Federal Updates 5/14/25

On our statewide call last week – Nonprofits & Philanthropy: Responding to Federal Actions – Common Good Vermont heard a request for more regular, digestible updates on federal actions impacting nonprofits. This post covers actions from the White House and Congress over the past couple of weeks. Did we miss something? Let us know (emma(at)commongoodvt.org) or fill out our Federal Impact Report Form.

Related Announcements:

Read on for:

Funding Cut Updates

Earlier this month, the Trump Administration started canceling National Endowment for the Arts grants, impacting Vermont organizations.

  • Affected organizations include Acorn Youth Crafts, the Fletcher Free Library and the Flynn in Burlington, Shelburne Museum, Henry Sheldon Museum in Middlebury, Vermont Folklife and the Vermont Symphony Orchestra, reports VTDigger.
  • Last Friday, Rep Becca Balint and Sen Peter Welch held a town hall with Vermont arts leaders. Read Seven Days coverage here.
  • Vermont Arts Council Response
  • Vermont Public interview with Vermont Arts Council executive director, Susan Evans McClure.

The Pride Center of Vermont saw HIV prevention funding cut by 80%:

Vermont Works for Women received notice on 5/6 that Women in Apprenticeship and Nontraditional Occupations (WANTO) grant program funding had been cancelled.

AmeriCorps cuts made in April continue to be felt in VT:

More complete updates can be found from the National Council of Nonprofits and Independent Sector.

  • 5/9 – A judge issued a temporary restraining order in a case against Trump administration layoffs brought by nonprofits, unions, and local governments. Plaintiffs allege that the the layoffs are unconstitutional because Congress has not authorized them, and insufficient staffing of federal agencies is impacting those who rely on government funds and services. NOFA is one of the plaintiffs as delays have had financial impacts on Vermont farmers.
  • In May, Vermont has already filed five lawsuits against the Trump administration, including around cooperation with federal immigration enforcement, protecting the Department of Health and Human Services, and the Trump Administration’s fake “national energy emergency” under the National Emergencies Act. Find all lawsuits filed by AG Charity Clark here.
  • 6/6 – Judge issues preliminary injunction in a Rhode Island case seeking to prevent the implementation of the executive order “Continuing the Reduction of the Federal Bureaucracy” as it applies to Institute of Museum and Library Services (“IMLS”), the Minority Business Development Agency (“MBDA”), and the Federal Mediation and Conciliation Service (“FMCS”).
  • 5/1 – In a similar case, the U.S. District Court for the District of Columbia granted a temporary restraining order to block the Trump Administration’s dismantling of the Institute of Museum and Library Services (IMLS). Read more from ALA.

Nonprofits Under Threat: What’s in the House Tax Bill

From the National Council of Nonprofits on 5/12:

The House Ways and Means Committee released today its draft tax legislation, which is the core of a major tax reconciliation package that Republicans hope to enact by summer. The draft tax bill includes many provisions which, if enacted, could have a significant impact on nonprofit organizations nationwide and the people they serve.

Impact on nonprofits

The tax bill includes several harmful provisions opposed by NCN that would, if enacted, threaten the entire nonprofit sector:

  • Giving unprecedented authority to the Administration to revoke nonprofit status from certain organizations without due process. This draft provision is similar to what was introduced in H.R. 9495, a bill opposed by NCN. If enacted, Section 112209 would allow the Secretary of the U.S. Department of the Treasury to unilaterally revoke nonprofit status from “terrorist supporting organizations,” without requiring the Secretary to share full evidence or ensure due process. While nonprofit organizations unequivocally oppose terrorism in all forms, any such enforcement action must still be grounded in transparency, evidence, and the rule of law. This authority could enable any Administration of any political party to target charitable organizations based on ideological grounds. Nonprofit organizations wrongfully designated would be irreparably harmed, losing the trust of donors and the communities they serve.
  • Increasing taxes on private foundations as a “pay for” for the bill. Section 112022 would, if enacted, significantly reduce financial resources available to nonprofit organizations to advance their missions. Foundations with assets of more than $5 billion will see tax rates of 10%, those with assets between $250 million to $5 billion would see tax rates of 5%, those with assets between $50 million and $250 million would pay 2.8%, and those with assets under $50 million would pay the existing 1.4% tax. At a time when nonprofit organizations face enormous financial challenges, the tax bill would make it even harder for organizations to serve their communities and fill the gaps unmet by local, state, and federal governments.

NCN supports the inclusion of a non-itemizer charitable deduction for taxpayers. Thanks to effective advocacy from nonprofit organizations across the nation and the leadership Sens. Lankford (R-OK) and Coons (D-DE) and Reps. Moore (R-UT) and Pappas (D-NH), the tax bill creates a non-itemizer tax deduction up to $150 for individuals and $300 for married couples, regardless of whether the tax filers claim an itemized deduction This proposal is based on the Charitable Act, a bill introduced by Sen. Lankford, Sen. Coons, Rep. Moore, and Rep. Pappas, and endorsed by NCN. To help bolster the work done in communities by nonprofit organizations, Congressional leaders should ensure this provision remains in the tax reconciliation package and expand it to further incentivize charitable giving.

Other provisions

The tax bill includes other provisions impacting nonprofits. The draft bill:

  • Increases and expands Unrelated Business Income Tax (UBIT) to include any qualified transportation fringe benefit, such as transit benefits or parking benefits, for charitable organizations. The provision also carves out an exception for church-affiliated organizations. In essence, this provision applies an income tax on an expense. This provision was previously passed in the 2017 and subsequently repealed due to the confusing nature of applying an income tax on an expense and difficulty of quantifying the expense of certain benefits such as the cost of a parking spot already owned by a charitable organization.
  • Limits on itemized deductions, including the charitable deduction. High-income taxpayers, those in the top 37 percent tax bracket, would be subject to an overall reduction in the value of their itemized deductions, disincentivizing giving. The benefit of total itemized deductions, including charitable contributions, would be reduced by 2/37 (resulting in a tax benefit of 35 percent). For example, a $100,000 charitable deduction would produce tax savings of $35,000 rather than $37,000.
  • Increases taxes on large private university endowments. The Administration has continued to target universities on ideological grounds, and the President has threatened to rescind nonprofit status for Harvard University and other institutes of higher education.
  • Creates a 1-percent floor for charitable contributions made by corporations and allows such corporations to carry forward the tax benefit for 5 years.
  • Extends excise tax on executive compensation for all employees earning $1 million or more.
  • Temporarily increases the standard deduction. This will further limit the number of tax filers who itemize their deductions, including for donations to charitable organizations.

The Energy and Commerce draft bill also rescinds many investments made by Congress under the Inflation Reduction Act. NCN filed litigation – and secured a preliminary injunction – in federal court to prevent the Administration from unlawfully withholding these investments and resources.

Impact on safety net programs

The Energy and Commerce Committee released a draft version of its portions of the tax reconciliation bill over the weekend. Taken together with the draft bill from the Ways and Means Committee, the tax reconciliation package could deeply cut or restrict access to several critical safety net programs, impacting many of the same people served by nonprofit organizations.

These draft bills:

  • Cut funding for Medicaid by requiring states to create and expand mandatory work and volunteering requirements to more households as a condition for receiving health benefits. NCN supports programs to promote volunteer activities, but we oppose proposals to condition government-provided benefits on “mandatory volunteerism,” which increases costs, burdens, and liabilities on nonprofit organizations. The proposal also creates a new federal cost-sharing requirement for adult beneficiaries who earn just above the federal poverty limit, and it prevents states from increasing taxes on healthcare providers to help cover costs. The bill reduces the federal cost-share for Medicaid expansion states, if the state allows undocumented immigrants to receive healthcare, even if the state uses their own funds for this purpose. Together, these changes could result in 13.7 million more people without health insurance, according to the Congressional Budget Office (CBO).
  • Exclude certain low-income families from accessing the expanded Child Tax Credit. While the proposal increases the maximum value of the tax credit from $2,000 to $2,500, 17 million children in low-income households would be denied the expanded benefit because their families do not enough high enough incomes. By making mixed-status immigrant households ineligible, 4.5 million U.S. citizen children would no longer have access to this resource.
  • Cut the Supplemental Nutrition Assistance Program (SNAP). The House Agriculture Committee bill is expected to shift costs to states, limit future increases to benefits to keep up with higher food costs, and impose stricter work requirements.

Next steps

The draft tax bill is slated for a vote in the Ways and Means Committee on Tuesday, May 13.  If the bill passes, it will be quickly combined with legislation approved by other committees, before heading the House floor for a vote as soon as the week of May 19.

By using the reconciliation process, Republicans can enact the tax bill with only a simple majority vote in the House and Senate. Republicans, however, have a very narrow majority in the House; Republican leaders cannot afford to lose more than three votes in order to pass the package as written. If Republican leadership garners enough support to pass the bill, it will then head to the Senate for a vote on the floor before going to the President’s desk for a signature. Leaders have indicated the 4th of July as a goal deadline for passage.

Based on a number of factors, NCN believes our best opportunity to change the tax bill is in the Senate.

Thank you for your advocacy!

Resources

Statement from Diane Yentel, President & CEO of the National Council of Nonprofits, Denouncing House GOP Tax Bill Targeting Nonprofits

Diane Yentel, CEO of the National Council of Nonprofits, issued a statement condemning harmful elements of the bill: 

“This tax bill introduced by House Republicans is a direct assault on organizations that serve the most vulnerable Americans, stepping in to provide support in overlooked communities. Families that rely on church food pantries, veterans that depend on nonprofits for mental health services, moms and babies that receive low-cost health care, and domestic violence survivors living in shelters are all harmed when Congress denigrates nonprofits and makes their work more difficult to do…” Read the full statement here.