Washington Snapshot: IRS Update for Tax-Exempt Organizations

What You Need to Know About Public Policy This Week...

• Congressional Democrats Negotiate Election Reform
• Office of Management and Budget Solicits Feedback on Learning Agenda
• IRS Releases Updates for Tax-Exempt Organizations
• Department of Commerce Seeking Comments on New Rural Business Center Program
• Welcome.US Grants to Community-Based Organizations
• Federal Disaster Resource Library Now Available to the Public
• Happening in the States

Congressional Democrats Negotiate Election Reform

Congressional Democrats continued negotiations on Biden administration priorities this week with the House passing a federal elections reform package. The bill now goes to the Senate, where narrow margins and the filibuster rule make passing most bills without Republican support impossible. The filibuster requires at least 60 Senators to vote in support of a bill, meaning ten Republicans must also support it in the current Senate. Some Democrats, including Senate Majority Leader Charles E. Schumer (D-NY), have suggested waiving the filibuster for this bill. Majority Leader Schumer has said he will bring the legislation to the floor next week. However, with multiple members of the Democratic caucus opposing the change, the filibuster is likely to stay in place.

Office of Management and Budget Solicits Feedback on Learning Agenda

The Office of Management and Budget is soliciting feedback until January 31 on a draft learning agenda, the first of its kind for the federal government. It is intended to identify gaps and potential research questions that will advance the three broad priorities in the President’s performance agenda: strengthening the federal workforce, delivering secure and equitable customer service, and managing the business of government. As federal agencies move toward using evidence to inform budget and decision making, learning agendas are a tool to build the capacity of the government to undertake innovation and achieve better impact. Philanthropic funders should use this survey to share expertise and lessons from nonprofit learning agendas.

Internal Revenue Service Releases Updates for Tax-Exempt Organizations

The IRS released a series of notices and updates in recent weeks, several of which are relevant to the nonprofit and philanthropic sectors. These include:

• Revised procedures for issuing, modifying, or revoking determination letters on issues related to exempt status and private foundation status. These procedures are updated annually.
• Tax Exempt and Government Entities Fiscal Year 2021 Accomplishments Letter detailing revocations made to organizations’ exempt status last year.
• An announcement of changes to some compensation reporting requirements for tax-exempt organizations.

The IRS also announced that taxpayers can begin filing on January 24 but should expect delays in processing those returns due to the ongoing pandemic and associated staff shortages.

Department of Commerce Seeking Comments on New Rural Business Center

The new Infrastructure Investment and Jobs Act establishes a new Rural Business Center Program. The Minority Business Development Agency (MBDA) is seeking public comments until January 25 on various rural issues and rural minority business enterprises (MBE) to deepen its knowledge regarding this sector of the economy. Among the areas of inquiry are the unique challenges faced by minority business enterprises in remote areas and examples or success stories from organizations that provide services to MBEs. Send comments directly to the MBDA at mbdapublicaffairs@mbda.gov.

Welcome.US Grants to Community-Based Organizations

The Department of Homeland Security’s Operation Allies Welcome and Welcome.US have been established to ensure Afghans and others fleeing their homelands are supported and connected to welcoming communities across the United States. The Welcome Fund will accept applications until January 21 that broaden community participation in resettlement support of Afghan newcomers. Grants are expected to range from $10,000 and $50,000. Larger grants for organizations mobilizing large-scale community participation at regional or national levels are also available.

Federal Disaster Resource Library Now Available to the Public

FEMA has now made its Recovery and Resilience Resource Library available for public use. The tool helps users to find and research federal disaster recovery resources that would be beneficial in pre-disaster recovery planning or in the wake of a disaster.

Happening in the States

Exclusive from our colleagues at the National Council of Nonprofits.

Preview of 2022 State Legislative Sessions

Forty state legislatures convene this month for their 2022 sessions and all but four (Montana, Nevada, North Dakota, and Texas) will meet in regular session at some point in the first half of the year. Forty-seven states are experiencing revenue surpluses, a factor that is changing the usual dynamic as policymakers and advocates approach what can be achieved. Here are three trends we are watching:

Tax Relief: This is an election year in most states, so tax policies—and in particular, tax cuts—are on the table. New York Governor Hochul announced in her State of the State address a plan to accelerate the phase-in of $1.2 billion in middle-class tax cuts. In Nebraska, lawmakers are targeting reductions in individual tax rates and other similar measures. New Mexico is considering a reduction in current rates for gross receipt taxes and a tax rebate proposal. A bill in Alabama would exempt property leased to nonprofit corporations from the state’s property tax. Mississippi aims to phase out the income tax and cut the sales tax on groceries while increasing the sales tax on other items such as alcohol. Several more are looking to follow suit this year, including Idaho, Indiana, Iowa, Kentucky, and West Virginia.

ARPA Investments: States spent only about half of their State and Local Fiscal Recovery Fund allocations last year and the remainder of the $195 billion in state allocations will be distributed by the federal government in May. As a result, investing ARPA funds will be a high priority. Legislatures are expected to address a number of funding priorities related to the missions of charitable nonprofits, such as affordable housing, child care access, health care, education, workforce shortages, and unemployment claims. In Kentucky, the Governor proposed using $400 million of the state’s allocation to provide bonuses for frontline workers who stayed on the job throughout the pandemic. On January 4, Rhode Island approved $119 million in ARPA spending for supporting the child care, hospitality, tourism, and event industries and assisting small businesses impacted by COVID-19.

Vaccination Policies: The decision on Thursday by the Supreme Court to temporarily block the OSHA workplace vaccination and testing mandates puts more emphasis on actions by states to impose their own requirements on employer actions. The ultimate result –the Supreme Court returned the cases to the lower courts for further litigation – may be federal preemption of these laws or a patchwork of conflicting and inconsistent laws that could prevent foundations, nonprofits, and other employers from protecting their employees, volunteers, clients, and the public from the coronavirus. Read more about states enacting a patchwork of conflicting vaccination restrictions