Washington Snapshot will be taking a break for the next few weeks during the holidays. Our offices will be closed from December 25th—January 1st, but we wish all of our readers a happy and peaceful holiday with family and friends! Snapshot will return on Friday, January 8th.
One Step Closer to Becoming Law!
The PATH Act, passed by the House yesterday and the Senate today, makes the IRA Charitable Rollover permanent law.
The President is expected to sign the bill into law soon.
“This is a major victory for philanthropy and charities, the result of a dynamic and collaborative effort across the field. Making these vital charitable provisions permanent law ends years of uncertainty for donors and foundations alike. We are confident that permanence will open new opportunities for giving. I applaud leaders in Congress for taking this step, and thank all of our members and colleagues who worked side-by-side to make this possible,” said Vikki Spruill, Council President and CEO.
Along with the IRA Charitable Rollover, the bill makes permanent the enhanced deductions for conservation easements and gifts of food inventory. These provisions were included in the House-passed America Gives More Act earlier this year. It also includes a few smaller provisions that would impact charitable organizations, such as a provision that would exempt transfers to 501(c)(4) and (5) organizations from the gift tax.
“We are disappointed that the bill does not simplify the private foundation excise tax or expand the IRA Charitable Rollover to donor advised funds. We have made significant headway with Congress pushing these policies forward, and will continue to actively keep these issues in front of Congress for future tax reform,” Spruill said.
The Council, our members, and colleagues have consistently promoted the value of making the IRA Charitable Rollover permanent law. Hundreds of Council members rallied together through the grassroots 5 Minutes for Philanthropy campaign, urging Members of Congress to take action on these charitable giving extenders. Colleague organizations and leaders in the field took up the #Act4Good and have generated well over a million impressions and reached over 100,000 accounts. Across the country, foundations continue to make their voices heard through emails and phone calls, on Facebook and Twitter.
We will alert you as soon as the President signs the bill into law. The Council is updating the IRA Charitable Rollover Toolkit for 2015 and will have it posted later today. The toolkit provides templates that help you reach out to donors about the IRA Charitable Rollover giving opportunity.
Council Submits Comments on IRS Gift Substantiation Proposal
This past Wednesday marked the deadline for submitting comments on a proposed rule by the IRS for an alternative way for charitable organizations to acknowledge donations and gifts they receive. As our readers know well, the rule would allow charities to file an information return by February 28theach year that includes taxpayer identification information for donors who contribute $250 or more, and provide a copy of the return to these donors in lieu of a contemporaneous written acknowledgment.
The Council believes this rule is problematic, and submitted comments to the Treasury Department voicing our concerns. Our comments raised four primary concerns:
1) The administrative burden this process would place on charitable organizations;
2) Donor privacy;
3) The deterrent effect this could have on charities’ relationships with their donors and their willingness to continue to give;
4) The “slippery slope” that could result in the reporting option evolving from optional to mandatory.
Others in the field have also voiced concern for this proposal. Last week, President and CEO of the National Council of Nonprofits Tim Delaney authored a piece in the Huffington Post outlining a number of drawbacks to the proposal. In addition, the National Council of Nonprofits along with Independent Sector are circulating a sign on letter in opposition to this proposal—which the Council has joined onto.
Senator Pat Roberts (R-KS) introduced the Protecting Charitable Contributions Act (S.2370) late last week that would block the rule from taking effect, citing its potential to have a “chilling effect on charitable giving.” On the House side, Representatives Keith Rothfus (D-PA-12) and Brian Higgins (R-NY-26) introduced the Charitable Giving Privacy Protection Act (H.R. 4281), which would prevent the IRS from requiring or accepting donor Social Security numbers as part of the gift substantiation process. Neither bill has not advanced at this point.
Omnibus Blocks IRS Political Activity Rulemaking
Passed in conjunction with the charitable “tax extender” package was legislation to fund the federal government. Included in this spending bill are several provisions that would effectively stall further action by the IRS on the matter of rulemaking regarding political activity by 501(c)(4) nonprofit organizations. Specifically, the bill would freeze funding for the IRS at 2015 levels, would restrict the IRS from awarding bonuses, and by providing additional agency funding that may only be used to support taxpayer services, fraud detection, and cybersecurity.
As our readers will recall, the IRS issued proposed regulations governing the political activity of 501(c)(4) organizations in 2013. The proposed rulemaking received a record-breaking number of public comments, many opposed to the rule as written. In our own comments to the IRS, the Council expressed concern about how an evolving regulatory environment for nonprofit political activity would impact 501(c)(3) organizations. This new proposed rulemaking was an effort to address the public comments, and is expected to regulate the political activity of all 501(c) organizations.
This news comes just a little over a month after IRS Commissioner John Koskinen announced his plans to issue revised regulations in early 2016, and finalize them as swiftly as possible.
FASB Votes to Revise Nonprofit Presentation of Cash Flows
Late last week at its December 11th Board meeting, the Financial Accounting Standards Board (FASB) decided not to require nonprofits to use the direct method of presenting operating cash flows. Instead, the Board tentatively voted to allow the use of either the direct or indirect method, and eliminated the requirement for those who choose the direct method to provide a reconciliation with the indirect method.
DAFs, IRAs, & BFFs
Recently, the Legal Affairs team received an inquiry from a community foundation that was approached by a donor advisor whose good friend was hoping to make a distribution from his or her own individual retirement account (IRA) to this DAF. Since the friend did not have advisory privileges with respect to the DAF, the foundation asked whether the gift could be directed to the DAF without the friend incurring a taxable event.
While the Council is actively working to change this, Legal Affairs advised that current law does not permit lifetime gifts from an IRA to a DAF without the donor having to pay income tax on the distribution. To make a gift from his IRA to the DAF, the donor would need to make an official withdrawal from the plan followed by a charitable gift of the cash proceeds to the DAF.
For more information on this or any other tricky legal matters, please contact the Council’s Legal Affairs team at firstname.lastname@example.org.
Access to the Council’s legal team is a valuable member benefit. Council attorneys are available to discuss your legal questions and to provide legal information by telephone, email and through our various publications and newsletters. This information is intended for educational purposes and does not create an attorney-client relationship. The information is not a substitute for expert legal, tax or other professional advice tailored to your specific circumstances, and may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.
Exclusive from our colleagues at the National Council of Nonprofits.
Pay For Success Programs Offer "No Free Lunch"
Nonprofits, grantmakers, and governments should be asking tougher questions (51 in fact) about the mechanics and promises of social impact bonds (SIB) and pay-for-success (PFS) programs, according to a new report published this month. The report, A Guide to Evaluating Pay for Success Programs and Social Impact Bonds, reviews numerous examples of the alternative private financing model which brings venture capital to the provision of public services and reaps profits only if the initiatives produce savings by achieving measurable results.
Under a SIB or PFS arrangement, the government repays the loan with interest if pre-determined social outcome targets are met. The report raises concerns that the focus on performance metrics can actually divert attention from hard-to-measure, but still promising, policy and program changes. It also highlights the experience of a pay-for-success initiative in Salt Lake City that reported phenomenal success in reducing the need for enrolling at-risk children in special education programs. According to a recent New York Times investigation, experts now question whether many of the children participating in the PFS intervention really were properly assessed as at-risk at the beginning of the program.
The Guide concludes that the programs “look better on paper than in reality” and “there’s no free lunch.” It was co-authored by In The Public Interest, the Minnesota Council of Nonprofits, the public-employees union AFSCME, and others