Update: Federal Tax Bill (Reconciliation)

Last week, members of MANP's staff traveled to Washington D.C. for a critically well-timed national Lobby Day organized by the National Council of Nonprofits. There, we met with Senator Collins, Senator King, and staff members from Rep. Golden and Rep. Pingree's offices. We advocated for key priorities in the major tax bill that is currently making its way through Congress.

One thing we heard from each office was how much they value hearing from you, and hearing your stories! Please continue to share your stories with our delegation, and share how federal policy-making impacts your community and your ability to carry out your mission.

After hearing from MANP staff and other nonprofit advocates in DC last week, the Senate Finance Committee released their version of the bill just last night.

There are several pieces of good news included in this latest draft, including things which MANP and nonprofits across the country helped to advocate for. If you reached out to Maine's delegation - thank you! There is more to do; please read below for current action items.

Changes Made to Drafts of the Tax Bill as a Result of Nonprofit Advocacy

• The revised bill increases the universal charitable deduction from $150 for individuals and $300 for married couples to $1,000 and $2,000 respectively – bringing the proposal closer in scale to the bipartisan Charitable Act, a bill introduced by Sen. Lankford, Sen. Coons, Rep. Moore, and Rep. Pappas, and co-sponsored by Sen. Collins. This welcome development will help encourage more charitable giving by individuals who do not itemize their tax deductions.
  
  
• The Senate bill also eliminates proposed new taxes on foundations, which would have significantly cut financial resources available to nonprofit organizations to advance their missions. Under the House proposal – which was removed by the Senate – foundations with assets of more than $5 billion would have seen a 10% tax rate on net investment income, those with assets between $250 million to $5 billion would have seen a 5% tax rate, those with assets between $50 million and $250 million would have paid 2.8%, and those with assets under $50 million would pay the existing 1.4% tax.
  
  
• The bill also removes the proposed tax on transportation benefits provided by nonprofit employers. This proposal would have diverted scarce resources away from essential services, undermined the ability of charitable nonprofit organizations to meet needs in their communities, and put greater strain on government.
  
  
• After effective advocacy from nonprofit organizations, House leaders earlier removed a provision that would have granted unprecedented authority to the Executive Branch to revoke nonprofit tax-exempt status without due process.

Current Action Items

There is more work to do! The revised legislation still includes several harmful provisions that take resources away from the nonprofit sector, reducing its ability to serve people in communities nationwide.

Nonprofit organizations should continue to contact their members of Congress – especially House and Senate Republicans – to urge them to:

• OPPOSE limits on individual and corporate giving. These proposals discourage charitable donations made by individuals and corporations, ultimately leaving nonprofit organizations with fewer resources to serve their community. The Senate and House bills include a 1% floor (minimum) for charitable contributions made by corporations and significantly reduce the value of itemized deductions for individual taxpayers, disincentivizing charitable giving. The Senate bill also adds a 0.5% floor (minimum) for individual itemizers.
  
  
• SUPPORT and further EXPAND tax incentives for charitable giving. Congress should include in the tax reconciliation bill the Charitable Act, introduced by Sen. Lankford (R-OK), Sen. Coons (D-DE), Rep. Moore (R-UT), and Rep. Pappas (D-NH), and co-sponsored by Sen. Collins, to create a non-itemizer tax incentive for charitable donations to nonprofit organizations. See NCN’s one-pager on the Charitable Act.

Further Cuts to Safety Net Programs

In both the House and Senate version, this bill proposes devastating cuts to federal safety net programs. Nonprofits cannot make up for these cuts, and as a result, more community members will go without.

The Senate bill further cuts safety net programs, such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP), which provide healthcare and food security to millions of people. While NCN and others are still reviewing the details, the Senate bill reportedly cuts more resources from Medicaid than the nearly $800 billion reduction proposed in the House. The House bill would result in nearly 13.7 million fewer people accessing healthcare, according to the Congressional Budget Office (CBO). The Senate provisions, however, are largely considered to be a placeholder for continued negotiations among Republican members of Congress.

Likewise, the Senate bill includes significant cuts to SNAP.  While the House proposal required all states to cover a share of the costs of SNAP benefits, the Senate proposal only imposes that cost if the state has an error rate above 6%. It is worth noting that this includes Maine (and 45 other states). Like the House bill, the Senate bill decreases the administrative costs the federal government pays by 25 percent, beginning in fiscal year 2027, effectively shifting costs to state governments. The Senate bill also removes an exemption from work requirements, proposed by the House, for people experiencing homelessness and youth aging out of foster care.

Timeline for Passage

The bill is expected to receive a vote on the Senate floor as soon as next week. If approved by the Senate, the bill will head back to the House of Representatives for a final vote before it is signed into law by President Trump.

While it will be incredibly difficult to make changes to the draft legislation at this point in the process, it is important for nonprofit organizations to continue to make their voices heard with congressional leaders about the impact these provisions will have on the millions of people who rely on essential services provided by nonprofit organizations.

Additional Resources

• NCN's full analysis of the Senate bill.
• Updated one-pager on how to protect nonprofits in tax reconciliation.
• Updated chart of the tax provisions.

Thank you to National Council of Nonprofits for their relentless advocacy on this tax bill, and much of this summary. MANP is a proud member of NCN, and organizations across Maine benefit from MANP's membership and NCN's work.