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    This is not a drill…

    It’s a common assumption that the greatest threat to fraternals’ tax-exempt status comes from Capitol Hill.  And indeed the most immediate challenge we face comes from Washington – not D.C., but the Evergreen State.

    Washington’s tax revenues, like virtually every other state, have been hit hard by the recession.  The state is facing a budget shortfall of $2.6 billion and lawmakers are looking at narrowing the financial gap by raising taxes and questioning virtually every existing “tax preference.”  A report issued by the State of Washington Joint Legislative Audit and Review Committee (JLARC) takes specific aim at fraternals’ premium tax exemption.  In fact, the report recommends that “The Legislature should clarify the public purpose being served by the tax preference for fraternal benefit societies, because it is unclear whether the objective or rationale for the exemption changed with the reenactments [of the state insurance code] in 1947 and 1987.”

    Translation: the state’s coffers are empty and any organization with a tax exemption is fair game to help make up the deficit.


    It’s not the lawmakers’ fault…

    The JLARC Report states that the “beneficiaries of the tax preference” are the 24 fraternal benefit societies that operate in the state of Washington.  It also states that “The focus of the work of these beneficiaries has changed over time.  The early fraternal benefit societies assisted poor, working-class members who could not afford to purchase insurance through other means.  Today, the focus of the work … has shifted to donating funds in support of benefits to members (e.g. social activities, adoptions, and burials) and charitable contributions.”

    What we have here is a failure to communicate.  It’s pretty clear to me that the JLARC members – and most likely the majority of state legislators – have no idea who we are or what we do.  But that’s not their fault – it’s ours.  And now we’ve got to muster the troops, including fraternal executives, lodge leaders, and representatives of the organizations that benefit from our financial and volunteer support, to demonstrate the value and validity of the tax exemption – not to the fraternal benefit societies doing business in Washington, but to citizens, taxpayers, and charitable organizations in the state.

    We’ve got you covered…

    NFCA is out in front on this issue.  We’ve retained local counsel to help us navigate the state’s political process.  The JLARC Report will be considered during interim legislative committee hearings this week – these are the sessions where lawmakers decide what will be on the 2010 legislative agenda – and our lobbyist will be there making sure elected officials know we plan to be fully engaged in any examinations of our tax exemption.  We’ve also sent a letter to every member of the JLARC, as well as to members of the Ways and Means and Finance Committees.  Most importantly, we are identifying grassroots volunteers from local societies and the organizations we support to deliver our message directly to state legislators.

    The Washington JLARC Report is unlike the challenge to our premium tax exemption that we faced in Hawaii earlier this year.  In Hawaii, the targets were the large tax-exempt health insurance providers; fraternals were included only because we are mentioned in the same section of the state tax code that was referenced in the legislation.  In Washington, we are identified as one of the groups whose “tax preference” deserves closer scrutiny.  In other words, we’re on the menu.  But the strategies and tactics we used in Hawaii – compiling accurate information on the real impact and value of member societies’ fraternal activities and delivering this information to key legislators through real live fraternalists who lived and worked there – are identical to what we’ll do in Washington.

    So what can you do?

    Folks, this is not a drill.  Washington is not the only state with fiscal problems and it’s likely our exemption will be questioned by lawmakers in other state capitals, as well as Congress.  We can win these battles – I’m confident of it – because we have a great story to tell.  But we can’t rely on “someone else” – lobbyists, NFCA staff, larger member societies – to carry our water.  Every society, every local lodge, every individual member has a responsibility to be an advocate for the fraternal system on this most fundamental of issues.

    So what can you do right now?  Well, if you’re doing business in Washington you’ve no doubt already heard from NFCA and are helping us gather information on the quantity and quality of your society’s fraternal activities, and your on-the-ground resources to help us deliver our messages to lawmakers in the state capitol and in the districts. 

    If you don’t operate in Washington, now is the time to get a firm handle on your society's fraternal activities and “prime the grassroots pump.”  We’d like you to educate your local lodge leaders and individual members on the importance of measuring the value of their good works, the importance of preserving the tax exemption, and the potential challenges to it.  Most importantly, we hope you’ll emphasize the need for them to be the fraternal system’s best advocates by communicating the fraternal message to state and federal public policymakers.  That means inviting them to local fraternal events, participating in State Fraternal Congress legislative days in state capitals, and sending them information (like the following brochure and state-specific flyer). 

    Business as usual just won’t do…

    When lawmakers know who we are and what we do and understand that our tax-exempt status delivers real value to individuals and organizations in their districts, then our tax-exempt status will be safe.  If we ignore challenges like those contained in the JLARC Report and continue to conduct “business as usual,” we’ll remain vulnerable.  The choice is yours…

    2 Responses

    1. I am a financial associate with Thrivent Financial for Lutherans and a resident of Virginia. I am an active member of NAIFA, but NAIFA does not focus specifically on fraternals. Is there a web source in my state that would alert me to any bills introduced into the Virginia legislature during the upcoming session?

    2. Ed… good question. You can visit the NFCA website and click on Government Affairs to gain access to our State Roundups. The State of VA also has a website which allows citizens to track legislation by subject matter, bill number, and committee. You may want to bookmark or RSS this page to track new bills. http://leg1.state.va.us/cgi-bin/legp504.exe?101=men=BIL Hope this helps.

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