After successfully averting a debt ceiling crisis, Congress has now embarked on the monumental effort of funding the government. Summer is officially here, and if you have been busy plotting and planning your summer vacation, fear not, here is a download of issues in Washington, DC affecting nonprofits:
Legislative Outlook
A deal to avert the U.S. defaulting on its debt was reached between Speaker McCarthy and President Biden. On June 3, President Biden signed the Fiscal Responsibility Act of 2023, which suspends the public debt limit through January 1, 2025. The bill establishes new discretionary spending limits, appropriates funding for the Veteran Administration Toxic Exposures Fund, and rescinds certain unobligated balances; expands work requirements for certain Federal programs; modifies environmental review processes; and terminates the suspension of Federal student loan payments.
With the debt ceiling crisis resolved, Congress has turned to the difficult task of funding the government. Given the new spending caps and a divided Congress, this could turn into another government shutdown saga if lawmakers are not able to reach an agreement before the September 30 funding deadline. Far-right Republicans, whose votes will be needed to keep the government funded, are demanding cuts that go far deeper than what President Biden and Speaker McCarthy agreed to in the bipartisan compromise they reached last month to suspend the debt ceiling. But but such reductions are all but certain to be nonstarters in the Senate. The stalemate threatens to further complicate a process that was already going to be extraordinarily difficult, as top members of Congress try for the first time in years to pass individual spending bills.
House Ways and Means Markup
On June 13, the House Ways and Means Committee approved three separate tax packages – the Tax Cuts for Working Families Act (H.R. 3936), Small Business Jobs Act (H.R. 3937), and Build It in America Act (H.R. 3938) – after an all-day markup. Combined into the American Families and Jobs Act, the measures fulfill Chairman Jason Smith’s (R-MO) commitment to develop a tax-based economic package springing from field hearings the Committee has held this year. The Tax Cuts for Working Families Act includes a provision that would rename the standard deduction “the guaranteed deduction” and allow an additional bonus amount of $2,000 ($4,000 for married couples filing jointly) in taxable years beginning in 2024 and 2025, but reduce the bonus amount for taxpayers whose modified adjusted gross income exceeds $200,000 ($400,000 for joint filers). During the markup, Rep. Schneider (D-IL) offered the Charitable Act (H.R. 3435) as an amendment and it was voted down by Republicans despite expressions of bipartisan support.
These bills aren’t expected to be enacted as-is, given that the Tax and Cut Jobs Act “pre-cliffs” remain stuck in a partisan impasse over the Child Tax Credit (CTC) expansion sought by Democrats, who are also opposed to rolling back clean energy provisions from the Inflation Reduction Act (IRA) that Republicans want to use as revenue offsets. However, the bills could represent Republicans’ negotiating position for talks later this year aimed at constructing a year-end tax extenders package — should the opportunity arise and a government spending or other must-pass vehicle for the package emerge. The timing of potential floor consideration isn’t clear because of Freedom Caucus members who held up recent floor activity over opposition to the debt limit bill.
Guidance for Clean Energy Tax Credits Released
On June 14, the U.S. Department of the Treasury, and the Internal Revenue Service (IRS) released guidance on key provisions in the Inflation Reduction Act to expand the reach of the clean energy tax credits and help build projects for state, local, and Tribal governments, nonprofit organizations, U.S. Territories, and rural energy co-ops.
The Inflation Reduction Act allows tax-exempt and governmental entities to receive elective payments for 12 clean energy tax credits, including the major Investment and Production Tax credits, as well as tax credits for electric vehicles and charging stations. Businesses can also choose elective pay for three of those credits: the credits for Advanced Manufacturing (45X), Carbon Oxide Sequestration (45Q), and Clean Hydrogen (45V).
Treasury’s proposed guidance helps provide clarity for governments, tax-exempt organizations, and businesses to understand the law’s scope and eligibility requirements. The proposed regulations clarify which entities would be eligible for each credit monetization mechanism, and lays out the process and timeline to claim and receive an elective payment or to transfer a credit and addresses numerous other issues. The proposed regulations will have a formal 60-day public comment period.
The guidance also includes temporary regulations for an electronic pre-filing registration requirement. The pre-filing process will help prevent improper payments to fraudulent actors like criminal syndicates and will provide the IRS with basic information to ensure that any taxpayer who qualifies for these credit monetization mechanisms can readily access these benefits.
Giving USA Report Released
On June 20, the “Giving USA 2023: The Annual Report on Philanthropy for the Year 2022” was published by the Giving USA Foundation. The report shows that total giving in the U.S. declined in 2022. Giving dropped to an estimated $499.33 billion — down 3.4% in current dollars and 10.5% after adjusting for inflation from a revised total of $516.65 billion in 2021. Giving by individuals totaled an estimated $319.04 billion, declining 6.4 percent in 2022 (a decline of 13.4 percent, adjusted for inflation). Giving also declined as a percentage of the nation’s gross domestic product, to 1.9% from 2.2%.
According to the report, total charitable giving has fallen only three other times in the last 40 years in current dollars: in 1987, 2008, and 2009. Giving had been strong in 2020 and 2021 as donors rallied to help address increasing needs amid a global pandemic and economic crisis and recovery, and supported efforts to advance racial justice. Drops in the stock market and high inflation caused many households to give less during for the year.
The decrease in charitable giving affects the ability of nonprofit organizations to meet needs and fulfill their missions — especially when the demand for these services continues to increase. Congress can help by restoring the charitable deduction for every American. Please take 1 minute to ask your legislators to support The Charitable Act.
Giving USA: The Annual Report on Philanthropy, the longest-running and most comprehensive report on the sources and uses of charitable giving in America, is published by Giving USA Foundation, a public service initiative of The Giving Institute. It is researched and written by Independent Sector member Indiana University Lilly Family School of Philanthropy at IUPUI.
Ana Montañez is Independent Sector’s manager of government relations.
