What's the Buzz?
Not surprisingly, the post-election view for the nonprofit community signals more regulation. Here’s a look ahead at the two areas of most concern to our members that are active in raising funds and building awareness for their missions.
In 2006, the regulatory buzzword has been “reform,” including charity reforms and postal reform. By choosing the word “reform,” lawmakers might have sought to inoculate the results from charges of regulatory overkill. What were the effects on your organization?
First, for the lawmakers charged with overseeing the tax-exempt community, it became increasingly difficult to pass sweeping reforms as was desired. At the start of such legislation, the zeal to capture every imagined wrongdoing was great as the legislators heard testimony from the charitable community. However, the reality of the legislative calendar and priorities resulted in charity “reforms” being broken into several parts, only some of which survived and passed into law through H.R. 4., the Pension Protection Act of 2006. Not to mention that one of the umbrella organizations for nonprofits and foundations, Independent Sector, spent many months putting together a broad range of issues and proposed solutions, which further slowed the regulatory train that was barreling down at the community, regardless of whether particular organizations were in favor of one proposal vs. another.
H.R. 4 includes four areas that need further correction by regulators and scrutiny by organizations:
1. IRA rollover provision. This is a good provision allowing individuals that are 70.5 years old to make contributions to charitable organizations tax free up to $100,000. The shelf life is very short — two years — so if you have not started to alert your potential donors to this, do it now.
2. Confidential information. We at the DMA Nonprofit Federation are concerned that the implementation of one of the provisions dealing with the exchange of information by the IRS to state charity regulators could lead to instances of confidential/sensitive/incomplete information being shared with the media and politicians seeking to gain from such information.
3. Non-cash donations. If you are receiving in-kind donations of clothing, household goods and the like, there is a new requirement that the donor must receive an acknowledgement from the charity that the material was received in “good used condition, or better” which shall inject further subjectivity to the process but should discourage the donation of old socks and hole-y T-shirts. This has received a high mark from some organizations, but since the IRS has not promulgated regulations, the impact is difficult to predict.
4. Receipting for cash gifts. According to the new law, which is in effect for gifts in 2007 for the most part, no deduction will be permitted unless the donor can substantiate it through a bank record or acknowledgement by the donee. This will have a dramatic impact on organizations that will be asked to provide such acknowledgement. Although it is estimated that 75 percent of tax filers do not itemize their deductions, that still means millions of donors.
There are other provisions that now the Treasury Department admits it is struggling to understand and implement. One such provision requires organizations with revenues of less than $25,000 a year to submit a yearly statement to the IRS notifying it of their status. Although this would only include a current address, names of leaders and any change to status, the IRS must now figure out how to notify 650,000 organizations of the change.
Recent pronouncements by congressional staffers indicate that they wish to pursue further changes, including issues on executive compensation, and the role of 501(c)3 and (c)4 organizations in politics. Senate Finance Chairman Charles Grassley most recently has been focusing his attention on nonprofit hospitals and any needed reforms in that area, since he is of the belief they are not operating as charitable organizations in terms of providing care for the underprivileged.
With regards to the issue of postal “reform,” the DMANF has long favored reform of laws governing the United States Postal Service to do the following: keep rates reasonable for nonprofits through a tight rate index; maintain universal service including six-days-per-week delivery; and provide a strong regulatory body to ensure rates are fair and to provide due process should the USPS try to spiral rates upward. Recently, the mailing community has had another reason to support reform: the new cost for providing a Civil Service Retirement System escrow and a military service pension would be taken out through legislation, which is at least a $3 billion annual savings.
If you are using the mail for any of your campaigns, you need to pay attention. This issue is key not only because of the increase in costs, but also because of the impact on the overall economy should the USPS fail. We have come very close to passage of comprehensive reform this year, and attempts will be made to have it pass during the lame-duck session. However, new hurdles presented themselves at the end of the year when Bill Young, president of The National Association of Letter Carriers — a labor union that had seemed to support the bill — suddenly said the union could not support it because of a provision that would penalize postal workers who pursue worker-compensation issues.
It remains to be seen whether postal reform can be taken up again because of the bitter feelings this opposition has created, although promises are being made that postal reform is close to passage.
In the meantime, you need to budget a 7 percent to 9 percent postal rate increase each year to pay for the increasing expenses of the USPS.
Xenia “Senny” Boone Esq. is executive director of the DMA Nonprofit Federation and vice president of Strategic Alliances. Contact: email@example.com.