News and analysis
September 09, 2011

President Proposes 2 Tax Breaks That Could Benefit Nonprofits

Chuck Kennedy / Official White House Photo

President Obama outlined a jobs plan to Congress Thursday night as Vice President Joe Biden and House Speaker John Boehner looked on.

The $447-billion jobs bill that President Obama announced last night proposes at least two tax breaks that would benefit nonprofit employers. But over all, the plan emphasized the need to help for-profit businesses hire more workers—and it’s not clear nonprofits would benefit from other tax incentives he mentioned.

That disappointed Diana Aviv, president of Independent Sector, a coalition of nonprofits and foundations that started a petition drive to persuade President Obama to include nonprofit employers in his plan to boost the economy and bring down the country’s high unemployment rate.

“I think the administration means well,” she said. “They simply didn’t include us in the discussions.”

The president, outlining to Congress a package of spending and tax measures, proposed two provisions to ease payroll taxes, which are paid by nonprofit and for-profit employers alike. One would cut the Social Security payroll tax in half for the first $5-million in payroll; the other would temporarily eliminate the payroll tax for up to $50-million in salaries of new workers or raises for current workers.

But Mr. Obama also proposed several tax credits­, without giving many details. They would be available for hiring unemployed veterans and workers who have been looking for a job for more than six months. Ms. Aviv worries they could be in the form of income-tax credits, which are not available to tax-exempt nonprofits.

Ms. Aviv said her group will push to ensure that those credits are adapted to nonprofit employers. In a previous battle over a similar issue, nonprofit advocates convinced Congress to amend last year’s health-care overhaul bill so that nonprofit employers—which were not eligible for the income-tax credits offered to small businesses—could get payroll-tax credits instead.

President Obama also said he will propose ways to raise money by making “modest adjustments” to Medicaid and Medicare, programs that provide revenue to many nonprofit health groups and by overhauling the tax code. He also restated his desire to cut “tax breaks for millionaires and billionaires.” While he gave few specifics, in previous budget proposals he has included the charitable deduction among the tax breaks for the wealthy that he would like to cut.

Ms. Aviv said she does not expect Congress to tackle changes to the charitable deduction immediately as it has bigger tax issues on its plate but that it will do so eventually.