October 2019 Public Policy Update
Beginning this month, SECF will provide members with monthly updates on the latest public policy developments in Washington and state capitols around the region, analyzing their possible impact on the charitable sector. If you would like to see an issue featured in a future Public Policy Update, contact Matthew L. Evans, SECF's director of public policy and special projects, at email@example.com.
From Recess to Recess
After a few weeks in Washington following the end of the August recess, members of Congress are once again in their districts for a two-week recess covering the Jewish high holidays as well as Columbus Day. The House and Senate will return to work October 15 with several items relating to philanthropy vying for space on the agenda. Here's a look at what SECF members may see during the remainder of the session.
Congress averted a government shutdown last week when the Senate passed a temporary spending bill that was later signed by President Trump. However, that bill's funding expires November 21. This legislation will allow lawmakers more time to finish the annual appropriations process. If regular appropriations legislation is not passed by then, lawmakers may pass a short-term continuing resolution, or CR, to keep the government operating at current funding levels.
Beyond these spending bills, the National Defense Authorization Act (NDAA) must be passed by January 1, 2020. This legislation has successfully made it through Congress for 60 years. The House and Senate have passed separate versions of the legislation, but significant policy differences have not yet been resolved.
Congress will be busy working on several other must-pass items, as well. Those include reauthorization of the Export-Import Bank, the National Flood Insurance Program, Temporary Assistance for Needy Families, and the extension of some health policy provisions set to expire this year.
Likely items with no hard deadlines
Beyond these essential bills, other topics that may be on the agenda for the remainder of this year include the extension of tax provisions, technical corrections to the 2017 Tax Cuts and Jobs Act, ongoing Senate confirmations and House investigations.
Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) have stressed the urgency of extending tax provisions, known collectively as “extenders.” Several Senate tax extenders task forces have released findings on which provisions merit action, and the others are expected soon.
Both Republican and Democratic lawmakers have acknowledged the need to repair certain parts of the Tax Cuts and Jobs Act, including the UBIT (unrelated business income tax) on transportation and parking benefits. SECF has been working hard with sector colleagues to ensure this provision is repealed. It remains a top priority.
As we head into the last quarter of the year, the national spotlight will continue to focus on this fall’s Democratic debates leading up to the 2020 primaries, which begin in February. Increased eligibility requirements for the debates have started to winnow down the field and more candidates may drop out ahead of the fourth debate on October 15. Two more debates, with even stricter eligibility requirements, are slated for November and December.
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Census 2020: Collaboration That Counts
By Regan Gruber Moffitt
Chief Strategy Officer, Winthrop Rockefeller Foundation
Regardless of place or profession, the Census affects everyone. It influences our country’s political landscape as the primary determinant for equal representation, the distribution of federal funding, and private and public community investments. The stakes in the 2020 Census have increased since the Census Bureau shifted its distribution methods to largely online surveys. After 229 years of using paper questionnaires, the digital transition is not easy.
Rural states like Arkansas have greater risks of an inaccurate count and a lot to lose.
The data shows that Arkansans may be less likely to participate in an online count. The state ranks 48th in the nation for broadband access, and 29 percent of residents have either no Internet or only dial-up-only access. Additionally, the state’s growing immigrant population includes many newcomers with limited English proficiency and plausible political fears of participation. Overall, hard-to-count communities, such as immigrant and rural populations, make up 20 percent of Arkansans. By leaving behind hard-to-count communities, the state risks a decade or more of significant economic losses. Even a 1 percent undercount could result in up to $1 billion in reduced federal funding coming to Arkansas.
Arkansas funders quickly recognized the high stakes and challenges of achieving an accurate count and have acted to address them collectively.
Arkansas Impact Philanthropy (AIP), a statewide collaborative of grantmakers committed to equity, led the way in creating a coordinated strategy around the 2020 Census. AIP has raised $600,000 from more than 10 foundations to support a complete count. AIP leveraged local funding to engage national philanthropic organizations, such as the New Venture Fund and the Beacon Fund, to help launch Arkansas Counts, a statewide initiative to reach hard-to-count communities.
AIP’s voice for Arkansas’s hard-to-count communities was heard all the way to Capitol Hill.
Several AIP members attended the 2019 Foundations on the Hill, a national gathering between philanthropic leaders and members of Congress. Arkansas funders spoke to their representatives about the importance of an accurate count. They shared data on the financial impacts of a Census undercount, offered best practices for engaging hard-to-count communities and provided recommendations on how congressional leaders could support local Get Out the Count (GOTC) efforts. A board member of the Women’s Foundation of Arkansas, who also works for the governor’s office, was part of the FOTH visits. Back in Arkansas, she facilitated a connection between AIP’s efforts and the governor's office.
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Charities Urged to Step Up Advocacy Efforts
From The Chronicle of Philanthropy
Only 3 percent of nonprofits reported lobbying activity last year, according to a new report that urges charities to step up their advocacy efforts in an era when government cuts are squeezing their finances.
The report from the National Council of Nonprofits, titled Nonprofit Impact Matters, calls on policy makers and nonprofit advocates to carefully consider the impact of government policy on charities, which are struggling to serve their constituents in an age of declining individual contributions and the threat of state and federal funding cuts for social programs.
"Common sense says that if 97 percent of nonprofits are passive, sitting quietly and politely on the sidelines, not standing for or speaking out for their missions, then nonprofits are ceding the playing field to others who will influence decisions by policy makers, potentially endangering nonprofits’ missions and the people and communities they serve," reads the report. (View the full article here.)
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Private Foundation Excise Tax Issue Gaining Steam on the Hill
SECF has, for several years, supported the simplification of the excise tax on private foundations via a single rate or flat tax. This rate would replace the current two-tiered system, which varies between 1 and 2 percent based on a foundation’s giving.
Simplification of the private foundation excise tax is part of SECF’s 2019 policy agenda. SECF has supported simplification since 2013.
In June, the House Ways and Means Committee approved legislation that calls for a standard 1.39 percent excise tax. The provision was added by Rep. Danny Davis (D-IL). The 1.39 rate was chosen, in part, because it was revenue neutral, according to congressional staff.
The charitable sector, including SECF, has organized around an effort to go beyond Davis’ proposal and enact a flat, 1 percent rate. Meetings with lawmakers on the issue are slated for October. The SECF staff, as well as the Board of Trustees and Public Policy Committee, will continue to track these developments and possible implications for foundations in the region.
More information about the private foundation excise tax is available on the IRS website.
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Tracking Proposal on Executive Compensation
SECF is closely following developments around an excise tax that resulted from the 2017 Tax Cuts and Jobs Act. As we detailed in a May Policy Alert, Section 4960 of the bill implements a 21 percent excise tax on executive compensation for tax-exempt organizations.
On December 31, 2018, the Department of the Treasury and the IRS released Notice 2019-09, which provides interim guidance under Section 4960 of the Internal Revenue Code.
As written, the Notice could require foundations to add compensation paid to a staff member or trustee from a related, non-foundation source (e.g. a family-owned business) to any income paid from the foundation, even if that amount is zero. Any compensation in excess of $1 million would be subject to a 21 percent tax.
The Notice could affect family foundations, corporate foundations and possibly some community foundations. Specifically, it indicates that compensation from “related organizations” would be considered when determining whether the $1 million threshold has been crossed. This language, particularly the definition of “related organization,” has led to some confusion within the sector.
SECF and others are concerned this provision could dampen volunteerism, affecting the makeup of boards at foundations and other nonprofits. It could discourage accomplished people from seeking to engage with the charitable sector and limit the recruitment of such people.
Treasury has heard from multiple voices in the tax-exempt world on this issue and is aware of the sector’s concern. Proposed regulations are expected to be released sometime next month. Once released, SECF and its members will have an opportunity to express their concerns during the regulation comment period. SECF has been working with its Public Policy Committee on this issue and will continue to update membership as news develops.
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Learn More About SECF's Public Policy Work
Matthew L. Evans is SECF's director of public policy and special projects.