ACR Newsletter

Welcome to the Alliance for Charitable Reform’s biweekly newsletter. Here we’ll provide you with news and views on issues that impact philanthropy.

Washington Roundup | Consider This | Top Reads

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Friday, December 12, 2014

>> Federal: Washington Roundup
>> Federal: Congress Mulls Extenders Package
>> Federal: President Leaning in on Tax Reform?
>> Federal: Incoming Finance Chairman Release Tax Reform Report
>> Federal: Cardin Releases Proposal, Preserves Charitable Deduction
>> Consider This: Top Five
>> Top Reads: WH floats veto threat on charitable tax bill

Washington Roundup

The 113th Congress is drawing to a close and lawmakers are rushing to complete a number of legislative actions before heading home for the holidays. The top priority this week was to pass a bill extending government funding beyond December 11 to avert a government shutdown. Late last night, the House passed a $1.1 trillion government-funding measure on a 219 to 206 vote. This bill will keep the government open through September 2015. In order to prevent a temporary closure, the House and Senate both approved a short-term continuing resolution (CR) to extend current funding levels for two days, allowing the Senate more time to debate the larger bill. It is expected to pass the Senate, and Majority Leader Harry Reid (D-NV) said he plans vote on the legislation “as soon as possible.” As of this writing, an exact time table has not been set.

Congress Mulls Extenders Package

In addition to the bill mentioned above, the Senate is also working to pass a bundle of annually expiring tax provisions, also known as tax extenders. You may recall that last week the House passed 378 to 46 a bill to renew roughly 50 provisions through the end of this year. While Senate Finance Committee Chairman Ron Wyden (D-OR) preferred a longer-term extension, he ultimately failed to garner support. The Senate is expected to pass the House bill.

This one-year bill, H.R. 5771, includes three charitable provisions: the IRA charitable rollover, the deduction for conservation easements, and the deductions for food donations. The Senate expects an extenders vote to be their final action before they adjourn for the year – a vote that could take place as late as Saturday.

President Leaning in on Tax Reform?

Meanwhile, many leaders in Washington commented over the last two weeks on the prospects for tax reform in the next Congress. Incoming House Ways and Means Chairman Paul Ryan (R-WI) and incoming Senate Finance Committee Chairman Orrin Hatch (R-UT) both committed to restarting tax reform efforts when they take their gavels in January. But up until recently, the President seemed disinterested in tax reform. That changed last week.

Speaking at the Business Roundtable last Wednesday, the President said he believes he can work with congressional Republicans on tax reform in the next Congress, noting he wants to get started on negotiations early next year because it will take “a full six to nine months before we could really solidify something.” He also suggested the two parties start with reforming the corporate tax code, which provides “fewer variables [and] moving parts,” and noted that Republican insistence on including individual reforms “could be a hang up.” Obama called the problem one that “that is solvable but is tricky,” adding, “[t]here is definitely a deal to be done.”

Incoming Finance Chairman Release Tax Reform Report

On Thursday, incoming Senate Finance Committee Chairman Orrin Hatch (R-UT) released a 350-page report meant to “provide background on where we are and where we have been with regard to our tax system as well as some possible direction on where our reform efforts should go in the near future.” The report discusses both the corporate and individual tax systems. The document outlines seven guiding principles for undertaking comprehensive tax reform:

  1. Efficiency and economic growth
  2. Fairness
  3. Simplicity
  4. Revenue neutrality
  5. Permanence
  6. Competitiveness
  7. Incentives for savings and investment

Note that Hatch does not call for “distributional neutrality” – which would require that the relative tax burden on individuals is the same as under current law.  This is fairly significant.  Chairman Camp identified distributional neutrality as a key principle for his tax reform draft, and consequently was forced to slash tax deductions associated with higher-income individuals, like the charitable deduction, to maintain distributional neutrality.  Rather, Hatch identifies “fairness” as a principle which offers more flexibility.

Cardin Releases Proposal, Preserves Charitable Deduction

On December 10, Senator Ben Cardin (D-MD) announced a comprehensive tax proposal that would impose a consumption tax, eliminate most taxes for lower- and middle-income families, and lower the corporate tax rate to 17 percent. Of particular note, Cardin’s proposal only preserves four deductions on the individual side of the code: the charitable deduction, the state and local tax deduction, a deduction for health and retirement benefits, and the mortgage interest deduction. The bill also proposes a 10 percent rate on goods and services and sets up three income brackets starting at $100,000 of taxable income: 15, 25, and 28 percent. While it is likely not going to advance very far, Senator Cardin is clearly serious about the idea. The point of him releasing it now is to try and influence next year’s tax reform debate, and we look forward to working with his office in the new year.

Consider This: Top Five

The top five political happenings of 2014…so far.

  1. The Biggest Loser: House Majority Leader Eric Cantor (R-VA) loses his primary to a college professor. It is the first-ever defeat of a House Majority Leader since the post was created in 1899.
  2. The Republican Wave:
    • The Senate flips Republican with a net gain of nine seats. With Sen. Mary Landrieu’s (D-LA) loss, her seat will be held by a Republican for the first time in 132 years. 
    • The House stays Republican with a gain of 12 seats, their largest majority since 1946. If they win a recount in Arizona, the GOP will have its largest majority since 1928.
    • At the state level, Republican Governors are unexpectedly elected in Maryland, Illinois and Kansas. A Republican is also elected in Massachusetts.
  3. The Start of Serious Tax Reform: Following two years of hearings and analysis, House Ways and Means Chairman Dave Camp (R-MI) released a nearly 1,000 page long tax reform draft. In order to get the corporate rate lowered, he slays many favored tax provisions, much to the dismay of many of his colleagues.
  4. The Turnover on the Tax Writing Committees: Both the House Ways and Means and Senate Finance Committee will have new chairs next year – former VP candidate Paul Ryan (R-WI) and Senator Orrin Hatch (R-UT) in the Senate. Both are keenly interested in tax reform.
  5. The Next Election Has Already Begun! With a wide open Presidential field in 2016, Washington is already abuzz over the considerable pack of those in the running. Who are chief among the speculation as the likely nominees? As of this writing, Secretary Hillary Clinton and Rand Paul, the Republican Senator from Kentucky.

Top Reads

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