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Public Policy
Independent Sector Policy Update
October 21, 2005
Advocacy Rights Threatened in Affordable Housing Legislation
A provision that would disqualify organizations that engage in nonpartisan election-related activities from applying for grants under a new Affordable Housing Fund may be added to a larger housing bill (HR 1461) before the bill comes to the House floor next week.
The proposed restrictions are so broad that groups would be denied eligibility to apply for the grants if they, for example, assist with nonpartisan voter registration efforts, provide transportation to the polls for the elderly and disabled, help shut-ins apply for absentee ballots from applying for these grants, or “maintain any affiliation” with any organization that provides any of those services.
The bill (H.R. 1461) is scheduled to go to the Rules Committee next Tuesday, October 25th and to the House floor Wednesday, October 26th. Independent Sector sent a letter to the Financial Services Committee leadership stressing our strong opposition to the proposed anti-advocacy provisions. IS also urges organizations to join a sign-on letter, and to send a letter to their Members of Congress by visiting our Action Center.
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FEC Holds Hearing on Nonprofit Issue Ads
At an October 20th hearing on electioneering communications, the Federal Elections Commission considered how to revise its exemption for grassroots lobbying ads by 501(c)(3) organizations. Two panels of witnesses commented on the three options under consideration by the FEC: narrowing the 501(c)(3) exemption; repealing it; or replacing it with a broad new exemption that covers all communications that do not “promote, support, attack or oppose” a federal candidate. Much of the discussion focused on whether the phrase “promote, support, attack or oppose” is so vague that charities would avoid lobbying ads completely rather than risk violating a regulation that contains that phrase. The Commissioners also took note of the fact that the U.S. Supreme Court will hear a case this year that challenges the constitutionality of the ban on grassroots lobbying ads during election times. Although the Commissioners discussed whether they should wait until the Supreme Court rules to revise their regulation, it did not appear that they were inclined to do so.
Independent Sector filed comments (PDF) with the Federal Election Commission urging the Commission to keep its current exemption from electioneering communications restrictions for 501(c)(3) organizations. More on this issue
House and Senate Struggle with Budget Reconciliation
Seven of eight Senate committees have now agreed on legislation that meets their targeted spending cuts for budget reconciliation. The Finance Committee Republicans will consider $34.7 billion in proposed cuts on Monday, October 24 and $70 billion in tax cuts by Friday, October 28. The package includes a total of $10 billion in Medicare and Medicaid cuts over five years. Senator Grassley succeeded in gaining some temporary relief for states hit by Hurricane Katrina. The federal reimbursement rate for targeted expenditures in those states would be 100% (the usual reimbursement rate varies between 50% and 83%). This provision is estimated to cost $1.94 billion over 5 years. The original Medicaid relief plan that Senators Grassley and Baucus proposed would have cost $9 billion over 5 years.
House Majority Leader Roy Blunt (R-MO) said he plans to try again next week to bring to amend the FY06 budget resolution to increase in mandatory spending cuts from $35 billion to $50 billion and to add a commitment to impose across-the-board cuts in 2006 discretionary spending. The Republican leadership postponed a floor vote on the amendment was postponed this week when it looked like they lacked sufficient votes for passage.
President's Tax Reform Panel Endorses Simplification of Charitable Contribution Deduction
The President's Advisory Panel on Federal Tax Reform endorsed an option for a simplified income tax plan that would, among other changes, allow all taxpayers to claim a deduction for charitable contributions that exceed one percent of their income. During an October 11th meeting, the panel discussed ways to discourage abuse of this proposal, including requiring increased reporting to the IRS from larger charities. One panel member suggested looking at ways to narrow the 501(c)(3) definition. Panel Chairman Connie Mack said that the panel wanted to go a step farther than protecting the charitable contribution deduction, by enhancing it and extending it to people who do not currently have that benefit. The panel will make its final recommendations to the Treasury Secretary on November 1.
IRS Releases Draft Form 990
The IRS has posted a revised Form 990 on its website for comment. Under Part III, the draft form now asks organizations to check a box if any foreign grants were made. Similarly, under Part VI, the form now has additional questions about whether the organization maintains an office or has a financial account in a foreign country.
Part V of the revised form is now divided into separate sections for current and former officers, and additional information is requested. The new questions include how many officers are permitted to vote at board meetings, whether any are related to each other through family or business relationships, and whether any receive compensation from any other related organization, including 509(a)(3) supporting organizations. The new form adds a column for any loans or advances received by former officers. A question has also been added under Part V about whether the organization has a written conflict of interest policy. These changes are in addition to changes already proposed for Schedules A and B for Form 990.
Draft Form 990 (PDF)
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IRS Posts New Guidance Tool for Private Foundations
The IRS recently posted a new web-based information tool for private foundations: “The Life Cycle of a Private Foundation” is intended to help foundations comply with federal tax rules and requirements. The web page provides a snapshot of five stages of a private foundation’s life: starting an organization, applying for tax-exempt status, filing requirements, maintaining compliance, and terminating the organization. The IRS launched a similar tool for public charities in 2004.
View The Life Cycle of a Private Foundation
The IRS exempt organizations division will also soon be releasing its work plan for 2006, which will again have a strong emphasis on enforcement, according to one of the counsels for that division. One of the planned projects for next year is further guidance on vehicle donations, with more specificity on determining market value. Final regulations on revocations standards for organizations involved in excess benefit transactions are also expected next year. A proposed rule was released in September.
More on excess benefit proposed rule
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