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Nothing Random About State Tax Exemption Debates

I’ve been in Colorado for a few days to recharge my batteries.  There’s something about the air at 11,000 feet (or maybe it’s the lack of it) that helps clear the mind.  But it’s time to get back to it, and there is no shortage of news to share and issues to tackle.  Here’s the latest on one of the most important…

States Playing Bigger Role in Tax Exemption Debate

As you know, NFCA is keeping a close eye on developments in the state of Washington after the Joint Legislative Audit & Review Committee (JLARC) recommended that the legislature “re-examine” a host of tax exemptions, including ours.  While the recommendation has not yet found its way into a specific bill, the budget crisis in the state is so severe that proposals to repeal tax exemptions could come up quickly right up until the very end of the 60-day legislative session in March.

The good news so far is that we’ve been able to generate hundreds of contacts between local fraternalists and key state lawmakers.  There is simply no replacement for personal communications between concerned and informed constituents and their elected officials.  NFCA and its member societies have crafted clear and concise messages about who we are and what we do and individual members of societies in Washington are turning those into compelling contacts with lawmakers who will decide whether or not to maintain the fraternal exemption.

NFCA has also retained a lobbyist in the state to not only be our “eyes and ears” in the capitol building, but to deliver our message to members of the state’s House and Senate tax committees and legislative leadership.  And finally, we are working with members to identify representatives of local charitable organizations that benefit from our financial and volunteer support who would be willing to contact legislators and let them know the value of our contributions to their constituents.  As we saw during a similar debate over our tax-exempt status in Hawaii last year, these types of “third-party endorsements” have a tremendous impact on legislators.

Over the next 60 days, we still need to ensure that legislators understand the fraternal benefit system so that we can avoid becoming a casualty of the battle to plug holes in the state budget.  Please encourage your members in Washington State to keep contacting their legislators using our convenient Legislative Action Center.  You’ll find form letters, news articles, and the latest information about Washington on this site.

This is just an isolated instance, right?

If only that were the case…  Clearly, Washington isn’t the only state with budget problems.  And just as clearly, the JLARC report illustrates that most public policymakers simply do not understand what a fraternal benefit society is and how our fraternal and financial programs contribute to the well-being of our members and the greater community.  When states are faced with a “perfect storm” of financial problems – the economic slowdown has sharply decreased tax revenues, yet no lawmaker wants to cut services or raise taxes in an election year – repealing tax exemptions can be awfully tempting, especially those that are not well understood or appear to be archaic.

We know that times have changed and that progressive societies have evolved to meet the needs of their members and the underserved in communities across the country.  We know that the basic structure of fraternal societies is the same – we still have lodges, democratic governance, and common bonds – and that, when organized correctly, can be a tremendous force for good in our society.  But in the end, it doesn’t matter what we know if public policymakers don’t know us.  JLARC overlooked these facts, and it’s likely that other legislators will do the same. Below are a few states taking a hard look at their tax codes:

New Jersey

On January 7, the New Jersey Senate unanimously passed A2139, a bill requiring the state to produce a more detailed tax expenditure report to gauge the effectiveness and relevance of tax breaks.  Many states require bare-bones tax expenditure reports that don’t go beyond providing basic revenue estimates for each exemption.  A2139 requires that the report identify the statutory authority for each tax break and determine whether it has been effective in achieving its goal.

At this point, A2139 has not been heard on the House floor, but odds are that it will be.  This bill has received good press, it’s been supported by taxpayer watchdog groups and constituents who support responsible spending. 


Kentucky is facing a $1.5 billion budget shortfall.  Legislators loathe raising taxes, especially on weary constituents who spent 2009 inundated with news about corporate bailouts and reductions in state services to seniors and children.  It’s more palatable to scour the tax code for extra dollars, which is what several state legislators have proposed.  House Speaker Greg Stumbo recently stated that he saw interest in closing tax loopholes to raise revenue in 2010. 


Kansas Governor Mark Parkinson is looking for revenue to plug a $300 million deficit.  He is open to tax policy changes to make this happen.  In addition, the Kansas Advisory Council on Intergovernmental Relations (KACIR) issued a tax-base policy evaluation guide to help lawmakers evaluate the efficacy of tax exemptions.  The KACIR guide is a checklist of 18 questions designed to help lawmakers determine whether an exemption should be granted; the guide asks the same kinds of questions posed by JLARC.  The KACIR guide isn’t just for Kansas – lawmakers in Pennsylvania have expressed support for the guide and are keeping an eye on budget developments in Kansas. 

What’s it all mean?

The best way to defend the tax exemption is to go on the offensive.  That means reaching out to state and federal lawmakers before the tax exemption becomes an enticing political target.  Helping members “tell our story” is one of NFCA’s top priorities for 2010.  Our Legislative Action Center (LAC) is one of the best and easiest ways you and your members can stay informed and spring into action when needed.  We encourage you to place a link to the LAC on your website, your lodge websites, or publish it in your newsletters. 

I’d like to hear your thoughts about how we can do more to help you and your society become more engaged in this initiative.  I’d also like to know why so many societies seem reluctant to be a part of this effort.  Is it because you think we’re “apolitical?”  Do you not have enough resources to devote to such an effort?  Do you think your members will resent being asked to reach out to public policymakers?  Are you concerned that you don’t have that great a story to tell?  Or is the tax exemption just not that important to you? 

Sound off by sharing your opinion here and let’s start a conversation that can help us tap our vast reservoir of political capital…

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