What the Johnson Amendment Repeal Discussion Means for Nonprofits

Discussions surrounding repealing the Johnson Amendment has been a hot topic in nonprofit news. This story has gained additional traction after Trump mentioned his plans during his Jan. 18th speech at Liberty University. The major concerns of this amendment repeal are that it would put deductions at risk and damage public trust.

The Johnson Amendment was passed in 1954 and it prevents charitable organizations from engaging in politics. It was introduced by then Senator Lyndon B. Johnson and it was suggested he did so because a charity opposed him in a primary race. The passage of this amendment “…[established] a rationale that, in return for not engaging in partisan politics, charities would continue to receive tax-deductible donations because they focus on contributing to the broader public good rather than narrower partisan interests.”

Supporters of the Johnson Amendment argue that 501(c)(3)s are able to concentrate and achieve their missions when they are not engaged in politics. Nonprofits serve the common good and with a repeal, it would erode people’s trust in who and how organizations help.

Opponents claim that the Johnson Amendment is in violation of the First Amendment. Nonprofits too have the freedom of speech and expression.

A repeal would blur the lines of what is a 501(c)(3) in terms of tax-deductions. Other nonprofits, like 501(c)(4), can engage in politics but cannot receive tax donations. It is possible that more entities and/or political groups would seek tax-deductible status to raise funds for political purposes and for potentially undisclosed donors. Also with the repeal, charities could “…lose the ability to receive tax-deductible donations…” and this would inhibit nonprofits from succeeding at their missions.

Repealing the Johnson Amendment is one option in change of federal law. There could be an executive order that would allow the administration to not enforce the law as long as political activities were ancillary. The IRS however could enforce the law if a nonprofit was engaging in more secular activity. From an opinion news piece, Congress seems hesitant to completely repeal the amendment. However, there is a bill at the House that would “amend the Internal Revenue Code to permit a tax-exempt organization to make certain statements related to a political campaign without losing its tax-exempt status.” This bill is the Free Speech Fairness Act.

What is your take on the Johnson Amendment repeal discussion? How would a repeal or executive order effect your charitable organization?

 

Sources:

Clerkin, Richard. “Repealing the Johnson Amendment could lead to reduced donations to churches and charities.” The News and Observer, http://www.newsobserver.com/opinion/op-ed/article134788344.html. Accessed 6 March 2017.

Hackney, Philip and Brian Mittendorf. “Trump may upend nonprofits with vow to ‘destroy’ Johnson Amendment.” Newsweek, http://www.newsweek.com/trump-upend-nonprofits-destroy-johnson-amendment-557716?_cldee=YW5uZS53YWxsZXN0YWRAYm9hcmRzb3VyY2Uub3Jn&recipientid=contact-75cd000f8e99e311956300155d009001-4e6ebff32b1e4064ade9eceac0048d63&esid=3dd07215-cef9-e611-959c-00155d009001. Accessed 6 March 2017.

“H.R.6195 – Free Speech Fairness Act.” Congress.gov, https://www.congress.gov/bill/114th-congress/house-bill/6195. Accessed 6 March 2017.

 

Nonprofit Updates from the IRS

irsYou may want to skip this post based on the title. However, you know you need to read it and rest assured it will be worth your time.

Short and sweet – the IRS recently updated and released the Form 990-EZ with a new help feature. In the 4 page form, there are small question mark icons. By clicking on the icon, you’d see a help display window. There are 29 of these question mark help icons and address common mistakes that small to mid size nonprofits make when filling out the form. This feature was created to help organizations file a more complete return and reduce the chances of the IRS contacting you. There is also a 47 page document with instructions on filling out the Form 990-EZ if that is helpful to you.

To find the Form 990-EZ with the new help feature and the Instructions for Form 990-EZ click here.

501(c)s: A Breakdown of the Many Types

taxThe most common 501(c) is the 501(c)3, but do you know the other types of nonprofits? Click here for a breakdown of the different 501(c)s as defined by the IRS.

With tax season, below is the IRS’s “quick check” whether you can deduct a contribution.

Deductible as Charitable Contributions Not Deductible As Charitable Contributions
Money or property you give to: Money or property you give to:
  • Churches, synagogues, temples, mosques, and other religious organizations
  • Civic leagues, social and sports clubs, labor unions, and chambers of commerce
  • Federal, state, and local governments, if your contribution is solely for public purposes
  • Foreign organizations (except certain Canadian, Israeli, and Mexican charities)
  • Nonprofit schools or hospitals
  • Groups that are run for personal profit
  • The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girl Clubs of America
  • Groups whose purpose is to lobby for law changes
  • War veterans’ groups
  • Homeowners’ associations
Expenses paid for a student living with you, sponsored by a qualified organization
  • Individuals
Out of pocket expenses when you serve a qualified organization as a volunteer
  • Political groups or candidates for public office
Cost of raffle, bingo, or lottery tickets
Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups
Tuition
Value of your time or services
Value of blood given to a blood bank

 

*Information for this post was collected directly from the IRS website and their publications. To read the full IRS publications about nonprofits click on the following titles: Publication 526 and Publication 557.

It’s Off the Table: Donor Social Security Numbers

importantOn December 20, 2015 we posted about a proposed federal regulation that would require nonprofits to collect donor social security numbers. Fortunately, the Treasury Department and Internal Revenue Service has announced that they have withdrawn the proposed regulation. A big part of their decision came from the 38,000+ comments from the public against the regulation.

As a group, 215 nonprofits urged for a withdrawal. The National Council of Nonprofits applauded the nonprofits for speaking up and are celebrating the power of nonprofit advocacy.

If the regulation would have passed, nonprofits would have had to submit an annual “Donee Report” to the IRS by February 28th with donors that made contributions of $250 or more. In the report information such as addresses and social security numbers were to be included.

To read the PCNRC’s original post on the topic, click here.

Federal Mileage Rate Change– from DWD “Mission-Minded” blog

Carrie Minnich (2) (576x800)Carrie Minnich, CPA at Dulin, Ward & DeWald Inc. recently posted about federal mileage rate change. The IRS recently released the federal mileage rates for 2016. Both the per mile rate for business and medical or moving purposes decreased. The per mile rate for charitable purposes stayed the same.

2016 rates are as follows:

54 cents per mile for business

19 cents per mile for medical or moving purposes

14 cents per mile for charitable purposes

To see Carrie’s post, click here.

What’s the Skinny on Federal Grants?

grants.govBillions of dollars in Federal grants are awarded each year for programs and projects that benefit the public. This assistance is rooted in the Constitution and its call to “promote the general Welfare.”   SOURCE: grants.gov

You’ve heard the infomercials expounding on “get free money” from the US government. The guy in the wild-n-crazy-suit makes it sound so easy and a pretty sure thing, but truth is there is a lot of competition in the federal grants realm (perhaps even more than in the private foundation world). Most of all there is a lot of work, eligibility requirements and necessity of being a qualified organization. Here’s a peek at which entities are the most likely to get the grant awards:

  • Universities
  • Researchers
  • Cities, counties and statesIN.usgrants.2015
  • Nonprofit organizations

Want to see where those awards go?  Check out usaspending.gov or the  Indiana State Summary which totaled $99,443,122,649 in funds awarded in FY-2015.

Still interested?

If you work for a state or private organization and are interested in grants, you may find the following resources helpful:

There are several types of grants available for states and organizations, such as:

Other resources for states and organizations include:

SOURCE: https://www.usa.gov/grants

Proposed Nonprofit Federal Regulation

This just in! According to a BoardSource e-blast on December 18, 2015, there is a proposed nonprofit federal regulation. The political newspaper published in Washington D.C., The Hill, reported that nonprofits will need to collect donor Social Security numbers as indicated by a new IRS proposed requirement.

What do you think about this proposed regulation? (Feel free to comment below.) The first big concern seems to be that many nonprofits do not have the resources to secure sensitive information and including from hackers. Tim Delaney, author of The Hill article and President/CEO of the National Council of Nonprofits, mentions that there are over 34,000 comments as of December 16, 2015. There are now nearly 38,000 as of December 22, 2015. The second biggest concern is that people will not give as often, said Delaney.

Read the full The Hill online article, click here.

Read the entire Federal Register with the IRS proposed requirement, click here.