Washington Snapshot - May 30, 2014

Events IconLast Chance: Public Policy Preconference

We are delighted with the level of interest we’ve received for our inaugural Council on Foundations Public Policy Seminar! The event, which takes place on Saturday, June 7th, from 9:30 am-4:30 pm at the Washington Hilton in Dupont Circle, is a preconference to our 2014 Annual Conference: Philanthropy Exchange.

We’ve designed this seminar for our members and colleagues who work in policy and advocacy. This intensive one-day workshop will dive into the art of developing an effective strategy to address complex, multi-issue legislation. We will use Ways and Means Chairman Dave Camp’s Tax Reform Act of 2014 as our launching off point for the discussion.

Space for this event is limited. For more information or to express your interest in participating, please contact govt@cof.org as soon as possible.

Congress IconWays and Means Passes Charitable Tax Extenders

IRA Charitable Rollover, Conservation Easement Deduction, and Food Inventory Deduction Advance in House

Yesterday, the House Ways and Means Committee met to markup several important bills focused on the charitable sector, including bills to make the charitable “tax extenders”—including the IRA charitable rollover—permanent law and a provision that would simplify the private foundation excise tax on investment income to a single rate of 1%. All five bills were passed out of the Committee, and will now face a full House of Representatives vote. Several Council staff were present for a first-hand look at the action!

Here is a full list of the charitable bills passed by the Committee on Thursday:

  • H.R. 4619, “To amend the Internal Revenue Code of 1986 to make permanent the rule allowing certain tax-free distributions from individual retirement accounts for charitable purposes.”
  • H.R. 4691, “To amend the Internal Revenue Code of 1986 to modify the tax rate for excise tax on investment income of private foundations.”
  • H.R. 4719, “To amend the Internal Revenue Code of 1986 to permanently extend and expand the charitable deduction for contributions of food inventory.”
  • H.R. 3134, “Charitable Giving Extension Act.”
  • H.R. 2807, “Conservation Easement Incentive Act of 2013.”

While the votes were largely along party lines, it is important to note that Democrats voted against the measures for fiscal reasons. In fact, most all of the Democratic members who commented during the three-hour long mark-up spoke in strong support of the substance and purpose of these provisions, citing may examples of how these charitable incentives have supported and improved conditions in their districts, especially in tough economic times. What the Democrats objected to was that none of these bills were “paid for” with spending offsets in other places. These bills will now need to be voted on by the full House. It is unclear when that will be, but we will keep you updated.

House Ways and Means Chairman Dave Camp (R-MI-4) took a strong position that the provisions did not require offsets because they were essentially permanent law. The Chairman noted that the IRA charitable rollover in particular had been in place for nearly 10 years—which is the lifecycle of the federal budget. Similarly, the provision to extend the charitable deduction for contributions to food inventories was in its sixth extension.

Congressman Aaron Schock (R-IL-18), who sponsored the bill to make permanent the IRA charitable rollover, commented during the markup: “[This bill] will strengthen the U.S. tax code, empower our people to give more generously, and provide our nation’s charities with the resources they need to continue the good work of helping others – and they should be able to do this on a permanent basis.”

Speaking about the uncertainty that the expired rollover has created for taxpayers across America, co-sponsor Earl Blumenauer (D-OR-3) noted that “[i]t is frustrating to have it seesaw back and forth between extension and expiration.”

Congressman Erik Paulsen (R-MN-3), who sponsored the legislation to simplify the private foundation excise tax, said in his opening statement: “This will simplify the tax planning process, especially for smaller foundations that now must spend valuable resources on accountants and lawyers instead of grantees.”

Co-sponsor Danny Davis (D-IL-7), made clear that this bill would help to put more philanthropic dollars into communities, stating—“when philanthropy thrives, communities thrive.”

Chairman Camp also spoke strongly in favor of simplifying the private foundation excise tax, explaining that this would “allow foundations to put more resources toward charitable purposes.”

Council President and CEO Vikki Spruill released the following statement after Thursday’s markup:

The Council on Foundations commends the Members of the House Ways and Means Committee for their commitment to supporting a strong philanthropic sector. The five charitable bills passed by the Committee today will encourage charitable giving and strengthen philanthropy’s ability to serve communities across the country.

Simplifying the private foundation excise tax to a flat rate of one percent will allow private foundations to spend more resources on communities in need, rather than on tax compliance. The measure will lift an administrative burden and direct more focus to the work of the foundation rather than navigating a complicated tax provision that creates a perverse incentive to give less, not more, in times of need. We would like to thank Congressmen Erik Paulsen and Danny Davis in particular for introducing this bill.

We are also especially pleased that the Committee voted to make the IRA charitable rollover permanent. This provision has long been a priority of the Council, and we thank Congressmen Aaron Schock and Earl Blumenauer for their leadership on this bill. A permanent IRA charitable rollover will give individual donors certainty when planning their charitable gifts, which means more money will flow to charitable causes.

We thank the Members of the House Ways and Means Committee for moving these bills forward, and we look forward to working with the full House of Representatives to move these provisions toward becoming law.

After the hearing, Camp told Tax Analysts that he hopes to take up additional tax bills this year “because I want to try and do incremental [tax] reform.” We anticipate that the chairman will continue to bring tax bills before the committee prior to his retirement at the end of this year.

Because of the chairman’s mentality to do “incremental reform” the charitable sector is not backing down on its defense of charitable giving incentives. As The Hill reports today, “nonprofits say they aren’t resting easy despite the fact the charitable deduction appears to be in less danger now.” Steve Taylor of United Way Worldwide expressed the sector’s main concern that “if Mr. Camp’s bill becomes the basis for work that is done on tax reform in 2015” it could mean changes to charitable giving incentive. Joanne Florino of The Philanthropy Roundtable reiterated Taylor’s point and added “our timeline is a long one, and we have to think about where is this going in the big picture.” Meanwhile, Geoff Plague of Independent Sector said that “we couldn’t ask for two more devoted champions for the charitable deduction” referring to Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Orrin Hatch (R-UT).

State Policy IconHappening in the States

California Fundraising Law Advances

In California this past Wednesday, AB 2077 passed unanimously and is set to be heard on the floor of the California Assembly next week. This bill, introduced by Travis Allen (R-Huntington Beach), proposes to increase the proportion of funds raised through charity and professional fundraising registration fees that the Attorney General’s office can channel toward enforcement of state compliance laws.

In accordance with state law, all charities that solicit donations from within the state must register with the state Attorney General. The aim of the bill is to identify and reduce the number of unregistered charities to protect California residents from ‘scam charities’ that solicit donations for a deceptive purpose at the expense of the donor. If passed, this provision will apply to all unregistered charities – regardless of whether the charity has dishonest intentions.

Online Guide to Missouri and Illinois Charities

The Better Business Bureau of Eastern Missouri and Southern Illinois have introduced an online guide for connecting donors to accredited charities in the area. The purpose of this guide is to assist donors with their charitable giving decisions by providing a list of organizations that meet a specified set of standards for ethical practices, as determined by the BBB Wise Giving Alliance Standards for Charity Accountability, with input from representatives from several charitable organizations, the accounting profession, grant-making organizations, corporate contributions officers, regulatory agencies, and research organizations.

The creation of this new resource is part of a larger effort to equip donors with knowledge and information that will help safeguard against fraudulent solicitations.

News IconPhilanthropy News and Op-Eds

Concern over Future of New Markets Tax Credit

The New Markets Tax Credit is one of the 55 “tax extenders” whose future is uncertain, and this is cause for alarm for some nonprofits who rely upon it to incentivize investments, The Chronicle of Philanthropy writes. The New Markets Tax Credit allows investors to receive a 39 percent tax credit on investments in approved projects in low-income areas, defined by metrics such as the area’s poverty rate. The recipients of the investment can be nonprofit organizations or private businesses.

The Chronicle cites the example of the Maryland Film Festival, a nonprofit organization with plans to remodel an old theater in a low-income neighborhood in Baltimore that has been designated to receive investments that are eligible for the credit. Without the investments driven by the credit, the Film Festival does not have the financing to move forward with the theater renovation project.

Like many of the other extenders, the fate of the New Markets Tax Credit is still up in the air. Geoff Plague, Vice President of Public Policy at Independent Sector, told the Chronicle that if Congress does not pass extenders bills this summer, loyal congressional supporters of specific extenders may have an incentive to push for comprehensive tax reform as a vehicle to renew the extenders that they care about.

Revision of NTEE Classification System

Over the past 18 months, the Foundation Center has been working to update the current system of classification for philanthropic and charitable organizations – the National Taxonomy for Exempt Entities (NTEE) system – to more accurately reflect the activities that occur within the sector today.

The NTEE classification system is used by the IRS, GuideStar, the National Center for Charitable Statistics (NCCS), and countless charitable organizations to classify the specific area in which an organization works.

The Foundation Center’s aim is to streamline the top-level categories while simultaneously capturing the different areas of focus for grant-makers, and invites the sector to provide feedback for these revisions in order to create new language that most accurately reflects this field of work. The comment period has been extended and is now open through June 30, 2014. To view the proposed revisions, please follow this link and click “Open the Visual Navigator” on the right side of the webpage under the “Explore” section.

Correction: Last week's edition of Washington Snapshot misidentified the co-sponsors of H.R. 4691. We apologize for any confusion this may have caused. A corrected version of the Council's statement is available on our website.