The tax reform debate is over, right? Well, not quite…

Thanks to years of painstaking work educating Members of Congress about the value and viability of the fraternal business model and the tax exemption on which that model is built, the Alliance and its members came out of the most extensive debate over federal tax reform in decades without a scratch.

Hail to the victors, right?

Not so fast.

State legislative sessions are just now getting underway and in at least two of them – South Dakota and Oregon – lawmakers will be considering measures to repeal the fraternal tax exemption. The South Dakota bill – HB 1181 – is perhaps the least complex measure I’ve ever read – a one-page proposal that would repeal not just the fraternal tax exemption but also the exemption that small county farm bureaus have had in place for decades. That’s actually good news because it means our colleagues from the National Association of Mutual Insurance Companies and the Farm Bureau will join us in opposing this misguided measure at its first hearing in the House Tax Committee tomorrow morning in Pierre, SD.

To keep things in perspective, HB 1181 is sponsored by several Democrats in a heavily Republican state. The purpose of the bill seems to be an effort to generate additional revenue for the state treasury. To our knowledge, the bill does not have the support of any Republican lawmakers. Our intent is to ensure the bill is defeated in its first hearing tomorrow, which would effectively kill the bill for the remainder of the session. Here is a quick look at what the Alliance has done to accomplish that objective:

  • We’ve retained a highly qualified lobbyist/local counsel and supplied him with a boatload of state-specific statistics on the fraternal impact in South Dakota to help us communicate our position on the bill with every member of the Tax Committee, as well as other legislative leaders in the state, before tomorrow’s hearing.
  • We’re assembling a “fraternal delegation” of 3-4 representatives from member societies to deliver our testimony in opposition to the bill. These are South Dakotans who are very engaged in their societies – regional managers, field representatives, local chapter leaders, board members, etc. – and who are willing and able to tell their story of how their society is making a positive impact on the community. Powerful stuff…
  • Our local counsel will lead the delegation in the hearing and deliver the opening remarks of the testimony describing the broader impact of fraternals nationally and within South Dakota. Then he will introduce each member of the delegation and ask them to deliver their brief remarks. I’ll be on hand to answer any detailed questions from Committee members about the fraternal model but will not testify as comments from local representatives are much more impactful than those from out-of-towners.
  • We’re also compiling an extensive list of the South Dakota fraternal and community service initiatives in which member societies were engaged in 2017. These could include direct financial contributions to local charitable and social service organizations and volunteer activities in which members were engaged.

It’s this type of aggressive and organized advocacy activity – involving professional lobbyists and, more importantly, local member society representatives – that helps win the day for the Alliance and its members. And it’s an incredible example of why members join and stay with the Alliance year after year. A threat to the tax exemption in any state – even small ones or states in which your society may not be actively engaged – is a threat to our business model everywhere. We take all of these threats seriously. Our objective in South Dakota is to first defeat this measure, and then to meet with those lawmakers who introduced it to better explain how fraternals make a positive impact on their communities and constituents. By doing so, we not only win the day in 2018, but for the long term.

I’ll keep you posted on the results of tomorrow’s hearing in a post later this week. Next week’s blog will focus on the more complex – and potentially more serious – threat posed by the Oregon legislation.

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