Have you scheduled time with your Congressional delegation during August recess? If so, we have just the tools and resources you might need . . .
In the past few editions of our weekly Washington Snapshot newsletter, we have been previewing an upcoming policy and advocacy toolkit to assist you with meetings with your lawmakers over August recess. You can access the toolkit here now!
The toolkit materials can assist you with all aspects of connecting with elected officials in your districts. Most of the documents are readily customizable for your purposes, and allow ample space for you to include information about the important work of your foundation. The toolkit is housed online on an easy-to-navigate website developed by the Council.
Toolkit resources include:
Planning for meetings – Local outreach opportunities; online outreach opportunities; sample meeting request letter (or e-mail); guidance on the rules of advocacy; talking points and frequently asked questions to use to prepare you for your meeting; Council positions on current policy topics; and information on how your lawmakers have supported philanthropy so you can go into your meetings confident and fully-informed.
Executing meetings – leave-behinds for members and staff that you meet with, including: "Tax Policy Matters" - an overview of how foundations are effected by the tax code; "Local Philanthropy" - a guide to the impact of philanthropy on your community; and "National Standards for U.S. Community Foundations™" - a one-page brief on the accreditation process and its importance to the field.
Following up after meetings – sample thank-you letter; template op-ed (all foundations); template op-ed (community foundations); and template press release.
We hope you will find these materials helpful as you seek to engage with your lawmakers next month. Be on the lookout for a supplement to the toolkit in the next few weeks with top-line findings from the Urban Institute study on donor advised funds, and messaging to accompany it.
As our readers probably know, last week the House passed the “America Gives More Act of 2014” (H.R. 4719)—which includes charitable provisions the Council has strongly supported for years. Thanks again to each of you who responded to our requests and contacted your representatives over the past few weeks to encourage support of H.R. 4719. Your efforts paid off!
The bill would make the IRA charitable rollover permanent law. It would also simplify the private foundation excise tax on net investment income to a single rate of 1 percent. Other provisions in the bill would make permanent current “tax extender” provisions that enhance the deduction contributing land conservation easements and food inventory. It also includes expansion of the deadline for claiming charitable contributions from December 31st to April 15th of the following year.
Sue Santa, the Council’s Senior Vice President for Public Policy and Legal Affairs, was quoted in Business Week and the Associated Press emphasizing that the bill will “strengthen charitable giving and give certainty to both donors and to the foundations." A Forbes piece from last week quotes the Council on the significance of the private foundation excise tax simplification: “That measure will lift an administrative burden that creates a perverse incentive for private foundations to give less, not more, in times of need.”
Our all-member message that went out last Friday offers more information and context on the Council’s advocacy efforts leading up to the bill’s passage:
Our team has been working with our members to tell their stories about how these measures would impact their work, discussing these initiatives on Capitol Hill at events like Philanthropy Week in Washington, and hosting ongoing meetings with lawmakers on these issues.
Simplifying the private foundation excise tax has been a key priority for the Council for over a decade.
The Council has also worked diligently alongside our community foundation members and colleagues in the field to secure a permanent IRA charitable rollover. No longer would we need to push every year or so for an extension. We know that a permanent rollover will give individual donors certainty when planning their charitable gifts, which will mean increased charitable investment for your organizations and the communities you serve.
Next Steps on Tax Extenders
The Senate is considering tax extenders as well. In April, the Senate Finance Committee voted to extend all three of the charitable extenders for two years. It has not considered the private foundation excise tax simplification.
Yesterday, we learned that Senate Majority Leader Harry Reid (D-NV) placed H.R. 4719 on the legislative calendar for the Senate floor. This indicates that the bill will not go to the Senate Finance Committee. Instead, it would go directly to the floor if the Senate chose to address it. While this is no guarantee that the Senate will consider it, it is a step in the right direction.
Regardless, action on the Senate floor is not anticipated this summer, and could be delayed until the lame duck session following the November mid-term elections. If the Senate does act, the two houses would then need to resolve the differences in their treatment of these important charitable tax provisions.
Meanwhile, the White House has issued a Statement of Administration Position (SAP) opposing H.R. 4719 on the grounds that the provisions in the bill lack spending offsets—the same concern expressed by House Democrats.
While the SAP states that the President would veto H.R. 4719 if it came across his desk, the Administration emphasizes that it “supports measures that enhance non-profits, philanthropic organizations, and faith-based and other community organizations in their many roles, including as a safety net for those most in need, an economic engine for job creation, a tool for environmental conservation that encourages land protections for current and future generations, and an incubator of innovation to foster solutions to some of the Nation’s toughest challenges.”
In a Nonprofit Quarterly assessment of the White House’s position on the bill, Rick Cohen opines that “the charitable incentives in H.R. 4719 are worth the cost.” However, he suggests that instead of tying them to spending cuts, they should be combined with measures such as ensuring that the IRS can properly enforce these provisions.
We’ll keep you posted as we learn how the House and Senate will work to resolve differences in their tax extenders packages. In the meantime, we encourage you to use the materials in our toolkit to reach out to your lawmakers about the importance of getting these charitable provisions passed into law!
This week, the Senate Finance Committee held a hearing on corporate tax inversions with the clever title, “The U.S. Tax Code: Love It, Leave It, or Reform It!”.
During the hearing, Chairman Ron Wyden’s (D-OR) opening statement reiterated his commitment to tax reform: “The American tax code is an anti-competitive mess. Comprehensive tax reform needs to happen soon. The longer we wait, our tax base will keep eroding, cash piles overseas will continue to grow, and investment dollars will be driven overseas,” the Chairman said.
This week’s hearing on corporate tax inversions addressed a topic that’s received public attention lately as prominent U.S.-based corporations such as Pfizer and Medtronic have sought to move their headquarters abroad in pursuit of lower tax rates. This practice, where a U.S. company acquires or sets up a foreign company, then moves its U.S. tax domicile to the foreign company’s lower-tax country, costs the U.S. government billions of dollars in lost tax revenue each year.
Despite a consensus that something needs to be done to halt inversions, there is a split between Republicans and Democrats over how to tackle the problem. Democrats have pushed for short-term fixes, while some Republicans only want to deal with the issue in the context of larger tax reform. This is a persistent theme in addressing a wide range of tax policy issues.
As many of our readers know, the Council on Foundations Legal Affairs team fields a wide range of legal questions from our members. While we can’t serve as legal counsel, we always aim to provide guidance that allows our members to better interpret their legal needs and operate with confidence. Washington Snapshot’s newest offering, “Trending in Council Legal Affairs,” highlights some of these interesting – and sometimes thorny – issues.
The IRS Can Read Minds: "Gifts" of Real Property
Over half a century later, the holding in the U.S. Supreme Court case of Commissioner v. Duberstein (1960), which fleshed out the income tax meaning of “gift,” still holds true. In order to receive a tax deduction, a donor must be acting out of a “detached and disinterested generosity.” Community foundations especially should keep this phrase in mind when accepting gifts of real property from donors who have entered into prearranged sales with third-party purchasers.
Recently, the Council’s Legal Affairs team has seen a spike in questions on gifts of real property to community foundations. The scenarios presented usually involve a donor seeking to gift a building/parcel/orchard to a foundation with an already-identified purchaser for the property. While it may appear that the donor has thoughtfully cut out some of the leg work and administrative burdens the foundation would have had to undertake in trying to sell the property, the IRS may not find this to be considerate.
The IRS disapproves of gifts of property with these prearranged sales because the Service reasons the donor is really just trying to avoid taxes and does not really intend to make a charitable gift. If the IRS were to look into transactions such as these, the risk is that the donor’s tax deduction would be denied and the donor could be held responsible for the tax he or she would have paid on the sale.
Therefore, community foundations should look out for whether there is bona fide donative intent on the part of the transferors in these property transactions. And, they should make known to donors of real property that their charitable deductions could be questioned if the IRS views their transaction as a prearranged sale.
The Council suggests two possible alternatives for these types of property gifts:
- Inform the donor that he or she may donate the property and allow the foundation to sell it (by finding its own buyer); or
- The donor can sell it and donate the proceeds, and take a charitable deduction for the cash gifts.
As always, for more information contact the Council’s Legal Affairs staff!
PACE Report on Transparency and Accountability
This past Wednesday, Philanthropy for Active Civic Engagement (PACE) released a white paper report that has been long in the works: Philanthropy and the Limits of Accountability: A Relationship of Respect and Clarity. This report explores the dynamic of how society has come to demand more transparency and accountability of foundations in an era of increasing social media connectedness. Some of the questions the report raises are, “How can [philanthropy] improve… working relationship[s] with citizens, communities, fields of work, and grantees?”, “How can [philanthropy] work with other sectors in a collaborative way?”, “Is [philanthropy’s] role to provide venture capital to social entrepreneurs? Or to scale successful innovation?”
The content of the report is centered on conversations conducted with leaders from the philanthropic sector, and their collective insight into how issues of accountability and transparency should be addressed while preserving and providing clarity regarding the aim of institutional philanthropy.
Upcoming NASCO Conference
The National Association of Attorneys General/National Association of State Charity Officials' Annual Conference, “The Evolving Role of Charitable Regulation in the 21st Century,” will take place on October 6, 2014 at the Hyatt Regency Capitol Hill in Washington, D.C.
This year’s conference discussions will focus on how charitable regulation is evolving and adapting to the ever-changing nonprofit landscape. Topics will include emerging issues under UPMIFA, regulator-sector opportunities for collaboration in addressing disaster relief, examining the way charities are evaluated by watchdog agencies, and questioning whether charities are, in the traditional sense, still charitable.
More details coming soon!
Rocky Mountain Tax Seminar
The El Pomar Foundation’s annual Rocky Mountain Tax Seminar will take place Wednesday, September 17th, through Friday, September 19th. The seminar is designed to update and inform managers and trustees of private foundations about the ever-changing tax laws that affect private foundations, and to encourage dialogue with the panel of speakers about practical problems foundation managers face in the day-to-day management of their foundations. Check out the website for a list of high-profile speakers and registration details!