Draft of Recommendations to the Incoming President

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THE NONPROFIT AGENDA:
RECOMMENDATIONS TO PRESIDENT GEORGE W. BUSH (AL GORE) TO STRENGTHEN THE NONPROFIT SECTOR

The following recommendations were developed by a group of 30 nonprofit sector leaders from across the country. They were convened by the Advocacy Institute, National Committee for Responsive Philanthropy, OMB Watch, and The Union Institute's Office of Social Responsibility, and were guided by a first-ever Internet-based survey that asked nonprofits to rank ideas that the next President should undertake to strengthen nonprofit social justice initiatives in this country.

There were roughly 1,000 responses to the survey, representing nonprofits from every state except Nebraska. (See www.ombwatch.org/article/articleview/597/1/107/ for a summary of the results.) The survey represents a large cross-section, or focus group, of the nonprofit community. However, no participating group or individual necessarily endorses every recommendation. Findings should rather be interpreted as approximate, or consensus, recommendations.

Nor are the recommendations intended to address all issues of concern to the nonprofit sector. Rather, the focus was on obtaining the perspective of state and local groups on broad nonprofit issues. The advisory group examined the social justice implications for these ideas and developed specific steps that President Bush/Gore can take to implement them.

Three major themes run throughout the recommendations. First, nonprofits believe that more can be done to improve the relationship between the government and the segment of the nonprofit sector working on social justice issues with people and families in need. These recommendations, if implemented, will strengthen the historical partnership between nonprofits and government. While this partnership has traditionally focused on service delivery, these recommendations will build a greater voice for the grassroots organizations that deliver services and speak on behalf of their constituents in public policy debates.

Second, nonprofits believe that the President can play a significant role in addressing inequalities - from social and economic disparities to inequities in the public policy and electoral arena. Curtailing the role of money in politics was far and away the number one policy recommendation. Money's role in politics influences the services nonprofits' provide and undermines the impact of advocacy for the people they serve. The current campaign finance system has created inequities where the wealthy now have more influence than other citizens. Specific policies, such as public financing of campaigns, are recommended.

Third, nonprofits believe that the Federal government can do more to support the causes, constituents and issues nonprofits work on. The second highest ranked recommendation was that the Federal government should invest in the people served by charities. This means using resources, perhaps some of the Federal surplus, to invest wisely in those who have not fully benefited from the economic prosperity of the past few years. It also means government actively working to bolster philanthropy, nonprofit careers, volunteering, and accountability within the nonprofit sector.

The President has enormous opportunity and authority to influence the relationship between government and the nonprofit community. Implementing these recommendations is a good starting point. In addition, the President can use the power and influence of the office to advocate for policies and practices that do not require legislative action. The President can and should seek to shape public opinion and institutional behavior as well as seek changes in official policies and regulations. It is essential that the President take early affirmative action to help nonprofits better serve vulnerable and needy populations. The President should publicly endorse the roles nonprofits play in our society-roles that seek to address inequities and improve quality of life for all. The President's leadership is vital to this sector of our society.

This report has three sections. The first section provides a general overview of the recommendations; the second section provides a summary of the recommendations; and the third section provides a more background and detail on each of the major recommendations.

There are seven areas in which we recommend change:

I. Money and Politics: Reduce the corrosive influence of money on Federal campaigns by embracing the principles of public financing and other possible models for reform.

II. Invest in People Served by Nonprofits: Invest in programs that address community needs and help the many people who have not benefited enough from the healthy economy. In a time of great economic prosperity and large Federal surpluses, these social needs can and should be met.

III. Strengthen Nonprofit Participation in Public Policy Matters: Simplify rules governing nonprofit policy participation and improve the relationship between Federal agencies and nonprofits of all sizes and types.

IV. Giving, Nonprofit Careers, and Volunteering: Allow nonitemizers to deduct charitable contributions on Federal returns. Permit individuals to transfer funds in certain retirement accounts to charities without tax penalties. Maintain the estate tax. Create a new student loan forgiveness program for graduates who work in charities. Initiate efforts to increase volunteering in smaller charities.

V. Improve the Federal Grantmaking Process: Speed up grant payments. Simplify application and reporting requirements. Provide technical assistance to help small nonprofits apply for Federal funds. Federal grantmaking should also conform fully to the constitutional principle of separation of church and state.

VI. Strengthen Capacity of Community-Based Organizations: Create a new national grant program to provide community-based organizations with operating support. Other initiatives to address digital divide concerns, such as through Community Technology Centers, should be undertaken as well. Encourage all donors to give more to community-based groups.

VII. Strengthen Nonprofit Accountability: Require greater disclosure from nonprofits and philanthropies, and improve access to nonprofit disclosure information. Improve IRS enforcement of current laws. Develop Internet-based directories of local services provided by nonprofits.

I. REDUCE THE CORROSIVE INFLUENCE OF MONEY ON POLITICS

Nonprofits ranked this the most important issue for the President to address. Respondents noted two ways in which current campaign finance system hurts nonprofits and the people they serve. First, the disproportionate influence of money negates the democratic principle of one-person-one vote. Second, and more practically, it creates imbalance in public policy debates, since wealthy campaign donors influence campaign outcomes and therefore have a greater influence over public policy. We encourage the new President to consider the following approaches to restoring principled democracy and leveling the playing field in public policy:

A. Discourage purchase of access to representatives of government through campaign spending.

1. Involve community-based organizations in debates around campaign finance reform so that self-interested stakeholders do not write new laws.
2. Promote public financing of all Federal elections.
3. Provide free or reduced cost airtime for Federal candidates on all broadcast media.
4. Limit soft money contributions.

B. Encourage citizens and citizen groups to participate in elections and public policy debates.

1. Support and under no circumstances limit the First Amendment rights of citizens and nonprofit organizations to speak freely on public policy issues.
2. Promote a level playing field in public policy debates by simplifying and updating tax laws that govern legislative lobbying by charities. Eliminate the tax code's distinction between direct and grassroots lobbying.
3. Adjust expenditure limits established in 1976 to account for inflation.

II. INVEST IN THE PEOPLE SERVED BY NONPROFITS

This ranked as the second most important issue for the President to address. Leaders commented on how important it is for the Federal government to invest in programs and policies that can build sustainable communities and broad, long-term economic prosperity. It is time to think big. In a time of economic prosperity and budget surplus, the country should put resources into program areas that have been neglected and under-funded. The nation should also begin to address gaps in the service delivery infrastructure-even if this means creating new Federal programs. Priority areas should include universal pre-school, universal health care, low- and moderate income housing, livable wages, and income supports for those that cannot obtain jobs. Specifically, the President should undertake the following:

A. Use a significant portion of the surplus to invest in people.
If estimates of the surplus decline, other resources should be devoted to public investments.

B. Target Tax Relief to Those Most in Need.
Across-the-board tax cuts primarily benefit the wealthy; they are the wrong approach to investing in our future. Precise tax cuts-such as expanding the Earned Income Tax Credit-are more efficient.

C. Consult With Community Leaders.
Community-based nonprofits have unparalleled insight into community needs and can help the President develop investment priorities.

III. STRENGTHEN NONPROFIT PARTICIPATION IN PUBLIC POLICY

An essential role of nonprofit organizations is to advocate for the people and causes they serve. The Federal government can play a critical role in strengthening nonprofit public policy participation:

A. Protect and Appreciate Advocacy Participation

1. Use the President's bully pulpit to support and encourage nonprofit advocacy.
2. Simplify the tax code to facilitate nonprofits' participation in policy making. Eliminate the confusing distinction between grassroots and direct lobbying, and include all lobbying under one expenditure ceiling. Adjust current expenditure limits-which have not been adjusted since 1976-to account for inflation. Seek ways to reduce the costs of burdensome reporting.
3. Direct the IRS to issue guidance for private foundations on how they can fund advocacy and lobbying activities without penalty.
4. Allow legal services programs to comment on Federal rules, regulations and programs that affect their clients. (Current regulations prohibit comment.) Eliminate similar restrictions on Federally supported volunteer programs.

B. Promote Participation in Federal Agency Policy and Program Activities

1. Establish a collaborative relationship between nonprofits and Federal agencies, similar to that enjoyed by small businesses. Agencies should assess the impact of regulations on nonprofits and their constituencies and appoint a nonprofit liaison to facilitate such deliberations. This improved relationship needs to exist at the national, regional and local office level of all Federal agencies so that nonprofits can have meaningful input to the agencies' processes.
2. Recruit nonprofits to help select agency performance measures as required under the Government Performance and Results Act (GPRA). Nonprofits' input will be invaluable since nonprofits are part of the service delivery infrastructure and will eventually collect information about performance measures.
3. Strengthen the White House Nonprofit Liaison program and charge the office with leading the efforts described in this section.
4. Designate or create state and national support centers to provide nonprofits with the research and technical assistance necessary to help them comment on government regulatory and programmatic proposals. The Protection & Advocacy program under the Developmental Disabilities Act is a model to emulate. Where appropriate, fees and fines from the regulated community can supplement Federal funding.
5. Use electronic communications to disseminate information and to facilitate nonprofit participation in agency proceedings, particularly in rural, low income and minority communities. Forums might include stakeholder roundtables and online discussions. Improve the U.S. Nonprofit Gateway www.nonprofit.gov and include a dedicated search engine and directory of topics all of which should be available through the new Federal web portal, FirstGov www.firstgov.gov.

IV. PROMOTE INCREASED GIVING, VOLUNTEERING, AND NONPROFIT CAREERS

There are a number of ways the President can expand resources - money, staff, and volunteers - to help charities carry out their missions:

A. Permit Nonitemizer Tax Deductions
Allow taxpayers who do not itemize on tax returns to fully deduct charitable contributions. The nonitemizer deduction should take affect immediately upon passage instead of being gradually phased in. The deduction threshold should be high enough to encourage giving but low enough-e.g., $100.00-to allow broad participation.

B. Permit Selected Retirement Account Rollovers to Charities
Allow taxpayers to donate money tax-free from Individual Retirement Accounts. Current legislative proposals would permit IRA rollovers for donors age 70½ or older. The President should encourage broader giving by lowering the eligible age to 65 and by allowing the rollover of Social Security benefits as well.

C. Maintain The Estate Tax
Oppose efforts to repeal the Estate Tax. Repealing the Estate Tax would increase aristocratic concentrations of wealth inconsistent with a democratic society. Repeal would impact the non-profit sector, abrogating current tax incentives and substantially decreasing charitable giving.

D. Create a Student Loan Forgiveness Program for Those In Nonprofit Careers
Support careers in public service by helping public agencies and nonprofits recruit and retain top-notch talent. Nonprofit and government agency employees with outstanding Federal student loans should be eligible for loan-forgiveness based on their length of service if their salaries are below professional market value. This program can follow the model the Public Health Service uses to recruit doctors for low income and rural areas. Pilot programs should include employees of AmeriCorps programs, legal services, public defenders, and health and social services.

E. Strengthen Volunteering-Particularly for Advocacy

1. Encourage AmeriCorps to develop flexible procedures-including the application and reporting processes-to help small grassroots nonprofits participate in the program.
2. Eliminate advocacy restrictions in AmeriCorps and under the Points of Light program.
3. Allow volunteer time to be used in lieu of cash match for Federal grants.
4. Provide a clearinghouse for volunteer opportunities and information.
5. Extend the Volunteer Protection Act to legal entities.

F. Oppose Targeted Charitable Tax Credits

1. Do not limit tax credits for charities to any particular type of nonprofit or any particular types of service.
2. Do not exclude charities that engage in advocacy from the benefit of tax credits.
3. Ensure that tax credits for charities supplements, rather than decreases, overall government funding for programs and services.

V. IMPROVE THE FEDERAL GRANTMAKING PROCESS

Roughly one-third of charities' revenue comes from government grants, underscoring the close partnership nonprofits have with government. Yet these financial interactions are often burdensome, particularly for smaller groups. The President can make the following six improvements:

A. Adjust Payment Reimbursement Procedures for Small Nonprofits
Institute faster payment procedures for Federal grantees. This would help thousands of small nonprofits that can not advance funds or wait long periods of time before they are reimbursed.

B. Involve Charities in Streamlining Grant Application and Reporting Requirements
Insist on full and timely implementation of the Federal Financial Assistance Management Improvement Act (P.L. 106-107), which mandates uniform application forms and reporting systems and calls for a streamlined Federal grants process. OMB should work with a team of nonprofit representatives, including small grant recipients and grants management experts, to develop its implementation plan.

C. Simplify and Unify Nonprofit Financial Reporting Requirements
Stop redundant and burdensome reporting requirements among Federal, state and local governments. These levels of government often require nonprofts to report the same financial information but in different formats and timeframes. The President should implement the recommendations in Unified Financial Reporting for Not-For-Profit Organizations (Jossey-Bass, 2000) to improve accuracy of information, simplify the multitude of reporting formats, and strengthen nonprofit accountability.

D. Initiate Outreach to Make Nonprofits More Aware of Federal Grant Programs
Federal agencies should conduct outreach programs to make more nonprofits aware of Federal grant opportunities. Develop the Federal Commons as a one-stop web resource and incorporate it into the U.S. Nonprofit Gateway and FirstGov (see above).

E. Provide Technical Assistance on Grant Application Process
Federal agencies should provide training and technical assistance for nonprofits that wish to apply for Federal grants.

F. Protect Freedom of Religion
Conform Federal grantmaking to the constitutional principles of separation of church and state. Religious congregations should be eligible for government grants to administer programs only when they can show that program services are kept separate from religious worship activities. No government funds should be used to operate programs where religious activity and proselytizing are indistinguishable from program services or incorporated into them. Federal funds should not be used to discriminate in hiring practices based on religious belief or affiliation. Given the controversy surrounding Charitable Choice, the President should wait for a Court review of its constitutionality before expanding it.

VI. INCREASE SUPPORT FOR STRENGTHENING THE CAPACITY OF COMMUNITY-BASED ORGANIZATIONS

Many of the above recommendations will strengthen the capacity of smaller nonprofit organizations. Three additional recommendations include:

A. Support Community Technology Centers and Nonprofit Technology Support
Provide grant support to create or enhance Community Technology Centers (CTCs) so that there is at least one CTC in every congressional district. CTCs help residents with technology issues, from job training, to computer literacy training, to community service. In large districts-particularly in rural, low-income, and minority areas-there should be more than one CTC. Overall, resources should be targeted to rural, low-income and minority communities. Government should also help small nonprofits select and use information technologies.

B. Provide Federal Funding for Community Based Organizations
Create a continuing national grant program based on the National Endowment programs to help them with general support needs and to improve quality of life in our communities.

C. Increase Philanthropic Support of Grassroots Initiatives
The President should use his "bully pulpit" to promote increased philanthropic support for community-based organizations. He should also consult with charities, foundations, corporations and other donors to build support for grassroots activities-particularly those dealing with social justice.

VII. STRENGTHEN NONPROFIT ACCOUNTABILITY

Support efforts to improve the public's understanding of nonprofits' work, and strengthen tools to hold organizations accountable for their actions:

A. Require Greater Disclosure of Nonprofit Activities

1. Improve the quality of information requested in IRS Form 990 so that data collected is more meaningful for accountability purposes.
2. Require the IRS to make the Form 990/990PF available in a searchable format through the Internet (either through the IRS web site or through another entity).
3. Require philanthropic efforts not covered by the IRS Form 990PF to be disclosed and made available through the Internet.

B. Improve Access to Information about Nonprofit Services

The Federal web portal, FirstGov, should be linked with state and local governments and with nonprofits providing government contracted services. The public can learn about services provided by government and nonprofit partners no matter where they live or where they travel.

C. Improve IRS enforcement of tax laws and regulations

Strengthen enforcement of tax-exempt rules to help build public trust in the nonprofit sector. Ensure that enforcement does not threaten, limit or chill nonprofit advocacy and robust public debate.

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