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Federal and State Policy Update

FEDERAL

FCC “DO-NOT-FAX” RULES

In the August 8th edition of the public policy e-mail update, there was a report of the Federal Communication Commission’s (FCC) Do-Not-Fax rule changes. These rules could have a wide ranging impact on the communication of your organization.

In August, the FCC issued an Order on Reconsideration that extends the effective date of the Do-Not-Fax Rules from August 26, 2003 to January 1, 2005. Therefore, until January 1, 2005, an established business relationship will continue to be sufficient to show that an individual or business has given express permission to receive facsimile advertisements.

All of your calls and letters to the FCC expressing concern over these rule changes convinced them to spend the proper time needed to analyze the impact of the proposed changes.

AMERICORPS UPDATE

In July, the Senate voted to provide AmeriCorps with an additional $100 million as part of an emergency spending bill, however the House rejected this provision and passed the bill without the AmeriCorps funds included. The Senate then voted to pass the House version of the bill before adjourning for the August recess.

Key opponents of the AmeriCorps funding in the House asserted that mismanagement had led to the funding crisis, and that appropriating more money was not going to solve the problem. Congressional leadership did state, however, that this issue could be taken up again in the future.

MNA members and other nonprofits in the state were very active in conveying the importance of the AmeriCorps program to policymakers and the public. For more information see the MNA Web site at www.mnaonline.org and the Save AmeriCorps Coalition Web site at www.saveamericorps.org

Charitable Giving Act of 2003

The House of Representatives passed the Charitable Giving Act, by an overwhelming vote of 408 to 13 on September 17. The bill provides a number of important incentives designed to encourage charitable giving, including the nonitemizer deduction and the IRA rollover provision. The nonitemizer deduction allows nonitemizing taxpayers to deduct giving over $250 up to a ceiling of $500 (joint filers can deduct giving over $500 up to $1,000). The IRA rollover provision allows individuals who are at least 70 ½ years of age to make direct or deferred gifts from their individual retirement accounts without suffering adverse tax consequences.

Another provision of the bill will simplify the lobbying expenditure requirements for nonprofit organizations, allowing them to spend all or any part of their lobbying expenditure limit on either direct or grassroots lobbying.

On September 9, the House Ways and Means Committee passed H.R. 7 after approving a compromise proposal on the administrative expenditures that private foundations can count towards their annual qualifying charitable distributions. The Committee excluded from qualifying distributions compensation paid to “disqualified persons” (e.g., board members, chief executives, and chief operating officers) in excess of $100,000 per person and air transportation that is not coach-class commercial travel. The bill also raises the excise tax penalties for self-dealing from 5 percent to 25 percent.

H.R. 7 will now go to a House-Senate Conference Committee to addresses the differences between the bill passed by the Senate and the bill passed by the House.

STATE

Sales Tax Exemption

House bill 4863, introduced by Representative Brian Palmer (R- Romeo), would amend the Sales Tax Act to provide an exemption against the first $75,000 of sales at retail by a nonprofit entity for fundraising purposes. The introduced bill revises the General Sales Tax Act which applies to nonprofit organizations that sell retail for fundraising purposes. For example, a museum may have a gift store that helps to fund the organization. Currently, an organization with total retail sales of less than $5,000 for a calendar year does not have to collect sales tax for fundraising purposes. To address the growing fundraising needs of nonprofits, the Act raises the threshold to $75,000.

A drafted substitute to the bill, by Representative Palmer, also removes the retroactive tax once the threshold is broken. This change addresses situations when nonprofits sell above the threshold and must collect sales tax from the first dollar. The current retroactive policy leads to a penalty for nonprofits that raise more than the allotted amount. For example, under current law, a nonprofit that raises $5,001 is responsible for paying sales tax for the entire amount raised. Whereas, a nonprofit that raises up to $5,000 does not have to collect sales tax.

The bill was introduced on June 19 and was referred to the Committee on Tax Policy. There are no immediate plans to address the bill in committee.

Volunteer Investment Grant Program

Despite outcry from the nonprofit sector, the Michigan Legislature recently cut the Volunteer Investment Grant Program from over $780,000 to $280,000. The VIG program, which assists communities in solving pressing social problems by supporting the needed volunteer infrastructure is essential to meeting the needs of Michigan communities. However, the funding for this program has been cut by 22% over the past few years. This is particularly disturbing in light of these difficult economic times and decreased giving and volunteering by Michigan residents. According to a recent study, Michigan residents decreased their levels of volunteering by 16% from 2001, which means only about 30% of Michiganians volunteered last year. In addition, giving was down last year, from 89.1% in 2001 to 80.1% in 2002.

Not only does the VIG program strengthen nonprofit organizations and their ability to serve those in need, but it also contributes to the local economy. Specifically:

• To date, communities have leveraged $5.8 million locally to match the $4.8 million of state funds.
• Volunteer Investment Grants have supported 34 volunteer resource centers throughout Michigan. These 34 centers serve 38 of Michigan’s 83 counties—reaching 53% of Michigan’s population. All told, 97 Volunteer Investment Grants have been awarded to local volunteer resource centers.
• In 2003, a total of $780,095 was awarded to 17 volunteer resource centers. These grants range in size from $24,200 to $100,000. Local communities will leverage at least $780,095 in local funds for VIG in 2003.

The annual fund is a granting program of the Michigan Community Service Commission, with grants ranging from $25,000 to $100,000. Each grant has to be matched by the local community, with the local match being placed into an endowment for community-based volunteer initiatives. The State VIG grant can be used by the organization to enhance their capacity through program development, technology enhancements or technical.