As we noted in last week’s Washington Snapshot, House Ways and Means Committee Chairman Dave Camp (R-MI-4) held a recent hearing on the seven business “tax extenders” that he opted to extend in his comprehensive tax reform proposal. The hearing, entitled “The Benefits of Permanent Tax Policy for Job Creators,” looked at the impact of these extenders on job creation and the economy. While it is unclear whether the Chairman will consider extending other provisions—such as the IRA charitable rollover—the Council is seizing every opportunity to let the Chairman know how critical this provision is to our members.
Council President and CEO Vikki Spruill submitted testimony for the congressional record this week, which will be considered by the Ways and Means Committee along with the testimony given at the hearing. Spruill emphasized the role of philanthropy as both an employer and a critical investor in charitable initiatives that create countless jobs:
[S]ince 2007, foundations have given over a quarter of a trillion dollars to support worthy philanthropic initiatives in every part of the U.S. Those funds have created countless jobs, both among the direct recipients of the support, and in every community in which those recipients—and their families, coworkers, friends, and neighbors—live and work. Moreover, the jobs the philanthropic sector has created jobs for those who have faced the greatest impediments to entering the workforce, either due to inadequate skills, severe disabilities, endemic poverty, family obligations, or the simple fact that they reside in areas where jobs are scarce. Strategic investments from philanthropy have provided a great many Americans with the tools and hope they need to achieve the American dream through employment, education, and opportunity.
Spruill urged the Committee to support philanthropy’s valuable role as job creator by permanently extending the IRA charitable rollover:
For the IRA charitable rollover to achieve the strongest effect, it should be enacted on a permanent basis to permit job creators—including, in the philanthropic context, donors, public charities, private foundations, donor-advised funds, supporting organizations, and the recipients of support from our sector—to engage in the long term planning required to design effective programs and allocate resources efficiently.
For those who have not been following the extenders action, the Finance Committee, under the leadership of Chairman Ron Wyden (D-OR), passed a bill out of committee earlier this month that would renew most of the original 55 extenders for two years. The charitable IRA rollover was expanded in its current form, along with the enhanced deductions for food inventory and conservation easement donations.
While the timing for movement on extenders bills in both the House and Senate is still uncertain, Senate Majority Leader Harry Reid (D-NV) may move for a floor vote on the Senate bill within the next few weeks. Before much can be done with the Senate Finance bill, the House Ways and Means Committee to pass an extenders bill, as the House must initiate any revenue bill. We are hearing that Chairman Camp will markup a handful of bills on individual tax extenders next week. None of the charitable tax extenders are implicated in these bills.
The Council will continue to closely engage in the tax extenders progress pressing for
IRS Releases Proposed Form 1023-EZ
The IRS has released a new, draft Form 1023-EZ, a streamlined application for 501(c)(3) tax-exempt status. The draft form is now available for public comment in the Federal Register through April 30th, a short time window during a busy tax season.
The new form is only two pages long and is available to organizations who meet the criteria of an accompanying eligibility worksheet. In general, to qualify an organization must not have projected annual gross receipts expected to exceed $200,000 in any of the next three years or had annual gross receipts exceed $200,000 in either of the past two years, and not have total assets in excess of $500,000. The IRS estimates that 17 percent of 501(c)(3) applicants will be eligible to use the 1023-EZ.
On the form, the organization must certify that it has met the organizational test, the operational test and the public support test. There are no requirements to submit financial data or organizing documents, or to describe the organization's activities beyond selecting an appropriate NTEE code. However, we note for our readers that there are 22 organizations on the eligibility worksheet that are disqualified from using this form, including limited liability corporations, churches or associations of churches, HMOs, and previously revoked tax-exempt organizations.
Paul Streckfus, editor of the daily EO Tax Journal, calls the new form “1023 for Dummies,” pointing out that it is incredibly simple to complete. It is unclear when the draft form will go live and become widely available for new tax-exempt applicants.
Georgetown Exempt Organizations Law Program
Starting yesterday, hundreds of attorneys from across the country gathered for the annual Georgetown continuing legal education program, “Representing and Managing Tax-Exempt Organizations.” The two-day program featured preeminent practitioners and scholars from the field of tax-exempt law, and several of the Council’s legal staff were there to learn about the latest developments in the sector. It was also a privilege for us to connect with so many of our members who were in attendance!
While the sessions covered a variety of compelling topics, we were particularly interested in Ruth Madrigal’s take on the IRS’s proposed rules on 501(c)(4) political activity, which we’ve been tracking closely. When asked about Treasury’s plan for the regulations, which Commissioner John Koskinen recently suggested may be rewritten, Madrigal stated that “it’s really too early for me to say how this will unfold, we have a large number of comments, and it will take us time to go through those, there has been a hearing requested, and so we will have a hearing but beyond that I can’t forecast where this project will go,” as Paul Streckfus reported in the EO Tax Journal today.
Impressions of McCutcheon
Earlier this month, we told you about the Supreme Court ruling in the McCutcheon case, which held that aggregate donation caps for single donors to candidate committees and party committees were unconstitutional under First Amendment freedom of speech doctrine. The long-term implications of the McCutcheon decision are not yet clear, however there is no shortage of viewpoints on what the decision means for democratic participation.
Mark Rosenman, Professor Emeritus at Union Institute & University, wrote a compelling op-ed in the Chronicle of Philanthropy with his belief that the ruling contributes to “the economically, socially, and environmentally destructive corrosion of the democratic process in the U.S.”
To combat what he views as the destructive influence of “the American oligarchy” in politics during campaigns and election seasons, Rosenman urges nonprofits to “spend the money to build enduring grassroots organizations, groups that use new techniques and media (as well as old proven methods) to engage and continually spur people to rally for policies that help everyone, not just the affluent.” In other words, he encourages nonprofits to start educating voters at the local level to build a more broad democratic participation.
On the other hand, some commentators are praising the decision as a positive step for democracy. Professor Joel Gora of Brooklyn Law School offered his reasoning on why McCutcheon will benefit our political process. “First, it will help redirect some political funding back to parties and candidates where it will be more transparent and accountable . . .Secondly, the current Court clearly continues to put the burden of proof on government to justify restrictions on the funding of campaign and electoral speech, which is clearly as it should be under the First Amendment . . .Third, the lifting of some statutory restraints on campaign funding may actually stir some serious thinking in Congress about ways to reform the campaign finance system so as to enhance and support the funding of political speech, rather than demonize and demean such vital democratic activity.”
We’ll continue to share viewpoints on this important ruling as its implications become clearer.
Florida Community Foundation Honored
Florida Governor Rick Scott, along with his Cabinet, passed a resolution honoring Florida’s community foundations for “their service to communities all across the state.” David Biemesderfer, President & CEO of the Florida Philanthropic Network, accepted the award on behalf of community foundations in the state.
The resolution commends Florida community foundations for their valuable role in connecting “people who care with causes that matter to make a difference in their communities.” It acknowledges that due to the critical work of community foundations, “local residents who have an in-depth understanding of their communities’ issues and needs are able to combine their charitable funds and the future earnings from those gifts for the benefit of all, improving the quality of life in those areas.”
Focus on Philanthropy and Journalism
As many of our readers know, the Council is a strong supporter of nonprofit media organizations, and is committed to ensuring that they receive fair and impartial consideration in their applications for tax-exempt status. In light of this interest, we were intrigued by the Philanthropy Roundtable’s feature on journalism and philanthropy, which appeared in their Spring 2014 edition of Philanthropy.
The feature articles ask the overarching question of whether philanthropy is fundamental to the future of modern journalism: “Can philanthropists and businessmen with a taste for ‘social investing’ do more than just soften the losses at news-reporting organizations whose business models have collapsed? Can they subsidize certain kinds of investigating and publishing to serve public interests? Can they help discover and extend new formats, new reporters, and new subjects that will strengthen journalism’s role in maintaining the health and freedom of American society?”
We encourage our readers to check out this series on a provocative and timely topic!
New Resources on Election-Related Laws and Regulations
An exciting, new interactive resource will help foundation staff better understand the laws regarding election-related activities. Sponsored by the Hewlett, Packard, Gates, and Moore Foundations, "Electioneering Rules for Private Foundations and Public Charities" provides an overview of laws and regulations that apply to 501(c)(3) organizations on a range of topics. The course “host”—dubbed “Maya” is a virtual teacher who helps learners navigate the course materials.
The resource is the newest in a series of interactive educational materials on the Learn Foundation Law website, a joint project of the sponsor foundations. Check out this free course and learn more about the electioneering prohibition, voter education, issue advocacy, interacting with candidates, voter participation, and more!