Nonprofits Could Benefit From Tuesday’s Divided Election Results

Editor’s note: This article will be updated throughout the day as more election results are available.

Following Tuesday’s midterm elections, nonprofits pressing their causes on Capitol Hill can take heart that lawmakers will take their interests seriously, both in the days before the new Congress takes office and beyond, nonprofit lobbyists said today.

Even as it is uncertain which political party will be in control of the House and Senate the fact that the midterms don’t appear to be a “wave” election means that two pending bills — to allow everyone access to a charity tax deduction and to help charities shoulder the burden of paying wages during a tough economic time caused by Covid— could see their way to passage in the lame-duck session of Congress over the next two months, said David Thompson, vice president of public policy at the National Council of Nonprofits.

“The lame duck is going to be quite productive,” Thompson predicted.

The Employee Retention Tax Credit was repealed retroactively at the end of September 2021. It provided a quarterly 70 percent tax credit for wages paid up to $10,000 per employee for employers affected by Covid.

And a tax provision that allowed people who don’t itemize their tax bills to write off up to $300 for their charitable gifts expired at the end of 2021. That means only about 8 to 10 percent of Americans have access to the charitable deduction today because most people don’t itemize.

Thompson said the sponsors of legislation in the House and Senate that would extend the charitable deduction and provide a retroactive wage credit for the last quarter of 2021 have retained their seats, and an initial tally showed that many of the bills’ co-sponsors will stay in office. That bodes well for those items in the next session of Congress if they are not approved during the lame-duck session. But Thompson is hopeful that lawmakers will include them in an annual late-year package of “tax-extenders” that Congress typically passes in December to restore expired tax provisions.

The provisions, according to Thompson, aren’t that controversial, but were held up because members of each party didn’t want to give their opponents any reason to claim legislative wins as the midterms drew closer.

“It looks like this is essentially a status quo election, so there’s no reason to hold bipartisan bills hostage,” Thompson said. “Post-election, the reluctance to pass something the other side supports wanes.”

Earmarks Now a Possibility

The failure of either side to declare a decisive victory makes it more likely that Congress will use the lame-duck session to pass a pending appropriations bill that is peppered with billions of dollars in earmarks, rather than pass a continuing resolution that would keep current spending levels in place until early next year, said Steve Taylor, a principal at Integer, a lobbying firm that represents nonprofits.

“The fact that the margins are very slim is going to work very much in the favor of nonprofits,” Taylor said.

Taylor, who was United Way Worldwide’s point person on Capitol Hill for years, said that if Republicans had won a large majority, it is likely they would insist on passing what is known in legislative jargon as a continuing resolution. Doing so, Taylor said, would allow them to set up their own policy-making apparatus next year that would enact spending cuts on social services, could result in no earmarks or restrictions on earmarks, and attempt to claw back some of the up to $100 billion in unspent funds from the American Rescue Plan that to a large extent could be directed to nonprofits.

In the fiscal year that ended in September, nonprofits, including colleges and universities, were the recipients of about $3 billion of the $9 billion in earmark spending, according to the Government Accountability Office.

It is less clear, said Taylor and Thompson, whether Congress will take action on pending legislation designed to speed up distribution of money from foundations and donor-advised funds to charity.

Taylor said he did not see the legislation gaining steam during the next session of Congress.

Republican J.D. Vance, who called the Ford and Gates foundations a “cancer” on society and called for the taxation of their endowments, has emerged victorious in the Ohio Senate race, Thompson said it is unlikely his victory will usher in big changes to donor-advised funds or foundation endowments.

“Because of the clamoring and the agitating and lobbying on donor-advised funds, there could be more attention” directed to the issue, he said. “But I don’t think Vance is going to have a great deal of sway in the Republican caucus.”

The idea of taxing endowments won’t likely gain steam in a new Congress, especially when the election results were so close, predicted David Kass, vice president of government affairs at the Council on Foundations. Lawmakers from both parties, he said, see the benefit of growing an endowment to be ready to address problems long into the future.

“Policymakers have looked into this issue, and they understand that it is a good thing to have long-term capital,” Kass said. “With these narrow margins, that’s unlikely to change.”

But the fact that there was no “red wave” of GOP wins nationally doesn’t negate the fact that conservative populists like Senator-elect Vance represent a growing tide of distrust of endowed wealth, says Michael Hartmann, senior fellow at the Capital Research Center, a conservative research and advocacy group. That distrust of elite institutions, he said, exists on both sides of the political aisle.

“Vance is not going to be wielding the gavel of a committee right now, but he will have an opportunity to work with some critics of elite endowments who don’t share his underlying worldview” on other issues, Hartmann said.

Nonprofits also saw one of their own gain an election victory. Democrat Wes Moore, who left his post as head of the Robin Hood Foundation to run for governor in Maryland, cruised to victory. To learn more about Moore, see a conversation he had with the Chronicle’s editor, Stacy Palmer, and social-justice activist Edgar Villanueuva.