Note: The ACR newsletter will take a brief summer vacation, so there will be no August 24th edition. We will continue to post updates to the ACR website and blog. The next edition will published on September 7th.
The ACR blog (www.acreform.com/blog) highlights our thoughts on news of the day. For regular updates from our blog, follow us @acrefom on Twitter.
Here is a roundup of the ACR blog since the last newsletter edition:
Speaking Out on Pease to Protect Charitable Giving
In 2013, the Pease limitation –a little-known tax provision limiting the value of itemized deductions (including the charitable deduction) for upper-income brackets- is scheduled to be reinstated if Congress does not act. Pease reared its head last week in a Senate Democratic tax plan to extend the Bush tax cuts for those making under $250,000 for one year. ACR joined our colleagues in the Charitable Giving Coalition in sending a letter voicing our concerns with the Pease measure to Senate Majority Leader Harry Reid (D-NV) and others who voted for this bill.
Senate Finance Committee Extends Tax Provisions, including the Charitable Rollover
Before leaving for August recess last week, the Senate Finance Committee approved the extension of a number of expired and expiring tax provisions (called “tax extenders”), including the IRA Charitable Rollover. This measure would extend the rollover provision for two years, while making it retroactive to January 1, 2012. In a letter to Members of Congress ACR and The Philanthropy Roundtable joined with the Council on Foundations in calling for a full extension of the rollover provision and expressing support for the Council’s efforts on this issue.
Both the House and Senate are on summer recess and will return on September 10th. Here is an update on major pending tax and legislative issues.
- Bush-era Tax Cuts Expiring at Year-End
Congress left town last week for a 5-week recess without agreeing on how to handle the year-end “fiscal cliff,” which refers to the set of tax increases and spending cuts totaling over $1 trillion that will take effect beginning January 1, 2013. While the House and Senate held symbolic votes on different proposals to extend the current Bush-era tax cuts, no real progress was made.
Specifically, on July 25th, the Senate passed a bill extending current tax rates for those families earning less than $250,000 a year, but allowed tax rates to increase for those earning more than that amount. The bill also reinstated the Pease provision, which limits the value of itemized deductions (including the charitable deduction) for those earning more than $250,000. ACR weighed in by sending a letter to all Senators who voted for the bill expressing disappointment that they voted in favor of reinstating Pease, and that letter can be viewed here. In addition, ACR joined with 27 organizations on a Charitable Giving Coalition letter opposing the Pease provision. On August 1st, the House of Representatives passed a very different bill. The House bill extended the current rates for all income brackets, and did not reinstate the Pease provision.
We expect no final action on the Bush-era tax cuts until the lame duck session of Congress at the earliest. In the interim, we expect both parties will highlight their positions on these tax bills as they campaign before the November elections.
- Federal Budget Cuts Set to Take Effect on January 1st
Earlier this month Congress passed and the President signed into law a bill that requires the Administration to provide a detailed plan of how it will implement the federal budget cuts that are scheduled to take effect January 1st. As you may recall, half those spending cuts will come from defense programs and half from domestic programs (including education, environmental and social welfare). By early September the President must begin to identify which programs are at risk. We anticipate a firestorm of response. Economists have forecasted that the cuts, combined with the January expiration of the Bush-era tax cuts, would slow growth and could send the country back into a recession. As reported “companies could begin scaling back their employment rolls once they learn the precise nature of the planned cuts from the Obama report.”
- IRA Charitable Rollover Not Dead Yet
Before leaving Washington, the Senate Finance Committee passed a bill that extended more than 50 expiring tax provisions, including the IRA Charitable Rollover provision. This provision would reinstate the rollover retroactive to the beginning of 2012 and extend it through 2014. The next step is for the full Senate to debate and vote on it. We expect that to happen in September, at the earliest. The House, however, has signaled it won’t take up a similar bill until the lame duck session after the November election.
- Preparing for Tax Reform in 2013
On Thursday, August 2nd the House passed a bill (H.R. 6169) that included a timeline as well as an expedited process for consideration of a tax reform bill in 2013 as well as a handful of tax-reform benchmarks. The bill stipulates that tax reform must: (1) consolidate the individual tax brackets down to two; (2) reduce the corporate rate to no more than 20 percent; (3) repeal the alternative minimum tax; and, (4) move to a territorial tax system for foreign profits. This bill is important because it serves as the first attempt at articulating the “expedited process” that Ways and Means Committee Chairman Camp (R-MI) called for in June. While the Senate is not expected to take up H.R. 6169, the House’s fast track language could serve as some guidance.
Passing Tax Extenders – an Olympic event on the Hill
Everyone in Washington is talking about doing tax reform next year but just how heavy a lift is that going to be? Well, if trying to get a grab bag of already passed tax provisions known as “extenders” out of the Senate Finance Committee is any indication, the answer is that an Olympic-worthy lift is in order.
Going forward, the widely accepted notion is that “reform” should bring the business and individual tax rates down by eliminating or reducing targeted tax breaks. With that goal in mind...(keep reading)
Here are recent headlines you may find interesting:Tax Reform/Charitable Deduction
Fiscal Cliff: Washington is sounding an alarm over “Taxmageddon” or the “fiscal cliff” that the nation faces at end of this year due to tax increases and spending cuts slated to take effect simultaneously. The Washington Post provides a question-and-answer on sequestration and what to expect.
Renowned economist and Yale professor Robert Shiller comments in the New York Times on several issues related to tax rates and incentives, including the charitable deduction. According to Shiller, “We need to accompany any tax increases with an affirmation and a broadening of the tax system’s support of philanthropy.”
Tax Reform: As discussion of tax reform mounts, Pete Domenici and Alice Rivlin once again offer their tax reform plan, which lowers individual rates to two brackets and converts the charitable deduction to a 15 percent refundable tax credit for charitable contributions, as a way forward for Congress.
Senator Charles Grassley (R-IA) suggests,“[a]s we consider how tax incentives help students and families pay for college, we should consider whether and how these incentives also increase costs.”
Payments in Lieu of Taxes (PILOTs): Inspired by PILOT measures in Boston and other cities, Lawrence, NJ, and Haverhill, MA, are asking their charitable communities to start or increase their contributions.
Social Impact Bonds: Massachusetts has announced the selection of seven nonprofit social service providers to participate in the nation’s first social impact bond program. Also see: Massachusetts Announces Nonprofit Partners in ‘Pay for Success’ Experiment, Philanthropy News Digest
Giving Pledge: The Foundation Center has launched a new section on its website called Eye on the Giving Pledge that provides profiles and grantmaking information on the 81 signatories of the Giving Pledge, the effort by Warren Buffett and Bill and Melinda Gates to encourage the wealthiest Americans to commit at least half of their assets to charity.This Caught Our Eye…
501(c)(4)s: A group of ten Republican senators have urged the IRS Commissioner to resist changing regulations for 501(c)(4) tax-exempt organizations in response to public pressure over their campaign-related activities. Click here for past coverage of this issue. Also see: Senators Warn IRS to Ignore Political Pressure to Rewrite Super-PAC Rules, The Hill, and Senators Warn IRS Not to Change Rules for Tax-Exempt Political Groups, Accounting Today
New York Attorney General Eric T. Schneiderman has launched a probe into the finances of certain 501(c)(4)s and requested tax returns and other financial information. Also see: AG Widens Probe of Tax-Exempt Groups, Albany Times Union
Social Innovation Fund: The Corporation for National and Community Service has announced the recipients of its 2012 Social Innovation Fund grants totaling $42 million to charitable organizations active in the areas of youth development, economic opportunity, healthy futures, and other pressing social needs. Also see: Social Innovation Fund Awards $42-Million, Chronicle of Philanthropy
American Nonprofits: A newly formed national association aims to help nonprofits with finance issues.
Combined Federal Campaign (CFC): The CFC Commission established last year to propose reforms to the CFC has released a report of 24 wide-ranging recommendations designed to improve the program amid declines in donations. One recommendation shifts the burden of CFC costs from donors to participating charities. Report: Federal Advisory Committee Report on the Combined Federal Campaign. Also see: Report Urges Changes to Federal Charity Program, Washington Post
Social Media: According to a new report by the Center for Effective Philanthropy, only 16 percent of grantees surveyed reported using social media created by the foundation funding them or its staff and they don’t find it particularly useful. Report: Grantees’ Limited Engagement with Foundations’ Social Media
2012 Philanthropy Roundtable Annual Meeting
The American Spirit of Giving
The Breakers, Palm Beach, Florida
Register now for the conference
The 2012 Annual Meeting of The Philanthropy Roundtable will offer principled, practical lessons on how donors can make the greatest impact. Come and engage. Come and learn. Come and share. The Alliance for Charitable Reform will offer programming on public policy issues affecting the charitable sector. ACR sessions and speakers will be announced soon.
Keynote speakers include:
Nancy G. Brinker, founder and CEO, Susan G. Komen for the Cure
Arthur C. Brooks, president, American Enterprise Institute
Cesar Conde, president, Univision Networks
Mark Edwards, executive director, Opportunity Nation
Michael M. Kaiser, president, John F. Kennedy Center for the Performing Arts
Bernie Marcus, chairman, Marcus Foundation, and co-founder, Home Depot
Featured speakers include:
Steven Anderson, president, Donald W. Reynolds Foundation
Carol S. Dweck, Lewis and Virginia Eaton Professor of Psychology, Stanford University
Ingrid Johnson, chair, City of Newark Reentry Advisory Board
Gay Hart Gaines, trustee, Mount Vernon Ladies’ Association
Adam Gelb, director for Public Safety Performance Project, Pew Center on the States
Fred Krupp, president, Environmental Defense Fund
Dave Levin, co-founder, KIPP, and superintendent, KIPP New York
James Liske, CEO, Prison Justice Fellowship
William P. Mumma, president, Becket Fund for Religious Liberty
Tricia Raikes, founder, Raikes Foundation
Kenneth W. Starr, president, Baylor University
John Tomasi, founding director, Political Theory Project, Brown University
For more information: http://www.philanthropyroundtable.org/topic/annual_meeting/
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