ACR NEWSLETTER

Obviously we all have an interest in avoiding the kind of economic Armageddon that some are predicting if we don’t raise the debt ceiling.  We’ve heard from foundation leaders who are watching and waiting to see how these unsettled economic factors will impact their organizations’ investments, noting that another sharp decline could have a dramatic impact on their investments and their work.  But longer term we need to be mindful about what has been put on the table over the course of this debate.  If this protracted debate is any indicator the nonprofit sector is likely to be challenged like never before.

Most of the reason for these challenges can be traced to money.  As in, the feds and the states and the towns don’t have any.  We’ve seen attempts at the state and local level to curb the charitable deduction, negotiate payments in lieu of taxes from tax-exempt entities, and try to define what constitutes a worthy charity from a less worthy charity.  One member of Congress calls them the “SOBs”, symphony, opera and ballet.  At the federal level, the President himself has proposed -–more than once– to curb the charitable deduction. Both Chairmen of the tax-writing committees have made it clear that they intend to pursue tax reform, and the nonprofit sector is most definitely on the table.  This means that not only can we expect the charitable deduction to come under scrutiny but also other issues that affect charitable giving (such as the estate tax and payouts) and the sector (administrative costs, executive and board compensation and attempts to redefine what is charitable). 

There is another, newer reason why we are likely to see tax reform sooner rather than later.  Just about all of the debt ceiling proposals that have been floated would establish special commissions or select committees designed to take on entitlement and tax reform in the next 24 months at the latest.  In general, these committees or commissions would have a set amount of time to make recommendations that would either be voted on immediately or would be sent to the tax and entitlement committees of House Ways and Means and Senate Finance to be tweaked.  Either way, the recommendations would be on a faster track than most other bills.  And those recommendations will surely have winners and losers in the tax space.

We find this prospect deeply concerning, particularly since the pressure to meet hurried timelines often preempts thoughtful discourse of public policy and its consequences.  Going forward we urge you to get involved with ACR sooner rather than later so we can leverage your voice and your interests.