Philanthropy was one of the main losers in the Republican tax package advanced by the Ways and Means Committee last week and set to hit the House floor soon. However, it was not the only loser, and it won’t be the only sector seeking to get in front of lawmakers in the months ahead to try to get its concerns addressed before the bill is signed into law.
This fact underscores why robust but strategic engagement will be so crucial in the months ahead as stakeholders compete for limited attention on Capitol Hill.
What Is at Stake
Collectively, the House Republican tax bill, as it stands today, would raise some $85 billion in revenue in new taxes directly targeted at the sector and other reforms, like limiting itemized deductions, that will impact charitable giving.
Private foundations and universities were hit especially hard with new tiered investment income tax structures with dramatic rate increases depending on asset size. For example, the colleges and universities with the largest endowments would see a 1,500 percent increase in their federal tax rate. Many private foundations, especially the largest, would see their tax rate double or more.
Charities were not spared either, with an expansion of the unrelated business income tax to hit parking and transportation fringe benefits, for example. Other reforms, such as the 35 percent cap on itemized deductions and the 1 percent floor the bill would impose on corporate charitable deductions, could lead to a decline in resources coming in the door.
The tax hikes in the bill are setting off alarm bells throughout the sector, and some are already mobilizing and making plans to ensure harmful provisions are not in the final bill or their impact is muted.
They are not alone.
Other Sectors Gearing Up to Hit Washington
Other sectors find themselves in the same boat as philanthropy in the House bill. One of the other major revenue raisers the GOP tapped to pay for their tax bill is rolling back clean energy tax credits. The bill includes around $500 billion in credit repeals that will hit the renewable energy and electric vehicles industries.
Just as some in philanthropy are, those groups are undoubtedly charting their game plan to get those provisions stripped or altered before this bill is signed into law.
In some ways, these industries are at an advantage as the writing was on the wall that House Republicans would gut these credits, prompting robust advocacy throughout the spring. This engagement is already paying dividends as senators say some of those provisions must change. The charitable sector, caught somewhat more off guard with the level of reforms directly targeting it for resources, has not seen such public assurances that changes are coming.
With Limited Bandwidth, Strategic Engagement Is Imperative
Importantly, advocacy is not a zero-sum game, and the charitable sector won’t be directly competing with other industries like renewable energy to see who can get their revenue-raising provisions removed from the bill. There are scenarios where both industries, and others, see their concerns addressed or lessened in the final product, especially if lawmakers turn to a more forgiving budgetary scoring mechanism favored in the upper chamber that would reduce the need to raise revenue.
What all stakeholders will be directly competing for is attention. There are only so many hours in a day, and staffers are sure to have their inboxes flooded in the weeks ahead with industries flocking to Washington to get in front of them.
Philanthropy has the opportunity to be one of those sectors here in DC, relaying to senators and House members how the tax hikes in the bill will make it harder for them to carry out their charitable mission and serve their communities.
But with attention on Capitol Hill at a premium, successful groups will be those that are strategic about what members they meet with, how they share their impact through data and stories, and how they inspire their peers to do the same.
For more information, I can be reached at gberkshire@integerpolicy.com.