The Power of A

Sen. Chuck Grassley (R-IA), ranking member of the Senate Finance Committee, has filed two amendments to the health care reform bill introduced by Senate Finance Chairman Max Baucus (D-MT) that directly impact tax-exempt organizations.

These amendments were filed along with more than 500 others before the end of last week, and are being considered in the markup of the Baucus bill that got underway Sept. 22.

One of Grassley’s amendments would give the IRS statutory authority to require that tax-exempt organizations report governance and management information as part of their annual Form 990 reporting requirements. The IRS revised the Form 990 for the 2008 tax year to include a new section on governance, among other changes. The section asks filing organizations questions about board composition, governing body review of the 990, and whether certain policies are in place for conflicts of interest, whistleblower and document retention, as well as a process for determining executive compensation. In drafting the new section, the IRS acknowledged it lacked explicit statutory authority to scrutinize nonprofit governance practices, but included the section because it believes good governance leads to improved compliance.

Grassley’s amendment would protect the IRS from “wasteful” legal challenges by adding language to specifically mandate that the agency require governance reporting by tax-exempt organizations.

The second amendment proposed by Grassley is a revenue raiser that would remove the safe harbor providing tax-exempt organizations a “rebuttable presumption of reasonableness” in setting the compensation of its officers and directors. In explaining the amendment, Grassley cited studies by the IRS of executive compensation practices at charities and nonprofit hospitals. These studies showed very high salaries and little recourse for the government to challenge the reasonableness of compensation paid by the organizations in question. Many organizations were able to use rebuttable presumption procedures to demonstrate compensation was set comparable to executives in other organizations, even in some instances for-profit organizations.

Grassley’s amendment would adopt a 2005 recommendation by the Joint Committee on Taxation to remove the rebuttable presumption defense and require organizations to disclose in their annual 990 filings a summary of the comparable information used to determine an executive’s compensation. In a report this week, BNA quoted a Grassley spokesperson as saying the changes to existing compensation rules would apply only to Section 501(c)(3) and (c)(4) organizations.

ASAE is attempting to determine the intent of this amendment, and analyzing its implications for tax-exempt organizations. Giving the IRS express authority to determine what is reasonable compensation and what are appropriate comparables would be viewed by many as a potentially dangerous extension of authority. ASAE will study this amendment closely, and report its findings.

Quick Hits

Senate Finance begins its markup … Baucus modifies his chairman’s mark.

As expected, Senate Finance Committee Chairman Max Baucus (D-MT) introduced his health care reform bill today after months of negotiating with three Democrats and three Republicans on his committee, dubbed the Gang of Six.

“This is a unique moment in history where we can finally reach an objective so many of us have sought for so long,” Baucus said in a statement today.

The Finance Committee mark up is scheduled to begin Sept. 22. Considered a more moderate alternative to the health care bills produced in the House and the Senate HELP Committee, the Baucus bill eschews the public insurance option in favor of creating membership-run nonprofit cooperatives to compete with the private insurance companies. The bill contains many of the other reforms endorsed by President Obama in his speech to Congress last week, including creating a state-based exchange through which individuals and small businesses could obtain insurance; providing tax credits for lower-income individuals and small businesses to help offset the cost of premiums; and requiring that most U.S. citizens and legal residents purchase health insurance or have health coverage through their employer.

According to Baucus, the Congressional Budget Office has estimated the cost of the bill at $856 billion over 10 years. Baucus said the bill will be fully paid for without adding to the federal deficit. To offset the cost, the bill calls for imposing a 35 percent tax on high-value insurance plans and new fees on insurers and other industry players.

The unveiling of the Senate Finance Committee’s bill has prompted renewed grousing from both sides of the aisle. Sen. Chuck Grassley (R-IA), the committee’s ranking member, has spent months at the bargaining table as one of the Gang of Six, but signaled this week he will not vote for the end product.

“Unfortunately, we’re operating under an artificial deadline set by the Democratic leadership and the White House,” Grassley said in a Sept. 15 statement. “I’m disappointed because it looks like we’re being pushed aside by the Democratic leadership so the Senate can move forward on a bill that, up to this point, does not meet the shared goals for affordable, accessible health coverage that we set forth when this process began.”

Grassley said he still has concerns that federal funds could be used for abortions, that illegal aliens could receive subsidies to help obtain insurance, and that medical liability reform measures aren’t tough enough.

The other two Republican members of the Gang of Six, Sens. Mike Enzi (R-WY) and Olympia Snowe (R-ME), haven’t yet said whether they will support the Finance bill, though many observers have said Snowe is probably the only hope for a bipartisan bill.

Meanwhile, liberal Senate Democrats are also balking at the Baucus bill. Sen. John Rockefeller (D-WV) told reporters Sept. 15 he won’t support the bill in its present form. Rockefeller has been pushing hard for a government-run public option and also opposes the excise tax on high-value health insurance plans included in the Finance bill. What do you think of the long-awaited bill unveiled by Sen. Baucus? How should the Senate proceed in the absence of Republican support for the bill?

Quick Hits

The full text of the chairman’s mark  … Reaction to the bill from Senate Minority Leader Mitch McConnell  … Ways and Means Chairman Charlie Rangel (D-NY) is skeptical about Senate plan (subscription required).

Over the past 24 hours, a series of events has moved the question of how to pay for health care reform to the forefront of the debate.  The following timeline shows how this issue has become the biggest roadblock to comprehensive health care reform:

•   On June 15, the Congressional Budget Office (CBO) sent a letter to Senator Kennedy (D-MA) and the Health Education Labor and Pensions (HELP) Committee scoring their draft proposal as costing $1 trillion over 10 years but only covering an additional 16 million Americans.  This plan lacked firm language on a public plan or an employer mandate
•   On June 16, CBO also released a score of an unreleased Senate Finance Committee proposal, placing its cost at $1.5 trillion over ten years.  Committee Chair Max Baucus (D-MT) responded that the scored proposal was two weeks old.
•   CBO also told the committee that the president’s plans for expanding health coverage would add to the nation’s federal debt without offsets.  The letter states “without meaningful reforms, the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it.”

With these updates, the Democratic leadership has been exploring new ways to pay for their health care plans.  CongressDaily obtained a document circulated by Ways and Means Committee Democrats with a series of proposals to pay for their legislation.  In addition to listing removing the tax-exemption for employers and increasing the tax on soda and alcohol, the document lists the following new ideas as “pay-fors”:

- Reducing deductions taken by pharmaceutical companies for prescription drug advertising expenses
- A 2 percent surtax on individuals earning more than $200,000 and households with $250,000 or more in adjusted gross income
- A 0.375% increase in the Medicare tax on both employers and employees, which will be controversial with small businesses
- Valued-Added Tax (VAT) on goods and services similar to a tax imposed by most European countries.

Interestingly, the limit on charitable tax deductions proposed by the president is not in the document, likely due to the resistance from members of the caucus.

Quick Hits

CBO Director says health care reform is a “hard slog” in USA Today… House Energy and Commerce Committee will release health care bill Thursday or Friday and “it will include some numbers”… The House Republican task force on health care releases its health care outline (details from ASAE to come)… Former U.S. Senate majority leaders Howard Baker, Tom Daschle, and Bob Dole release their bipartisan health care reform plan.

We’ve been using this site to keep association professionals informed and engaged in a dialogue around healthcare reform, which is by far the top priority for Congress and the administration right now and an issue in which plenty of associations have a stake.

Apart from analyzing and influencing policy, however, there is a strong public benefit component to what associations do on a daily basis. That’s why associations are typically granted tax-exempt status, and a big reason why they’re so important and engrained in the fabric of our society. If you saw the TV ad for The Power of A (which ran from April through Memorial Day weekend in the Metro Washington region), you know that the goal of the campaign was to remind policymakers that associations are tremendous resources for solving pressing problems in this country.

ASAE showcases the public benefit role of associations through its Associations Advance America Awards program. We recently completed the second and final round of judging for the 2009 Awards, and we want to congratulate 17 associations who received ASAE’s Award of Excellence. These award-winning programs will be up for consideration for ASAE’s highest honor, the Summit Award, to be announced in July.

They also give policymakers and other opinion leaders some specific examples of how associations promote volunteerism and community service, and improve the quality of life enjoyed in communities across the country. Congratulations to these 17 Award of Excellence winners for 2009:

American Academy of Dermatology
Program: AAD Camp Discovery

American Academy of Dermatology
Program: National Melanoma/Skin Cancer Screening Program

American Academy of Ophthalmology
Program: EyeCare America (ECA) Seniors EyeCare Program

American Beverage Association
Program: National School Beverage Guidelines

American Institute of Certified Public Accountants
Program: 360 Degrees of Financial Literacy

American Institute of Certified Public Accountants
Program: Feed the Pig

American Library Association
Program: Smart investing@ your library

American Speech-Language-Hearing Association
Program: Listen to Your Buds

Association Management Center
Program: Solid Rock Carpenters

Civitan International
Program: Civitan International Research Center

Illinois Certified Public Accountants Society
Program: Military Service Tax Preparation Project

Independent Insurance Agents of New Mexico
Program: SafeTeen New Mexico

New Jersey Academy of Family Physicians
Program: Increasing Colorectal Cancer Screening

Professional Landscape Network
Program:  PLANET”s Renewal & Remembrance

Safari Club International Foundation
Program: Sportsmen Against Hunger

School Nutrition Association
Program: Power Up With School Breakfast

Texas Land Title Association
Program: Texas Courthouse Restoration Stewardship Initiative

With lawmakers still considering options for financing health care reform, ASAE joined a coalition of diverse nonprofit organizations this week in opposing a proposal from the Obama administration to impose new limits on charitable tax deductions.

The Senate Finance Committee last week released a wide range of policy options for funding comprehensive reform of America’s health care system, including potential savings from within the health care system, modifications of current health care tax expenditures, and non-health-related tax provisions proposed by the Obama administration in its FY10 budget proposals.

One of the administration’s key proposals to fund health care reform would reduce the tax deduction for charitable contributions from 35 percent to 28 percent for families earning more than $250,000. The administration has estimated the proposal could raise about $318 billion over 10 years.

“Health care reform is something we all want to see, but stifling a vital sector whose sole purpose is helping those in need is not an appropriate method of financing these reforms,” said the May 26 coalition letter to Senate Finance. “In light of these challenging economic times, now is not the time for Congress to be providing disincentives to giving.”

ASAE signed the letter along with the Association of Fundraising Professionals, the DMA Nonprofit Federation, the Alliance of Nonprofit Mailers and the National Catholic Development Conference.

You can view the letter here.

Senate Finance Committee Chairman Max Baucus (D-MT) has said he would prefer to pay for reform by finding money within the health care system, but he included the non-health-related options proposed by the White House “in deference to the president.”

An Office of Management and Budget (OMB) official this week said the administration still considers the proposal to lower the tax deduction for charitable contributions as the best option for change without undermining incentives for employers to provide health insurance for workers, according to the Bureau of National Affairs (BNA).

Chris Vest
Director, Public Policy
ASAE

The Senate Finance Committee May 18 released a 41-page list of policy options for funding comprehensive reform of America’s health care system, many of which have already prompted criticism from affected industries and their respective associations.

The options on the table are wide-ranging, and include potential savings achieved from within the health care system, modifications of current health care tax expenditures, and non-health-related tax provisions proposed by the Obama administration in its FY10 budget proposals.

Senate Finance Committee Chairman Max Baucus (D-MT) has said he would prefer to pay for reform by finding money within the health care system, but he included the non-health-related options proposed by the White House “in deference to the president.” Among the biggest potential financing options is a proposal to cap the exclusion for employer-provided health insurance, valued at $133 billion in 2008 alone. Options include capping the exclusion based on the value of the health insurance policy or an employee’s income level, or converting the entire employer-provided exclusion to an individual tax deduction or credit.

Other proposals would modify the tax treatment of Health Savings Accounts (HSAs) and modify or eliminate Flexible Spending Accounts (FSAs); modify or eliminate the itemized deduction for medical expenditures; and change the rules applying to tax-exempt hospitals to require them to maintain a minimum level of charitable activity, limit charges to the uninsured, and limit aggressive collection actions.

Another revenue-raising option that has already attracted attention is a proposed tax increase on alcoholic beverages and sugar-sweetened beverages. Baucus will convene a Finance Committee meeting on May 20 to walk through the various policy options. The committee is accepting public comments on the various financing options until May 26, and comments can be sent to Health_Reform@finance-dem.senate.gov. To download a copy of the committee’s policy options for financing health reform, click here.

I’ve really enjoyed reading the various posts on this site, and getting a sense of how my colleagues are approaching some tough challenges in the industries and professions they represent. This seems like a good forum for sharing some ideas that might be adaptable by other groups. In that vein, I’d like to share a few of the ways my organization, The Adhesive and Sealant Council (ASC), is providing support to its members in this economic environment:

Educating our Industry’s Customer Base

o    Developing a new educational web portal (www.adhesives.org) designed to educate engineers/designers/architects about adhesives and sealants to assist them in developing next generation products that offer superior design and functionality and will be competitive worldwide. In conjunction with the website, providing a new Adhesive CAD Symbol that designers can incorporate in AutoCAD drawings to enable them to easily represent an adhesive, thus streamlining their future CAD efforts;
o    Providing an analysis of the 2009 American Recovery and Reinvestment (Stimulus) Act that may positively impact our members;
o    Creating new forums for our members to receive business leads from  our industry’s customers; and
o    Developing partnerships with engineering and designer professional societies that represent the broader manufacturing sector and need to know about adhesives and sealants – co-sponsoring web-based seminars and providing educational information to enrich their memberships

Education for the Adhesive & Sealant Supply Chain
o    Lowering web-based seminar registration fees to make them more affordable;
o    Offering a broader array of programming to appeal those on travel restrictions; and
o    Providing timely speakers on the economy and ways to deal with the Great Recession at our conventions

Industry Information
o    Creating a new weekly Economic Report webpage on the ascouncil.org to provide timely information for members; and
o    Forging new relationships with third party providers of technical books (Smithers Rapra and Knovel) at discounted prices or complimentary access available to members only

Building Community
o    Leveraging social media to help generate online dialogue about solving design problems using adhesives and sealants;
o    Hosting roundtable peer group discussions at ASC Conventions to discuss such issues as managing tight credit, optimizing inventory control to help free up cash; and
o    Hosting various member peer groups to address the recession (e.g. HR – managing labor force in these challenging times; compensation/benefit issues)

Government Advocacy
o    Participating in a Manufacturing Sector coalition (with other associations) to help influence future tax code with sound policies designed to spur on demand for building products via tax credits and deduction incentives.

Thanks for the opportunity to post, and I look forward to the continuing dialogue on the Power of A site.

Larry Sloan, CAE
President
The Adhesive and Sealant Council

The ASAE’s President and CEO on this week’s Health Care discussion as a follow up to yesterday’s post.

As John mention in the clip, click on Get Involved to join in the conversation.

Earlier this week, representatives of several organizations and associations with a stake in health care reform were called to the White House to provide their perspectives on reforming the health care system and reducing costs.

“[W]e have joined together in an unprecedented effort, as private sector stakeholders—physicians, hospitals, other health care workers, payors, suppliers, manufacturers, and organized labor—to offer concrete initiatives that will transform the health care system,” wrote the collective leaders of six health care organizations.

This joint effort is exactly what ThePowerofA.org seeks to demonstrate — that, combined, associations are problem solvers with the experience, expertise and resources needed to tackle the toughest challenges our country faces.

That President Obama called our country’s associations to the center of the debate is strong evidence that associations and their members are (and will be) critically important resources as this administration works toward health care reform.

Not every association, however, will have the opportunity to have the ear of the President on every issue.  That’s where ThePowerofA.org comes in.  In a previous post, ASAE CEO John Graham asked readers and association members, “Imagine if you were sitting across the table today with a member of the Obama administration or a legislative director for a member of Congress. What would you want them to know about your association and your members that might assist them in crafting good policy?”

Leaders of several associations had the privilege of answering that question this week.  It’s a question that’s as critical now as ever.  To give your answer, click ‘get involved‘ to give your answer or comment below and let us know what you think about the recent Health Care summit.

Chris Vest
Director, Public Policy
ASAE

The May edition of Associations Now is hot off the press and one of the most popular pieces features interviews with a variety of CEOs all answering questions surrounding the economic downturn, the effect it’s had on their organization, and what they’re doing to recover.

Below, I’ve pulled the highlights of the most compelling responses.  As you read the answers, be thinking about what you’d say if someone asked what associations are doing to move the country forward.  If you’ve got an answer we want to hear it; comment on this post, or click Get Involved to submit a video, become a guest poster, or add an association to the growing list of PowerofA.org particpants.

(You can read the full feature here. )

Associations Now: How has the economy affected your association?

Kris Cook, National Affordable Housing Management Association: “We have a little bit of a unique situation in that we’ve been a stressed industry for eight to 10 years. Being a stressed industry, you learn to live on a shoestring, so now that everybody else is stressed, it’s like, “Been there, done that.” We’ve been lean and mean.”

Chris Bates, Independent Office Products and Furniture Dealers Association: We have two membership divisions—office-supplies dealers and office-furniture dealers—and it’s been remarkable to see how differently, in terms of degree at least, they’ve been impacted. The office-supply dealers have soft market conditions, but by and large, because they’re nimble, they’ve been able to gain market share and partially offset what’s going on.  The office-furniture dealers, on the other hand—the business is falling off the map. When the overall industry compresses in a six-month period of time by 25 to 30 percent, that’s huge.

Erin Fuller, Tysons Tomorrow: As an organization that just celebrated our one-year birthday, the lucky thing is that we only know this environment. I never had any fat-cat days.

AN: What has your experience been like with your boards through the economic downturn?

Kris Cook “We created what we affectionately called our Financial Meltdown Taskforce. Within a month, they had come up with a white paper that had 10 possible solutions to bringing back investors.

AN: Do you have any last thoughts or takeaways?

Cedric Calhoun Alliance of Hazardous Materials Professionals: I would throw in partnering—partnering with staff to get things done, partnering with chapters, partnering with like organizations. There is obviously strength in numbers and, depending on how you partner, potentially less risk in some of the things that you’re trying to accomplish.

Chris Vest
Director, Public Policy
ASAE