Thursday, December 5, 2013

Nonprofit Advocacy Matters | December 2, 2013

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Treasury, IRS Propose Major Shift in Electioneering Rules for Non-Charitable Nonprofits
The Treasury Department and Internal Revenue Service issued proposed regulations last week that would restrict the types of political activities that 501(c)(4) social welfare organizations could engage in without running the risk of losing their tax-exempt status, but stopped short of providing a clear percentage or “bright line” for determining how much political activity would be considered too much. The proposed rules would create a new term, “candidate-related political activity,” that is drawn from federal election campaign laws to distinguish what activities will not be considered related to promoting social welfare. In addition to retaining current restrictions on election-related activities (e.g., prohibition on direct contributions to candidates), the proposed definition of “candidate-related political activity” would include running ads that name candidates shortly before elections. The rules would also apply to a broader array of offices beyond elective offices under current rules to also include activities in support or opposition of the appointment or confirmation of executive branch officials and judicial nominees. Also falling under the definition would be partisan and nonpartisan activities such as voter registration drives, get-out-the-vote efforts, candidate forums, and voter guides. The proposal asks for public comments on what types of activities should be exempted from this blanket inclusion of measures many organizations consider essential to their missions of promoting civic engagement and democracy.

On the controversial question of how much “candidate-related political activity” is too much, Treasury and the IRS toss that hot potato to the public which is asked to weigh in with comments on what is an acceptable level (beyond the current vague regulatory standard of engaging “primarily” in social welfare activities) and how to measure those activities. The public is also asked to opine on whether rules similar to the proposed rules should be applied to 501(c)(3) charitable nonprofits, 501(c)(5) labor unions, and 501(c)(6) chambers of commerce and trade associations. Comments should be submitted to the Internal Revenue Service by February 27, 2014.

Budget Negotiators Aiming Low, May Hit the Target
A grand budget bargain, it’s not, but budget negotiators working on a deal to keep the government operating into the New Year reportedly are close to reaching an agreement on two important issues: (1) setting overall spending levels for the rest of the current and 2015 fiscal years, and (2) curbing some of the second wave of arbitrary sequestration cuts that otherwise go into effect on January 15, 2014. To date, the House and Senate have been nearly $90 billion apart on how much to spend this fiscal year that started in October. Negotiations have been stuck in the same partisan positions from the past three years – raising taxes versus cutting spending in entitlement or mandatory programs. The leaders of the budget negotiations, Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI), reportedly are seeking to reduce the additional automatic and arbitrary sequestration cuts by coming up with a combination of non-tax revenue gains, including user fees and sale of wireless spectrum, and modest cuts in mandatory spending in such areas as federal employee retirement plans. The legislation that funded federal programs after the government shutdown gave the budget conference committee untilDecember 13 to strike a deal. That legislation, known as a Continuing Resolution, expires on January 15 and another federal government shutdown is possible unless the House, Senate, and President can agree on a spending plan.

Influential Senators Make Bi-Partisan Call for Support of Charitable Giving Incentive
The charitable giving incentive should be protected during the rewrite of the federal tax code, according to a letter to leaders of the Senate Finance Committeesigned by Senators Ron Wyden (D-OR) and John Thune (R-SD). “It is the only provision that encourages taxpayers to give away a portion of their income for the benefit of others,” the Senators wrote, stressing, ”For this reason, it is not a loophole, but a lifeline for millions of Americans in need.” The letter is significant both because of what it says, and because of the influence that the writers wield in the Senate. Senator Wyden is scheduled to become the top Democratic tax writer in 2015 upon the retirement of current Finance Committee Chairman Max Baucus (D-MT). Wyden is a long-standing supporter of tax incentives for giving, including retaining the charitable deduction in a bi-partisancomprehensive tax overhaul bill he sponsored with Senator Dan Coats (R-IN). Senator Thune serves as Chairman of the Senate Republican Conference, the number three position in Senate Republican leadership, and has been a consistent critic of efforts to curb or eliminate charitable giving incentives. Both Senators Wyden and Thune are members of the Senate Finance Committee.

States Can’t Show Job Growth from Tax Incentives Given to Businesses
Half of states lack the ability to measure the outcomes of the incentives they hand out to for-profit companies in the name of creating new jobs, and only a quarter have workable measures, according to a study from the Pew Center on the States. Every state has at least one jobs tax incentive, according to the report, “but no state regularly and rigorously tests whether those investments are working and ensures lawmakers consider this information when deciding whether to use them, how much to spend, and who should get them.”

News reports appear to confirm the Pew findings and suggest further that incentives to for-profit businesses may not be effective. For example, Georgia has given $106 million in tax breaks to companies that failed to deliver 42 percent of the jobs they promised.Tennessee’s Jobs Tax Credits programs are being criticized after an audit last month revealed that state officials were unable to prove many of the businesses receiving credits had produced the required number of jobs or capital investments. The Illinois Governor’s $527 million worth of tax breaks are also under fire: "Politicians love these types of programs because they can point to the jobs they created," one economics professor warns. "But the problem is it's hard to measure the jobs lost through higher taxes paid by other businesses that pay for these programs." After a drawn-out jobs incentive race with neighboring Kansas, the Governor of Missouri has called for a moratorium on certain business incentives that he says have moved jobs around the state rather than creating new ones.

Government-Nonprofit Contracting Updates
Kansas Shifts Human Service Delivery from Nonprofits to For-Profit Companies

Kansas will become the first state to shift responsibility for delivery of services to developmentally disabled people away from the current network of community-based nonprofits to for-profit companies based out of state. As a result of the change, three insurance companies will be making final decisions about who is eligible for care and which services are appropriate and reimbursable. Currently, community-based nonprofits and county agencies have that responsibility. Families and advocates reportedly are worried that the insurance companies lack experience in managing statewide programs of this complexity and may make decisions based on profit motives rather than on the wellbeing of disabled individuals. The switch from government and nonprofit oversight to for-profit management is under consideration in Louisiana and New Hampshire.

Late Payments, Management Problems Cost Pennsylvania Taxpayers $7 million
Lax management, unfair bidding practices, and late payments to contracted home care providers cost Pennsylvania taxpayers $7 million, according to a new report from the Commonwealth’s Auditor General. The identified problems stemmed from a new contract between the Department of Public Welfare and a financial service provider that the Auditor General found was awarded based on preferential treatment. During the transition to the new provider, contracted home care workers did not receive payments for up to four months. These contract payments, which amount to the home care worker’s paychecks, cover medical services allowing elderly and those with disabilities to remain in their own homes. The lack of payments resulted in 1,600 patients obtaining services elsewhere, at a higher cost, when their home care providers were forced to leave their jobs.


Incoming Pittsburgh Mayor Opts for Confrontation, Collaboration - Simultaneously
The Mayor-Elect of Pittsburgh is pushing for changes that could have both negative and positive effects on local nonprofits. Even before being sworn in as Pittsburgh’s new Mayor, Bill Peduto is calling for an aggressive approach to extracting payments in lieu of taxes (PILOTs) from larger nonprofits by replacing the City’s annual agreements with the Pittsburgh Public Service Fund (PPSF) for millions of dollars with a longer-term agreement that would demand even more money. At the same time, he reportedly is creating anonprofit liaison office focused on working collaboratively with local nonprofits to improve the work being done in low-income communities. "We need to be able to create a city government that enables you to carry out your mission," the Mayor said to an annual convening of area nonprofits.

Additional State and Local Issues

Reality-Driven Policy Priorities
In Montana and elsewhere, it has proved difficult this year to gauge the effects on charitable nonprofits of congressional actions and inactions on such issues as the federal government shutdown, the fiscal cliff, arbitrary sequestration cuts, and the Affordable Care Act, to name only a few. In October, the Montana Nonprofit Association (MNA) asked charitable nonprofits “How are you faring?” Seventy organizations responded, and the results will be used to inform and motivate the State Association’s policy and advocacy work on the largest federal policy issues affecting nonprofits.

Here’s what MNA learned from survey participants:
  • More than two-fifths of nonprofit survey respondents say they were directly affected by the federal government shutdown. More than twenty percent of respondents said the services they provide were affected.
  • More than 40 percent of respondents also said they were directly affected by sequestration, the arbitrary, across-the-board federal spending cuts that started going into effect in March.
  • Only 56 percent of nonprofits say they understand and are prepared for the implementation of the Affordable Care Act.

MNA also received compelling, real-world stories from nonprofits. Here is one example:
“After having two years of primarily flat funding, sequestration reduced our funding levels by 5.27%. It was a major hit to our budget. The bills continue to come in and the cost of business continues to increase at a rate not adequately addressed by our funding. The needs in the community by low-income families continues to increase and demand for services is ongoing.”
MNA plans to continue offering surveys in the coming year so that it can develop and pursue public policy priorities based on its members’ experiences in the ever-changing operating environment in which nonprofits work.

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Data Spurs Emergence of a "Digital Civil Society"

Press Release

Cheryl Loe
Communications Project Manager
The Foundation Center
(888) 356-0354 ext. 701
Jon Warne
Communications Officer
European Foundation Centre
+32 2 512 8938

Data Spurs Emergence of a "Digital Civil Society"

New Edition of Annual Blueprint Forecast Offers Insights,
Predictions for Philanthropy

New York, NY — December 4, 2013. Released today,Philanthropy and the Social Economy: Blueprint 2014 is the much anticipated annual forecast for the industry of philanthropy. Written by leading scholar Lucy Bernholz, the latest edition — which considers the European context for the first time in addition to the American landscape — explains the shifts that come as civil society is manifested in digital environments, including opportunities to establish a new standard of trust regarding how private data are used for public benefit. As data become more and more a part of our everyday lives, ethical challenges facing philanthropic enterprises of all types emerge.
"Now, more than ever, we need new frameworks to understand and shape philanthropy for the 21st century," said Lucy Bernholz, visiting scholar at Stanford University's Center on Philanthropy and Civil Society and author of Blueprint 2014. "I'm hopeful theBlueprint can further regional and global conversations about how philanthropy — in all its various forms — can best evolve to meet society's needs in this rapidly changing world."
The Blueprint is published by GrantCraft, a joint service of the New York-based Foundation Center and Brussels-based European Foundation Centre that taps the practical wisdom of funders to develop resources for the philanthropy sector. In addition to philanthropists, the Blueprint is a strategic resource for anyone using private resources for public benefit, including social business leaders, nonprofit and association executives, individual activists, and policymakers.
In this year's report, Bernholz presents her observations of European philanthropy, discusses how digital civil society can potentially change the root structures of the social economy, makes predictions for 2014 (and revisits those she made for 2013), and considers the reach of the "civic technology" efforts of governments and technologists to engage citizens.
"As changemakers strive to make the world a better place, Lucy Bernholz has their backs by looking ahead," said Bradford K. Smith, president of the Foundation Center. "Everyone in the social sector can benefit from Lucy's perceptive observations and insights on where we are now, where we are headed, and most importantly, where we should be headed."
A highlight of each year's Blueprint is a list of emerging philanthropy-related buzzwords ("privacy" ranks number one this time around). The Blueprint also lists wildcard world events — unanticipated legislation, scandals, or disasters — that have the potential to mitigate or accelerate the timing of big shifts in the social economy. One of Bernholz's predictions for 2014 is that a major crowdfunding scandal will draw scrupulous attention to online fundraising platforms.
In her career as a consultant, writer, and blogger, Bernholz has established herself as an incisive authority in the complex arena of data and philanthropy. The Huffington Post calls Bernholz a "philanthropy game changer," Fast Company magazine named her Philanthropy2173 blog "Best in Class," and she has been named toThe Nonprofit Times' annual list of 50 most influential people. Throughout 2014, Bernholz will continue to investigate and cultivate conversations around the ideas in Blueprint at theGrantCraft blog and on Philanthropy2173.
Philanthropy and the Social Economy: Blueprint 2014 can be downloaded for free at and discussed online using #blueprint14.

About the Foundation Center
Established in 1956, the Foundation Center is the leading source of information about philanthropy worldwide. Through data, analysis, and training, it connects people who want to change the world to the resources they need to succeed. The Center maintains the most comprehensive database on U.S. and, increasingly, global grantmakers and their grants — a robust, accessible knowledge bank for the sector. It also operates research, education, and training programs designed to advance knowledge of philanthropy at every level. Thousands of people visit the Center's web site each day and are served in its five regional library/learning centers and at more than 470 Funding Information Network locations nationwide and around the world. For more information, please or call (212) 620-4230.
About the European Foundation Centre
The European Foundation Centre, founded in 1989, is an international membership association representing public-benefit foundations and corporate funders active in philanthropy in Europe, and beyond. The Centre develops and pursues activities in line with its four key objectives: creating an enabling legal and fiscal environment; documenting the foundation landscape; building the capacity of foundation professionals; and promoting collaboration, both among foundations and between foundations and other actors. Emphasising transparency and best practice, all members sign up to and uphold the European Foundation Centre Principles of Good Practice. For more information, please visit
The Foundation Center • 79 Fifth Avenue, New York, NY 10003 •(212) 620-4230

Rock n' Roll n' Risk Management - RISK eNews

Rock n’ Roll n’ Risk Management

A friend of the Center, who happens to be an accomplished sound engineer, forwarded a terrific article to us this week about how the best rock n’ roll roadies can do things many music fans might believe are impossible. Why? Well, one reason seems to be that roadies and members of production crews are motivated to do the impossible because the show must always go on.
Why Roadies Are Our Best Bet For Typhoon Haiyan Relief In The Philippines, by Ruth Blatt, published at, features an interview with Charlie Hernandez, a former roadie and production manager for The Police. Blatt, who writes about “the intersection of rock n’ roll and business,” describes how roadies and the rock concerts they support “descend upon a site and then quickly disappear. Along the way, they face technical complexity, divergent regulations, multiple vendors, language barriers, and the certainty of unforeseen obstacles.”
As we read about how touring professionals came together to provide relief in Haiti and Pakistan after the disasters in those countries in 2010, we couldn’t help but see that the talents of roadies offer valuable lessons for nonprofit leaders charged with ensuring that their missions go on.

Risk Tips from the Road

·         Ask for Help and Be Eager to Help — In addition to “somebody to love,” every nonprofit leader needs lots of somebodies to help sustain a charitable mission. The article explains that despite the demands of the work and lifestyle, many roadies and production managers spend their free time helping others. As a result, the best in the business have bigger contact lists in their cell phones than professional match makers. According to our sound engineer friend, keeping a mental note of the skills and interests of people you meet on the road, and saving contact details, are essential to getting the help you need when you need it.
·         Close the Loop — Roadies don’t call it a day until every piece of equipment is packed up and on the truck or headed to the airport. The ability to follow-through until the job is completely done is essential to making sure the band is ready for the next stop on the tour. The commitment to closing the loop is applicable in risk management as well. Whether it’s conducting an in-depth review of the nonprofit’s policies and the actions taken by staff after an accident or near-miss, or taking the time to tell a vendor the reasons you’ve decided to change providers, closing the loop is fundamental to preserving trust in key relationships, learning from experience, and inspiring confidence in your mission and team.
·         Inspire Loyalty — Blatt’s article explains that “fierce camaraderie” is a must in the tough business of rock n’ roll. That means you’re unlikely to hear about a roadie throwing a fellow roadie under the tour bus, literally or figuratively! Many nonprofit leaders have learned the hard way that you need to earn, rather than insist, on loyalty. True loyalty exists in nonprofits where staff members believe that executives bring integrity to the job each and every day. In the world of risk management, lukewarm loyalty is a downside risk waiting to materialize. When staff are disloyal or disillusioned they are more likely to disregard the risk management policies of the nonprofit.
The Queen song The Show Must Go On was the final track on the rock band’s 1991 album, Innuendo. Written principally by band member Brian May, The Show Must Go On is regarded as a tribute to the bravery and fierce determination of lead singer Freddie Mercury, who continued to perform despite being gravely ill. The song was released as a single, just six weeks before Mercury died in 1991. The song reminds us that nonprofit missions are vital to the health and well-being of individuals, communities and the environment, and therefore must also go on. To reach your goal of becoming an effective risk champion, remember to ask for help and give help freely, close the loop after accidents and near-misses, and inspire true loyalty by leading with integrity.
Melanie Herman is Executive Director and Alexandra Ricketts is Project Manager at the Nonprofit Risk Management Center. Melanie and Alex welcome your feedback on this article or questions about the Center’s resources for nonprofits at or(202) 785-3891.