Nonprofit advocates are optimistic that the Biden administration and new leaders in the Senate will extend a law allowing all taxpayers to itemize their charitable deductions, and perhaps other policy changes helpful to nonprofits.
In the stimulus bill enacted in December, nonprofits won a one-year extension, through tax year 2021, of a provision that allows single people to deduct up to $300 and couples up to $600 in charitable gifts even if they don’t itemize.
Jeffrey Moore, chief strategy officer at Independent Sector, said his organization will be pushing for an extension and expansion of that provision immediately, perhaps by getting it added to Biden’s $1.9 trillion stimulus plan, which will probably be among the first items of business to move through Congress this year. Moore noted that Biden’s plan so far is thin in terms of specific proposals that would help nonprofits.
David Thompson, vice president for public policy at the National Council of Nonprofits, said, “The lowest hanging fruit” for nonprofits seeking a boost from the Biden administration would be extending the deduction for another year. He added, “Doubling it to $600/$1,200 would be nice.”
“It is a jobs thing. It is a public relief thing. There are plenty of reasons to do it other than, ‘Gee, we want it,’” Thompson said.
Thompson said the “holy grail” for nonprofits would be to remove the dollar limit on the deduction and make it permanent, but he thought that was unlikely to happen in the next two years.
Steve Taylor, senior vice president and counsel for public policy at the United Way Worldwide, said it is essential for nonprofits to use the current deduction to persuade more donors to give. Charities will have more success getting Congress to extend or expand the deduction, Taylor said, if they can show data proving that it’s effective.
“All of the evidence shows that that deduction ought to increase private donations by about 5 percent,” Taylor said.
Thompson is optimistic that state and local governments will get more federal help under the Biden administration. Biden has already proposed $350 billion in emergency funding for state and local governments. Nonprofit advocates say those funds are crucial because they would prevent cash-starved states and local governments from delaying or cutting payments to charities that have service contracts with them.
Multiple Opportunities
Although the Biden stimulus plan is the immediate focus for nonprofits, lobbyists say legislative changes affecting nonprofits could be in play in as many as three tax and budget bills before Congress this year.
Moore said an infrastructure package in Congress later this year also could carry priorities for nonprofits including investments in “civic infrastructure,” such as programs and incentives for volunteering, national service, and voting-rights protection.
As those bills come up for consideration, nonprofits should feel good about the ascension of Ron Wyden to chairman of the Senate Finance Committee, both Moore and Thompson said. Wyden, currently the top Democrat on the committee, is poised to become chairman soon after two new Georgia senators are sworn in and Democrats take control of the Senate.
“He brings up nonprofits on his own, without being asked,” Thompson said of the Democrat from Oregon. “He personally thinks and speaks about nonprofits.”
Wyden has already made it clear he wants the Internal Revenue Service to investigate nonprofits that may have been involved in organizing or funding the this month’s insurrection on Capitol Hill.
Another priority for nonprofits is repeal of the requirement under the second stimulus law that recipients must show they have had at least a 25 percent drop in revenue to qualify for forgivable Paycheck Protection Program loans. The 25 percent revenue loss requirement “is not a rational standard” for nonprofits, Thompson said. For example, food banks may have doubled their revenue, but the demand for services may be up tenfold, he said.
Taylor of United Way agreed that the requirement is highly problematic for many nonprofits. “The gross receipts requirements might make sense for businesses, but it makes no sense for charities,” Taylor said.
Thompson said he thinks it’s unlikely that Congress will take action to impose new payout requirements on foundations and donor-advised funds. Philanthropist John Arnold and Boston College law professor Ray Madoff have developed a tax proposal with strong incentives for foundations to distribute a bigger share of their assets every year. The proposal, which has drawn support from several big foundations and wealthy philanthropists, also would scale back the tax advantages for donor-advised-fund account unless the money is distributed within 15 years.
Moore agreed such proposals are unlikely to advance anytime soon: “I don’t see it right now.”
Other issues nonprofits would like to see addressed include:
- Repeal or improve a “necessity” form created by the Small Business Administration intended to make nonprofits prove the financial need for Paycheck Protection Program loans of $2 million or more. Thompson called it a “horrendous” record-keeping burden that the SBA created without being directed to do so by Congress.
- Change the law that says volunteers who are reimbursed for mileage must declare everything over 14 cents as income. “This is a long-standing annoyance for nonprofits,” Thompson said.
- Many nonprofit advocates have called for a new cabinet-level post dedicated to the needs of nonprofits. Moore said nonprofits need a steady and sustained presence that will endure beyond the Biden-Harris administration. As an example, he noted that under the Paycheck Protection Program, nonprofits got “shoehorned” into the Small Business Administration, which doesn’t understand nonprofits.
- Independent Sector conducted an unscientific poll of nonprofits asking them to cite their top areas of need from the federal government. More than 900 organizations completed the survey. The top needs cited were greater incentives for charitable giving, more direct relief for individuals, and streamlining government grants and contracts.
