Washington Snapshot - January 10, 2014


Welcome back from the holidays and cheers to the start of a new year!

Philanthropy Week in Washington

If you’re looking to participate in an important event and amplify the voice of philanthropy, then you won’t want to miss “Philanthropy Week in Washington 2014”! Make your plans to come to Washington, D.C. the first week of March.

"Philanthropy Week in Washington,” hosted by the Council on Foundations, is the new initiative for a week of activities – some very familiar and others new. The week will begin and end with communications activities using both traditional and social media. The main activities in Washington D.C. will be conducted mid-week (March 4th-6th) so that participants can both enjoy a variety of events and make effective use of their time here in the nation’s capital.

Many of you have participated in Foundations on the Hill (FOTH) over the years – and it’s not going away! FOTH, hosted by the Forum of Regional Associations of Grantmakers with strong and ongoing support from the Council, will be the primary, Capitol Hill-focused event during which delegations from across the country visit with their Members of Congress (March 5th and 6th). “Philanthropy Week” seeks to offer those participating in FOTH a comprehensive and impactful Washington experience. It will add a unique element of education and relationship-building for leaders of both community and private foundations.


“Philanthropy Week” will also include the Alliance for Charitable Reform Summit for Leaders, the half day informational seminar that has gained in popularity and prominence over the past several years. This year’s Summit will take place on the morning of March 5th.

Also, this year we’ve secured a fabulous hotel in a central, vibrant location. Check out the Philanthropy Week website for registration information.

Now, more than ever, we must protect and enhance philanthropy in America. Philanthropy has been a pillar of our society from the time of our founders. Let’s continue to educate federal lawmakers on the imperative role of philanthropy before proposals that could alter tax policy and uproot the sector’s ability to advance the public good take hold.

“Philanthropy Week” will bring a diverse and dynamic group representing the philanthropic sector to demonstrate the vital role of charitable giving and its inextricable link to thriving communities. We’ll tell policymakers and the public about philanthropy at work in the daily lives of their constituents – from providing shelter and feeding the hungry to expanding access to education and health care to creating jobs, strengthening the economy and fostering innovation.

In the coming months we will also be providing you with a series of educational and preparatory communications, including webinars later in January and February.

Together, we will educate our country’s leaders about philanthropy and ensure it continues to improve lives, solve problems and brighten futures.

We look forward to seeing you in March!

Tax Policy Happenings

More tax reform discussion drafts expected

Senator Max Baucus (D-MT), Chairman of the Senate Finance Committee, may be on track to become the next U.S. Ambassador to China, but he is still set on releasing more tax reform drafts before he departs. To date, Baucus has released discussion drafts on energy, international taxation, cost recovery and accounting, and tax administration. As we’ve reported before, the tax administration draft proposes requiring all tax-exempt organizations to electronically file their Form 990s, but gives organizations the ability to request a waiver from this requirement if they lack the technology necessary to e-file.

Baucus will likely leave the Senate by the end of February, and it is widely anticipated that Senator Ron Wyden (D-OR) will replace him. Senator Wyden recently joined Senator John Thune (R-SD) in circulating a letter encouraging their colleagues to support of the full value of the charitable deduction, and he has been a staunch advocate for nonprofit and philanthropic organizations.

On the House side, sources tell us that Ways and Means Chairman Dave Camp (R-MI-4) remains committed to tax reform. We expect that Chairman Camp will release his own tax reform drafts at some point this year, though it is not clear when those could appear or what they would look like.

Meanwhile, more change is afoot for the future of the Ways and Means Committee membership, as Representative Jim Gerlach (R-PA-6) announced his upcoming retirement. In a press release announcing the retirement, Chairman Camp describes Gerlach as a “respected leader on the Ways and Means Committee and in the Congress,” and “a true professional dedicated to finding real solutions for his constituents and the American people.”

IRA charitable rollover and "tax extenders"

The IRA charitable rollover is one of dozens of “tax extenders” that expired at the end of 2013. In years past, an extenders bill has often been passed the following calendar year and applied retroactively. This year leadership of the tax writing committees in both the House and Senate has expressed a preference for only taking up the extenders in the context of comprehensive tax reform. Yet, momentum for a tax extenders bill has been building in the Senate. We anticipate that a bill will pass by the end of 2014, but the tax extenders could first incite a lengthy debate over whether Congress should find the revenue to pay for them first. And as we’ve reported in past weeks, Senator Chuck Schumer (D-NY) introduced a stand-alone IRA charitable rollover bill, the Public Good IRA Rollover Act, which would expand the rollover and make it permanent law. The bill has not moved past the Finance Committee.

We know this provision is particularly important to our community foundation members, and we will continue to follow policy developments on the IRA charitable rollover closely.

IRS 501(c)(4) political activity regulations

Over the past few months, we’ve been covering the new Internal Revenue Service (IRS) proposed regulations on the political activity of 501(c)(4) organizations. The regulations create a more bright-line rule about what political activities do not qualify as promoting social welfare for 501(c)(4)s. Currently the IRS applies a “facts and circumstances” test to make this determination.

The IRS is soliciting public comments on the proposed regulations. Of particular interest to Council members, the IRS seeks comments on whether similar guidance should be developed to define political activities for other types of tax-exempt organizations. Comments are due by February 27, 2014, and may be submitted electronically via the Federal eRulemaking Portal.

New IRS Commissioner John Koskinen said he hopes the new regulations will take the IRS out of any "political judgment position" because the agency "needs to be non-political" to do its job correctly. In addition to the new regulations, Koskinen said he hopes to regain public trust in the IRS through increased transparency, establishing a more comprehensive website, and providing better customer service.

The proposed rules have received a lot of negative attention. Most recently, ABC News reported that many Tea Party-affiliated 501(c)(4) organizations will oppose the regulations on the grounds that they are overly restrictive in prohibiting (c)(4)s from engaging in activities like voter registration drives.

We continue to scrutinize the proposed regulations closely, particularly the potential implications for 501(c)(3) organizations. If your organization plans to comment, or if you wish to express your views on the rules for the Council’s consideration, please contact Katherine LaBeau.

Personnel changes at the IRS

As we announced in December, John Koskinen was confirmed as the new IRS Commissioner. Koskinen has a reputation as a problem-solver and restructuring expert. The Administration hopes that Koskinen will resolve issues within the IRS and restore the public’s confidence in the agency after controversy erupted last April over the agency’s handling of applications for 501(c)(4) certification, an event that led to the dismissal of numerous IRS agents and the head of the Tax Exempt and Government Entities division.

In an internal IRS memorandum, the agency recently revealed that Sunita Lough will be the next TEGE Commissioner. She is currently director (prefiling and technical guidance) of the IRS Large Business and International Division, and just finished a detail as deputy commissioner of TEGE as Director of Exempt Organizations. The memorandum also named Tamera Ripperda as the next Director of Exempt Organizations (the position formerly held by Lois Lerner). Ripperda is the departing industry director for global high wealth with the IRS Large Business and International Division.

Nonprofit expense reporting

The Financial Accounting Standards Board (FASB) met at the end of the year to tentatively decide to improve the reporting of expenses for all nonprofit entities. This decision was made because the FASB found that voluntary health and welfare organizations were not consistently reporting functional expenses – mostly due to the fact that it was difficult to determine whether a given organization met certain criteria. We will continue to follow this and other FASB decisions that affect your foundation and the organizations you serve.

Government spending debate

Lawmakers on Capitol Hill have buckled down to try to resolve differences in a $1 trillion omnibus appropriations bill that would fund all federal agencies for the remainder of fiscal year 2014. The spending bill needs to be passed by January 15th to implement the two-year budget deal reached in December that eliminates some of the automatic "sequester" spending cuts.

Republicans and Democrats disagree over many provisions in the bill—such as Affordable Care Act (“Obamacare”) funding. Senate Appropriations Committee Chairwoman Barbara Mikulski (D-MD) expressed concern over the “very difficult timetable” that her Committee was working under, with the passing of the budget agreement just a few weeks ago. She also implied that if a full-year bill could not be passed by next Wednesday, appropriators may consider passing a stop-gap shorter-term spending bill that would expire in another couple of months.

IRS updates revenue procedures

The IRS has issued several updated Revenue Procedures that provide guidance for tax exempt organizations filing new applications for tax exemption (IRS Rev. Proc. 2014-9), requests for changes in status (IRS Rev. Proc. 2014-10), letter rulings and determinations (IRS Rev. Proc. 2014-4), retroactive reinstatement after revocation (IRS Rev. Proc. 2014-11), and an updated fee schedule (IRS Rev. Proc. 2014-8).

The IRS also issued new interim guidance for 509(a)(3) (“Type III”) supporting organizations in Notice 2014-4. The guidance implements the additional changes to Type III supporting organizations created by the Pension Protection Act of 2006. It sets out circumstances in which a supporting organization will qualify as “functionally integrated” as a result of its support of a governmental entity. The IRS is soliciting public comments on this guidance, which are due by March 7, 2014.

Feel free to contact the Council’s legal team with any questions about this updated guidance.

Other News in Philanthropy

December donations surge

If you aren’t convinced about the role of the charitable deduction in encouraging donations, perhaps the spike in donations in late December will help persuade you.

The Atlantic reports that according to the Chronicle of Philanthropy’s data, roughly 30 percent of all donations are received in December, and 10 percent of them are received between December 29th and 31st. The Atlantic points to tax benefits as the cause of the December giving surge. The author notes that “[t]he majority of donors surveyed in a 2011 year-end giving poll declined to single out tax benefits as a strong motivator for their charitable transactions in December. But what else explains the numbers showing that more people donate online in December than they do in the wake of a global disaster?”

Government to pay overhead costs for contracts and grants

Chronicle of Philanthropy reporter Alex Daniels writes about a new federal rule that will allow nonprofits to pay for 10 percent of overhead or administrative costs with federal grant or contract dollars. Under current rules, the reimbursement rate for overhead expenses varies by federal agency. Daniels reports that many nonprofit leaders are happy about the rule, because it will guarantee at least a minimum reimbursement for overhead expenses.

In December, the Center for Nonprofits and Philanthropy at the Urban Institute released the results of a survey on nonprofits that receive federal contracts or grants. The survey found that about one-fourth of the nonprofits responding did not get reimbursed by the federal government for overhead or administrative expenses. Director of the Center for Nonprofits and Philanthropy Elizabeth Boris called the new rule a “step in the right direction.”

Philanthropy leaders to watch

The Chronicle of Philanthropy released its list of “People to Watch” in 2014 earlier this week. Among those the Chronicle recognized was Emmett Carson, CEO of the Silicon Valley Community Foundation. “With nearly $2-billion in donations from Mark Zuckerberg, . . . Carson has an opportunity to broaden the impact he can have as chief executive of the Silicon Valley Community Foundation, which appears poised to overtake the Tulsa Community Foundation as the nation’s largest community fund,” wrote Doug Donovan of the Chronicle.

La June Montgomery Tabron, President of the W.K.Kellogg Foundation, was also recognized for her commitment “to continuing the foundation’s alliance with 26 other grant makers, started in 2013, to support programs designed to improve the well-being of young minority men.”

Rebutting critiques of the sector

We are continuing to see voices from the sector speak out against claims that not all nonprofit activity is “charitable.” The Institutional Religious Freedom Alliance (IRFA) sets forth many reasons why we should encourage a diversity of nonprofit organizations and activities. For instance, IRFA says: “Our society, including the poor, is better off when civil society is thriving, and one way the government assists civil society to thrive is to encourage giving in general.”

Steven Woolf, Senior Tax Counsel for the Jewish Federations of North America, responded to Robert Reich’s argument that some nonprofits are more “charitable” than others based upon the wealth of their donors. Woolf says that many organizations that rely upon wealthy donors are social service and religious organizations that “provide crucial social services to the most vulnerable among us.”

Woolf ends with a call to stop criticizing wealthy donors. “America is still recovering from an economic downturn and our charitable organizations are being asked to do more with less. Let's stop bashing those who choose to give to causes about which they care deeply,” Woolf says.

In a PostBulletin.com op-ed, JoAnn Stormer and Paul Harkess of the Rochester Area Foundation point out that many of the institutions we interact with and rely upon every day are nonprofits. “The theaters and symphonies we enjoy are often nonprofits. Children's sports leagues and maybe your favorite garden club are also nonprofits. Our pets may have been adopted from or treated at the local Humane Society. Many of us belong to professional associations that help us develop our knowledge and careers, and virtually all of them are nonprofits.” Stormer and Harkess emphasize that without these nonprofit organizations that we often take for granted, a significant gap in valuable services would exist. They also quoted Council President and CEO Vikki Spruill’s letter to the New York Times editors.

Keep in Touch!

Please feel free to reach out to any of us on the public policy team with any comments or concerns, or to share an issue, article, or op-ed you’d like to see covered in a future Washington Snapshot.