By Kris Lev-Twombly

In the final hours of 2012, Congress and the White House came to a budget agreement that forestalled the “fiscal cliff”, a suite of federal spending cuts and tax increases which would have taken place if Congress and the White House were unable to reach a budget agreement by December 31.

The agreement, the American Taxpayer Relief Act of 2012, is a complex, 157-page bill full of details that are not of direct pressing interest to the nonprofit sector. At CalNonprofits, we feel there are four important takeaways for California’s nonprofit community:

1. A deal was made… sort of
A review of the news coverage will tell you that the fiscal cliff was averted. This is partially true. A deal was made, and the “cliff” was avoided… at least part of it… for now.

A bit of good news: the most progressive tax schedule in decades was passed. The deal raises $620 billion in revenue, coming in part from increases on income, capital gains and estate taxes for America’s wealthiest households. Current income tax rates have been extended indefinitely for individuals earning less than $400,000 and joint filers earning less than $450,000 -- approximately 98% of Americans. While this revenue is less than what President Obama originally proposed, it is a step in the right direction for equitably increasing revenue to balance the budget.

Other important parts of the deal which benefit communities served by nonprofits include:

- Extension of emergency unemployment benefits, helping more than 2 million Americans
- Extension of the Child Tax Credit, Earned Income Tax Credit, and the American Opportunity Tax Credit, applicable to a combined total of 25 million working families and students.

2. Most decisions on spending cuts were delayed for two months
While the deal raised revenue, it fell short of addressing the spending cuts scheduled to take place. As part of the deal, these cuts have now been delayed for two months. The next Congress will have to work with the President to negotiate how to approach these cuts.

We in California’s nonprofit community must focus our advocacy efforts on protecting the programs that are important to our constituencies.

If you get state or county funding, remember that over 30% of California’s state budget comes from the federal government. Cuts to federal non-defense discretionary spending could have a huge impact on state programs in California. Now is the time for us to speak up. If you aren't already connected to state and national coalitions of nonprofits working in health care, domestic violence, disabilities, substance abuse, etc., do so now to join efforts for your constituents.

3. The charitable deduction was left alone
The charitable deduction remained virtually untouched. A small change was made with the reinstatement of the 1986 "Pease amendment" that may increase by about $2,000 taxes for households making $300,000 or more and which give more than 35% of their income to nonprofits. All told, donors will have basically the same tax incentives and disincentives to make donations.

There was considerable hubbub in the nonprofit sector across the country regarding the peril of the charitable deduction in the fiscal cliff negotiations. Whether the threat to the deduction was real or part of a game of chicken is hard to say. But the discussion within the sector-- and the advocacy that came out of the sector--brings up an enduring question: what should the nonprofit sector REALLY be advocating for in federal budget negotiations? More revenue through more progressive taxation? Preserving funding for important safety net programs? A more equitable approach to the charitable deduction?

If the main message coming from the nonprofit sector is simply to preserve the charitable deduction at its current limit, there is a sense that we are advocating in self-interest, and as a result we may be missing the opportunity to fight for what really matters.

4. What really matters
The fact remains that the deal negotiated in the final hours of 2012 is a compromise. There is still much more ground to gain in increasing revenue and doing so equitably. For the nonprofit sector, increased revenue is a cause worth fighting for.

There is still much ground to lose in the next weeks -- from reduced funding to nonprofits, to decreased safety net programs for constituents, to increased demand for already strained services provided by nonprofits. This can’t go unopposed or untold. Preventing these cuts or telling the story of their impact should be top priorities for the nonprofit sector in California and across the county.

Congress can do better. President Obama can do better. And we in the nonprofit community can and must do better, both at pressuring our elected representatives to make better, fairer deals, and at messaging our values rather than simply defending our income streams.