Special Edition
This Special Edition presents breaking news from late last week:
Congress Passes Bipartisan Spending, Tax Legislation; Charitable Giving Incentives Made Permanent
Late last Friday, President Obama signed into law bipartisan legislation that funds the government through the current fiscal year (until September 30, 2016) and changes a significant number of tax provisions. The massive bill addresses numerous policy issues of interest to charitable nonprofits, ranging from funding for mission-related programs to restoring and making permanent three expired incentives for charitable giving. Two bills passed the House as separate measures that were subsequently merged and approved by the Senate as the Consolidated Appropriations Act, 2016. See summaries ofspending provisions and of the tax provisions for full details.
- The food donation tax deduction provision raises the cap on giving and allows small businesses donating wholesome excess food to a qualified nonprofit to take the same enhanced tax deduction that C corporations have been permitted to take since 1976. The provision also raises the ceiling for business donations from 10 percent to 15 percent of adjusted gross income and helps farmers and ranchers through a new special rule for valuing food inventory. (Sec. 113)
- The enhanced tax deduction for conservation easement donations has helped America’s land trusts work with farmers, ranchers, and other modest-income landowners to increase voluntary land conservation by a third, to over a million acres a year when the tax incentive is in effect. (Sec. 111)
- The IRA charitable rollover option, which allows individual taxpayers aged 70½ and older to donate up to $100,000 from their individual retirement accounts (IRAs) directly to charitable nonprofits, has provided needed support for the work of social service programs, religious organizations, arts and cultural institutions, schools, healthcare providers, and other charitable organizations — all of which benefit Americans across the country. (Sec. 112)
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The package does not include the streamlined foundation excise tax provision from the America Gives More Act nor a revision sought by community foundations to expand the IRA rollover. Nonprofits and foundations active on those issues are vowing to continue the advocacy efforts in the New Year.
The bill contains many other provisions important to nonprofits, including those serving low-income families. For instance, it makes permanent three key enhanced tax credits that were scheduled to expire at the end of 2017: the child tax credit (Sec. 101), the American Opportunity tax credit (Sec. 102), and the earned income tax credit (Sec. 103). A dozen “integrity” provisions were included to reduce concerns over perceived fraud and abuse in those programs (Secs. 201-212).
The Consolidated Appropriations Act, 2016, includes a provision that temporarily stalls further action by the Internal Revenue Service on proposed revisions to regulations governing partisan political activities of 501(c)(4) social welfare organizations (Sec. 127). The law also freezes funding for the IRS at 2015 levels, except for added resources to support taxpayer services, fraud detection, and cybersecurity.
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IRS Proposed Gift Substantiation Regulation
More than 37,000 concerned individuals and organizations submitted comments on the proposed gift substantiation regulation, and virtually all that are viewable expressed a common theme: it is a very bad idea for nonprofits to be asking for donors’ Social Security numbers, maintaining that personal information in their files, and submitting it to the IRS. In the view of many, “never is the better answer” when the question is whether individuals should give their Social Security numbers to people claiming to be soliciting on behalf of a charity.
The question arose in September when the Treasury Department and Internal Revenue Service published proposed regulations to permit, but not require, charitable nonprofits to file a new, separate information return with the IRS (in addition to the Form 990) by February 28 every year to substantiate contributions of more than $250 in value. The new informational tax return (“Donee Report”) would require the nonprofit using it to collect the donor’s name, address, and Social Security number (SSNs) or other taxpayer identification number. Nonprofits taking this option would also be required by that date to provide a copy to each donor listed (but only the portion that contains “information related to that donor”).
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 Opposition to the proposed rules was broad-based and consistent. A set of joint comments submitted by the 215 nonprofits expressed concern that the collection of SSNs would “expose the public to increased risk from identity theft, impose significant costs and burdens on nonprofit organizations, and create public confusion and disincentives for donors to support the work of nonprofits.” See also the joint news release from Independent Sector and the National Council of Nonprofits. In separate detailed comments, the National Council of Nonprofits challenged the procedural irregularities in the rulemaking process and demonstrated that the proposal to collect SSNs runs counter to IRS’ own advice, the policies of law enforcement agencies across the country, and clear directives from the federal government and Congress.
The National Association of State Charity Officials (NASCO) expressed similar concerns about the likelihood of identity theft, stating that “based upon our experience in regulating charities and charitable fundraising, many donors, particularly elderly, will fall for this scheme and could wind up victims of both fraudulent charitable fundraising and identity theft.” The charity regulators went farther, warning nonprofits that voluntarily adopt the proposed voluntary reporting regime: “Nonprofits that collect social security numbers and fail to protect or improperly protect that data could be subjecting themselves and their boards to regulatory and legal action for a breach of their fiduciary duties.”
The proposed regulation also drew negative responses from Capitol Hill. On December 17, Representatives Keith Rothfus (R-PA-12) and Brian Higgins (D-NY-26) introduced theCharitable Giving Privacy Protection Act (H.R. 4281), a bipartisan bill designed to prevent the IRS from requiring or accepting donor Social Security numbers as part of the gift substantiation process. This narrowly crafted bill would fix the primary problem raised by the nonprofit community concerning the need for protecting donors, nonprofits, and the public from identity theft. See the news release on the bill. Another bill introduced by Senator Pat Roberts (R-KS) seeks to block the rulemaking.
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2016 Public Policy Agenda
The board of directors of the National Council of Nonprofits approved the 2016 Public Policy Agenda that will guide the advocacy priorities of the nation’s largest network of nonprofits. The agenda sets priorities in six focus areas: tax policy, budget and spending, employment, public-private partnerships and government contracting, nonprofit advocacy rights, and public trust and nonprofit independence. Among other changes and updates, the revised public policy agenda more overtly expresses opposition to so-called “taxpayer bill of rights” (TABOR) and other budget gimmicks that limit the options for policymakers to address critical and immediate needs in their communities.
The 2016 agenda also recognizes the growing attention at the state and local levels to various proposed employment policies, such as hiking the minimum wage and requiring paid leave. The policy agenda makes clear that “federal, state, and local government changes to employment laws and rules … affect the work of and people served by charitable nonprofits differently depending on each organization’s mission and focus area.” As the Council of Nonprofits stressed when nonprofits were submitting comments on the proposed changes to federal overtime policy, the agenda encourages frontline nonprofits to conduct mission-based analyses to determine how proposed employment policy proposals will affect the people they serve and the ability of the organization to meet those needs. The policy agenda goes on to make clear that “fundamental fairness dictates that any changes in governmental employment policies should incorporate revisions to existing and future contracts and grants through which charitable nonprofits perform services in communities on behalf of governments.”
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- Spending/Tax Legislation
- Proposed Gift Substantiation Rules
- 2016 Public Policy Agenda
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Worth Quoting
“Charities can confidently plan and expand the good work they do.”
- Senator Ron Wyden (D-OR), ranking member of the Senate Finance Committee, quoted in ajoint news release with the chairmen of the Senate Finance and House Ways and Means Committees, December 15, 2015, singling out the permanent extension of the charitable giving incentives for special note as a key achievement in the PATH Act.
“Charitable nonprofits are an essential element of our society that positively affect the lives of millions of Americans. This commonsense bipartisan legislation will serve to better protect these valuable organizations and their supporters and ensure that they can continue to provide important services to communities across the country.”
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Bill Texts Worth Studying
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Numbers in the News
318 to 109
316 to 113
65 to 33
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More Numbers in the News
37,937
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Publishing Note
The next regularly scheduled edition of Nonprofit Advocacy Matters will be published on Monday, January 11, 2016. Watch for updates and breaking news on the Council of Nonprofits' Twitter pages (@NatlCouncilNPs and@buildnpcapacity) unless there is a need for another special edition.
Happy Holidays
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