Jobs bill could help some nonprofits, hurt others

President Obama’s $447 billion package of Federal spending and tax cuts designed to stimulate hiring includes specific efforts to help nonprofits. The American Jobs Act would reduce nonprofit payroll taxes and eliminate them if nonprofits add new staff or increase wages. The plan also would provide a tax credit for nonprofits to hire veterans and long-term unemployed workers.

The White House issued a statement recognizing the importance of the sector in economic recovery, citing the President’s awareness that one in twelve workers in the U.S. are employed by nonprofits. The legislation would provide funding to state and local governments that could also be passed down to nonprofits and/or benefit their constituencies, such as financial assistance for local schools and funding for home rebuilding.

Nonprofit advocates have called for the President to specifically recognize nonprofits as a source of job creation, and for policymakers at all levels to include nonprofits in job growth strategies and policies. Nonprofits employ more than 13 million people and pay more than $500 billion in wages annually.

To pay for the package, the President seeks to limit itemized deductions claimed for charity by upper-income taxpayers. Obama suggested changing the limit for write-offs for itemized deductions from 35 to 28 percent. (For example, a donation of $100,000 would save the donor $28,000 in taxes rather than $35,000 in taxes.) The plan would only apply to the wealthiest taxpayers—an individual with an adjusted gross income of at least $200,000 or a married couple with an adjusted gross income of at least $250,000. It would provide the Federal government roughly $400 billion over ten years.

Many nonprofit advocates say the legislation would reduce giving to charities and force them to lay off workers or cut services to those in need, a counterproductive strategy in a plan to boost employment and help struggling nonprofits better serve their communities. Others suggest that only the largest and wealthiest nonprofits, such as museums and universities, are likely to be affected, as these are the main recipients of large grants from wealthy donors looking for tax write-offs.

Several other nonprofit-related jobs bills are already pending in the White House, although they show little sign of being supported by the Republican House. These include Sen. Kirsten Gillibrand’s Urban Jobs Act (S. 922/ H.R. 683), which would make competitive grants to nonprofit community-based organizations to provide job training, education, and support services and activities for eligible urban youth to provide them with a “pathway to employment, or education leading to employment” and require the creation of “local jobs council advisory committees” to demonstrate community-based support for the nonprofits’ strategies. Rep. Keith Ellison’s Put America to Work Act (H.R. 2368) would help local governments “create employment opportunities for unemployed and underemployed residents of distressed communities” through “fast-track jobs” and fund public and nonprofit entities to create employment opportunities in construction/rehabilitation, remediation/demolition, human services, and youth programs.

You can read more about the American Jobs Act at Thomas.gov or on the White House website. With regard to nonprofits, the Jobs Act would:

  • Reduce nonprofit payroll taxes;
  • Extend the expansion of unemployment benefits through January 2, 2013;
  • Eliminate the payroll taxes if a nonprofit adds new staff or increases wages;
  • Provide a tax credit (applicable to nonprofit payroll taxes and withholdings) to nonprofit employers that hire veterans and long-term unemployed workers;
  • Provide financial assistance to states or nonprofits to help unemployed and low-income individuals to find job-related opportunities or skills; and
  • Provide financial assistance for state and local governments, school construction and money to rebuild and refurbish homes.
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