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Advocacy in Action

Posted By Jennifer Gill, Friday, June 8, 2018
Updated: Friday, June 8, 2018


June 8, 2018



Short Session Winds Down
Current word around the legislative building is that the General Assembly will adjourn the short session most likely by the end of June. Governor Roy Cooper Wednesday vetoed the budget bill passed last Friday by the General Assembly; there is little doubt that the two chambers will quickly override the veto. We continue to track legislation impacting our member communities and are in full planning mode for the long session which begins in January 2019.

Federal Tax Reform Impact Still Sorting Itself Out
The Tax Cuts and Jobs Act (TCJA) was signed into law in December 2017 and went into effect on January 1, 2018. This was the largest overhaul of the tax code since the 1980s. Although most of the major provisions of the TCJA addressed changes in the individual rates and deductions, many provisions will have an effect on nonprofit providers moving forward. While we are still waiting on guidance from the IRS, we urge members to speak to their accountants and financial consultants to explore how these changes will specifically affect their communities.

OPERATIONAL ISSUES
Unrelated Business Income Tax (UBIT) Changes
Prior to the passage of the TCJA, nonprofit organizations could calculate UBIT based on combining all of their unrelated business activities income. If one unrelated business activity had income it could be offset by another activity that had business losses. For example, if one unrelated business activity generated $20,000 and a separate unrelated business activity of the organization had a loss of $5,000, the organization would pay UBIT on $15,000. Under the TCJA, this is no longer allowed. Each unrelated business activity must now be accounted for separately for UBIT purposes. The change to the corporate tax rates, however, also changed the unrelated business income tax rate to 21 percent for UBIT over the $1,000 threshold.

Application of UBIT On Commuting/Parking and Other Fringe Benefits to Employees
Organizations that provide their employees with 1) transportation fringe benefits that are not included in their employees’ taxable income; 2) parking reimbursements; or 3) on-premises gyms must now include the value of such benefits as unrelated business taxable income subject to UBIT. Parking reimbursements include any expenses paid or incurred by the organization for a parking facility used by employees on or near the organization’s premises. To avoid the UBIT liability, an employer organization can either provide the benefits as taxable items to the employees or discontinue providing the benefits. This is a marked change for nonprofits to be subject to a tax on expense rather than on income. LeadingAge national has signed on to an American Society of Association Executives (ASAE) letter requesting a delay in implementation of this provision pending additional guidance from the IRS. For additional information, see IRS Publication 15-B – Employer’s Tax Guide to Fringe Benefits regarding descriptions of fringe benefits.

Repeal of Advance Refunding Bonds
Tax-exempt advance refunding bonds, a form of refinancing used by 501(c)(3) borrowers, has effectively been eliminated because the TCJA makes the interest on such bonds taxable. Advance refunding had been a common practice used by issuers to refinance bonds beyond 90 days from their call date to take advantage of a better interest rate.

FUNDRAISING ISSUES
Some TCJA provisions will affect donors and any tax benefits they might receive from making charitable contributions. These provisions are estimated to reduce charitable giving by billions of dollars per year.

Increase in the Standard Deduction
TCJA raises the standard deduction from $6,350 to $12,000 for single individuals and from $12,700 to $24,000 for married couples. This will likely reduce the number of taxpayers that will itemize their deductions because for many itemizing will not significantly reduce their taxable income. Estimates are that the number of filers who itemize will fall from 30% of taxpayers to 6% and, correspondingly, charitable giving could be reduced by $12 billion to $20 billion per year. See Tax Policy Center and National Council of Nonprofits resources

Limitations on State and Local Tax (SALT) and Mortgage Interest Deductions
Under the TCJA, deductions for all state and local taxes (income, property, real estate, and sales tax) combined cannot exceed $10,000. A substantial number of individuals in high cost of living/high tax states will exceed this cap. This greater tax burden for people in those states will probably have an adverse effect on non-profits as people will have less money available to donate. The TCJA also reduces the cap on the home mortgage interest deduction on new loans from $1 million to $750,000 in principal value and repeals the deduction for interest paid on home equity debt. These changes could have an impact on charitable donations similar to the effect of restrictions on SALT deductions. People will have higher taxes and less income available to donate.

Doubling of the Estate and Gift Tax Exemptions
The TCJA doubled the estate and gift tax exemptions to $11.2 million and so far, fewer wealthy taxpayers will be hit with a very hefty tax (40%) for leaving or gifting money to their children. Those who still have to pay estate taxes will have much more of their transferred wealth exempted from being taxed. Most wealthy taxpayers who are potentially subject to estate and gift taxes work with their tax planners to mitigate and minimize the taxes they would have to pay. Deductible charitable contributions are often a big part of their strategies. In 2010, the estate tax was temporarily repealed and there was a significant drop in charitable bequests in IRS tax filings from the prior year.

Charitable Contribution Deductions and “Pease” Limitation
Individuals can now take a greater deduction for charitable giving if they itemize their deductions. They can claim up to 60 percent of their adjusted gross income. Previously, the limit was capped at 50 percent. Also, the “Pease” limitation has been repealed. Therefore, there will be fewer restrictions for individuals who decide to itemize their deductions. This is good news as it could encourage high-income earners to contribute more to charity.

Efforts to Change/Amend the TCJA
In reaction to the changes in the TCJA, LeadingAge national has joined other organizations in supporting an effort for a “universal charitable deduction.” This concept would provide for an “above-the-line” income tax deduction for charitable contributions and thus likely would ameliorate the expected decline in charitable giving associated with the passage of the TCJA.

Guidance on IRS Rules Around Politically-Related Activity
As the nation prepares for mid-term congressional elections this year, many nonprofit aging services providers are concerned about staying within Internal Revenue Service rules for allowable politically-related activity. LeadingAge national has prepared a set of guidelines to help you stay in compliance. If you work for a nonprofit organization, can you contribute to political campaigns or participate in candidate fundraising? What kind of help can you give residents with learning about candidates who are running for office or getting to the polls to vote? Can your organization hold candidate forums? What if an elected official who is running for reelection wants to visit your community to talk to your residents? All of these questions are discussed in LeadingAge national’s new publication, Lobbying and Election Activity: Guiding Principles for Nonprofit Providers. As the campaign season heats up, we hope these guidelines will help you balance your and your residents' rights as citizens with the IRS restrictions on political activity by nonprofits.

Opioid Legislation Makes its Way Across the Federal Landscape
The House Energy and Commerce Committee has approved 57 separate bills incorporating a wide range of proposals to deal with the various aspects of the opioid crisis, the widespread misuse of addictive pain medications. The measures include proposals to encourage development and use of non-opioid pain relief alternatives; to increase physician and public awareness of the dangers of opioid addiction and of alternative treatments; to facilitate the use of telehealth and electronic health records to track use of opioid prescription medication; and to encourage communication among Medicare and Medicaid agencies, providers, quality improvement organizations, and pharmacies on the use of these medications. The next step for this legislation is consideration on the House floor. While this has not yet been scheduled, it could occur as early as this month. On the Senate side, Majority Leader Mitch McConnell (R-KY) has indicated that opioid legislation could be taken up while the Senate is in Washington in August, since the traditional recess has been cancelled. LeadingAge national understands the need to address the widespread abuse of these medications, which are a serious and growing public health threat. We welcome and support more research on effective alternatives to the use of opioids, to increased public awareness and knowledge of the dangers of the drugs and potential alternatives, and more effective communication among health care providers and payors on the use of the medications. We have to be concerned that legislation will not have unintended consequences for long-term services and supports providers, whose residents and clients often have valid medical needs for opioid pain relief medication. Federal law requires nursing homes to ensure that residents are free from pain to the extent possible. We are carefully monitoring the development of legislation to ensure that residents whose pain cannot be effectively managed without opioids continue to have access to the medications they need.

New Regulations Analyzed for Impact
Federal agencies were busy last month, releasing proposed rules and regulations that affect how our members serve older Americans. LeadingAge national's content experts responded by analyzing and sharing their insights on how these proposed regulations might affect your operations. Please be sure to check out the following analyses:
• The proposed rule for the FY2019 Skilled Nursing Facility (SNF) Prospective Payment System (PPS), and our updated SNF PPS Calculator;
• The proposed rule that would update FY2019 Medicare payment rates and the wage index for hospice programs serving Medicare beneficiaries; and
• A sub-regulatory guidance detailing an array of home and community-based services (HCBS) that Medicare Advantage plans can offer as supplemental benefits beginning in Calendar Year 2019.

In addition, check out LeadingAge national's newly updated Regulatory Roundup, which is designed to provide up-to-date information about important regulatory initiatives at the federal level. The suite includes products designed for nursing homes, HCBS and HUD housing providers.

Fighting Fraud Committed Against Older Adults
In its ongoing efforts to protect older adults from telephone and internet scams, the U.S. Senate Special Committee on Aging has released its 2018 Fraud Book on the top ten scam complaints reported in 2017 against older adults. According to the Government Accountability Office, financial fraud targeting older Americans is a growing epidemic that costs seniors an estimated $2.9 billion annually. Moreover, according to the Senate Aging Committee report, seniors often do not report fraud because they do not know where to report it, are too ashamed to admit they have been scammed, or may not even know that they are victims. In 2017, the Aging Committee’s Fraud Hotline received more than 1,400 complaints of fraud targeting seniors around the country.

The top ten scams reported in 2017 were:
• IRS Impersonation Scams
• Robocalls and Unsolicited Phone Calls
• Sweepstakes Scams / Jamaican Lottery Scam
• “Can You Hear Me?” Scams
• Grandparent Scams
• Computer Tech Support Scam
• Romance Scams
• Elder Financial Abuse
• Identity Theft
• Government Grant Scams

If you or someone you know are the victim of a scam or fraud attempt, please call the Special Committee on Aging’s Fraud Hotline at 1-855-303-9470. In addition, bipartisan legislation to strengthen banking laws to protect older adults against financial fraud now has passed both houses of Congress and is on its way to the White House to be signed into law. The Senior Safe Act will encourage banks, credit unions, insurance companies, investment brokerages, and other financial services to train their employees in spotting possible fraud against older customers and protect the companies and their employees from liability for reporting suspected fraud to regulatory agencies.


LeadingAge North Carolina | 222 N. Person Street, Raleigh, NC 27601
919-571-8333 | info@leadingagenc.org | www.leadingagenc.org


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