The Council’s Public Policy team has been closely tracking a flurry of activity on the Hill this week, as the Senate Finance Committee considered which of the 55 expired “tax extenders” to extend for another two years. The IRA charitable rollover made it into the bill, the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, with a provision extending it for two years in its current form. The enhanced deduction for food inventory donations and the deduction for qualified conservation contributions were also included in the package.
As our readers know, the Council strongly supports Senator Schumer’s (D-NY) bipartisan Public Good IRA Rollover Act of 2013 (S. 1772). This bill would permanently extend the IRA charitable rollover, eliminate the $100,000 cap, allow donors to make rollovers beginning at age 59 ½, and permit rollovers to donor advised funds, supporting organizations, and private foundations. Over the last several weeks, the Council has fervently advocated in the Senate for the inclusion of the rollover in any extender’s bill. We’ve also been working very closely with House Ways and Means Committee staff to ensure that the IRA rollover provision gets included in the House version of the package.
Several procedural steps remain before the tax extenders can be reinstated. Yet, we are encouraged by the progress the EXPIRE Act has made in the Senate Finance Committee, and look forward to seeing a House Ways and Means Committee extenders bill in the coming weeks.
Foundations and Regionals Push for IRA Rollover Expansion
Last week, we shared several letters to senators from our colleagues at community foundations around the country, demonstrating a unified voice of support for expanding and enhancing the IRA rollover. This week, we are pleased to share more of these calls for congressional action from philanthropic organizations.
Philanthropy Ohio asked Senator Rob Portman (R-OH) to extend the IRA charitable rollover to donor advised funds. “Every Ohio community foundation can give examples of how they lose donations each year because a potential donor, upon learning that they cannot use the rollover to open a DAF, chooses not to make a gift. The current prohibition limits the growth of giving as it restricts donor flexibility by codifying a preference of one type of charity over another,” the group stated.
The Community Foundation of Greater Dubuque urged Senator Chuck Grassley (R-IA), the original author of the IRA rollover provision excluding donor advised funds, to voice his support for removing the exclusion.
The Community Foundation of Jackson County also called on Senator Grassley to remove the exclusion. “A donor can use the IRA Charitable Rollover to give to a university endowment, or to an endowment of a local hospital or art museum—but they cannot build community endowment by contributing to a donor advised fund at the local community foundation,” the Foundation told the Senator, making the case for the inequity behind the exclusion.
The Florida Philanthropic Network reached out to Senator Bill Nelson (D-FL) to ask his support for allowing rollover gifts to donor advised funds. The Network highlighted a donor advised fund held by The Community Foundation for Northeast Florida to demonstrate the critical work that donor advised funds make possible.“In the past 15 months the Delores Barr Weaver Fund has already made grants in excess of $16 million (more than 30% of the Fund) to support many causes including programs for at?risk girls and women, safety net services, arts, public education, mental health services, and services for aging adults,” they emphasized.
Philanthropy Northwest and several community foundations in Washington state also weighed in, sending a letter to Senator Maria Cantwell (D-WA). In the letter they ask to make "donor advised funds eligible to recieve qualified charitable distributions under the IRA charitable rollover," and state that "removing the prohibition will help promote community philanthropy at a time when the charitable sector is being asked to do more to help those in need."
IRS alters interpretation of what's allowed annually for IRA rollovers
Speaking of IRA rollovers, we are also tracking and analyzing an IRA ruling about a January 28, 2014 tax court decision, Bobrow v. Commissioner of Internal Revenue. It was previously understood that an individual could make one tax-free rollover for each IRA that the person held in any one year. However, according to the author’s read of the Bobrow case, it seems that the one tax-free rollover per year limitation may be the combined limit for all IRAs an individual holds. This ruling could impact how frequently IRA charitable rollovers may be used as a giving tool.
Chairman Camp Announces Retirement
Staunch tax reform advocate House Ways and Means Chairman Dave Camp (R-MI-4) has announced he will retire at the end of this session. The Chairman stated in his announcement, ““[d]uring the next nine months, I will redouble my efforts to grow our economy and expand opportunity for every American by fixing our broken tax code, permanently solving physician payments for seniors, strengthening the social safety net and finding new markets for U.S. goods and services.”
Council President and CEO Vikki Spruill issued a statement thanking Chairman Camp for his tireless work on tax reform and wishing him the best in retirement:
On behalf of the Council on Foundations, I would like to thank Chairman Camp for his decades of public service to the people of Michigan and to the U.S. House of Representatives. We wish him the very best in months and years ahead. We are pleased that Chairman Camp is devoting his final months in office to fine-tuning his comprehensive tax reform proposal.
Throughout his tenure as House Ways and Means Chairman, he has remained dedicated to growing the economy and expanding opportunities for all Americans by advancing a much-needed reform of our tax code. Many provisions in the Chairman’s proposal would impact philanthropic organizations, both positively and adversely. We will continue our work with Chairman Camp and his senior staff to navigate this proposal and find the best solutions for the sector, with full appreciation for the objectives the Chairman is aiming to advance in his bold and comprehensive proposal.
Howard Gleckman of the Tax Policy Center echoed the Council’s gratitude for Chairman Camp’s contributions to tax policy in a blog post this week. “At a time when too many of his fellow lawmakers substitute easy partisan rhetoric for hard work, Camp wrote a serious tax reform plan...I hope that when some future President finally signs a tax reform law, Dave Camp will be invited to the ceremony. He will deserve the thanks of whoever finally gets credit for rewriting the revenue code. And he deserves our thanks.”
As our readers know well, for the past month we’ve been analyzing Chairman Camp’s tax reform bill, assessing its potential impact on philanthropic and charitable organizations, and determining how to best represent the interests of our members as we embark on an education and advocacy campaign among House Ways and Means Committee Members and staff.
For more information about the proposal, we encourage you to take a look at the Council’s summary provisions in the bill that impact tax-exempt organizations.
Chairman Ryan's Budget
House Budget Committee Chairman Paul Ryan (R-WI-1) released the House Budget Resolution on Tuesday. The Budget swiftly passed the Budget Committee, and will proceed to the House floor for a vote. It cuts $5.1 trillion in spending over the next 10 years, and makes changes to mandatory spending programs such as Medicare.
Since the House and Senate have already agreed upon a Budget Resolution for this year and next, Chairman Ryan’s Budget is predominantly a statement of his policy priorities, and an indication of actions he and other Republicans may take if they win control of both chambers of Congress in the upcoming midterm elections.
Additionally, the Budget sets out Congressman Ryan’s values and top-line goals for “pro-growth tax reform.” Yet, Ryan does not endorse a particular tax reform approach or provide details on how he would look to reform the tax code if he succeeds Representative Camp as the next Ways and Means Committee Chairman.
While we don’t generally report on Supreme Court rulings, this week’s decision in McCutcheon v. FCC is an important ruling that could have significant implications for our national elections. The Supreme Court issued a major decision this week that changes the landscape for campaign finance activities. The decision does not directly impact 501(c)(3) or 501(c)(4) organizations, but it could significantly change the flow of contributions to some 527 political organizations if donors decide to shift more donations back to political parties.
In the McCutcheon v. FCC decision, five Justices (Roberts, Alito, Scalia, Kennedy, and Thomas) ruled that aggregate donation caps for single donors to candidate committees and party committees, were unconstitutional under First Amendment freedom of speech doctrine. McCutcheon does not change existing limits on how much individual donors can give to an individual candidate or party committee. Justice Stephen Breyer writing for the dissenting justices said “If Citizens United opened a door, today’s decision, we fear, will open a floodgate.” He also said that the ruling “overturns key precedent, creates serious loopholes in the law and undermines, perhaps devastates, what remains of campaign finance reform.”
This decision, in the wake of the 2010 Citizen’s United, could once again alter the flow of political campaign dollars. As our readers likely recall, Citizens United held that corporations, certain tax exempt organizations (only 501(c)(3) organizations are explicitly prohibited from making contributions to a political campaign) and unions must be permitted to make unlimited political contributions to PACs and 501(c)(4) organizations under the First Amendment, as long as these dollars are not being coordinated with candidates or campaigns.
While the impact of the decision will depend upon how the Federal Election Commission interprets the details of the decision, campaign finance experts are speculating that the practical effect will encourage more donations to flow to political parties now that the aggregate cap has been lifted.
The charitable deduction and the Washington Monument: American icons
Robert Sharpe, Jr., President of the Sharpe Group, authored a compelling op-ed in The Hill this week on “the importance of protecting and preserving America’s iconic symbols,” namely, the charitable deduction. Sharpe informs readers that the Washington Monument restoration project was only partially funded by Congress, and matched by private philanthropic dollars. Yet, the President and lawmakers on the Hill continue to float proposals for reducing the value of charitable giving incentives, Sharpe notes.
Sharpe makes three key arguments against limiting the charitable deduction: donations will go down significantly; our communities and our economy will suffer; and the deduction is not about the donor. “The real burden would fall on millions who depend on the generosity of donors – not the donors themselves,” he argues. Sharpe’s powerful conclusion should certainly resonate with lawmakers on Capitol Hill: “The Washington Monument is an iconic symbol of American democracy. So is our vibrant voluntary sector. Preserving both of them will ensure they stand strong as symbols of America for generations to come.”
Nonprofits Can't Replace Government
Michael Hiltzik of the Los Angeles Times published a provocative op-ed attempting to dispel the notion that nonprofits are better equipped to address social problems than government. “To suggest that such organizations can effectively supplant government social programs is worse than a mere fantasy — it's a cynical and dangerous fantasy that serves only as a talking point to cut those programs,” Hiltzik argues.
Hiltzik argues that nonprofit donations—like government dollars—are also scarce during times of economic hardship. He also suggests that not all philanthropic dollars go towards benefitting those who would otherwise be served by government programs, namely, the poor. Hiltzik brings up the misguided notion that we’ve heard before from Professor Ray Madoff and others that the tax code should distinguish between donations to causes that alleviate poverty, versus those that serve the “pet projects of the rich.”
The Council continues to vigilantly monitor commentary on suggestions to create a hierarchy of charitable purposes or charitable organizations in the tax code. In other words, creating a system where not all are treated equally. This issue has hovered around for many years, and along with many of our colleagues in the field, we will continue to vigorously oppose the concept of a hierarchy.
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.