the U.S.

So rather than getting flowers or gifts through the mail, you can now automatically send your friends a notification asking them to give money to a good cause instead.

Alongside this, Facebook is continuing its push into video by encouraging you to share an auto-generated personalized video to mark a friend’s birthday.

A video will show up on the day, inviting you to share it with your friend — so rather than posting your usual quirky “happy birthday, dawg” message, you can save yourself even more hassle by simply resharing the work of Facebook’s algorithms. Your friend will love you for it, we promise.