State Legislation & Issues
Budget Clock is Ticking - Get Informed with MLPP briefs!
We have reached an important point in the state budget process that determines spending priorities for our local communities and the state for the next year. Final decisions will be made soon, with legislators hoping to have the budget done by the end of May.
Our new Budget Briefs will update you on the main differences between the governor’s budget recommendations and the House and Senate’s passed budgets, and highlight the funding priorities that we think demand attention.
We only have two weeks to make a difference in funding for the next year. Please read these new budget reports and join us in fighting for funding for these essential programs to help the men, women and children of Michigan, especially those who are struggling the most.
Why are so Many Nonprofit Cases at the Michigan Tax Tribunal?
From CMF's Weekly Download, April 18, 2016
Across Michigan, nonprofits are being required to pay taxes on property due to local assessor's interpretations of charitable work.
Many nonprofits (foundations and social service providers alike) assume that 501c(3) status from the IRS automatically provides exemption from local property taxes. The reality is that ultimate judgment on property tax exemption in Michigan is in the hands of local assessors - and the local assessors are charged with interpreting what is often a subjective question: "What is a charitable institution?"
As a result, over the past two years the number of contested nonprofit property tax exemption cases has risen to more than 40 being considered by the Michigan Tax Tribunal. These cases cover all parts of Michigan and a wide diversity of nonprofits, ranging from childcare facilities to assisted living facilities and more.
Most charitable nonprofits do not budget for paying local property taxes, which is resulting in tax bills that are enough to sink an organization. Moreover, the subjective nature of interpretation from assessor to assessor poses bigger questions around clarifying decision making on both the nonprofit and assessor sides. For MNA members that own their own facilities or support nonprofits that own facilities, solving this question is a high priority. While at least three bills have been introduced in Lansing to help solve individual cases, MNA, with the assistance of CMF, has been developing legislation that will provide a comprehensive fix - clarity for both local nonprofits and assessors in making decision on applications for property tax exemption.
Legislation is expected to be introduced later this month with bi-partisan support. But legislation is only part of the solution. CMF and MNA will also be launching a toolkit to help nonprofits explain to local assessors the charitable services they are providing, as well as help inform assessors in evaluating property tax exemption applications.
Currently, local assessors utilize six broad criteria as defined by the Wexford Case, to evaluate property tax exemption.
Michigan Nonprofit Association supports the League of Women Voters Education Fund and the publication of the voters' guide. With the online voters guide you can enter your address to find your polling place, see the races on your ballot, compare candidates' positions side-by-side, and print out a "ballot" indicating your preferences as a reminder and take it with you to the polls on Election Day. There are also resources for military and overseas voters.
Bills we are tracking
Increase Your Government Overhead Reimbursement
Governments at all levels – local, state, and federal – that hire nonprofits to deliver services are now required to reimburse nonprofits for the reasonable indirect costs (sometimes called “overhead” or “administrative” costs) they incur on behalf of governments when federal dollars are part of the funding stream. The new mandate is embedded in grantmaking rules that the federal Office of Management and Budget (OMB) put into effect at the end of 2014. In addition, the new OMB Uniform Guidance streamlines and clarifies cost allocation and other rules related to government grants and contracts, removing some areas of confusion and inconsistency while treating more of a nonprofit’s expenses as direct (reimbursable) costs.
Six action steps to take now:
- Determine whether the source of some or all of your government funding is federal (rather than state or local). In many cases federal funds are granted through state, county, and city departments. If you aren't sure, ask your contract officer in government. You have a right to know. If some of your funding has federal origins, the new Office of Management and Budget Uniform Guidance (OMB UG) probably applies to you.
- Check on the expiration dates of your contracts that involve federal money. The OMB UG applies to new contracts signed after December 26, 2014. The OMB UG does not require contract renewals to use the new standards for overhead if nothing substantial has been changed in the new contract. We hear from some nonprofits that their government funders are trying to characterize all new contracts as basic renewals so that the higher overhead rules don't apply.
- Review the overhead rate in your government contract. If the rate is less than 10%, or if you have a fee-for-service contract based on costs that assumes less than 10% overhead, the new OMB Guidance is crucial for you to understand and act on.
- Review your current overhead assumptions – under the new guidance, some items you may have assumed as part of your overhead rate will actually be treated as direct costs.
- Develop your strategy now for getting better overhead rates in your new contracts: talk to other nonprofits with similar contracts and consider a joint educational approach with your funder. Talk with your auditor and enlist his or her help in making the case to the government agency. Document your discussions with your government contract officer so that even if you are pressured into a contract with less than 10% overhead, you'll have material for making the case retroactively.
Let us know this is an issue for your organization. As we work with legislators, state administrators and county officials, bringing together as many nonprofits as possible on this issue empowers all of us.
Federal Legislation & Issues
Charities Helping Americans Regularly Throughout the Year Act (CHARITY Act S.2750)
Senators John Thune (R-SD) and Ron Wyden (D-OR) today introduced the "Charities Helping Americans Regularly Throughout the Year Act" (CHARITY Act), S.2750.
If enacted, the legislation would:
- Express the sense of the senate that "encouraging charitable giving should be a goal of tax reform," and that Congress should ensure that the value and scope of the federal charitable deduction "is not diminished
- Permit IRA rollovers into donor advised funds and add pay-out and other disclosures for DAFs
- Streamline the foundation excise tax by setting a fixed rate of one percent (unenacted portion of the America Gives More Act)
- Mandate electronic filing of IRS Form 990s, with a delayed effective date for smaller nonprofits with revenues of between $200,000 and $500,000
- Establish an adjustable Volunteer Mileage Rate pegged to rate for medical/moving purposes (currently 19 cents)
- Make a limited exception to the private foundation excess business holding tax for enterprises that donate all profits to charity.
White House Vetting Final Overtime Rule
The White House is vetting the Department of Labor’s (DOL) proposed changes to rules governing eligibility for overtime pay, as industry and nonprofit groups continue weighing in with their concerns.
DOL’s proposed rule, first released June 30, 2015, would raise the current salary threshold of eligibility for overtime from $23,660 per year to $50,440. Many nonprofit groups have brought up their concerns regarding the new threshold, the annual adjustment rate for overtime wages, and the deadline for employers to comply.
In recent weeks, groups have shared their requests for last minute changes to the rule with the White House Office of Information and Regulatory Affairs, including increasing the 60-day implementation window to up to a year for nonprofit organizations and businesses.
Faced with the possibility of having to increase salaries or reclassify workers, some nonprofit groups indicate they are already making decisions about which services may need to be scaled back. In a statement, IS member the American Red Cross said “The reality of the proposed rule is that it will immediately increase our cost of responding to disasters, which will likely mean less money to spend on services to people in need.”
DOL has received over 270,000 comments on the proposed rule, and while many offer concerns about its impact on employers, others strongly endorse the change. The Economic Policy Institute said that the rule would “restore a protection that has been missing for some time,” and Sen. Elizabeth Warren (D-MA) has continued to lead the charge in favor of the rule’s expansion for the benefit of workers across the country.
The White House is expected to finalize the proposed overtime changes on or before May 16.
H.R. 4281, the Charitable Giving Privacy Protection Act
MNA is supporting legislation introduced by Congressmen Keith Rothfus [PA-12] and Brian Higgins [NY-26] that will help protect nonprofits and encourage charitable giving by ensuring that nonprofits are never forced to collect social security numbers when soliciting or accepting donations. This simple, narrowly-crafted bill has been endorsed by groups like Habitat for Humanity and the National Council of Nonprofits, which represents more than 25,000 nonprofit organizations across the country. One-page summary.
Treasury/IRS withdraw gift substantiation proposed regulation
The Treasury Department and IRS announced that they are withdrawing the proposed gift substantiation regulation. The proposed regulations would have permitted, but not required, 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. A new informational tax return (“Donee Report”) would have required the nonprofit using it to collect the donor’s name, address, and Social Security number (SSNs) or other taxpayer identification number and also provide a copy to each donor.
Treasury and the IRS received 37,977 comments during the rulemaking period that ended on December 16, virtually all of them hostile to the proposal. This network, working with other national groups, submitted comments on behalf of the nonprofit community making the case 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.”
Nonprofit Advocacy Matters
The National Council of Nonprofits provides MNA's members access to public policy, training, and education resources at the national level. Nonprofit Advocacy Matters is a bi-weekly newsletter on policy issues affecting the nonprofit sector.Click here to access the most recent issue of Nonprofit Advocacy Matters.