Nonprofits should aggressively press their agenda on Capitol Hill during the short lame-duck session of Congress, said policy experts who briefed charity and foundation leaders this week. An influx of new lawmakers, who may be unfamiliar with the ins-and-outs of nonprofit policy, and a divided Congress will make it difficult to secure legislative victories in the New Year, they said.
Following Thanksgiving, the Senate will only be in session for 12 days this year and has a long to-do list. Many nonprofits hope especially that Congress will take time then to expand charitable deductions to everyone who gives, not simply those who itemize on their tax returns. Charity advocates hope they can persuade lawmakers to attach the measure to one of the major pieces of legislation deemed essential to pass before lawmakers leave Washington in December.
“We should be looking for relief in any train leaving the station,” said Steven Woolf, tax consultant to the National Council of Nonprofits and former tax counsel at the Jewish Federations of North America.
Woolf made his comments this week at a virtual meeting held by the council. Other philanthropy and charity membership organizations, including the Council on Foundations, Independent Sector, and United Philanthropy Forum, held live or virtual meetings this week to discuss policy strategy following the midterm elections in which the Democrats will maintain control of the Senate, and Republicans will control the House.
A centerpiece of those discussions was the charitable deduction. Major tax legislation in 2017 doubled the standard deduction, a move that took away the charitable deduction for all but the wealthiest taxpayers. A temporary measure to allow for a $300 deduction for charitable gifts for all taxpayers expired at the end of the 2021 tax year.
More than 400 nonprofit members of the Charitable Giving Coalition, an advocacy group dedicated to preserving the charitable deduction, signed a letter asking House and Senate leaders to restore the deduction as part of disaster-relief legislation pending in Congress. This week, several dozen members of the coalition met with the staffs of 60 members of Congress.
In addition to the disaster-relief package, the deduction could be restored in a pension bill that is circulating in both chambers or in a set of “tax extenders” that Congress usually addresses at the end of the year to reset tax provisions that have expired.
“The calendar is an issue,” Ken Kies, managing director of the Federal Policy Group, a tax lobbying firm, told members of the Council on Foundations on Tuesday.
Looking Ahead at April 15
Kies said lawmakers will feel enormous pressure to pass the tax extender bill before Congress adjourns, but the frenzy of activity leading up to the closing gavel will make it difficult to get legislators’ attention. If it is not included in a late-year tax package, however, Kies said action on the deduction is still possible in the early months of the year, in time for people to take advantage of it before tax day on April 15.
“We have a fallback plan, but it’s not our preferred plan, obviously,” said Kies, who previously served as chief of staff of the Congressional Joint Committee on Taxation.
Many nonprofit policy advocates were caught off-guard when Congress passed the 2017 tax overhaul. Stung by that defeat, some committed to taking more time getting lawmakers up to speed on charitable tax law and the role of nonprofits in society.
Nonprofits should take advantage during the lame-duck session of the work already done because in 2023 they’ll have to largely start all over again, Arshi Siddiqui, a Washington corporate and nonprofit lawyer said at the Council on Foundations session. She said that the next Congress is likely to act on big “must pass” bills that have bipartisan support. With those pieces of legislation, it is essential to have the ear of lawmakers lest nonprofit concerns get lost in the wake of a large, complex bill.
She called upon nonprofit leaders to sound a constant “drumbeat” on policy.
“This is a building exercise,” she said. “We have so many new members on both sides of the aisle who really have a steep learning curve in terms of the policy. It underscores the need to really have these relationships in place so we’re not caught flat-footed as a sector.”
Kies agreed that nonprofits will have to spend a lot of time educating new members of Congress.
“Many of them don’t know what a donor-advised fund is,” he said. “They don’t even know what a foundation is.”
Donor-Advised Funds and Endowments
With control of Congress likely to be divided between Democrats and Republicans, bills will have to get broad bipartisan support to advance next year. That will make it difficult for some pieces of legislation, including the Accelerating Charitable Efforts Act, a bill expected to be re-introduced next year that would provide incentives for people with donor-advised funds to speed their gifts to charity.
Nonetheless, Woolf, the National Council of Nonprofit’s tax consultant, predicts that donor-advised funds and the tax treatment of endowments will receive a lot of attention in the next Congress.
He also pointed to recent donations of stock to 501(c)(4) nonprofits, which allowed donors to escape the capital-gains tax on appreciated assets. In August, the conservative Marble Freedom Trust received $1.6 billion in such a gift. That was followed in September by the transferof the $3 billion apparel maker Patagonia to a collection of progressive nonprofits.
Woolf predicted that Sen. Sheldon Whitehouse, a Democrat from Rhode Island who chairs the Senate Finance Committee’s subcommittee that oversees tax policy, will use these recent events “to continue his battle against so-called dark money” in politics.
Bolder Action Needed
In addition to educating legislators about nonprofits, philanthropy leaders need to learn about the policy-making process, said Matthew L. Evans, senior director of public policy at the United Philanthropy Forum. The forum’s in-person get-together this week drew more than 30 foundation leaders, most from statewide or regional foundation membership groups.
Foundation leaders, Evans said, are sometimes timid to push for policy changes. In addition to changes that directly impact giving, they should, within the bounds of the law, press for more overarching changes that protect democracy and address societal and racial inequities, he said.
He called for philanthropy to be advocates as well as financial supporters of organizations pressing for change.
“We care about the universal charitable deduction, but we also care about voting rights and racial equity, " Evans said. “We don’t believe they’re mutually exclusive. They go hand-in-hand.”
Philanthropy’s role in a stable democracy was evident in the results of the elections themselves, Daniel Weiner director of the elections and government program at the Brennan Center, told participants of a gathering held by Independent Sector. When donors and nonprofits get involved, he suggested, democracy is strengthened and further policy wins can follow.
“The election went very well from the perspective of operating smoothly, with the losers conceding that they lost and respecting the democratic process,” he said. “The worst that we had feared from the rhetoric that we saw before the election so far has not come to pass.”
The reason, he said, was that tens of thousands of people, often supported by nonprofits, ensured that there were few hitches in the voting process.
“We should never, ever take that for granted”
