Welcome to a robust version of the DC Download! Congress is working hard to finish some important business ahead of the August recess. If you have been busy planning or daydreaming about the August recess or lost on the “Barbenheimer” phenomenon, fear not. Here’s the latest news affecting nonprofit organizations from Washington, DC.
Government Funding Outlook
Congressional appropriators in the House and Senate are working to consider and pass the 12 annual appropriations bills that allocate billions of dollars in federal funding for the 2024 fiscal year (FY) that begins October 1. Differences on a number of contentious issues are causing delays and final bills are not likely to be completed by October 1, with the passage of a Continuing Resolution (CR) on any that are outstanding by the September 30 deadline. As background for this year’s debate, President Biden signed into law in May a bipartisan agreement to lift the federal debt ceiling in exchange for capping FY2024 domestic spending at roughly FY2023 levels and allowing 1 percent growth in FY2025. Importantly, however, if Congress does not pass all 12 appropriations bills by January 1, 2024, for FY2024, or January 1, 2025, for FY2025, then automatic spending caps will take effect at levels 1 percent below the spending level for FY2023 appropriations.
Congress would then have until April 30 to enact full-year appropriations before the 1 percent cuts are locked in for the remainder of the year. In a July 9 Dear Colleague letter regarding the Senate agenda for the current work period, Senate Majority Leader Chuck Schumer (D-NY) said on government funding, a main task of the chamber “will be to deliver on the deal that President Biden and Congress agreed to in June to fund our government and protect key investments in infrastructure, U.S. competitiveness, Social Security, Medicare, Medicaid, our veterans and more.”
Defense, Farm Programs and FAA Reauthorization Update
Significant authorization legislation for the Department of Defense, the Federal Aviation Administration (FAA) and major farm programs are being actively considered in Congress this year. Lawmakers are sprinting toward the finish line to pass a number of authorization bills before the August recess, including the National Defense Authorization Act (NDAA) and the FAA reauthorization bill, which includes extension of taxes that fund the airport and airway trust fund through FY2028. The House has passed an FAA reauthorization bill, but the Senate is not expected to consider it before September. The Senate is on track, however, to complete consideration of the NDAA bill before August. In addition, negotiations continue in both the House and Senate on a major farm bill that, among other issues, sets the level of Federal food assistance programs. Congress is expected to work to complete the FAA bill before the September 30 deadline, however, short-term extensions are already being discussed for FAA and the farm bill as part of an extension of government funding.
Supreme Court Decision on Affirmative Action
On June 29, The US Supreme Court ruled against university policies that take race into account for admissions in two cases that could have potential implications for the broader charitable sector. In 6-2 and 6-3 decisions, the Court ruled in two cases — Students for Fair Admissions v. Harvard and a separate suit the group filed against University of North Carolina — that both universities’ admissions policies violate the equal-protection clause of the 14th Amendment. While the effect of the decision beyond higher education is unclear in the short term, foundations, charities, and other employers are bracing for potential future challenges to efforts to promote diversity in areas such as grantmaking and hiring decisions. For more information on this issue, see a legal memorandum co-commissioned by Independent Sector on the decision and its potential implications on the charitable sector.
Supreme Court Decision on Logan Forgiveness
On June 30, the Supreme Court also struck down President Biden’s plan to forgive about $10,000 in student loans per borrower, and up to $20,000 in some cases. The decision affects the loans of more than 40 million Americans, and student loan payments are expected to resume this fall after a three-year hiatus. In response, the Biden Administration introduced the Saving on Valuable Education (SAVE) plan, which will lower monthly payments for many borrowers. Under the SAVE plan, income protected from payments will rise from 150 percent above the federal poverty guidelines to 225 percent. As a result, a single person earning less than $32,805 a year will have monthly payments of $0. The same would happen to families of four that make less than $67,500. The Public Service Loan Forgiveness Program – which is critical to building and retaining the nonprofit workforce – was not impacted by the Supreme Court’s decision.
Grantmaking Reform Bill Introduced
Senators Peters (D-MI), Cornyn (R-TX), and Lankford (R-OK) introduced the Streamlining Federal Grants Act of 2023 (S. 2286), to streamline the administration of grant programs across the federal government. Specifically, the bill directs the Office of Management and Budget (OMB) to provide guidance to federal agencies on how they can simplify and update their grant application processes, including by making notice of funding opportunities easier to understand, updating software systems that are used to apply for and manage federal grants, and implementing common data standards for grant reporting. The bill also requires agencies to appoint a senior official to develop and implement these plans to improve their grant application and reporting processes. The bill follows a hearing held earlier this year to discuss the challenges faced by governments and organizations in small and rural communities when applying for federal grants. The Senate Homeland Security and Government Affairs committee is scheduled to consider several bills, including the Streamlining Federal Grants Act, on July 26.
Request for Comments on Digital Assets
On July 11, Senate Finance Committee Chairman Wyden (D-OR) and Ranking Member Crapo (R-ID) asked for comments on “uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders, and interested parties.” The Committee release said answers to questions will be collected on a rolling basis until September 8. A June Joint Committee on Taxation report said the tax code “does not treat all property the same” and “in some instances, different kinds of property are subject to different tax treatment.” Of note for the charitable sector, the letter specifically requested comments on the treatment of donations of digital assets to charities and the treatment under section 170(m) of the tax code.
Child Tax Credit Update
On July 13, the Senate Finance Subcommittee on Taxation and IRS Oversight held a hearing on “Assessing 25 Years of the Child Tax Credit (1997-2022).” The hearing covered traditional arguments regarding expanding the child tax credit (CTC) like the version in effect for 2021, including whether an expansion is necessary to lift children out of poverty or whether a greater federal benefit discourages work. Subcommittee Chairman Michael Bennet (D-CO) said the aspect of the credit that is subject to the most debate is full refundability, and he asserted that 70 percent of those who received the refundable credit were working. Senator Ron Johnson (R-WI) expressed concern about complexity and how to design “benefit programs that don’t make people dependent on government.” He said the Subcommittee should look at federal benefit programs in total and how to simplify them. “How do you provide those types of benefits without encouraging dependency?” he asked, adding that he would like to understand the issue better. Senator Johnson encouraged, as he has with Social Security, roundtables to “start fixing these problems.” Future action on changes to the child tax credit is unclear, as evidenced by tax negotiations at the end of last year. At that time, negotiators failed to reach a compromise on a package of tax provisions that included a continuation of a temporary expanded child tax credit in effect during the pandemic in exchange for extensions key corporate tax extensions, such as expensing of research and development (R&D) costs.
Congress has been active on healthcare issues during the July session. The House Energy and Commerce Health Subcommittee held a markup of 17 health care bills. On Thursday July 13, the Subcommittee sent to the full committee 17 bills on a range of health care topics. During the hearing, Democrats raised concerns that Republicans were advancing a partisan Pandemic and All-Hazards Preparedness Act (PAHPA) reauthorization that lacks funding increases and improvements to public health data and fails to address the medical supply chain and ongoing drug shortage crisis. Republicans, meanwhile, expressed a desire to address drug supply chain issues separately.
There was also partisan debate over a bill that would ban certain gender-affirming care procedures from being performed at GME-supported Children’s Hospitals. During the hearing, there was bipartisan support for bills to reauthorize several health care and research programs on pediatric cancer, premature birth, maternal mortality, sickle cell disease and heritable blood disorder research, Parkinson’s disease, the dental workforce, substance use disorder, and the firefighter cancer registry. There was also bipartisan support for a bill to clarify Medicaid’s authority to leverage direct primary care and other models to improve primary care. While there was some bipartisan support for a bill to allow employers to offer stand-alone coverage of telehealth-only services to certain employees, several Democrats raised concerns about the lack of consumer protections and the need to ensure consumers are aware of the type of coverage being purchased.
At the same time, the House Committee on Education and the Workforce held a markup of health transparency legislation. On July 12, the Committee advanced four bipartisan bills that aim to increase transparency in health care. Each bill passed with unanimous or near unanimous support, with potential action by the full House of Representatives in the fall.