With Tax Code Changes Looming, Nonprofits Must Speak Up
In the past, many nonprofits have been afraid to advocate politically. While no one is suggesting nonprofits step into the partisan fray, nonprofit leaders must make their voices heard on legislation and policy proposals that directly impact charitable giving.
Recent years have seen a flurry of legislative and executive proposals at all levels of government that many nonprofit leaders maintain will harm the charitable sector. Here are just a few examples:
- The Obama administration, for a seventh consecutive year, pushed for a 28 percent cap on charitable tax deductions on individuals in the top tax brackets, with estimates of losses to nonprofits ranging from $1 billion to $9 billion.
- Before retiring, U.S. Rep. Dave Camp (R-MI) proposed a two percent limit on the amount of deductions taxpayers can take on their adjusted gross income. Experts predict that, if enacted, this could cost the nonprofit sector $3 billion in lost donations.
- There has been talk in Congress of increasing the reporting requirements of donor advised funds and mandating that the funds disperse a set percentage of their assets annually, similar to how private foundations function.
- States nationwide have pushed to limit CEO compensation at state-funded nonprofits.
- Cities across the country have asked, pushed, demanded and cajoled nonprofits to adopt PILOT (Payment in Lieu of Taxes.)
These aren’t all terrible ideas. But capping deductions at 28 percent or introducing a 2 percent cap would have a disastrous effect on American philanthropy. Yes, we know the wealthiest donors aren’t primarily motivated by tax incentives, but we also know their gifts are strategically structured to maximize tax benefits.
I have been involved in the nonprofit sector for several decades, and I can recall no other era in which charitable giving has been thrust into the political sphere the way it has in recent years. Now, for at least a century, there has been inherent tension between the nonprofit sector and government: Both seek to act in the interest of the public good and both need our money to do so. It is no secret that the recession of 2007-2010 left governments, from the federal government to cities and towns, feeling cash strapped. In Washington, both Democrats and Republicans have stressed the importance of reforming our overly complex tax code and looking for ways to find additional revenue without raising taxes.
But there’s something more at play.
The media, and by extension the public, has developed a growing cynicism regarding nonprofits over the last decades. Whether it is scandals involving venerable institutions like the 92nd Street Y in New York or the Geddy Museum in Los Angeles or questions over the spending practices of the American Red Cross, the press has started covering nonprofits almost like – gasp – politicians. Then there are the scandals that have rocked the Catholic Church as well as other faith communities. Taken together, there is a sense that American nonprofits are no longer sacrosanct and untouchable. But rather than take scrutiny as a reason to run for cover, the nonprofit community should embrace questions as an opportunity to detail its contributions.
“Congress has changed its perspective on the sector,” said Jason Lee, general counsel for the Association of Fund Raising Professionals, during a recent webinar titled “Advocacy and Government Relations: Charitable Giving and Nonprofit Issues” and sponsored by the Giving Institute. “This is such a key time for the nonprofit sector to be active.”
When Obama first introduced the 28 percent cap proposal back in 2009, a number of groups came together to form the Charitable Giving Coalition. That coalition has brought together disparate nonprofit forces to lobby in a bipartisan manner on behalf of the charitable sector.
And it has been successful. The coalition has, thus far, helped to prevent passage of any legislation that would erode deductions for charitable giving.
Lee stated that tax reform is high on the agenda of Congressional Republican leadership. Despite the slim chance of major compromise on the Hill, there will be a strong push to get something done in 2015 – since 2016 is going to be all about the campaign. Certainly the 28 percent cap deduction proposal has been around since 2009. It stands to reason that if it hasn’t gone anywhere yet, it isn’t going to. But Lee explained that nothing can be taken for granted and a number of sources on the Hill have told him that “everything is on the table.”
Nonprofits can no longer afford to think of advocacy as a dirty word. It is imperative that each and every nonprofit monitor events, particularly in Washington, and let their lawmakers know how proposed changes could impact residents in their district. As Sally Ehrenfried, manager of philanthropy and volunteer engagement at Blackbaud made clear on the webinar, lawmakers should be approached like top donors. Before writing to an elected official, let alone meeting with them, nonprofits should do their research and consider carefully what exactly they are asking for. Of course, she noted, it helps to build a relationship and educate leaders about what the nonprofit does, who it serves and how it helps the district.
There is a wealth of resources available on the Charitable Giving Coalition’s website. Check it out. Find out if your state has a nonprofit coalition and get on their mailing list. It is certainly possible that tax overhaul could have a major impact on nonprofit fundraising. Let’s make sure our voices are heard.
You must log in to post a comment.