A lot of legislative activity that would affect nonprofits is brewing in Congress in the months and years ahead.
On Wednesday, the National Council of Nonprofits sponsored a day on Capitol Hill when state associations of nonprofits from across the country met with members of the House and Senate and advocated for legislation important to nonprofits. Other groups will be coming to Washington, D.C., throughout the summer to advance their policy priorities.
Here’s a look at the status of key issues:
Near Term
Charitable Deduction for Taxpayers Who Don’t Itemize
Status: In response to the pandemic, Congress enacted a temporary tax break allowing people who don’t itemize their taxes to deduct donations to charity, something they couldn’t do previously. The limit was $300 for individual filers and $600 for couples. The deduction was popular, but Congress declined to extend it last year, and it expired.
Outlook: Congressional experts say the deduction is a strong contender to be extended retroactively, perhaps as part of a package of year-end tax provisions.
Nonprofit advocates hope not only for an extension but also for an increase in the maximum amount people can write off. Bipartisan legislation in Congress would extend the break through the 2022 tax year and increase the maximum deduction to about $4,000 for single people and $8,000 for couples.
Ben Kershaw, director of public policy and government relations at Independent Sector, said it’s important that Congress not wait until the end of the year to retroactively extend the tax break because some donors are making giving decisions now that are affected by the absence of the tax deduction.
“This isn’t like another tax break you can restore at the end of the year and get the same bang for the buck,” Kershaw said.
Deduction Limits for Taxpayers Who itemize
Status: During the pandemic, Congress raised the limitation on charitable deductions from 60 percent to 100 percent of adjusted gross income. That provision expired along with the deduction for taxpayers who don’t itemize. Some advocates of preserving the tax breaks acknowledge they may not have a big impact on giving, but they are concerned about seeing hard-fought legislative gains slip away at a time when they are working to expand incentives for charitable giving.
Outlook: Tim Delaney, CEO of the National Council of Nonprofits, which lobbies on behalf of nonprofits, said he is optimistic that the 100 percent limit will be restored, most likely in a year-end tax bill. Kershaw agrees, although he’s a little less optimistic about this provision than he is about the extension of the deduction for people who don’t itemize. He said this issue also is time-sensitive and shouldn’t wait until the end of the year
Tax Deduction for Mileage for Nonprofit Volunteers
Status: People who drive while doing volunteer work for nonprofits can deduct 14 cents per mile, compared with 58.5 cents for business travel.
Outlook: The National Council of Nonprofits sees an increase in the mileage deduction for certain kinds of volunteer activity as a relatively small and simple item that could get attached to almost any tax bill that advances in Congress.
Longer Term
Changes to the Tax Treatment of Endowments
Status: The 2017 tax-cut package included a tax on the investment returns earned by the largest university endowments. Some nonprofits see that legislative change as a worrisome sign that bipartisan populist anger is building over the size of the endowments that some nonprofits are amassing.
Outlook: Ohio Republican Senate candidate J.D. Vance is among the most vociferous and extreme critics of higher education, and he proposed seizing their endowments. While the number of lawmakers and political candidates who are taking aim at endowments is relatively small, Elizabeth McGuigan, director of policy at the Philanthropy Roundtable, said she sees “a concerning populist uprising” that could generate momentum for a broader curtailing of the tax benefits for endowments. Delaney agrees, adding that calls to chip away at tax benefits for charitable activity “can grow quickly, so they need to be watched.” Kershaw added, “There seems to be some willingness to scrutinize charitable assets.”
Public Service Loan Forgiveness
Status: A program created in 2007 sought to encourage college graduates to pursue careers at nonprofits and in government by forgiving their student debt. The program has been plagued with administrative problems. President Trump sought to shut down the program, but it survived.
Outlook: Delaney says the Biden administration has worked to smooth out inequities and disruptions in the program. Nonprofits would like to expand the program, but Kershaw said legislation to do so seems unlikely to advance this year.
Regulating Charitable Giving
Status: The Accelerating Charitable Efforts Act is a bipartisan bill introduced in both the House and Senate intended to boost giving by foundations and by individuals who open donor-advised fund accounts.
Outlook: Congressional observers say the ACE Act has almost no chance of enactment this year. The legislation has collected few cosponsors so far, and the abrupt resignation of one of the bill’s key supporters, Rep. Tom Reed, a Republican from New York, further clouded the outlook for the ACE Act.
Still, the legislation’s bipartisan start in Congress, along with President Biden addressing one element of the package in his latest budget proposal, means the ACE Act still has life, perhaps by itself or as part of some even broader overhaul of the charitable sector, including changes to endowments. Biden’s budget proposal would prohibit private foundations from meeting their annual 5 percent payout requirement by transferring money to donor-advised funds, where they can sit idle indefinitely.
“Once something is in the president’s budget, things have a way of staying in there,” Kershaw said. He added that elements of the ACE Act “have the potential to gain significant bipartisan support.”
McGuigan of the Philanthropy Roundtable, which opposes the legislation, gave it a lower chance of movement. “There’s just no momentum,” she said. “There’s not much appetite right now for reining in what nonprofits can do and how people can give charitably.”
