Maine Nonprofit Law E-Bulletin
December 16, 2016
In this issue:
- What Does Unified Republican Control Mean For Your Nonprofit?
- New Overtime Rule Kicks In Soon
- E-Bulletin Information
What Does Unified Republican Control Mean For Your Nonprofit?
If Donald Trump and the Republicans were your candidates of choice, then congratulations indeed. May you be correct in placing your faith in them. If you view Tuesday’s elections as apocalyptic, then read on for more reasons to be concerned. In particular, what does this new regime mean for charitable organizations? With the caveat that everything here is speculation, and that a Trump presidency is going to be wildly unpredictable, here are some initial thoughts, all of them rather sobering.
- Lowered tax rates will likely hurt nonprofit charities. Both Trump’s tax plan and the House Republican plan call for lowering tax rates on the wealthy (from a current top rate of 39.6% to 33%). Likewise, the proposed elimination of the estate tax would reduce incentives for end-of-life giving. Although not all experts agree, most consider it likely that charitable giving will decline due to decreased incentives. The nonpartisan Tax Policy Center estimated that Trump’s overall tax plan would reduce individual charitable giving by 4.5 percent to 9 percent ($13.5 billion and $26.1 billion) in 2017.
- Limits on charitable deductions are in the mix. Trump’s tax plan and the House Republican plan call for different treatment of charitable deductions. Trump’s plan would cap all itemized deductions — including for charitable donations — at $100,000 for single people and $200,000 for married couples. In contrast, the House plan would eliminate all deductions except for the charitable deduction and the mortgage interest deduction. It seems intuitive that Trump will cede these sorts of policy details to Paul Ryan and the House Republicans. Then again, it’s Trump, so who knows what will happen. Capping the charitable giving deduction is not an inherently partisan idea; Obama proposed a similar plan in some of his earlier budgets. But deduction limits coupled with lower tax rates would be a double blow for charities. In any event, whether to impose charitable deduction limits could be a significant policy matter as a tax bill winds its way through Congress, and nonprofits should be on the alert for opportunities to influence their representatives. All of Maine’s members of Congress are probably persuadable on this issue.
- Spending cuts will affect all sectors of society, including charities. It should come as no surprise that significantly reduced tax revenues will lead to all sorts of pressures on the spending side. Any and all domestic discretionary spending is at risk of substantial cuts in the coming years. This will mean reduced direct outlays from the federal government, as well as increased need for nonprofit services as federal, state and local government programs contract.
- Repeal of Obamacare will affect nonprofit health insurance plans and constituents. Because Republicans have been virtually silent on what programs, if any, would replace Obamacare, it is impossible to gauge the effect of repeal on nonprofits or individuals. That said, under any objective assessment, it seems unlikely that any replacement programs would be as comprehensive and generous as Obamacare.
- Greater leeway to lobby and campaign? On the campaign trail, candidate Trump discussed repealing or scaling back the limitations on lobbying and campaigning activities by 501(c)(3) organizations. See here for more details. In particular, churches have pressed for such loosening of the rules over the past several years. I don’t support these changes am skeptical that such proposals would become law, but stranger things have happened.
New Overtime Rule Kicks In Soon
The federal Department of Labor’s revised overtime rules take effect on December 1, 2016. Now is the time for nonprofits to make sure that they understand how the new rule affects their staff. Because Maine’s overtime law is tied to the federal Fair Labor Standards Act, the new federal rules apply to all Maine employers and employees, with no exception for nonprofit organizations. For more information, see http://www.nonprofitmaine.org/blog/dol-overtime-rule-latest/. It remains to be seen whether the new administration or Congress will attempt to overturn the new rule, but there’s little doubt it will take effect on December 1.