federal & state policy issues€¦ · start up costs paid by gifts, grants, donations....

Southwest RPD

September 2018

Renny Faganrfagan@coloradononprofits.org

Federal & State Policy Issues

Impacting Colorado’s Nonprofits:

Advocacy in Action

~Coffman, J. (2008). Foundations and Public Policy

Grantmaking.

Manitou Incline

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Mantiou Incline

https://gardenofthegodscolorado.com/manitou-incline-

colorado-springs/

Revenue Sources by Sector

Sector Private

Donations

Private

Payments

Govt.

Grants/pay

ments

Investment

Income

Other

revenue

Arts, culture,

humanities

44 34 16 < 1 6

Education 20 65 15 3 2

Environment/

animals

51 28 15 < 1 5

Health care 4 59 35 < 1 2

Human

Services

17 28 51 1 3

Source: Evaluating the Charitable Deduction and Proposed Reforms, Urban

Institute, June 2012

Coloradans Consider Tax Benefits

• 50% agreed that they consider tax benefits

when they donate.

Gen X and Baby Boomers

Incomes over $100,000 (75.8%)

Republicans more than Independent

(27%/19% strongly agreed)

Those who gave more ($1,000 to $10,000)

Federal Tax Law & Charitable Deduction

• Increased standard deduction for

individuals ($12,000), joint ($24,000) and

heads of household ($18,000).

• Raised limits on cash donations for

itemizers to 60% AGI

• Failed to include universal deduction– H.R. 3877/S.2123 would have allowed non-itemizers

to deduct up to $4,000 individual/$8,000 joint

CO Charitable Deductions (2015 IRS Data)

Income Percent of

charitable

deductions

Average

contribution

Percent of all

charitable

gifts

Average

itemized all

deductions

Total

Charitable

Contributions

$1K to $10K 1 $1,164 <1 $15,683 $9,781,000

$10K to $25K 4 $2,012 1 $15,718 $51,538,000

$25K to $50K 11 $2,291 5 $15,439 $179,107,000

$50K to $75K 15 $2,606 7 $17,002 $280,191,000

$75K to $100K 15 $3,087 8 $19,438 $329,551,000

$100K to

$200K

36 $4,000 25 $23,744 $985,948,000

$200K to

$500K

14 $7,120 18 $37,872 $705,830,000

$500K to $1m 2 $18,006 7 $70,910 $266,485,000

$1m or more 1 $154,468 28 $317,945 $1,073,558,000

Totals 100 $5,595 100 $25,509 $3,881,989,000

Existing State Deduction for Non-itemizers

• Since 2005, Coloradans who do not itemize on their

federal return may deduct charitable contributions that

total more than $500 from their state taxable income.

• Form DR 0104AD (06/30/17) COLORADO

DEPARTMENT OF REVENUE , Line 7

• Value is 4.63 cents per dollar.

• In 2015, 155,704 Colorado taxpayers gave $234 million.

Average deductible gift of $1,562. Tax savings of $72.32

IRS SALT Proposed Reg’s

New federal tax law limit of $10,000 for state and local

tax deduction

High tax states created ways for payments to

government run nonprofits providing public services.

Charitable contributions without limitation instead of

taxes

IRS SALT Proposed Reg’s

• Taxpayer gets a benefit when they receive

a state income tax credit for charitable

donations

• Treated like reduction in charitable

contribution by the amount of fair value

received, i.e. gala ticket

• Would impact Colorado’s Child Care

Contribution Credit and Enterprise Zone

Credits

IRS SALT Proposed Reg’s

• If rule becomes final, applies to donations after August

27, 2018

• IRS Comment period: October 11

• Sample comments:

https://www.coloradononprofits.org/policy-updates/proposed-irs-

rules-state-giving-tax-credits/aug-29-2018

New UBIT Rules

• Instead of aggregating all revenues and expenses from

unrelated business income, nonprofits must separate for

each trade or business

• No definition of trade or business

• Until final reg, IRS proposes using NAICS codes

• Nonprofits can combine the revenue and expenses from

all advertising activities (e.g. online advertising and ads

in a variety of print publications) into one category

(NAICS code 541800), since these would all be within

the same NAICS code. (National Council of Nonprofits)

More Resources

https://www.councilofnonprofits.org/how-tax-

cuts-jobs-act-impacts-nonprofits

Nonprofit Partisanship

• “Johnson Amendment” prohibits nonprofits and

churches from receiving tax-deductible

donations if they endorse or oppose candidates

for public office.

• Various Congressional proposals to weaken

• House bill funding the IRS basically prohibits

IRS from enforcing against churches

• https://www.councilofnonprofits.org/take-action-

johnson-amendment

New State Law

• What If?

$1,051,186,788

1,892,688 households

$559 average per household

Potential Impact

What If….?

Income Tax Refunds

Colorado Gives Day Checkoff

SB18-141 Donate to a Colo Nonprofit Fund

Adds option for taxpayer to designate any 501(c)(3) in

good standing under Colo Charitable Solicitations Act

(CCSA) and in existence for 5 years

Retain existing checkoff funds and organizations

Taxpayer must enter CCSA identifier

Starts with 2019 tax year, filing year 2020

Cost of administration paid from donations, just like

federated workplace giving campaigns

Start up costs paid by gifts, grants, donations

HB18-1013 Nonprofit Sustainability Act

Donors save $1 on state

taxes (25% credit up to

$5k)

For every $4 they give

(max gift of $20k)

HB18-1013 Nonprofit Sustainability Act

Funds are invested

in endowment that

grows over time

Boards must manage

the funds per donor

intent and UPMIFA

Nonprofits have funds

for innovations, rainy

days or to add to

annual revenues

HB18-1013 Nonprofit Sustainability Act

• 12 million impact on state’s general fund, but $48 million in giving to nonprofit funds

• Passed House Finance but killed in House Appropriations

• Path forward for this legislation is difficult

– Reduction of state revenues

– (mis)perception of endowments

– Lack of appreciation for nonprofit operating environment

How do we become more

influential?

Become a trusted source

It’s all about Relationships

Why Relationships are Important

• You will become a trusted resource

– You want them to call you, not just call you back

• You will build trust and credibility

– Don’t ask a stranger for a favor

• They will both listen and hear what you say

– Silence is acquiescence

• You can work together to solve problems

How Elected Officials Decide

• Life experience

• World view

• Personal knowledge of the issue

• Information from a trusted source

• Community opinion leaders

• Views of their constituents

• Gut feeling of what’s right

Learn About Your Elected Officials

• District number/areas represented

• Political party and values

• Professional background

• Personal interests and family

• Where they give or volunteer

And the Cycles of Their Process

• Procedure for a bill to become a law

• Budget timeline and input process

• Opportunities for public comment at

meetings

Importance of Relationships

Source: Pinterest

Becoming a Trusted Source

Educate elected officials about what you

do

• Invite them to visit your nonprofit

• Meet them where they are

– Individual appointments

– Public comment times at meetings

• Invite them to your special events

• Send them your newsletter

Becoming a Trusted SourceProvide opportunities for Elected Officials to

expand their own networks and talk about

their priorities

• Meeting your board, volunteers, donors,

constituents

• “Meet and greet” with your network

• Forum on your issues

Using Relationships to Communicate

• Strategically select a spokesperson

• Make your “ask” direct and succinct

• Activate network connections

– Content is more important that volume

– Show breadth and depth of your supporters,

genuinely and respectfully

Messaging tips

• Give local facts– District, city, neighborhood

• Share personal stories – Bring a client or person impacted

– Anecdotes, quotes, testimony, etc.

• Quantify impact– Give scope and significance to the issue

– Who is for or against this policy and why

501(c)(3)- Lobbying &

Political Rules

Nonprofits can’t support or oppose candidates for elected public office

Nonprofits can lobby but limited

to either:

o an “insubstantial part” of

activities; or

o a set percentage of

expenditures based on

budget size - 501(h)

election

“Insubstantial Part” vs.

“Expenditure” 501(h) Insubstantial Part Limit

• Activity-based

– Time + expenditures

• Lobbying must be

insubstantial, which is not

defined

• Depends on 990-reported

facts and circumstances

Expenditure Limit

• Expenditure-based

– Paid time +

expenditures

• Lobbying must be less

than set % of total

expenditures

• Depends on 990-reported

budget size

501(h) electionBudget size Total annual expenditures that may be

spent on lobbying.

Up to $500,000 $100,000 (20%)

$500,000 to $1,000,000 $100,000 + 15% of expenditures over

$500,000.

$1,000,000 to $1,500,000 $175,000 + 10% of expenditures over

$1,000,000.

$1,500,000 to

$17,000,000

$225,000 + 5% of expenditures over

$1,500,000.

Over $17,000,000 $1,000,000

Direct Lobbying

• Communication to a legislator, staffer, or govt. employee to influence legislation

• Refers to specific legislation (bill, ballot measure)

• Reflects a view on legislation

Grassroots Lobbying

• Communication encouraging public to contact and influence legislators

• Refers to specific legislation

• Reflects a view on legislation

• Call to action

• Must not exceed 25% of total

What is NOT Lobbying?

• Discussion of broad social issues without

reference to specific legislation

• Results of analysis or research on a legislative

issue with facts presented fully and fairly.

• Responding to written requests from a

legislative body (not an individual legislator).

What is NOT Lobbying?

• Distributing materials to your members

discussing legislation with no call to action.

• “Self defense”—Actions responding to

legislation threatening the existence or

livelihood of an organization

• Testifying at the request of a legislative body.

Political Activity Rules

• Cannot participate in any political campaign of behalf of

or in opposition to any candidate for public office

• 501c(3) prohibited activities:

– Public communications for or against candidates

– Making campaign contributions or paying expenses of political

organizations

– Conducting voter engagement activities based on party affiliation

of voters

– Communications comparing the organization’s positions on key

issues with those of candidates

– Connecting criticism of a public official to voting in an election

Lobbying Resources

• National Council of Nonprofitshttp://www.councilofnonprofits.org/nonprofit-

advocacy/power-information

• Alliance for JusticeBolderadvocacy.org

• Nonprofit Voter Engagement Network (www.nonprofitvote.org)

• Colorado Nonprofit Association– Speak for Yourself toolkit

Nonprofits of Influence

• Community-wide networks

• Silence is acquiescence

• Levers

• Relationships

• Our cause is just

Renny Fagan

Colorado Nonprofit Association

rfagan@coloradononprofits.org

789 Sherman Street, Suite 240

Denver, CO 80203

www.coloradononprofits.org