IRA Charitable Rollover Bill Introduced in House
Congressman George Holding (R-NC) introduced the Grow Philanthropy Act (H.R.4709) this week. This bill proposes an expansion of the IRA charitable rollover provision to allow for distributions to donor advised funds (DAFs).
In addition to this bill, several other pieces of legislation impacting foundations have been percolating in the House. One of these items is a resolution (H.RES.668), which was introduced by Philanthropy Caucus Co-Chairs Pat Tiberi (R-OH) and John Lewis (D-GA) to express the sense of the House of Representatives that philanthropy is an integral partner to government with a unique and proven ability to foster innovation, strengthen society, and build thriving communities.
Another one of these items is the Private Foundation Excise Tax Simplification Act of 2015 (H.R. 640). This bill was introduced by Erik Paulsen (R-MN) and Danny Davis (D-IL) last February to simplify the private foundation excise tax to a flat rate of 1%.
The Council was actively engaged in encouraging the introduction of these pieces of legislation, and will continue to urge lawmakers to demonstrate their support for philanthropy by co-sponsoring this legislation and joining the Philanthropy Caucuses in the House and Senate.
Ways & Means Tax Policy Committee Holds Second Tax Reform Hearing
This Wednesday marked the second in a series of hearings on tax reform held by the Ways and Means Tax Policy Subcommittee. The purpose of this hearing was to discuss proposals for reforming the income tax system.
The key take-away from this hearing—echoing previous hearings—was the mutual agreement that, after more than 30 years, the tax code needs major reform and simplification.
No future hearings on this topic have been announced, but many have speculated that the next hearing will occur sometime in May.
Clarifying Permissible Distributions for IRA Charitable Rollover
Now that the law regarding distributions directly from individual retirement accounts (IRAs) to qualified charities (the “IRA charitable rollover”) has been made permanent, a Council member asks whether a donor is limited to one distribution per year and/or one charity per year. Section 408(d)(8) of the Internal Revenue Code outlines the requirements for qualified charitable distributions from IRAs, and simply states that:
“so much of the aggregate amount of qualified charitable distributions with respect to a taxpayer made during any taxable year which does not exceed $100,000 . . . made directly by the trustee to an organization described in Section 170(b)(1)(A)” (with certain exceptions), and “made on or after the date that the individual for whose benefit the plan is maintained has attained age 70 ½”
will be excluded from the taxpayer’s income and therefore qualify as an IRA charitable distribution. The Code specifically provides that it is the aggregate of all qualified charitable distributions (plural) up to $100,000 that will count.
Many IRA trustees have developed forms to use when requesting a qualified charitable distribution, and these forms will generally ask the donor to designate the name of the charity to receive the distribution. For ease of administration, IRA trustees may prefer that a donor name only one charity per transaction request, but there is no authority to suggest that a donor cannot initiate multiple transactions in a year. The only limitation set forth in the rules is that the aggregate amount cannot exceed $100,000 per year.
The Council’s public policy and legal staff had also addressed this question in its Analysis of IRA Charitable Rollover Extension in an FAQ posted on the Council’s website earlier this year:
Is a donor limited to one IRA charitable distribution per year, or can a donor request multiple transfers?
Donors aged 70 ½ or older are limited to a maximum of $100,000 in any one year as an IRA charitable distribution, however there is no requirement that the entire amount be made in one transfer or that the entire amount go to a single qualified charitable organization. Donors can request multiple direct transfers from their IRA to qualified charities in a year, but only $100,000 will be excluded from income as an IRA qualified charitable distribution.
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.
Constitutional Liberties at Risk in States
The most troubling and recurring issue of 2016 so far is the apparent indifference by lawmakers to the constitutional liberties of 501(c)(3) organizations.
Connecticut legislators are targeting Yale University’s endowment with a bill that would force Yale to either spend its investment returns or pay taxes on them. This proposal disregards the bedrock Supreme Court decision of almost two centuries ago enforcing the Constitution’s Contract Clause, which protects the independence of nonprofits from government intrusion.
A New Jersey bill would create a state income-tax deduction for donations to New Jersey nonprofits — but only New Jersey nonprofits. Such in-state protectionism was considered last year by lawmakers in Vermont, who eventually rejected it as a clear violation of the U.S. Constitution’s Commerce Clause, which prohibits states from passing measures that improperly burden or discriminate against business transactions across state borders.
A bill in California attempts to regulate nonprofit solicitations and advocacy in ways that are constitutionally suspect, including infringing on the First Amendment's guarantee of free speech. The legislation would force every nonprofit in the country that solicits funds in California to put a link on its home page, and print a disclosure on all other solicitation materials, directing potential supporters to the California Attorney General’s website. That office is instructed to provide “information about charities, informational materials containing consumer rights and protections and charity research resources to allow donors to become informed about a charity before making a decision to give.” Such legislative language puts nonprofits at the mercy of an elected partisan’s changing views on what’s “appropriate” on such things as overhead, compensation, and advocacy – as well as which charitable causes are worthy.
The California bill failed to make it out of committee this week due to very effective advocacy efforts. See the CalNonprofits letter in opposition and the letter signed by more than 200 nonprofits, including nearly every state association of nonprofits from across the country, that make the case for transparency and against needless and constitutionally suspect mandates.
But by far the most egregious legislation arose this year in Oklahoma (and was copied in Missouri). This bill sought to make it a crime for anyone associated with an "animal rights charitable organization" to solicit contributions from anyone in Oklahoma with the intent that the money be spent on "program services or functional expenses" outside the state or for "political purposes inside or outside" Oklahoma. On its face the bill violated the Constitution by 1) limiting “political” speech (freedom of speech), 2) banning fundraising (speech and advocacy rights), 3) blocking fundraising across state borders (commerce clause), and 4) providing ambiguous terms for what is or is not illegal conduct (due process). The Oklahoma version of the bill passed in the House but stalled in a Senate committee due to effective advocacy; the Missouri bill lives on.
To learn more about these challenges and the constitutional rights of foundations and charitable nonprofits, read the article by Tim Delaney in the Chronicle of Philanthropy and the constitutional analysis by the National Council of Nonprofits.
D5 Coalition Co-Chairs Share Update on Diversity in the Sector
During the Council’s Annual Conference this week, the D5 Coalition released its fifth State of the Work report. In an op-ed for the Chronicle of Philanthropy, D5 Co-Chairs Stephen Heintz, Robert Ross, and Luz Vega-Marquis share a summary of this report—both the good news and the bad news.
The good news is that there is an increasing amount of data becoming available on this topic, that diversity, equity, and inclusion (DEI) are gaining traction in the philanthropic sector, and that proponents of DEI are successfully broadening previous conceptions of diversity to include sexual orientation and disability.
The bad news from the report is that the data collected by the Council shows the proportions of CEOs of color has remained flat at only 8% over the past five years. In light of these disappointing figures, the Co-Chairs called for a renewed sense of energy around achieving results around DEI in philanthropy—beginning by accepting the responsibility and challenge to improve diversity and inclusion in the “broader network of institutions and associations that support the philanthropic arena.”
White House Hosts Council Members for Roundtable on Outcomes and Evidence
Council President and CEO Vikki Spruill joined a number of Council members for a White House Roundtable on Moving Towards an Outcomes Based Social Sector. Scheduled to occur as a part of Philanthropy Week in Washington, this event was hosted by the White House Office of Social Innovation and Civic Participation. Participants discussed the potential of and obstacles to adopting an outcomes based approach to more aspects of social services.
A key focus of the conversation was examining how federal administration data could be deployed to help service providers, private funders, and government better design, implement, and grow social programs. As part of the Administration's focus on this goal, participants discussed the Evidence-Based Policy Commission, currently being formed after President Obama signed bipartisan legislation mandating it last week. The commission will be comprised of experts in data science, social service, and privacy rights, and it will offer proposals to help advance the use of evaluation and replication across the federal government.
A number of Council members shared their own efforts to adopt outcomes oriented strategies. Foundation leaders shared the challenges they face in accomplishing this, including trouble finding consistent data at state and local levels, the need to adapt proven strategies to the contexts of new places, and how to best deliver technical assistance to grantees.