Washington Snapshot - March 25, 2016
News from the Hill
House Tax Policy Subcommittee Holds Hearing on Tax Reform Proposals
As we reported last week, the House Ways and Means Subcommittee on Tax Policy held a hearing on Tuesday about potential tax reform approaches.
The Subcommittee heard testimony from Representatives Devin Nunes (R-CA), Michael Burgess (R-TX), and Rob Woodall (R-GA) where they shared their thoughts on cash-flow and consumption-based tax reform proposals.
Central themes from this hearing included 1) agreement that the tax code needs immediate, fundamental support, 2) how to address tax reform in a way that enhances America’s competitiveness in a global economy, and 3) the essential role that bipartisanship will play in achieving tax reform.
Chairman of this Subcommittee, Charles Boustany (R-LA), announced that the next in this series of hearings will be held on April 13th and will focus on income-based tax reform proposals.
Executive & Regulatory News
IRS Invites Comments for 2016-17 Priority Guidance
The Department of Treasury and IRS have issued their annual call for public comment on the Priority Guidance Plan.
The Priority Guidance Plan is used to identify which tax issues will be a priority for the agency to address in a given year through regulations, revenue rulings and procedures, notices, and other published guidance.
The Council submits comments on Priority Guidance annually, and will be drafting comments to submit for 2016-2017 in the coming weeks. If you would like to discuss this matter or have questions, please contact our Public Policy team at govt@cof.org.
Trending in Legal Affairs
Can a Foundation Re-Purpose Unclaimed Charitable Contributions?
The Council’s Legal team recently received a question from a corporate foundation about its employee payroll deduction program.
In this case, employees of the corporation were able make contributions to their charity of choice directly through the payroll system. Some of these contributions to charity (made in the form of checks) were not accepted or ‘cashed’ for a full year, and the corporate foundation wondered if these “stale checks” could be re-directed to other charities.
The issue in question was that some states have “escheat” laws—meaning, that when there is unclaimed property (such as a contribution to a charity that has disbanded or lost its 501(c)(3) status), the state has a right to claim that property if it is “unearned.”
The legal team advised that the determining factor in this scenario is whether or not the contribution was “earned” by the intended charity before it disbanded. For example, if a grant is made to a charity for general operating expenses prior to the charity shuttering its doors, this funding was presumably “earned” since the charity was operational during and after receipt of the gift. However, if a grant is made to a charity for a specific program that never had the opportunity to come to life before the charity closed, the gift is not likely to qualify as “earned” and could be subject to escheatment by that state.
For more information on this or any other tricky legal matters, please contact the Council’s Legal Affairs Team at legal@cof.org.
Access to the Council’s legal team is a valuable member benefit. Council attorneys are available to discuss your legal questions and to provide legal information by telephone, email and through our various publications and newsletters. This information is intended for educational purposes and does not create an attorney-client relationship. The information is not a substitute for expert legal, tax or other professional advice tailored to your specific circumstances, and may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.
Happening in the States
Exclusive from our colleagues at the National Council of Nonprofits.
Public University Foundations Under Scrutiny
Public officials are raising questions about the spending practices of the nonprofit fundraising arms of public universities. Legislation in Connecticut would require the UConn Foundation to disclose information about its spending broken down into broad categories as well as dedicating 15 percent of new revenue to student scholarships and fellowships. However, unlike failed proposals of years past, the bill stops short of applying the state’s freedom of information laws to the foundation.
Although the foundation’s president has said that such disclosure requirements can cause a decline of individual donors, the foundation is supporting the bill amid growing calls by critics to scrap it for even stricter legislation. Separately, members of the University of North Carolina system Board of Governors are questioning the lack of transparency at the 17 foundations operating on 11 campuses that raise money for their associated universities. Of particular concern are the investment practices of the foundations and how they interact with university finance and property transactions.
Advocacy, Fundraising Rights Under Attack in Oklahoma, Missouri
Legislators in Oklahoma and Missouri are coming under harsh scrutiny from the nonprofit community because of legislation that would make it illegal for an “animal rights charitable organization” to raise funds inside those separate states to be spent for "program services and functional expenses" elsewhere and bar fundraising for “political purposes.”
A constitutional analysis by the National Council of Nonprofits found that the legislation, if enacted, would violate numerous fundamental rights protected by the United States Constitution and set a dangerous precedent that threatens other charitable organizations and individuals both within and outside the two states. A Missouri State Representative rejects concerns about the unconstitutionality of a nearly identical bill he is sponsoring, claiming, “What my issue is has nothing to do with speech, it has to do with where those monies are going.”
In an op-ed in today’s Oklahoman newspaper (3/25/2016), Marnie Taylor of the Oklahoma Center for Nonprofits wrote: “We are steadfast in our belief that nonprofits must have the ability to advocate on their behalf, fundraise for programs and deliver services to those in need without impediment. We also believe that, if passed, this legislation could have an unforeseen, negative ripple effect throughout philanthropy and charitable nonprofits.
Philanthropy News and Op-Eds
Evolution of Democracy Funding in Society
As a part of the ongoing Equity, Diversity, and Inclusion (EDI) Project, Nonprofit Quarterly published a piece this week questioning whether philanthropy is evolving at a proportionate rate with growing social justice movements—such as the #BlackLivesMatter movement.
Author Austin Belali, Director of the Youth Engagement Fund (YEF) at the Democracy Alliance, posits that philanthropy for democracy is not currently achieving its full potential for impact because the funding communities for strengthening democracy and supporting racial and social justice exist separately from one another. He argues that these issues are inextricably connected and should be addressed using an integrated approach.
Both diversity, equity, and inclusion (DEI), and philanthropy’s role in American democracy will be areas of focus for sessions at our upcoming Annual Conference this April. For our readers who will be attending the conference and are interested in this issue, you can browse session descriptions here or contact us at govt@cof.org with questions.
