Speaker Ryan Releases Tax Blueprint
As our readers know, Speaker of the House Paul Ryan (R-WI) organized five task forces to draft substantive blueprints outlining policy options for a number of issue areas—including tax reform.
Chaired by Ways and Means Committee Chairman, Kevin Brady (R-TX), this task force released its blueprint on tax reform today. Though this document does not contain specific legislation, nor language that directly addresses the charitable tax deduction or donor-advised funds, it is significant because it will serve to inform future tax reform proposals—particularly, the proposal that Speaker Ryan has alluded that he would like to introduce before the end of this year.
“The Committee on Ways and Means will develop options to ensure the tax code continues to encourage donations, while simplifying compliance and record-keeping and making the tax benefit effective and fair," read the blueprint. To read the entire blueprint, click here.
The Council is conducting a thorough analysis of this blueprint, and will provide a summary of its details next week. Stay tuned!
Donor Disclosure Bill Passes House, Moves to Senate
We reported in late April that the Preventing IRS Abuse and Protecting Free Speech Act (H.R. 5053), introduced by Congressman Peter Roskam (R-IL), had been passed out of Committee following a markup by Ways and Means. This bill has now passed the House and moved to the Senate for review by the Finance Committee.
This bill would prohibit the Secretary of Treasury from requiring tax-exempt organizations to disclose donor and contribution information—effectively eliminating the donor disclosure requirement that currently exists as part of the IRS Form 990.
We will continue to follow this bill and share any new developments.
A Rock Climbing Gym, a DAF, and a Cliffhanger
A community foundation recently contacted the Council with a question about one of its donor-advised funds (DAF). This particular DAF was established by a local rock climbing gym, and was funded by a portion of member dues collected. The owner of the gym served as donor advisor. The intent of the fund was to grant money to groups—including local school districts in low income neighborhoods—as a way to encourage and promote rock climbing among diverse populations that may not otherwise have access.
The groups that receive grants from the DAF could then select from a number of area gyms at which to climb. As it turned out, most of the grant recipients chose to climb at the gym that established the DAF—despite the fact that the grant application stated that the organization was not required to select that gym as a condition for receiving the grant. However, the foundation was still concerned that this could present an unintentional conflict of interest due to impermissible benefits.
The Council’s legal team noted that even though this situation nears the fine line of prohibited activity, under the facts and circumstances, there is likely no legal issue with this. Under the rules applicable to DAFs, there can be no distribution from a fund that would result in a “more than incidental benefit” to the donor or advisor, and the penalty for doing so was steep. The legal team did not think groups choosing to climb at the gym rose to a “more than incidental benefit.”
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.
New Jersey Considers Charitable Deduction, Property Tax Exemption Protection
Suffering in silence has never been the cultural norm for residents of New Jersey, and that trait may pay off this month as the Legislature considers solutions to challenges that bedevil foundations and nonprofits. Specifically, New Jersians may for the first time be able to deduct charitable donations from their state income taxes and a quirk in state law may be closed that will limit the challenges to property tax exemptions.
On Thursday, key committees in the House and Senate approved bi-partisan legislation that would establish a non-itemizer income tax deduction for contributions to New Jersey safety net organizations that are eligible to participate in the New Jersey State Employees Charitable Campaign (NJSECC), the workplace giving program for New Jersey state employees. Currently only 1,100 New Jersey-based organizations participate in the NJSECC, but new charities would be allowed to apply and, if accepted, be eligible for the state tax-deductible contributions under the bill. The charitable deduction is part of a larger package of tax and budget measures that include a hike in the state Earned Income Tax Credit, a phase out of the estate tax, an increase in the taxable threshold for retirement and pension income, and increases to certain taxes on petroleum products.
In a recent report, the Center for Non-Profits in New Jersey raised concerns about the ability of chronically underfunded organizations to meet ever-increasing community needs. The state association of nonprofits identified New Jersey as among the minority of states without any state-level tax incentive for giving, and IRS data indicate that charitable giving, as measured by federal charitable tax deductions claimed by New Jersey households, was still below 2007 pre-recession levels in 2013.
The bi-partisan bill is scheduled for votes in the House and Senate early next week so that it can be sent to the Governor before the start of the state’s fiscal year on July 1. It is not clear whether Governor Christie will sign the legislation if it reaches his desk.
A separate piece of legislation generating interest would prohibit private citizens from filing lawsuits challenging the property tax exemption of foundations and nonprofits. A lawsuit pending against Princeton University has been brought by two dozen local taxpayers who assert that the university should no longer be considered a charitable nonprofit eligible for tax exemption. They are suing the local government as well for failing to enforce the law. The broader nonprofit community strongly supports the new legislation because of concerns that current law empowers disgruntled residents to harass organizations with missions they oppose, such as reproductive health or environmental concerns.
Rockefeller Foundation President Gives Interview About Foundation's Future
Judith Rodin, President of The Rockefeller Foundation, spoke to The Chronicle of Philanthropy this week about her tenure and the foundation's potential financial strategies moving forward.
"We have about $160 million of our endowment in double-bottom-line investments currently," said Rodin. "We do have as a goal continuing to look for mission-related investments that could produce sizable returns on both bottom lines."
Council President, Vice Board Chair, and Other Sector Leaders Pen Letter to the Editor
In response to a recent Washington Post article which contained a myriad of inaccuracies and misconceptions about philanthropy, the Council responded with a letter to the editor: “Tuesday’s article on donor-advised funds (DAFs) provides a laundry list of damaging and inaccurate assertions about DAFs, specifically those created by financial institutions. Community foundations, leading stewards of positive change at the local level, also sponsor DAFs which offer the benefit of being an efficient and less administratively burdensome option for many donors who want to establish philanthropic vehicles.”
New Data on the State of Children’s Well-Being Released
This week, The Annie E. Casey Foundation released its 2016 KIDS COUNT Data Book, which provides information on the status of children’s economic well-being, educational performance, health, and family and community well-being.
The findings show that today’s teenagers are breaking records in education and health indicators, though low-to-moderate income children continue to face significant barriers to economic mobility. The report provides national, state, and local level data across an array of indicators impacting child well-being, and the site can be used to create custom indicator reports for your community.
The report also highlights key trends in children’s well-being over the period of time following the recession, and offers recommendations for policymakers to ensure a bright future for our country’s children.