As lawmakers work to finalize comprehensive tax legislation passed by both chambers of Congress, nonprofit advocates are waging one last fight: to see that a House-passed measure that would allow nonprofits and churches to engage in political activity is cut from the final bill. If they succeed, it will be a lonely victory. Congress ignored most of the other items on nonprofits’ agenda amid a relatively lean lobbying effort.
Charities’ marquee item, a “universal deduction” that would have allowed taxpayers to write off a gift to charity even if they didn’t itemize their tax returns, is dead and has no chance of being resuscitated in House-Senate negotiations, said Hadar Susskind, senior vice president for government relations at the Council on Foundations.
“Zero,” he said. “It’s dead. It’s over. It’s not going to be there.”
The remainder of the score sheet is lopsided against nonprofits as well.
In both the House and Senate versions of the legislation, lawmakers placed an excise tax on certain universities and on nonprofit executive pay above $1 million. The pending bill would simplify the tax that foundations pay on their endowment income, but many grant makers would end up paying more.
Both the House and Senate versions of the bill would double the estate-tax exemption. In the House, lawmakers voted to eliminate the levy entirely in 2024, snatching away a key tax incentive that planned-giving departments at charities and universities use to entice donors to give before they die.
And tucked into the House bill is the focus of nonprofits’ rear-guard action: a provision that would weaken the so-called Johnson Amendment, which prohibits politicking from the pulpit and other nonprofit political activity.
Spreading the Message
Mr. Susskind maintains that getting the universal deduction included in the broader legislation was a “reach,” but even so, it was one of the main issues, along with the Johnson Amendment, that mobilized a large swath of charities and foundations. Throughout the summer and fall, nonprofits spread the message on Capitol Hill: a universal deduction, they said, would mitigate the damage of a key part of the GOP tax plan.
To provide tax relief to middle-class Americans, Republican tax writers doubled the standard deduction nonitemizers can claim. The result, charities warned, was that all but the wealthiest Americans would have no incentive to itemize their taxes, and fewer would make charitable gifts as a result.
Policy makers seemed receptive. Over the summer, Rep. Kevin Brady of Texas, the chairman of the House Ways and Means Committee, assured charities that he wanted to maintain a tax incentive to give, although he did not specifically support the universal deduction. And in July, foundation leaders met with Vice President Pence to push their message: Without the universal deduction, charitable giving would drop $13 billion out of the $282 billion Americans give annually.
Trounced by the Heavyweights
But the provision came with an estimated cost of $13 billion in lost annual federal revenue, making it a hard sell to lawmakers who were already struggling to hold down the cost of a package that would slash the corporate tax and provide a variety of tax breaks for individuals. The fight pitted nonprofits against some of the most experienced and well-financed corporate lobbyists working in Washington.
Jon Pratt, executive director of the Minnesota Council of Nonprofits, said charities had little chance of being heard over the din when faced with the “raw political power” exercised by GOP majorities who badly wanted the corporate rate cut and a big legislative victory.
Increased partisanship has made it difficult for charities to get the attention they’ve had in the past, he said. Much of their work, whether it is running summer camps, fighting drug addiction, or staging art exhibits, appeals to people throughout the political spectrum.
“Now anything with expenditures is seen as partisan,” he said, adding that lawmakers do a lot of “head patting” with charities that come to press their agenda.
“They’ll say, ‘Your organizations are so great. You’re so important to our communities,’ " he said. “It can seem like a good meeting, but in the end, it is just a meeting.”
Every member of Congress pays lip service to charities, agreed Mr. Susskind of the Council on Foundations. But kind words don’t mean nonprofits have much sway.
He points to Sen. James Lankford as a measure of nonprofits’ weak influence during the Senate deliberations. A holdout on the bill, Mr. Lankford was also the author of a measure calling for a universal deduction. News reports in the week leading up to the Senate vote on the tax package identified him as a key vote. Many nonprofits thought the policy might stay alive if Mr. Lankford offered his bill as an amendment.
“Not one of those articles had him saying, ‘Well, if they include my universal deduction, I’m going to vote for it,’ " Mr. Susskind said. “He didn’t condition his vote on it. We saw pretty clearly that the priority for members who voted for this bill was a 20 percent business tax rate, and not protecting nonprofits.”
Meanwhile, as nonprofit advocates waited to see whether Mr. Lankford would come to their rescue, other denizens of K Street, the business lobby, were huddled with Senate staffers and reworked major portions of the bill, writing in longhand in the margins of the document.
Falling Short
Collectively, the Council on Foundations, Independent Sector, the National Committee for Responsive Philanthropy, the National Council of Nonprofits, and the Philanthropy Roundtable spent more than $670,000 on lobbying through the first three quarters of the year.
That’s not enough to make a dent, especially when for-profit groups are involved in the same battle, said Alan Abramson, director of the Center for Nonprofit Management, Philanthropy, and Policy at George Mason University.
“Foundations and nonprofits just don’t support advocacy to the extent it needs to be supported if the sector is going to have more victories,” he said.
Making it even more difficult, he said, is that nonprofit groups usually first identify with their mission as art galleries, addiction clinics, and hospitals, rather than as tax-exempt organizations.
“It’s only somewhere down the line that they think of themselves as being part of a nonprofit tax sector,” he said. “So sectorwide concerns like the deductibility of contributions doesn’t get the support maybe it should.”
Job Losses
Elizabeth Boris, a fellow at the Urban Institute, said nonprofits did not have a strong, cohesive national voice on tax issues. Some tactics could have been more effective, she said. For instance, Joseph Cordes, a visiting fellow at the institute’s National Center for Nonprofits and Philanthropy, projected nonprofits would suffer job losses of at least 220,000 if the House version of the bill were made law. If those estimates were circulated widely early in the process, rather than over Thanksgiving, perhaps nonprofits could have had more success focusing on jobs.
Too often nonprofits are attacked by people who don’t agree with their mission, Ms. Boris said. People are turned off by the religious leanings of a group or the fact that the group has a large endowment or that it assists refugees. Given the highly polarized state of politics, Ms. Boris suggested nonprofits could advance their cause better if they focused on how varied they are.
“Maybe that’s the message that we didn’t get across — the diversity of the sector,” she said. “If some group out there is antithetical to your ideological beliefs, there’s another one that is for them.”
Missed Chance
Some advocates for nonprofits say charities missed a big chance this summer by not fully embracing a bill authored by Rep. Mark Walker, a North Carolina Republican, that would have extended the charitable deduction to all tax filers. If they had gotten on board early and generated a groundswell of support for the bill, which was similar to Mr. Lankford’s Senate legislation, nonprofits would have had a better chance of success.
A nonprofit advocate who declined to speak on the record was “annoyed” that Mr. Walker’s bill was not given fair consideration and that nonprofits didn’t press harder for it.
Mr. Walker does not sit on the Ways and Means Committee, where tax legislation originates, making it difficult for his measure to get serious consideration.
“A lot of the groups who are new to tax lobbying really focus their energies the Ways and Means and [Senate] Finance committees, and this guy comes out of left field and says, ‘What about this?’ " the person said. “I don’t think they took him seriously. It languished, and here we are today.”
Brian Walsh, executive director of the Faith and Giving Coalition, said nonprofit advocates were slow to get behind the legislation because Mr. Walker’s bill would have limited the amount of charitable gifts people could have used to reduce their tax liability by using the universal deduction. Although an increased standard deduction was a key part of the bill, leaders like Mr. Brady of Ways and Means had said he supported a charitable incentive in the tax code. Some nonprofit leaders, Mr. Walsh said, were holding out for a measure that would have fully protected the scope of the charitable deduction.
“Many faith-based and charitable organizations had not reached a final conclusion about what they could live with” and were slow to back Mr. Walker’s legislation, he said. “The mixed messages made that more difficult.”
Tough Message to Sell
The highly charged partisanship in Congress also makes it hard to sell a nuanced position on taxes, Mr. Walsh said. Republicans, he said, were eager to score a victory, so they pushed the bill through as quickly as they could, making it impossible to delve into tricky policy debates.
The fact that the bill left the charitable deduction intact, even if it would have been rendered impotent by the increased standard deduction, made it even more difficult for nonprofit advocates to explain their position, Mr. Walsh and other charity advocates said.
In fact, Mr. Brady, the Ways and Means chairman, predicted an increase in giving under the legislation despite forecasts showing otherwise. In a tweet on Giving Tuesday, Mr. Brady said the higher standard deduction and hoped-for gains in the economy would stimulate giving.
That message was galling to people like Nancy Berlin, policy director for the California Association of Nonprofits.
“I was disappointed in him,” she said. “It was not an appropriate time to put forth his ideology about taxes.”
Seeking a Win
In the Johnson Amendment, nonprofits have an opportunity to fight off another loss. Major charity advocacy groups, including the Council on Foundations, Independent Sector, and the National Council of Nonprofits, plan to press their members to contact their lawmakers. Mr. Susskind, of the Council on Foundations, said he expects the groups to coordinate advertising in Washington policy newspapers over the next few days. And Tim Delaney, president of the National Council of Nonprofits, is pushing a letter, signed by 5,600 churches and charitable organizations opposed to weakening the Johnson Amendment.
If charities are allowed to support political candidates, he told reporters on a call on Tuesday, nonprofits will lose the public trust.
“The American people are distraught with the rancor of politics today,” he said. “We as a community do not want to be tarred and feathered and dragged into that toxic pollution.”
Correction: An earlier version of this article misspelled Tim Delaney’s name and rendered the name of the National Council of Nonprofits incorrectly.
