Current Legislation & Issues
On December 20 congress passed the final Tax Cuts and Jobs Act. The bill was signed into law by President Trump on December 22. What does this mean for nonprofits? The Tax Cuts and Jobs Act increases the standard deduction, a change that is estimated to decrease charitable giving by $13 billion annually. The bill repeals the Affordable Care Act's individual mandate, causing 13 million people to lose health insurance and raising premium costs for everyone.
Check out the National Council of Nonprofits Webpage: Resources on How the New Federal Tax Law Impacts Charitable Nonprofits.
Listen to Anne Gingerich, PANO's Executive Director, talk about the two bills and their impact: WITF's Smart Talk - Pennsylvania Nonprofits.
Taxing Tax-Exempt Employers on Employee Parking Must be Stopped
The Tax Cuts and Jobs Act contains a troubling provision that applies federal income tax to transportation and parking benefits, as well as the use of on-premises athletic facilities provided by tax-exempt organizations to their employees. Tax practitioners who have evaluated Section 512(a)(7) generally believe that the result of this new provision is that tax-exempt organizations that provide these benefits to their employees will be subject to unrelated business income tax on the cost of the benefits provided. This may include a nonprofit organization that simply allows its employees to park in a parking lot or garage that is part of the organization's facilities. To complicate matters further, measuring the costs of these benefits remains to be addressed in future "regulations or other guidance" issued by the IRS, after reporting and tax payment obligations have already begun.
Because of this new tax, many tax-exempt employers, including churches, hospitals, charities, and schools, will be required to file federal Form 990-T and, in many cases state corporate income returns, every year regardless of whether they actually engage in any unrelated business activity apart from the provision of these types of benefits.
PANO believes this element of the new tax law should be repealed because:
1. The very purpose of tax exemption is not to have tax-exempt organizations' charitable, religious, and educational activities on the same footing as taxable businesses because of the work they do to benefit their communities and the inherent challenges associated with raising money to support such work.
2. The federal income tax on unrelated business income is intended to apply to income generated from unrelated commercial activities conducted by tax-exempt organizations. Providing these kinds of benefits to employees does not constitute generating income from an unrelated commercial activity and there is no sound policy basis for applying a tax for commercial activity to these benefits.
3. These new obligations are likely to result in significant additional administrative and tax reporting burdens and costs on affected nonprofits, many of whom lack the necessary financial and other resources to manage these burdens and costs.
Calls to Action
1. Contact Your Representative
Please contact your Pennsylvania U.S. Representative and ask them to support H.R. 6037 introduced by U.S. Representative Michael Conaway (R-TX) that would repeal this provision of the Tax Cuts and Jobs Act. The bill would also repeal:
• Section 512(a)(6) of the act which requires nonprofits with business income to pay the tax on each separate "trade or business". H.R. 6037 would reinstate current law which allows nonprofit organizations to consider all unrelated business income as a whole so that losses in one line of unrelated taxable income can be used to offset taxable income in one or more other lines of unrelated taxable business.
When you speak with your representative, also ask them to urge the treasury department and the IRS to delay implementation of these provisions.
2. Contact U.S. Senators
Please contact your Senator Casey and Senator Toomey and ask them to support S. 3332 introduced by Senator James Lankford (R-OK) that mirrors H.R. 6037, repealing this provision of the Tax Cuts and Jobs Act.
When you speak with your senator, also ask them to urge the treasury department and the IRS to delay implementation of these provisions.
3. Contact the IRS Through Their Public Comment Form
Add your voice to the call for relief by going to the IRS public comment form and insisting that Treasury and the IRS delay implementing the two new UBIT subsections until one year after Final Rules are promulgated. (In the pubic comment form's line for Form/Instructions/publication Number, fill in "Form 990-T".)
Updates on Johnson Amendment
On July 19, the U.S. House of Representatives narrowly approved an appropriations bill that includes a provision that would effectively prohibit the Internal Revenue Service from enforcing the Johnson Amendment against churches. On July 31, the U.S. Senate approved its version of the appropriations bill that does not include the anti-Johnson amendment language adopted in the House-passed bill. The fate of the harmful provision in the House bill will rest in the hands of a yet-to-be-named House-Senate conference committee on the bill.
Nonprofits wanting to help preserve nonprofit nonpartisanship should contact Senator Casey, Senator Toomey, and your U.S. Representative and deliver this simple message:
“Partisanship has NO place in charitable organizations – whether churches, charities, or foundations. Oppose all efforts in conference to add a controversial anti-Johnson Amendment rider to the Financial Services spending bill.”
Join the 5,000+ nonprofits and add your organizations name to the Community Letter in Support of Nonpartisanship.
Nonpartisanship Is a Shield and Not a Barrier
The voting public in the United States trusts charities more than they trust political parties or any one politician. See Independent Sector's United for Charity Report. But one tenet underpinning the public’s confidence is in imminent jeopardy: nonpartisanship.
After hearing from nonprofits from around the Commonwealth, PANO joined the National Council of Nonprofits in signing the community letter in Support of Nonpartisanship. Over 5,000 organizations signed the community letter of support, calling on Congress to protect the longstanding Johnson Amendment and nonprofit nonpartisanship. Check out this press release from the National Council of Nonprofits. Thank you to everyone who added your organization to the letter.
- Johnson Amendment Survey Results436.95 K | 3/17/2017
Johnson Amendment Information and History (click to read more)
The Johnson Amendment
The Johnson Amendment prohibits 501(c)(3)s from directly or indirectly participating in any political campaign on behalf of, or in opposition to, any candidate. Charities are prohibited from fundraising for and endorsing or opposing candidates for political office; ministers are restricted from endorsing or opposing candidates from the pulpit. If they do, they risk losing their tax-exempt status. The Johnson Amendment does allow these same nonprofits to advocate for mission-related issues.
Why Nonpartisanship Matters
Repealing the Johnson Amendment could tarnish the integrity of the nonprofit and philanthropic community, damaging public trust in the impartiality and independence of our sector and our mandate to "do good." PANO joins National Council of Nonprofits, the Independent Sector, the Council on Foundations and hundreds of charitable nonprofits in support of nonpartisanship. We strongly oppose efforts to politicize charities by eliminating the Johnson Amendment for these reasons:
1. These proposals may subject charities and foundations to demands from candidates for endorsements and campaign contributions, potentially diverting donor money away from mission-related work to benefit politicians.
2. Nonpartisanship is a shield, not a barrier. Participation in partisan politics can create strong opponents on issues that nonprofits care about and impede their ability to get help from those they oppose to fulfill their mission. Partisanship could alienate those who depend on those organizations for services or those who contribute time, talent and treasure to nonprofits.
3. The Johnson Amendment has worked for more than 60 years without significantly hampering charities. Nonprofit already have many legal avenues to advocate for mission-related issues with policymakers. Nonprofit managers and their supporters have the right to freely express their views on candidates as individuals.
4. Charities could become conduits for tax deductible contributions to be used for political activity. No other political contributions are tax deductible. This could open the door for more unaccountable money in our political system, because charities do not have to make public the names of their donors. This may be particularly true for churches because they are not required to obtain formal recognition of their exempt status and are not required to file tax returns that report their expenditures
• GuideStar Blog - Perspectives on the Johnson Amendment
Charitable Giving Tax Deduction (Click to read more)
2017 marked the 100th anniversary of the charitable tax deduction. Congress and the new administration are expected to reevaluate federal tax policies, most, notably the charitable deduction.
Your legislatures need to hear from you; let them know what the charitable deduction makes possible for your organization, your fundraising efforts and your donors. Send a letter, email and post on social media (use hashtags #100yearsofgiving and/or #ProtectGiving), see a copy of PANO’s letter below.
- Charitable Giving Tax Deduction Letter To Legislatures47.12 K | 2/16/2017
- Charitable Giving Story - For Pete's Sake499.33 K | 2/16/2017
- Charitable Giving Story - New Hope Ministries447.75 K | 2/16/2017
Health Care (click to read more)
Join PANO and the National Council of Nonprofits in calling our legislatures to advocate for a health care bill that will expand rather than contract affordable coverage and that will promote affordability for all Americans.
We urge our legislatures to expand healthcare access and reject proposals that would cause millions of Americans to lose their coverage or make harmful changes to Medicaid.
1. Healthcare coverage should be affordable, attainable and adequate to meet the health needs of children, families and individuals.
2. Medicaid is critical to families and communities. Currently, Medicaid provides comprehensive and affordable healthcare coverage to over 97 million Americans who would otherwise go uninsured. These include our most vulnerable populations: children, seniors and people with disabilities.
3. Children with Medicaid protects working families from financial hardships and ensures their children have healthcare to remain healthy and have the opportunity to succeed in school.
Support our communities and find a solution that provides affordable, attainable and adequate healthcare for all children, families and individuals living in Pennsylvania.
Health Care History
In the summer of 2017, PANO gathered feedback from Pennsylvania's nonprofit sector to learn both your position and also how you see H.R. 1628 Better Care Reconciliation Act impacting those you serve. Of the 106 participants responding to the survey:
• 87% oppose the legislation
• 7% support the legislation
• 7% are undecided
Those opposed to the bill named various groups of vulnerable Pennsylvania citizens who would be negatively impacted by this bill including: those in need of drug and alcohol treatment (e.g. those addicted to heroin and opioids), persons with disabilities (e.g. autism, intellectual disabilities), those seeking housing, education, job placement, veterans senior citizens and inmates. Check out the full survey results.
- Health Care Letter to Senators524.72 K | 7/6/2017
- Health Care Survey Results713.2 K | 7/6/2017
Recent Legislation & Issues
OMB Uniform Guidance (click to read more)
The federal Office of Management and Budget (OMB) released the interim final regulations on the Uniform Guidance (effective December 24, 2014). Included are important changes to: reimbursement for indirect costs, cost allocation, audit threshold, and procurement.
Check out the OMB Uniform Guidance Webinar Recording|http://store.pano.org/14/The_New_OMB_Uniform_Guidance_Webinar_Recording_11-5-14] to learn more about the changes. Special thanks to our presenters for the National Council of Nonprofits, David L. Thompson, Vice President of Public Policy and Beth Bowsky, Policy Specialist for Government-Nonprofit Contracting.
For more information, check out these resources:
- National Council of Nonprofits'OMB Guidance on Indirect Costs: What It Does and Why It Matters
- National Council of Nonprofits’ OMB Toolkit: Know Your Rights . . . And How to Protect Them
- National Council of Nonprofits’ special OMB edition of Nonprofit Advocacy Matters
- Informational videos on the federal website
- CliftonLarsonAllen White Paper
- McKonly and Asbury Video on New Internal Controls
Partnering for Impact: Government-Nonprofit Contracting Task Forces Produce Results for Taxpayers
Nonprofits and governments can reduce their own costs, improve services provided to constituents, and return greater value to taxpayers by creating government-nonprofit task forces to develop and implement recommendations to reform contracting practices and procedures. That is the key finding of a new report of the National Council of Nonprofits, which conducted an extensive analysis of joint task forces in nine states charged with rooting out waste while maintaining and even enhancing accountability.
The report provides a how-to guide for nonprofits, working with their State Associations, who want to streamline the government-nonprofit contracting process. It also provides practical guides for building collaborative relationships with government officials. Download the Report
National Study of State Contracts and Grants – 2013
This compilation of state profiles from the Urban Institute's 2013 National Survey of Nonprofit-Government Contracting and Grants, provides national and state-by-state snapshots of most types of nonprofit organizations that have contracts and grants with local, state, and federal governments. The individual state profiles are designed to document the extent of nonprofit-government contracting, processes and problems.
Full Report (PA stats start on page 91)
- Health Care Survey Results
- Charitable Giving Story - For Pete's Sake