Commentary: Congress Has to ‘Answer For The Sector’

December 18, 2014       Paul Clolery      

The nonprofit sector needs its own Michael Corleone. In the classic movie “The Godfather,” Frank “Frankie Five Angels” Pentangeli urges Michael to strike at his enemies. “Look, let’s get ‘em all — let’s get ‘em all now, while we got the muscle.”

Corleone put him off. But Corleone had a Plan B. In the case of the charitable sector, leaders are on to Plan C, D, E & F. It is unclear if there is a Plan G.

The Democrats could have made a “hit” while they still had the muscle in Congress but chose not to help the charitable sector. That’s even with the incoming head of the Senate Finance Committee, Orrin Hatch (R-Utah), on the record supporting extending the tax incentives for giving. The $1.1 trillion spending package pretty much ignores the important tax incentives expiring on Dec. 31.

And once again President Barack Obama showed he is no friend to the tax-exempt world when he threatened to veto an earlier tax compromise legislative package. The package was said to deal with 55 expiring federal tax extenders and included charitable giving incentives such as the IRA charitable rollover. It never saw the light of day.

Likewise as dead as Fredo at the bottom of a lake in Reno is the America Gives More Act (H.R. 4719), which would have dealt with the expiring tax incentives.

Sector leaders were seeking five charitable provisions including renewing and making permanent three of those: the IRA charitable rollover, the enhanced deduction for donating land conservation easements, and the enhanced deduction for donating food inventory. They also supported extending through April 15 the deadline for claiming charitable donations on the previous year’s tax filing and simplifying to 1 percent the excise tax rate for private foundations’ investment income.

Extending the tax breaks for just two weeks via this passed package is a slap in the face to a sector that in 2012 (the most recent figures) represented 5.4 percent of the nation’s gross domestic product (GDP), contributing $887.3 billion to the economy. And of those tax-exempt entities, 501(c)(3) public charities accounted for slightly more than three-quarters of the sector’s revenue ($1.65 trillion) and expenses ($1.56 trillion) and more than three-fifths of nonprofit assets ($2.99 trillion) during 2012.

There reportedly are 6,488 earmarks in the $1.1 trillion package and it appears swine waste management in North Carolina and maple syrup researchers in Vermont have more pull with Congress than the charitable sector. The earmarks total $8.3 billion, not to mention the gutting of financial reforms written into law to prevent another Wall Street meltdown.

Actually there was one provision for a tax-exempt organization — $125,000 for fishery equipment for the Guam Fisherman’s Cooperative Association.

As reported earlier this year in The NonProfit Times, The Center for Responsive Politics (CRP) in Washington, D.C., home of OpenSecrets.org, estimates the nonprofit industry spent $44 million on lobbying during 2013, which pales in comparison to the pharmaceutical industry, which spent $226 million or even the automotive industry at $58 million but is not pocket change.

That $44 million could have purchased a lot of meals, coats, medical visits and school books. Instead, it bought almost nothing. The lobbyists will argue that Congress can pass a new version of the America Gives More Act when it reconvenes in January and make the tax changes retroactive. The odds of the next Congress agreeing to anything where there aren’t revenue offsets would curl the toes of any gambler looking at a tout board. It has little chance of passage in its current form.

It’s time for the sector to stand up. It is time for sector leaders to stop playing nicely. It is time for the organizations with well-chiseled political action arms to target members of Congress who refuse to help their own constituents. That’s right. It is their own constituents who are being hurt.

There should be radio spots, opinion pieces in local newspapers, tweets, Facebook posts and Instagram messages letting voters in those district know that not moving on these incentives damages their neighborhoods. Nonprofits in those districts need to hold rallies and take the action they are always extolling their member to do.

“Don” Corleone took his revenge but “Frankie Five Angels” ran afoul of him and was encouraged to make his own exit, which he did. Members of Congress who target charities are not going to go as quietly. This is not about targeting Democrats or Republicans. It’s about removing members who clearly won’t help their own constituents.

The election cycle starts today. Who will be the sector’s “Godfather?”