Nonprofits May Be Able to Go Politically Wild Thanks to House Republicans

New Orleans   The “law of unintended consequences” is not one that was passed by the US House of Representatives and its far right, ideological Republican majority, but it is certainly one that they might soon learn at their peril.

One of the many hidden time bombs in their recent tax bill, now heading towards conference with the Senate, was originally a repeal of the Johnson Amendment that prohibits tax-exempt charities from political activity. Initially, their amendment was only a wet kiss to the heavy breathers in their religious base who wanted a special exemption to practice politics from the pulpit. Not to be outdone – the final version of the House bill instead opens a political floodgate for charities to go wild. Their bill says that any tax-exempt charity can boost or bust political candidates if “the preparation and presentation of such content” is “in the ordinary course of the organization’s regular and customary activities” and does not result in more than de minimis incremental expenses.” (thanks to Ellen P. Aprill a tax law professor at Loyola Law School who read and reported the language!)

So, sure, that would cover preaching, because there’s no cost in adding an endorsement into a sermon, but it would also cover a world of other things that fit fully into a nebulous “de minimis” standard like a banner across a website’s home page, constant Twitter and Facebook posts, and endless email blasts all of which have virtually no cost. Remember as well that these standards are all set and monitored by the Internal Revenue Service, which to date, since the passage of the Johnson Amendment, has never clarified the existing standard of what might be permissible political activity, leaving the matter to institutional restraint and lawyer empowering, as one outfit after another takes a stab at a number, whether less than 5% or 8% or zero. Remember also that because of that the penalties are also somewhere between nil and a hand slap. President Trump’s own foundation was caught in this mess, as you may also remember, when he used the foundation’s funds to make several political contributions at the 5-figure levels, all of which he remedied by repaying the foundation. There was never a question about whether he was going to surrender the tax exemption of his foundation and certainly no evidence that the IRS was threatening to take it away. Without the thin shield of the Johnson Amendment, there will be no practical limits to what nonprofits might be able to do.

The Republican House may think more activism from the pulpit makes it all worthwhile, but they aren’t the only nonprofits who can jump into the partisan playgrounds. Take nonprofit hospitals for example, which still make up almost 60% of hospitals. A list of the top six systems from Ascension to Kaiser in the Wall Street Journal indicated they were turning over $158.5 billion dollars annually. Hospitals were pretty united in their opposition to the Republican efforts to repeal the Affordable Care Act, and will be even more committed to any cutbacks in Medicaid or Medicare. If “de minimis” was 5%, they could spent almost $8 billion, but even dropping notices in every bill or banners on every sign-up for your medical records online now would certainly get the message out. It would also cost just the same for doctors and nurses to whisper in patients’ ears as it cost for the pastor to slip an endorsement in a prayer.

Churches are shrinking while many other parts of the nonprofit sector, like healthcare, are soaring. The Republican House might should get on their knees and offer something up to the Republican Senate to save them from this repeal before the law of unintended consequences makes them give more than they hope to receive.


The Affordable Care Act Needs to be Enforced by the IRS Now

New Orleans   These days everyone wants to talk about taxes, I get that, and that means the IRS, right? Sure it does, but while we’re talking about the IRS let’s talk about the fact that they need to get on the stick and enforce all the laws, not just the ones they feel like, and that means assuring full compliance with the provisions of the Affordable Care Act.

It’s important to never forget that the IRS holds the whip hand when it comes to enforcing the various rules and regulations of Obamacare. For individuals who were required under the individual mandate to buy insurance, they already know this full well, because penalties are being deducted from their tax refunds to cover their penalty. Arguably that’s almost a kinder and gentler way of being dunned because they are taking money from people before they have it their hands, get a good feel for it, and nurture any sort of loving attachment. In some cases, as we’ve pointed out before, for lower income workers it’s a better deal to pay the penalty than to pay a ridiculous amount of your annual income for high-deductible insurance providing bare minimum benefits by lower waged, service sector employers.

So the IRS is good at that part of their job under the Affordable Care Act, because the money is already sitting in the Treasury on a taxpayer’s account. Where they have been dilatory is in enforcing the mandate on employers with 50 or more employees who were required to provide insurance and decided to be scofflaws and just not do it. According to the Wall Street Journal, the IRS finally has sent out thousands of letters to employers going back to 2015 to collect penalties for noncompliance. It adds up, too. According to the Journal, “The Congressional Budget Office estimated in 2015 that employers would owe $9 billion in fiscal 2016 and $13 billion in fiscal 2017.” Maybe that’s not larger than their collective bar bill, but it’s big money and worth the climb to reach out and pull back into the Treasury. Remember as well, these businesses were stiffing their workers on their healthcare, and that’s invaluable.

That’s all great in my book, but there’s more to be done. The IRS is also supposed to be riding hard on nonprofit hospitals and whether they are really justifying their tax exempt status. This was an amendment generated by Republican Senator Chuck Grassley from Iowa, so it almost seems like a bipartisan requirement. There’s a death penalty involved, because the hospitals could lose their exemption by having neglected their charitable purposes. ACORN and Labor Neighbor Research & Training Center with the help of interns from Tulane University in New Orleans and the University of Ottawa have been examining hospital IRS 990s for years. We have found huge billionaire dollar medical institutions, many who claim to be good community citizens, only recording 1 to 2% for charity care, even when the average for such institutions nationally is about 4%. A back of the envelope estimate we have made is that an additional half-billion dollars in free care would be available for lower income families in Texas, Louisiana, and Arkansas, if all nonprofit hospitals even hit the minimum national standard.

The IRS needs to do all of their job under the Affordable Care Act. After years of hammering individuals, it’s good news that businesses are finally being called to account, but it’s past time for hospitals to either be charitable and really spend their money to provide care for lower income families or stop pretending and pay taxes to help pay for the Affordable Care Act.