January 2018 Public Policy Update: New Tax Law, Legislature Back in Session

January 16, 2018

The new year is upon us, which means legislators are back to work and it is time for nonprofits to start considering what this year’s public policy landscape has in store. Below are key issues for your organization to be aware of:

Next Steps on Federal Tax Reform

At the end of 2017, Congress passed a tax reform bill that makes sweeping changes to the tax code beginning this year. Below is a brief summary of the new law, and for deeper analysis of the impact for nonprofits, please review the summary published by the National of Council of Nonprofits that is available here.  

Changes in the Tax Law:

  • The new law doubles the standard deduction, which will reduce the number of taxpayers who itemize. The reduction in itemizing taxpayers means that fewer taxpayers will receive a tax benefit for making donations to nonprofit organizations. It is estimated by the U.S. Congress Joint Economic Committee Democrats that the new law places approximately $285 million in charitable giving in Washington State at risk.
  • The new law imposes a $10,000 cap on State and Local Tax (SALT) deductions, which could put pressure on local governments and school districts to find new revenue, lower taxes, or make local service cuts.
  • The new law doubles the Estate Tax exemption from $11 million to $22 million, which will likely impact planned giving.
  • The new law essentially repeals the Affordable Care Act’s individual mandate by changing the penalty for not having insurance to $0 beginning in 2019. This could increase the number of voluntarily uninsured people.
  • The new law made changes regarding Unrelated Business Income Tax. Each UBIT transaction is now taxable, instead of the previous method of aggregating gains and losses.
  • The new law imposes a 21% excise tax on nonprofits with top employees making $1 million or more.
  • The new law imposes a new 1.4% excise tax on the net investment income of nonprofit colleges and universities with assets of at least $500,000 per full-time student and more than 500 full-time students.

What Remains the Same

The following proposals were under consideration but were not passed into law.

  • The Johnson Amendment, which requires nonprofits to remain nonpartisan, remains in place.
    • This is due to the work of nonprofits advocating to retain the Johnson Amendment. Thank you to everyone who met with their members of Congress, made calls, sent emails, and posted items on social media. Your advocacy made a difference!
    • Unfortunately, the Johnson Amendment repeal effort could come back during the federal spending fight expected to play out this week and next week before the January 19th government funding deadline.
  • Private activity bonds, donor advised fund rules, volunteer mileage rate, the status of art museums, and the foundation excise tax stay the same.

On January 11, 2018, the National Council of Nonprofits hosted a webinar about the next steps on tax reform. The webinar, which is embedded below covers operational changes for your nonprofit, fundraising issues, public policy and advocacy challenges, and some next steps for your organization to take. The National Council of Nonprofits emphasizes that the new laws are likely to lead to federal, state, and local spending cuts even as the need for services provided by nonprofit organizations increases. We recommend viewing the entire one hour webinar, but key segments to watch include

  • Operational Changes @ 12 Minutes
  • Fundraising Issues @ 25 Minutes
  • Public Policy Challenges @ 31 Minutes
  • Next Steps @ 50 Minutes

As the implementation of the tax law continues to unfold, Washington Nonprofits recommends that your organization undertake these action steps:

  • Stay informed about how the law is being implemented. Watch for updates from Washington Nonprofits, others in your network, and the media.
  • Look out for operational compliance issues. Look for updates to be posted to the IRS’ website as well as items that may come from your vendors, such as your payroll processor, auditors, legal counsel, and others.
  • Keep fundraising with a focus on your mission. Work to emphasize your mission and impact over the tax deductibility of donations.
  • Be prepared to advocate for your mission. Anticipate that opportunities will arise for you to advocate for your mission to elected officials, the public, and the media as the impact of the tax law begins to be seen in your community.

We are very interested in learning what your organization is doing to message about the new tax law, as well as what we can do to be helpful to all of you as we get adjusted to the new tax climate. Please contact us to let us know how your organization is adjusting.

2018 Legislative Session Preview

This year’s session is intended to last 60 days and pieces of legislation will move quickly to meet the 60 day deadline. Democratic control of both the House and Senate gives them the opportunity to set the legislative agenda, which is expected to include passing Washington’s delayed capital budget and resolving the Hirst water rights decision; addressing the Washington Supreme Court’s ruling that stated last year’s legislative fix to the McCleary decision was insufficient; and addressing variances in the state budget on issues including special education, mental health court fines, and forest fire relief. There are additional so-called “Legacy Bills” that are expected to pass as well. Those include bills on expanding voting rights and equal pay, among other issues. You can follow the latest developments on the legislative session at www.leg.wa.gov.

SB 5991– Increasing transparency of contributions by creating the Washington state DISCLOSE act of 2018

Washington Nonprofits is currently watching SB 5991 as it makes its way through the legislature. Under the bill, all types of nonprofits that spend above $10,000 on ballot measure advocacy would be subject to the same donor disclosure requirements as traditional political committees (such as PACs). The disclosure requirements would also apply to all types of nonprofit organizations that provide $10,000 to a 501(c)(4) or PAC for ballot measure advocacy and to 501(c)(4) organizations that provide $10,000 to PACs for political spending. SB 5991’s disclosure requirements mean that the nonprofit would have to disclose its top ten donors above $10,000, as well as any donors above $100,000, if it engages in the spending described above. The disclosure would apply to any donor to the organization that meets the giving threshold, regardless of whether the money was earmarked for a specific purpose.

Before our policy call, Washington Nonprofits discussed the bill with its prime sponsor, Senator Andy Billig, and he is interested in hearing concerns and questions from nonprofits. Senator Billig’s phone number and contact form are available here. If you are thinking about reaching out to the Senator, please keep us apprised of your concerns and what you learn. Background information on current laws in Washington State regarding nonprofits and ballot measure activities is available from Bolder Advocacy here.

Additional Policy Issues

Public Service Loan Forgiveness

Many nonprofit employees use the Public Service Loan Forgiveness program to manage their student loans. At the end of 2017 there was a proposal floated in Congress and by the Department of Education to end the Public Service Loan Forgiveness program for future borrowers. A change such as that proposal could have serious implications for the future of the nonprofit workforce. It was shared on the call that the blowback against changing the program kept the proposal from gaining traction. Washington Nonprofits will continue to provide updates on this issue.

 Census 2020

Washington Nonprofits is currently monitoring the lead up to the implementation of the 2020 census. The census is critical for determining how resources are allocated to different areas and the drawing of political districts. We learned recently that a proposal has been floated to add a question about citizenship to the 2020 census. According to certain experts, there is a concern that such a question to could impact the implementation of the census and lead to an inaccurate count. Washington Nonprofits will work with our partners to monitor and respond to this issue and other policy decisions that might compromise an accurate count.

Nonprofit Corporation Act Update

Washington Nonprofits is continuing to work with a committee of the Washington State Bar Association to modernize the statutes governing nonprofits in Washington State. The substance of the proposal is nearing completion and we are aiming to provide nonprofits with a plain language summary of the proposal in the coming months. We will continue to provide updates as the process progresses.

January Advocacy Tip: Follow the Legislative Action

Now that the legislature is reconvened for its 60 day session, it is important for your nonprofit to be aware of how the legislature will work as it heads toward the end of session. You can follow all of the legislative action on the legislature’s website at www.leg.wa.gov. If you’re unsure of how to get started, check out the resources available from the Legislative Resource Center’s “Citizen’s Guide to Effective Legislative Participation.” You will learn how a bill becomes a law, how to read a bill, and other tips for effective advocacy.


Next Public Policy Calls

The tentative dates for Washington Nonprofits’ 2018 public policy calls are:

  • Wednesday March 14, 2018 at Noon
  • Wednesday May 30, 2018 at Noon
  • Wednesday September 5, 2018 at Noon
  • Wednesday November 14, 2018 at Noon

Registration information will be shared closer to the call dates. Make sure you’re signed up for Washington Nonprofits’ Public Policy and Advocacy email list to receive the registration information. Click here to sign up for our email list!

February 27: Nonprofit Legislative Reception at the Governor’s Mansion in Olympia

In partnership with the United Ways of the Pacific Northwest, Philanthropy Northwest, and the Washington State Community Action Partnership, Washington Nonprofits is proud to announce the 5th annual Nonprofit Legislative Reception. This is a great opportunity to meet state legislators, nonprofit leaders, and special guests. Click here to learn more and register.

Join Our Public Policy Committee

Washington Nonprofits is looking for members to participate in our Public Policy Committee. Please email me if you are interested.

Washington Nonprofits is Here to Help!

If your organization is seeking advice on an advocacy issue, feel free to connect with us. We are very interested in connecting with you and offering advice and support where appropriate. Additionally, if your organization is interested in publishing an op-ed or letter to the editor on the policy issues we’re watching, we’re happy to assist with that too. Lastly, if your organization is hosting a lobby day or event with an official, please send us the information so we can help get the word out.

Upcoming Advocacy Days

Below is a list of upcoming Advocacy Days in Olympia that may be of interest to your organization. Please feel free to submit your own Advocacy Day event if you would like us to include it in the roundup.

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