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Eye on government.

From maintaining the current system of nonprofit taxation to stable nonprofit postal rates, ASAE focuses on issues that affect the ability of associations and association executives to continue their valuable work. Through a representative process involving ASAE members and the Government Affairs Committee, the ASAE Board of Directors determines the society's position on public policy issues.

Associations and association executives are affected by legislation and regulation at virtually all levels of government. ASAE has mobilized issues-oriented task forces and subcommittees to study and address the concerns of our membership. What follows are brief descriptions of the Government Affairs focal points for ASAE's fiscal 1993, ending June 30, 1993.

1. 401(k) reinstatement

Following the Tax Reform Act of 1986, tax-exempt employers that did not adopt an Internal Revenue Code Section 401(k) plan by July 1, 1986, cannot presently do so. Section 501(c)(6) groups are especially affected by this policy, because they have no alternative retirement savings plan. Section 501(c)(3) groups, however, are able to offer Section 403(b) plans (tax-deferred annuities), which provide many benefits comparable to a section 401(k) plan.

As a founding member of the 401(k)s for 501(c)s Coalition, ASAE continues to lead the effort to increase the number of cosponsors of House and Senate bills and to work for their passage in the 103rd Congress. The goal is tax fairness for all.

The current law discriminates against trade associations and their employees. Without the option to offer employees a competitive plan, trade association employers cannot compete as effectively with their counterparts in the public and private sectors.

There is no visible opposition to the reinstatement of 401(k) plans for associations, but this provision has yet to be attached to a bill passed by the Congress and approved by the president.

Section 401(k) was part of H.R. 11, a $21.8 billion urban aid and tax bill passed by both the House of Representatives and the Senate but vetoed by President Bush. ASAE continues to work for the reinstatement of Section 401(k).

2. Nonprofit postal rates

Historically, postal rates for nonprofit mailers have been lower than those for commercial and other mailers. In fact, many nonprofit mailers could not operate effectively if they had to pay commercial rates, which is why The Postal Reorganization Act of 1970 created the concept of revenue forgone.

This is a congressional appropriation, determined annually, that is set aside to provide for preferred postal rates for nonprofit organizations. The U.S. Postal Service requests an amount every year, based on its estimate of the volume of nonprofit mail. Congress does not guarantee, however, that the full amount requested will be granted.

For example, Congress approved only $122 million for postal revenue forgone for fiscal 1993, $359.9 million less than the amount requested by the postal service. Nonprofit mailers feared a rate increase of 33-50 percent until Representative Ed Roybal (D-CA) included language in the House appropriation bill that states the U.S. Postal Service cannot raise nonprofit postal rates in fiscal 1993.

The "Roybal fix" is merely a temporary solution to a permanent problem, and it makes postal rates a volatile issue for fiscal 1994. ASAE, along with the Alliance for Nonprofit Mailers, Washington, D.C., and the Nonprofit Mailers Federation, Landover, Maryland, is working for the implementation of a permanent solution to the nonprofit mail problem.

ASAE currently favors the idea of a subclass option for second- and third-class nonprofit mail, because it would alleviate the difficulty of acquiring a revenue forgone appropriation from Congress as well as maintain nonprofit mail rates at a stable level.

An overwhelming ASAE member response to a legislative alert issued June 19, 1992, helped maintain stable nonprofit mail rates through fiscal 1993. Without the efforts of concerned members during 1993, ASAE and the nonprofit community may see a reduction in their postal rates benefits or a rate increase. ASAE plans to mobilize the community again in 1993 to enact a permanent solution that would ensure reasonable and stable postal rates for nonprofit organizations.

3. Unrelated business income tax

ASAE firmly believes that any attempt to alter unrelated business income tax statutes is the single greatest threat to associations' economic viability. ASAE opposes any effort to radically change unrelated business income tax. For 42 years, unrelated business income tax statutes have outlined the kinds of income-producing activities that are exempt from federal income tax, protecting activities substantially related to the organizations' exempt purpose. For example, unrelated business income tax exempts income from advertising, proceeds from controlled subsidiaries, royalties received from meetings and conventions, and the capital holdings of the association.

There is cause for concern, however, because as recently as July 28, 1992, the House passed H.R. 5645, a bill introduced by Representative Ed Jenkins (D-GA), which exempts from taxation certain sponsorship payments received by associations. Although passage of the Jenkins bill may have helped many associations clarify the tax-exempt status of their corporate-sponsored events, it would have changed the tax status of income received from affinity credit card programs.

This is not an acceptable payment solution. Associations rely on the income from affinity credit cards to carry out a wide variety of public service activities. Taxing such income would be burdensome and counterproductive.

ASAE, with the assistance of the Texas Society of Association Executives, Austin, and the Chicago Society of Association Executives defeated one provision in H.R. 11 that would have taxed income associations generate from affinity credit cards. That particular provision was removed from the bill in the conference committee's final hours.

The new pay-as-you-go budget provisions, enacted as part of the budget compromise reached in 1990, are undergoing severe strains. As concern over the size of the deficit, the weak economic recovery, and banking instability continues, Congress may look to changes in unrelated business income tax as a method for solving other problems. ASAE continues to monitor the tax situation very carefully.

ASAE President R. William Taylor, CAE, and Ed Coleman, a partner in the Washington, D.C., law firm of Webster, Chamberlain & Bean--along with representatives from other nonprofit organizations--testified at IRS hearings in late July 1992 on behalf of the association community in response to proposed examination guidelines for corporate sponsorship payments.

The proposed guidelines clarify whether tax is owed on sponsorship activities based on the "facts and circumstances" of individual cases. The guidelines state that "tax-exempt organizations can publicly acknowledge donors for their contributions, but if the organizations conduct advertising for donors the payments are taxable income, not tax-exempt contributions."

Proposed changes in unrelated business income tax continue to threaten the stability of nonprofit tax policy. Corporate sponsorship and affinity credit card programs are only the latest programs targeted by the Internal Revenue Service and supported by certain factions in Congress. For associations, there is an overwhelming need to maintain the current tax structure for unrelated business income.

4. Volunteer protection

Volunteers are the lifeblood of any nonprofit organization. Without the work of dedicated volunteers, the ability of government entities and nonprofit organizations to provide their services free, or at a reduced cost, would be substantially diminished.

It is for this reason that ASAE has joined forces with the National Coalition for Volunteer Protection, Washington, D.C., to work for legislation to protect volunteers from the potential threat of liability lawsuits. In 1992--through the work of ASAE and its allied societies--California, Colorado, and Delaware have amended their laws to ensure better protection of their volunteers. Bills also have been introduced in Arizona, Connecticut, Maryland, South Carolina, Rhode Island, Tennessee, and Washington, D.C.

Efforts to protect volunteers from personal liability have increased dramatically since President Bush launched a major nationwide effort with the state attorneys general to enact volunteer protection legislation at the state level in 1991.

The results of a Gallup survey commissioned by ASAE confirmed fears of volunteer advocates. Nearly 20 percent of the nonprofit organizations surveyed admitted that volunteers were withholding service or resigning out of fear of liability exposure. This figure is too significant to be ignored. It translates to fewer volunteers for nonprofit organizations.

ASAE, in cooperation with the National Center for Community Risk Management and Insurance, Washington, D.C., has developed its "Volunteer Protection Action-Kit" to assist nonprofit organizations in their efforts to have state legislation passed to protect volunteers.

ASAE continually maintains that the importance of volunteers cannot be ignored. Association officers and directors need to be protected to maintain the level of volunteer activity throughout the nonprofit community.

Note: The "Volunteer Protection Action-Kit" is free to ASAE members. Call (202) 626-2703; (202) 626-2803 TT. Or fax your request to John Creedon at (202) 371-1673.

5. Proposed federal ethics rule

After a year of struggling with the Office of Government Ethics, ASAE claimed a qualified victory for the association community in August 1992.

In July 1991, the Office of Government Ethics issued a proposed rule governing standards of ethical conduct for employees of the executive branch. Federal employees would have been restricted (in cryptic language and ambiguous guidelines) from participating in professional associations.

Following ASAE's call for comments on the proposed rule, the Office of Government Ethics received almost 1,000 comments from associations and federal employees, a majority of whom were angered by the proposed guidelines. Specifically, associations opposed Section 806, which restricted federal employee involvement in professional associations.

In a news conference August 6, Office of Government Ethics Director Stephen D. Potts said he doubted that the section would be reissued at all. If Section 806 is reissued, it will be done "in a proposed form and open to comment," Potts promised. The final rule was released in the August 7, 1992, issue of the Federal Register without Section 806.

There is no basis for excluding federal employees from the educational experiences and networking opportunities available to members of professional associations. The benefits of belonging to associations should not be limited to employees in the private sector.

After testifying on behalf of ASAE and the association community, Donald G. Weinert, executive director of the National Society of Professional Engineers, Alexandria, Virginia, and chairman of the ASAE Ethics Task Force, said, "We are delighted to claim a qualified victory by forcing the Office of Government Ethics to take a serious look at its broad language on association participation. . . . Preventing federal workers from taking part in professional growth and development through associations would have been a tragic loss for the nation."

ASAE has asked the Office of Government Ethics to work with the association's Ethics Task Force to draft suitable language to revise Section 806 should the issue arise in the future.

6. Section 127 employer-provided educational-assistance programs

Section 127 of the Internal Revenue Code expired in June 1992 after Congress failed to grant it an additional six-month extension. The section, which provides for employer-provided educational-assistance programs for employees, had already been issued one six-month extension at the cost of $1.1 billion.

Section 127 allows employees to exclude from their gross income reimbursements up to $5,250 for educational expenses received through an employer-provided educational-assistance program.

Legislation to extend Section 127 for 18 months was included in the vetoed urban aid and tax bill. Section 127 not only provides employees with the opportunity for upward mobility, but it produces better-educated, skilled employees to the benefit of their firms and the economy in general.

As a member of the Section 127 Coalition, ASAE supports legislation in both the House and the Senate that would permanently reinstate Section 127 to the Internal Revenue Code.

7. Section 457 nonelective deferred compensation

Section 457 of the Internal Revenue Code sets forth the guidelines by which employees participating in a nonelective deferred compensation plan must pay tax on that plan. Unlike tax-qualified pension and profit-sharing plans, Section 457 plans are not "qualified" before the Internal Revenue Service. It is for this reason that they are available only to a select group of employees.

IRS has adopted the position that Section 457 applies to nonelective as well as elective deferred compensation. This position ignores the traditional distinction between the tax treatment of employee elective deferrals and employer-instituted nonelective deferrals.

Therefore, an employee of a tax-exempt organization who participates in a nonelective deferred compensation plan that fails to meet the requirements of Section 457 will be taxed currently on income that he or she has not yet received, cannot elect to receive, and may never receive if he or she dies or the employer becomes insolvent.

It is unfair to apply the same tax treatment to elective and nonelective deferred benefits of employees of tax-exempt organizations. ASAE is seeking passage of legislation to remedy the issue of nonelective deferred compensation.

8. PACs and public financing of elections

Political action committees offer individuals the opportunity to collectively demonstrate their satisfaction with a candidate's views by helping that candidate gain or remain in office. Through PACs, individuals who might otherwise go unheard speak with one voice to compete with large contributors.

PACs were inspired by 1976 campaign reform legislation in an attempt to make the electoral process more democratic. They are often accused of "buying" candidates, increasing campaign costs, and granting special-interest groups undue influence.

In fact, PACs help reduce taxpayers' costs for public campaign financing. PACs represent the members of associations in an open, noncoercive manner. ASAE supports the right of associations to maintain PACs for their members and continues to monitor current legislation that may restrict or abolish PACs.
COPYRIGHT 1993 American Society of Association Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Leadership: An Association Management Supplement for Volunteer Leaders 1993; issues which affect associations' ability to pursue their work
Publication:Association Management
Date:Jan 1, 1993
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