New Mexico nonprofits have a choice to make:
- Do nothing and hope for the best
- Be reactive
- Be proactive
- Be boldly proactive
We need to make our choice before the choice is made for us.
Do Nothing and Hope for the Best:
- The New Mexico State Legislature has made attempts in the past to tax nonprofits and those attempts have all failed. Even the 2017 attempts both died in committee. The state legislators are still talking about tax reform and they are looking very seriously at nonprofit state level tax exemptions. Even if the state legislators do not undertake tax reform in 2018, they will be positioning themselves to do so in 2019.
- Congress has not been successful in passing Repeal and Replace, but they have already passed new rules so they can approve tax reform with a simple majority.
- Trust others to speak up on your behalf. Yes, some funders have contacted state legislators in the past. A group of funders is currently in conversation about how to defend against efforts to remove state tax exemptions. HOWEVER, these funders are not engaging with nonprofits to give us an opportunity to provide crucial data to inform the messaging.
- Defend our tax-exempt status at both the federal and state levels.
o The federal government in their tax reform efforts is looking at nonprofits as a source of revenue. See “Nonprofit Organizations Brace for a Tax Increase” by Allison Grayson, Independent Sector, October 20, 2017.
o The State Legislature is actively working on tax reform. Earlier this year, we saw two proposals, House Bill #412 in the regular session and House Bill #8 in the special session. While these two bills died in committee, tax reform is still on the agenda. Legislators have commissioned a study, and the report is anticipated for the end of December.
o Even if legislators don’t attempt tax reform during the 2018 short legislative session, they will be preparing for tax reform in 2019.
o When I met recently with a progressive state legislator and the subject of tax came up, he told me that the legislature has been unable to raise personal income tax, so they have to tax nonprofits, there’s no one else.
o A state lobbyist said that this was the most serious attempt to tax nonprofits that she has seen in the 20 years she has been lobbying.
- Work with state legislators to help them understand the effects of their proposals.
o Understand what is being proposed
o Do the math with your organization’s budget
o Translate the loss of the proposed taxes into how that would affect the work of your organization and its ability to deliver services
o Share this information with your House Representative and Senator
- Work with state legislators to define the terms used in a tax reform bill. House Bills #412 and #8 included language to have nonprofits pay Gross Receipts Tax on “receipts,” but “receipts” was not defined. Richard Anklam, New Mexico Tax Research Institute, warned that without a clear definition, “receipts” could be interpreted to include grants, contracts, donations, proceeds from fundraising events, and fees for service.
- Contact your Congressional Representative and Senator (202-224-3121). Here is an overview from the National Council of Nonprofits of major issues of concern for all 501(c)(3) organizations:
o Protecting Nonprofit Nonpartisanship (Johnson Amendment)
Be Boldly Proactive
- Accept that the policies governing nonprofits are going to change and participate in the process.
- Commit to coming together with other nonprofits to utilize your expertise, wisdom, and insight to propose changes to policies that will benefit our communities and are workable for nonprofits.
- Join New Mexico Thrives to ensure that New Mexico nonprofits have a strong voice in Santa Fe and are not overlooked in Washington.