Government and Politics Watch

October 26, 2009

Members of Congress Urge House to Include Nonprofit Aid in Health Bill

More than 40 members of Congress have signed a letter asking House leaders to ensure that the final health-care-overhaul bill offers relief to small charities that provide health insurance to their employees.

“For health-care reform to be truly comprehensive, it must include nonprofit employers and their employees,” says the letter, which Rep. Betty McCollum, Democrat of Minnesota, took the lead on.

The letter highlights the importance of the nonprofit workforce to the economy, and notes that current House proposals offer tax credits to help small for-profit employers offer insurance plans. (The credits would apply to income taxes, which charities do not pay.)

On the other hand, both Senate health-care bills, now in the process of being merged, provide help to nonprofit employers. The finance committee bill would provide credits for certain payroll taxes to charities with no more than 25 full-time-equivalent employees. The health, education, labor, and pensions committee bill would offer subsidies to both for-profit and nonprofit small employers.

“Every dollar nonprofit employers pay in higher insurance premiums is another dollar taken away from delivering essential food, shelter, clothing, and other vital services that people need in this devastating economy,” Tim Delaney, president of the National Council of Nonprofits, said in a statement.

“We hope that the White House will now step forward to join this growing chorus in the House and Senate who recognize that nonprofits are vital employers who cannot be left behind on health-care reform.”

More information is availalbe on the council’s Web site.

— Suzanne Perry

October 19, 2009

Why Charities Need to Pay Attention to State Registration Laws

Is your nonprofit group registered to solicit money in all 50 states?

In the past, it wasn’t necessary for many groups to file registration papers outside of their home states. But with the advent of online fund raising, many organizations are probably violating laws in some states because they are collecting donations without letting state authorities know.

Tony Martignetti, a planned-giving adviser in New York and author of Charity Registration: State-by-State Guidelines for Compliance, says he believes as many as 90 percent of all nonprofit groups have not complied with state registration laws.

And some states are starting to crack down.

This month, for instance, a foundation operated by H. Lamar Willis, an Atlanta city-council member, was fined $25,000 by Georgia regulators because it was not registered in that state, The Atlanta Journal-Constitution reports.

What should your organization be doing to make sure it is following these laws? Listen to the latest episode of Philanthropy This Week, which features an interview with Mr. Martignetti about charity registration.

— Peter Panepento

October 15, 2009

Social Innovation Fund Guidelines Expected by End of the Year

The Corporation for National and Community Service plans to issue final guidelines by the end of the year for groups that plan to apply for grants from the new Social Innovation Fund, with the first awards likely to take place in late spring or summer, corporation officials said today.

Congress has not yet adopted a budget for the 2010 fiscal year, which began October 1. However, while waiting for the official allocation, the corporation “can and expects to move forward” with the guidelines, or “notice of funding opportunity,” said Marta Urquilla, senior adviser for social innovation.

President Obama proposed $50-million for the fund, which will provide grants to help nonprofit groups expand promising programs to tackle pressing national social problems. The Senate Appropriations Committee approved that amount, but the House voted to cut it to $35-million. The full Senate has not yet acted.

The corporation, the federal agency that will manage the Social Innovation Fund — which it now calls “the Sif” — held the conference call to explain how the money will be allocated and to answer questions from the field. Ms. Urquilla and Bob Grimm, the director of research and policy development, spent much of the time explaining the goals and procedures outlined by the Edward M. Kennedy Serve America Act, which authorized the money.

But they also gave some hints about how the corporation will carry out the law:

The Serve America Act says at least 85 percent of the money should go to established grant-making institutions or consortia, which would in turn provide grants to nonprofit groups. It says the corporation may, however, provide up to 10 percent of the money directly to nonprofit groups. But the officials said the corporation will not give any money directly to nonprofit groups — or seed capital for start-up operations — during the fund’s first year.

The corporation will not award grants to specific geographic regions. However, it will look for a “geographic balance.”

The Serve America Act requires both the intermediary grant makers and the nonprofit groups that receive their grants to provide matching funds. A grant maker could provide both the matching funds to receive the federal money and money to help its grant recipients meet that requirement. The only requirement for matching funds is it come from non-federal sources.

The corporation expects to provide awards to some grant makers that detail in their application some or all of the nonprofit groups that will be part of their “portfolios.” However, it will also select one or more applications where grant makers plan to host a grants competition for nonprofit groups after they receive the federal money.

Under the Serve America Act, the corporation will award five-year grants of $1-million to $10-million to the intermediary grant makers (which can include partnerships between grant makers or with certain state or local government entities).

They will provide grants of at least $100,000 a year for three to five years to the nonprofit groups, following consultations with “a diverse cross section of community representatives.” Those groups must provide data on the “measurable outcomes” their work has had.

— Suzanne Perry

Note: An earlier version of this story incorrectly said the maximum grant to intermediary grant makers was $5-million.

October 12, 2009

IRS Offers Online Video Program to Explain the Form 990

The Internal Revenue Service has developed for its Web site a case study — and a series of videos — designed to help charities better understand what is required of them in the Form 990, the informational tax return that the IRS redesigned for the 2008 tax year.

The materials, called “The New Form 990: Getting Started,” were created by the IRS’s Exempt Organizations division “to help illustrate key points and answer important questions” about the revised form, the tax agency said.

The materials begin with a written set of facts that detail the organizational and financial aspects of a hypothetical charity, the Exempt Organization for Disaster Relief, which was “formed” to help people in three states.

Next comes a filled-out Form 990 with two schedules that show how the hypothetical organization would properly complete the annual return.

The IRS then offers seven videos, each between five and 10 minutes long, that explain key sections of the Form 990, using facts from the case study.

The videos, which can be viewed in any order, focus on an overview of the Form 990; two parts of the form that cover the organization’s revenues and expenses; the form’s balance sheet and supplemental financial statements; the form’s program services section, which the IRS said “allows an organization to ‘tell its story;’” compensation questions; governance questions; and a checklist of required schedules and overview of new schedules for 2008.

— Grant Williams

October 09, 2009

National-Service Advocates Campaign for Tax-Free AmeriCorps Education Grants

National-service advocates are campaigning to persuade Congress to approve a bill to exclude from income tax the education grant that AmeriCorps members earn after completing their service.

The Segal AmeriCorps Education Award Tax Relief Act, H.R. 1596, was introduced by Rep. John Lewis, Democrat of Georgia, and is now before the House Ways and Means Committee.

Unlike other federal education grants, such as Pell Grants and G.I. Bill aid, the AmeriCorps award — which rose to $5,375 on October 1 — is now treated as gross income for income-tax purposes.

AmeriCorps Alums and Voices for National Service are asking supporters to sign a letter to the Ways and Means Committee or to contact their Congressional representatives.

— Suzanne Perry

October 08, 2009

National-Service Agency Plans Conference Call on Social-Innovation Fund

The Corporation for National and Community Service plans to hold a conference call next week to answer questions about the Social Innovation Fund, the new federal program that will provide millions of dollars to help nonprofit groups start or expand promising social projects.

The call will take place from 1 p.m. to 2 p.m. Eastern time on Thursday, October 15. Information about how to participate is available on the corporation’s Web site.

The corporation and the White House Office of Social Innovation and Civic Participation have conducted more than 50 meetings with nonprofit groups, foundations, evaluation experts, academics, and others about how to design the fund, Nicola Goren, the corporation’s acting chief executive, writes today on the White House blog.

They have also conducted five listening sessions around the country and plan to hold several more during the next several months, she writes.

President Obama proposed spending $50-million in 2010 on the Social Innovation Fund, which will be managed by the corporation. The Senate Appropriations Committee endorsed that amount, but the House voted to cut the budget to $35-million. The full Senate has not yet weighed in.

— Suzanne Perry

October 02, 2009

Proposed Charity-Compensation and Governance Amendments Put on Hold

Sen. Charles E. Grassley, the senior Republican on the Senate Finance Committee, did not pursue votes on two amendments that he proposed to the committee’s health-care bill affecting executive compensation and governance at charities.

But he inserted comments on them into the record and reserves the right to propose the language later, either as part of the health-care bill or to another piece of legislation, said Jill Gerber, his press secretary.

The finance committee completed work early this morning on amendments to the bill drafted by Sen. Max Baucus, the Montana Democrat who chairs the committee, and is expected to take a final vote next week.

Sen. Grassley, Republican of Iowa, proposed eliminating a “safe harbor” provision in IRS rules that allows executive compensation at charities to be deemed reasonable if the group follows certain steps. It would also require certain charities to disclose what type of comparable data they used to determine compensation for their executives.

The senator also proposed an amendment to clarify that the IRS has the right to ask questions about governance and management practices on the revised Form 990 informational tax return.

In his remarks for the record, Mr. Grassley noted that many of the highest-paid nonprofit executives are at hospitals. He referred to The Chronicle of Philanthropy‘s new survey of compensation of chief executives at big foundations and charities, which found that the biggest earner among the groups reviewed was at Partners HealthCare System, in Boston.

— Suzanne Perry

Nonprofit Leader Shows Early Fund-Raising Strength in Senate Bid

Alan Khazei, co-founder of the nonprofit group City Year and a prominent advocate of national service, announced yesterday that he has raised more than $1-million in his bid to succeed the late Mass. Sen. Edward M. Kennedy.

Only one other candidate,Martha Coakley, the state’s attorney general, has raised more, according to The Boston Globe. Ms. Coakley has received more than $2-million.

Mr. Khazei raised the money in about two weeks thanks to a group of supporters who gave $5,000 each, says The Globe. He has also raised significant sums through house parties and online giving.

The fund-raising success establishes Mr. Khazei, less well-known than some of his rivals, as a competitive candidate, The Globe and other newspapers said.

The special election to replace Sen. Kennedy takes place on December. 8.

October 01, 2009

Coalition Urges Congress to Offer Relief on Pensions

Independent Sector, a national coalition of charities and foundations, has renewed its call for Congress to ease rules that require charities and other employers to make certain payments to “defined-benefit” pension funds.

The Pension Protection Act of 2006 made significant revisions to the so-called minimum funding rules for employers that provide pension plans with defined benefits, or specific amounts of money, to retired workers.

Nonprofit groups “have endeavored to meet the significantly increased minimum funding obligations imposed by the Pension Protection Act while maintaining programs upon which individuals and communities rely,” Independent Sector said in a statement issued as the House Ways and Means Committee met to discuss pension plans.

“The abrupt [stock] market decline last year turned those pension funding obligations into a severe problem never anticipated when the act was drafted,” Independent Sector said. “The funding rules now threaten not just the viability of the pension plans but the survival of the organizations themselves.

For example, Independent Sector said Family Service of Greater Boston, which annually serves more than 5,800 families in need of help, offers a defined pension plan to its employees. “The funding status of Family Service’s pension plan dropped to 72 percent as a result of the market decline, creating projected future minimum annual contributions of almost $500,000 for this small agency,” Independent Sector said.

Independent Sector said the organization “has already significantly reduced or eliminated other benefits, increased the employee share of health insurance premiums, frozen wages for a two-year period, eliminated positions through attrition, and consolidated administrative functions. Now it is facing further actions that could impede its ability to sustain critical services.”

Without immediate relief from pension obligations arising from the market losses of 2008, Independent Sector said, “the current rules will force nonprofits that sponsor defined benefit plans to divert substantial financial resources away from vital community services at a time when they are desperately needed.”

The coalition asked Congress to provide a temporary reprieve that will allow groups “to recoup the shortfall for 2008 over a longer, more manageable period. By stretching out payments for these unexpected losses, such relief will permit organizations to maintain services and jobs, while continuing to fund their pension plans.”

Independent Sector had earlier asked Congress for help with pensions in a letter last year.

— Grant Williams

Budget Center Defends New Proposals to Limit Charitable Deductions

The Center on Budget and Policy Priorities has taken issue with a coalition of nonprofit leaders that criticized a Congressional proposal to cap the tax breaks for charitable donations at 35 percent as a way to help pay for a health-care overhaul.

“The letter claims that limiting the value of the deduction for charitable congtributions would create a disincentive for affluent individuals to donate,” Robert Greenstein, executive director of the liberal think tank, says in a new report. “This ignores the fact that the proposal would merely keep the incentive for high-income people to donate where it is today.”

President Obama has proposed letting tax cuts enacted during the Bush Administration expire in 2011, which would raise the top tax rates to 36 percent and 39.6 percent — up from today’s 33 percent and 35 percent. He also proposed capping the tax breaks for itemized deductions at 28 percent.

Several Senate Finance Committee members have proposed instead that the limit remain where it is today, 35 percent, instead of rising along with the new tax rates as would normally happen.

Mr. Greenstein also criticizes the coalition for “cherry picking” findings from studies on how tax incentives affect charitable giving and for suggesting the new limits would cause donors to delay gifts.

“Wealthy donors already have a reason to delay contributions now, at a time when they are badly needed, because the tax subsidy for such donations is scheduled to rise in 2011 to 39.6 percent,” Mr. Greenstein writes. “Acting now to keep the tax subsidy at 35 percent would remove that incentive. If anything, therefore, the proposal would accelerate donations, not delay them.”

The Finance Committee is now debating a health-care bill drawn up by Sen. Max Baucus, the Montana Democrat who chairs the committee. Mr. Baucus did not incorporate the proposals on itemized deductions into his bill.

— Suzanne Perry

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