Policy Update: Federal and State Issues

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Nonprofit Connect wants to keep you informed about recent policy changes that affect the nonprofit community and those we serve.

Anti-Johnson Amendment Language in H.R. 6147
Included in the House appropriations bill to fund the Internal Revenue Service (H.R. 6417) is language that could effectively prohibit the IRS from enforcing the Johnson Amendment, and allow charitable organizations to spend assets to support political organizations and PACs. The bill is now in a conference committee made up of members of both chambers to work out language for a final version.This may be the Administration's last chance to politicize charitable and religious organizations.

Most legislators are on break between now and Labor Day, and could be available via their local office numbers, included below. Click here for more information on the Johnson Amendment.

Missouri
Congressman Emanuel Cleaver: (816) 842-4545
Congressman Sam Graves: (816) 792-3976
Congresswoman Vicky Hartzler: (816) 884-3411
Senator Claire McCaskill: (816) 421-1639
Senator Roy Blunt: (816) 471-7141

Kansas
Congresswoman Lynn Jenkins: (816) 471-7141
Congressman Kevin Yoder: (913) 621-0832
Senator Jerry Moran: (913) 393-0711
Senator Pat Roberts: (913) 451-9343

New Notice on Unrelated Business Income Tax
Last week the Treasury Department and the Internal Revenue Service released Notice 2018-67, which proposed interim rules for interpreting major changes to unrelated business income tax (UBIT) in the federal tax law enacted last December.

Interim Rule
The Notice clarifies that until final regulations are issued, likely in 2019, nonprofits may rely on a “reasonable interpretation” of the UBIT statutes in determining whether their organizations have more than one "trade or business," and whether they need to pay UBIT on each.

Nonprofits are advised to review the North American Industry Classification System (NAICS) Codes to better understand how your organization fits within their categories, and which codes are most appropriate for your filing status.

Request for Comments
The Notice includes an opportunity for nonprofits to provide comments on how these proposed changes may affect their filings. Nonprofits are asked to compare the NAICS codes to your own unrelated business revenue streams to determine which categories are and are not applicable. You can send comments to Notice.Comments@irscounsel.treas.gov through December 3, 2018.

SALT Workaround Laws
Also last week, the Treasury Department and the Internal Revenue Service announced draft regulations designed to change how the federal government will treat donations to certain charitable organizations that generate state or local tax credits.

Proposed Changes
The proposed changes would require donors to treat any tax credits they receive like other benefits they may receive from charitable giving, such as subtracting the cost of a meal at a gala. Donations made for the purpose of receiving a tax credit would be reduced by the value of the credit.

Example
Currently if a state gives a 70% tax credit on donations made to a charitable organization (government, or otherwise), a donor who gives $1,000 would get a $700 state tax credit and $1,000 federal deduction. Under the proposed rule, the same $1,000 donation would result in a $700 state tax credit and only a $300 federal deduction.

Request for Comments
Before the regulations are adopted as final rules, Treasury and the IRS will give consideration to public comments submitted by October 8, 2018. You can make your comments by clicking here and searching for “Contributions in Exchange for State or Local Tax Credits.” 

Extending Tax Credits in Missouri
HB 1288 is sitting on the Governor’s desk awaiting his signature. This bill extends the tax credit for donations to specific “child advocacy centers;” provides a tax credit equal to 50% of the taxpayer’s contributions of $100 or more to “diaper banks,” “local homeless shelters,” and “local soup kitchens;” sets sunset dates for all provisions 6 years after effective date.

Click here for tips on submitting public comments. These policy alerts are to keep you informed, and give you the opportunity to make your voice heard on legislation that could affect your organization’s mission.

 
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