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April 2003 – Government Directory, Spotlight on Research, State Budget

I. Current political environment and what this means to nonprofits:

There are a few key federal policy issues that deserve the attention of MNA members, see the section on “What you can do” for specific suggestions to address the following:

SUPPORT CARE ACT – The Senate is expected to soon address CARE Act (S.256). This bill was introduced on January 30 by Senator Charles Grassley (R-IA), chairman of the Senate Finance Committee, Senators Max Baucus (D-MT) (ranking member of the Finance Committee), Rick Santorum (R-PA), and Joseph Lieberman (D-CT). The proposed CARE Act includes tax incentives to promote charitable giving and a provision to simplify the lobbying expenditure limit for charities.

The tax incentives include:

• A deduction for a portion of charitable contributions made by individuals who do not itemize deductions (single filers would be allowed to deduct total contributions over $250 up to a ceiling of $500; for joint filers, the amounts are $500 up to a ceiling of $1,000);
• Tax-free distributions to charities from individual retirement accounts (donors aged 59½ and over may rollover amounts from a traditional or Roth IRA to create a life income gift to a charity; donors aged 70½ and over may make direct cash contributions to a charity);
• Charitable deductions for contributions of food and book inventories;
• Expansion of the charitable deduction for scientific property used for research and for computer technology and equipment used for educational purposes;
• An adjustment to the basis of S corporation stock for certain charitable contributions;
• An enhanced deductions for charitable contributions of literary, musical, artistic and scholarly compositions; and
• Mileage reimbursements for charitable volunteers excluded from gross income.

The bill also includes a provision to simplify the lobbying expenditure limitation for charitable nonprofits, and several provisions to improve the oversight of tax-exempt organizations, including removing barriers for the IRS to share information with state charity officials of proposed actions related to 501(c) organizations. To assist the IRS in its oversight of exempt organizations, the bill authorizes a specific appropriation of $80 million for the administration of the exempt organizations of the IRS.

The bill also restores funding for the Social Services Block Grant to an annual appropriation of $2.8 billion and provisions to expand the Individual Development Account program.

This Act incorporates several initiatives of particular interest to MNA and its members, including the charitable tax deduction for non-itemizers, the tax-free rollover from IRA to charities and the simplification of the lobbying limitations.

Provide a Tax Incentive for Charitable Giving by All Americans - Offering a charitable deduction to all individuals is consistent with our nation's tax policy framework and would result in an increase in charitable giving levels. PricewaterhouseCoopers, in a study commissioned by INDEPENDENT SECTOR, estimated that this type of proposal would increase charitable giving nationwide by more than $18.5 billion over the next five years. The same study estimated that this type of proposal would increase charitable giving in the state by $2.8 million a year.

Allow Tax-Free Rollover of IRA Assets to Charity - As a result of careful planning, many older Americans are finding that the value of their IRAs and other retirement savings accounts substantially exceed their retirement income needs. Current law can discourage the transfer of retirement assets to charities. Currently, the donor pays income tax on the full value of the gift to a charity, and attempts to claim an offsetting charitable deduction. However, if the donor does not itemize deductions, or if the amount of the transferred assets exceeds certain limits relative to the donor's adjusted gross income, the donor will not be able to claim a full, off-setting income tax deduction.

Simplification of the Lobbying Limits - The simplification proposal would eliminate the additional, unnecessary restrictions on grassroots lobbying under current law. If this proposal becomes law, charities will have the discretion to spend their total allowable lobbying budget on direct or grassroots lobbying or on any combination of the two activities. Under current tax laws, tax exempt charities are prohibited from participating in political campaign activities and are limited in their level of lobbying activities. Specifically, a charity may participate in lobbying activities as long as "no substantial part" of the charity's activities is lobbying. However, Congress, in 1976, enacted IRC Section 501(h) which permits a charity to elect a bright-line test to determine its permissible amount of lobbying activities. The test is based upon a percentage of an organization's "exempt purpose expenditures" with an overall cap of $1 million. The test also includes a complicated separate cap that limits "grassroots lobbying" to no more than 25% of total allowable lobbying expenditures. Thus, grassroots lobbying is capped at $250,000 for the largest charities, with even lower caps for smaller charities.

OPPOSE NONPROFIT POSTAGE RATE INCREASE – Senators Susan Collins (R-ME), Tom Carper (D-DE), and Sam Brownback (R-KS) introduced S. 380, which was passed by Senate Committee on Governmental Affairs on March 5. In the House, Rep. John McHugh (R-NY), Rep. Henry Waxman (D-CA), Tom Davis (R-VA), and Danny Davis (D-IL) introduced H.R. 735, which was passed by the House Committee on Government Reform on March 6. The Administration and the Postal Service support the legislation.

Both bills correct the statutory formula for Postal Service payments to Civil Service Retirement System (CSRS). By changing the formula, the lawmakers seek to prevent a $71 billion overpayment by the Postal Service to the CSRS. The Office of Personnel Management (OPM) has determined that the Postal Service, based on payments required by existing law, will over-fund its obligations to the Civil Service Retirement System (CSRS) by over $70 billion dollars or more. Without swift passage of these bills, the Postal Service will be forced to assume CSRS costs based on the overpayment formula, rather than on actual costs. As a result the Postal Service will request an increase in postage rates as early as April, leading to a lengthy and expensive postal rate case with a rate hike we can't afford.

OPPOSE NONPROFIT ADVOCACY LIMITATIONS – In mid-March H.R. 1350, a bill to reauthorize the Individuals with Disability Education Act, was introduced with a provision prohibiting nonprofit parent centers from engaging in any “federal relations.” This would have also prohibited anyone working with an organization that engages in “federal relations” (e.g., Wal-Mart or the Chamber of Commerce) from serving on the board of a parent center or for that matter any staff of the parent center serving on the board of an organization that engages in “federal relations.” There was some expectation that the provision would also be broadened to more than nonprofit parent centers. It should be noted that the bill did not define “federal relations.” The sponsor has removed this language, however, it is possible that this issue could rear its ugly head again in other reauthorization and appropriation bills. Policymakers must understand that the ability of charities to voice their concerns is critical to the success of the nonprofit community, those they serve and the resources they protect.

II. What you can do:

WRITE, CALL, VISIT

Write – Since 9/11, mail to federal policymakers has taken up to two months to be received. To ensure that federal policymakers receive your requests in a timely manner it is better to fax your letter to their Washington office. To assist you with this process, we have enclosed a listing of fax numbers for U.S. House and Senate. Also, we have enclosed a sample letter to send to the Senate regarding the CARE Act and sample letters to send to the House and Senate regarding the Nonprofit Postage Rate Increase (please note that the different letters refer to the House bill # and the Senate bill #). There is no action needed at this time in regards to the advocacy limitation proposals. However, it is imperative that you let all policymakers know how important advocacy is to fulfilling your mission.

Call – After you send you letters, it is a good idea to follow it up with a call. At this time, you can simply ask if they have received the letter or you can discuss with them your support for the CARE Act and your opposition to the Nonprofit Postage Rate Increase. Just remember to keep it brief, use the talking points outlined in the letters and remember to thank them!

Visit – If you have the opportunity to meet with federal policymakers this is by far the most effective advocacy method that will gain you the most results. Unless you have a close relationship with your Representative/Senator, their office will most likely ask that you submit a letter requesting a meeting. Again, in light of the large amount of time it takes for Washington offices to receive mail, it would be a good idea to fax your request.

If you need any assistance with the above suggestions, don’t hesitate to call Erin Skene at 517/492-2400.