For the past few weeks, we’ve working to analyze Chairman Camp’s tax reform bill, assess its potential impact on philanthropic and charitable organizations, coordinate with our colleagues in the field, and most importantly determine how to best represent the interests of our members as we embark on an education and advocacy campaign among House Ways and Means Members and staff. This week, we share with you the Council’s summary of each provision in the bill that impacts tax-exempt organizations.
As always, please feel free to contact the Council’s Policy Analyst Katherine LaBeau for more information about the Camp bill or to expressyour concerns.
Council Works to Preserve & Expand IRA Rollover
Word in Washington is that Senator Ron Wyden (D-OR), Chairman of the Senate Finance Committee, will release a bill by March 31st to reinstate most of the 55 tax extenders that expired at the end of 2013, including the IRA charitable rollover. The Senate Finance Committee would then mark up the bill. Our sources tell us that the provisions will likely be extended for through the end of 2015, and that they will not be paid for with other budget offsets or tax increases.
House Ways and Means Committee Chairman Dave Camp (R-MI-4) has also communicated to his Ways and Means colleagues his commitment to passing a permanent extenders package that includes some, but not all, of the tax extenders. The Chairman’s Tax Reform Act of 2014, which we’ve been covering since its release last month, only explicitly maintained less than half of the 55 extenders and did not include the IRA charitable rollover. While the extenders process will be separate from the Chairman’s comprehensive reform plan, the reform proposal reflects the Chairman’s views on which extenders he would prioritize, Tax Analysts reports (subscription only). An internal Committee memo signaled his plan to revisit the extenders “policy by policy to determine which extenders should be made permanent.” Chairman Camp emphasized that “a short extension of tax policies is no way to legislate and is even worse for the families and businesses who utilize those tax benefits.”
As our members know, the Council has long supported a permanent extension of the IRA charitable rollover, and an expanding the rollover by eliminating the $100,000 cap, allowing donors to make rollovers beginning at age 59 ½, and permitting rollovers to donor advised funds, supporting organizations, and private foundations. The bipartisan Public Good IRA Rollover Act of 2013 (S. 1772), which the Council strongly supports, would make these critical changes. We’ve been actively working with key Senate Finance and House Ways and Means staffers to see that the IRA charitable rollover is included in any tax extenders bill that is advanced. And, to the extent that Congress is open to modifying the extenders, we are pushing for the provisions in S. 1772 to be included in the extenders bill.
Other philanthropic organizations around the country are rallying for a permanent extension and expansion of the IRA charitable rollover. The Oregon Community Foundation (OCF) urged Senator Ron Wyden (D-OR) to allow charitable rollover donations to donor advised funds: “a donor can use the IRA rollover give to a university endowment, or to the endowment of a local hospital or art museum, but not to a donor advised fund at the local community foundation. This exclusion hurts community foundations, including OCF, as the local hubs for philanthropy in communities across the country. Community foundations not only democratize philanthropy by giving local residents a way to give back to their communities; but they also provide countless services to the nonprofit sector in every state and nearly every Congressional district.”
The Communities Foundation of Texas explained the value of DAFs in a letter to Senator John Cornyn (R-TX). “DAFs are a cheaper, more flexible alternative to creating a private foundation and they promote generous charitable giving. They also help people be less reactive and more thoughtful about their charitable giving, increasing the bottom-line impact of those charitable dollars in the community. They fund everything from early childhood programs that prepare more kids for being ready to learn, to museums that support cultural enrichment and attract economic development, to filling backpacks with food for hungry kids to take home from school on Friday afternoons when there likely will be no other food for them over the weekend. DAFs are a major part of the philanthropy in our state,” the Foundation emphasized.
The Grantmakers Forum of New York reached out to the New York Senators Chuck Schumer (D-NY), Kirsten Gillibrand (D-NY), and Representative Tom Reed (R-NY-23), to ask for their support in allowing rollover gifts to DAFs. They quoted several New York foundation leaders speaking about the work that DAFs facilitate in their communities. “In Rochester, donor-advised funds have helped us build quality early childhood education, telemedicine, mentoring programs, after-school programs and much, much more. These are our best living donors – and the ones most likely to invest in our community’s future, too. They want to use the IRA rollover to put money into programs that work and nonprofits that matter. We urge you to consider this change,” said Jennifer Leonard of the Rochester Area Community Foundation. George Ferrari of the Community Foundation of Tompkins County explained: “[Donor advised] funding has gone many programs and to preserve libraries, youth employment programs and health services which have lost governmental funding yet remain a priority of local residents.”
Treasury Solicits Input on 2014-15 Priority Guidance Plan
The Treasury Department’s Office of Tax Policy and the IRS are seeking input from the public on what to include in its Priority Guidance Plan for 2014 and 2015. Once developed, the plan will identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance over the next two years. The Council’s public policy and legal affairs team will submit comments and recommendations to Treasury and IRS. We are assessing issues to determine our priorities.
IRS TE/GE Reorganization
The IRS has announced a reorganization of the legal team in its Tax Exempt and Government Entities division (TE/GE), the division at the center of last year’s targeting controversy. The agency expects to implement the changes by October 1st.
The change involves moving staff responsible for published guidance (including revenue rulings, revenue procedures), certain private letter ruling requests and technical advice, from TE/GE to the IRS Office of Chief Counsel. The Office of Chief Counsel is typically responsible for these types of materials for other IRS divisions. Notably the Exempt Organizations Division Director, the position formerly held by embattled IRS alumna Lois Lerner, will be relocated to the IRS’s Cincinnati office. The Ohio office is where most of the applications for 501(c)(4) organizations were processed.
Typhoon Recovery Contributions Law
In response to Typhoon Haiyan, which devastated parts of the Philippines last year, Congress passed the Philippines Charitable Giving Assistance Act (H.R. 3771) this week, and the President signed the bill into law on Wednesday. The law allows taxpayers to deduct contributions made towards the typhoon relief efforts through April 15th of the calendar year, rather than December 31st of the 2013 tax year.
The Hill quotes Representatives Mike Kelly (R-PA-3) and Mike Thompson (D-CA-5) speaking about the desperate need for donations. "Sadly, only $369 million has been contributed to date," Representative Thompson said. He also noted that the United Nations estimates that it will need $788 million for relief efforts through this November, more than double that amount.
Congress has taken steps like this in the past to encourage giving to particular, large scale causes. The Council points to this Congressional activity as a clear sign that lawmakers understand the connection between tax incentives and charitable giving.
Cooperative and Small Employer Charity Pension Flexibility Plan
Also this week, Congress passed the Small Employer Charity Pension Flexibility Act (H.R. 4275). The 2006 Pension Protection Act (PPA) changed the way most pension plans are funded. However, Congress granted charities and cooperative associations with defined benefit multiple employer pension plans a temporary exemption from the PPA in order to assess whether the rules would be appropriate for them.
This bill extends the exemption from PPA rules, but allows charities to opt into the PPA rules in 2014 if those rules will work best for them. It also shields charities from scheduled pension premium increases.
IRS Commissioner Koskinen Oversight Testimony
On Wednesday, IRS Commissioner John Koskinen testified before the House Oversight and Government Reform Committee, the latest in dozens of congressional hearings with IRS officials since the targeting scandal erupted last spring. The tense hearing pitted Koskinen against Committee Chairman Darrell Issa (R-CA), who has asked the IRS to turn over several years’ worth of internal IRS documents and emails. Commissioner Koskinen made it clear that he does not think these materials are relevant to the House Oversight investigation into the 501(c)(4) organization targeting matter, and that it may take years to produce the volumes of information requested by the Committee. Chairman Issa threatened to hold the Commissioner in contempt of Congress if the IRS does not produce all of the requested documents, POLITICO reports.
Meanwhile, the general counsel’s office of the House of Representatives has given Chairman Issa the go-ahead to bring contempt charges against Lois Lerner, the former IRS official at the center of the targeting controversy. House Oversight Republicans have expressed extreme frustration over Lerner’s assertion of her Fifth Amendment rights each time she has been called to testify.
Ryan Budget Expected Soon
House Budget Committee Chairman Paul Ryan (R-WI-1) will finalize the House Budget Resolution by next week. His Senate counterpart, Senate Budget Committee Chairwoman Patty Murray (D-WA), has declined to submit a budget this year, deferring to the two-year spending plan agreed upon by the two leaders in December. Ryan’s plan will set forth House Republican spending priorities for the coming year and through the next 10 years, though the proposal will stick to the overall spending levels for 2014 that Chairman Ryan set with Chairwoman Murray.
Hill insiders say that Chairman Ryan’s budget is likely to prioritize restoring defense spending after 2014, balancing the budget by 2024, and not raising new taxes. We will monitor the proposal closely, paying particular attention to any tax policy proposal that the Chairman chooses to include.
Florida Nonprofit Overhaul
Back in January, we told our readers about sweeping reforms proposed by Florida Agriculture Commissioner Adam Putnam. The reforms take a variety of steps aimed at increasing transparency among Florida nonprofits, and include: requiring nonprofits to provide more detailed financial and operational information to the state; creation of a statewide database with information about each nonprofit operating in the state, including violations of state law; and new levels of oversight of professional fundraisers in the state.
This week, President and CEO of the Florida Philanthropic Network (FPN) David Biemesderfer offered FPN’s stance on the proposal to The Tallahassee Democrat. “FPN believes the proposed revisions will help ensure donors can remain confident their charitable contributions are being used as promised to support the causes and organizations they care about, leading to a positive environment in Florida for charitable giving,” Biemesderfer said.
Michigan Lawmaker Seeks to Restore Charitable Deduction
Michigan State Senator Tonya Schuitmaker has introduced a bill that would allow Michigan taxpayers to once again claim tax credits for donations made to food banks, homeless shelters, and community foundations. The credit would be worth up to 50 percent of the value of the contributions made, with a maximum credit of $100 for a single filer or $200 for joint filers.
The state’s charitable tax credits were eliminated in a state tax overhaul in 2011, when the state was experiencing extreme budget hardships. A companion bill from State Senator Patrick Colbeck would restore the tax credits for donations to programs that deal with the arts, radio, universities, or museums. Both pieces of legislation have been referred to the State Senate Finance Committee.
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, event, or op-ed you’d like to see covered in a future Washington Snapshot.