Thune Questions Lew About Cap on the Charitable Deduction, IRS Compensation
Senator John Thune (R-SD) questions Treasury Secretary Jack Lew about the proposed cap on the charitable deduction at a Senate Finance Committee hearing on the President’s FY2015 budget proposal.
Mar 5, 2014
Live Blog: 2014 ACR Summit for Leaders
This is a live blog providing updates from the 2014 ACR Summit for Leaders.
We’re just a few minutes from starting. We’ll have a few opening remarks followed by the congressional panel.
ACR on President’s Budget: Disappointed in Cap, Praise Streamlined PF Excise Tax
Budget Proposal Also Includes the Buffett Rule
WASHINGTON, D.C.— The Alliance for Charitable Reform (ACR) issued the following statement upon the release of President Obama’s budget proposal for fiscal year (FY) 2015, which includes a 28 percent cap on the charitable deduction, the Buffett Rule and a streamlined private foundation excise tax.
“We are disappointed that the President has, for at least the seventh time, proposed to cut the charitable deduction,” Sandra Swirski, executive director of ACR, said. “Capping the charitable deduction at 28 percent could cost the nonprofit sector up to $9 billion a year, dealing a big blow to our charities and our economy. The charitable deduction is a lifeline not a loophole and we strongly urge the President to reevaluate his stance on cutting the deduction.”
The President’s proposal also includes the Buffett Rule which imposes a minimum 30 percent tax on incomes beginning at $1 million, but does allow for a charitable deduction providing credit against taxes owed. However, the charitable deduction in the Buffett Rule is also capped at 28 percent.
“While the so-called Buffett Rule does recognize the unique nature of the charitable deduction, it still caps that deduction which will ultimately result in decreased charitable giving,” Swirski continued. “ACR and our colleagues in the sector have worked tirelessly to educate our elected officials on the unique nature of the charitable deduction and the significant damage any reduction in its full value will do to our communities and most vulnerable neighbors. We look forward to continuing this effort in light of the President’s budget.”
The budget proposal also includes a streamlined private foundation excise tax of 1.35 percent.
“ACR strongly supports the proposed consolidation of the private foundation excise tax to a flat rate instead of the current two-rate structure, which has the practical effect of deterring foundations from increasing their grants during times of great need,” Swirski said. “Despite the consolidation, the proposed rate of 1.35 percent would result in a tax increase for many foundations and we urge a flat rate of one percent instead.”
The release of President Obama’s FY2015 budget comes on the heels of a tax reform plan released by House Ways and Means Chairman Dave Camp (R-MI) and a day before the 2014 ACR Summit for Leaders. Both proposals are likely to be among the topics discussed at this year’s Summit.
ACR Summit Panelists Express Thoughts on Tax Reform Plan
Two panelists slated to participate in next week’s Alliance for Charitable Reform (ACR) Summit for Leaders published articles about the tax reform bill recently released by House Ways and Means Chairman Dave Camp (R-MI).
In his Forbes column, Howard Husock, vice president for policy research at the Manhattan Institute, explained that Chairman Camp’s proposed tax reform proposal gets the most fundamental part of its approach to charitable giving right but there are some reasons to be concerned.
Stephen Moore, chief economist at the Heritage Foundation (and former Wall Street Journal editorial board member), wrote in Investor’s Business Daily that Chairman Camp should be praised for his attempt to rewrite the tax code but expressed frustration over the fact that there is little momentum to advance it.
Both men, along with a moderator, comprise the final panel of the Summit: Two Perspectives on Tax Reform and Private Giving Incentives. Take on opportunity to read both pieces and then make sure to register for next week’s ACR Summit for Leaders where you will be able to hear much more.
Letter to IRS on Proposed Rules
Adam Meyerson, president of The Philanthropy Roundtable, sent a letter on Tuesday to John Koskinen, commissioner of the Internal Revenue Service, offering comments on the proposed rules for tax-exempt organizations on candidate-related political activity.
“The proposed rules—without question—threaten the essential and permissible work of donors, foundations, and charitable organizations to: 1) educate the general public and our policymakers about a broad range of social issues of critical importance to our nation and its communities; and 2) encourage the civil discourse about those issues that is central to democratic government. Because of the threat which these proposed rules present to philanthropic freedom and effectiveness, we respectfully urge the Internal Revenue Service to reconsider its significantly expanded definition of ‘candidate-related activity,’” Meyerson wrote in the letter.
ACR Statement on Camp Tax Reform Legislation
Bill Recognizes Importance of Charitable Deduction, Streamlines PF Excise Tax
WASHINGTON, D.C.— The Alliance for Charitable Reform (ACR) issued the following statement upon the release of tax reform legislation authored by House Ways and Means Chairman Dave Camp (R-MI).
“Chairman Camp has taken on the difficult task of crafting comprehensive tax reform legislation and we applaud his commitment to this effort,” Sandra Swirski, executive director of ACR, said. “By preserving a charitable deduction, this bill acknowledges the importance of the deduction as it encourages individuals to give their money away for the benefit of others. Some proposed provisions do raise concern and we look forward to working with the Chairman and other members of the Committee to improve the bill.”
Camp formally unveiled his bill today at a media briefing on Capitol Hill.
“This legislation does not reflect ideas solely advanced by Democrats or ideas solely advanced by Republicans, nor is it limited to the halls of Congress. Instead, this is a comprehensive plan that reflects input and ideas championed by Congress, the Administration and, most importantly, the American people,” Camp said in a news release.
ACR also strongly supports the proposed consolidation of the private foundation excise tax to a flat one percent instead of the current two-rate structure, which has the practical effect of deterring foundations from increasing their grants during times of great need.
Lawmakers Must Understand Philanthropy to Make Better Policy Choices
By Alicia Philipp and John Tyler
There’s an old saying in politics: “If you’re not at the table, you’re on the menu.”
As policy makers in D.C. and elsewhere debate public-policy changes that directly affect philanthropy, this idiom will become reality unless more foundations recognize their place in enhancing understanding of what philanthropy does and the constructive impact it has.
The issues on the menu are broad-ranging and varied, including changes to the private-foundation excise tax, the charitable deduction, and possibly new rules for donor-advised funds. What’s more, Congress might debate whether the definition of what qualifies as “charitable” should be narrowed and whether we need new regulations on nonprofit governance and what constitutes wise decision making.
Perhaps more important are the policies that affect our missions: policies on immigration, economic opportunity, climate change, health care, education, and so many other causes that foundations try to influence through their grant making. Foundations can have an important role in sharing their experiences about what’s already worked and informing policy makers about research that might clarify the implications of new laws and regulations.
Foundations have a choice. We can accept the status quo and passively submit to the changes thrust upon us, or we can actively engage with policy makers about who we are and what we do as individual foundations. Doing so can help policy makers better understand the broad impact of philanthropy, even as we educate them about grant programs that have achieved results and those that haven’t worked as well as we’d hoped.
As policy makers debate shifts in fiscal and social policy, society needs for them to understand philanthropy better than they seem to.
For instance, policy makers talk about charities, churches, and foundations filling gaps as fewer public dollars support the social safety net and other public services. The assumptions underlying the “gap filling” mind-set suggest that policy makers misunderstand philanthropy’s capacity and probably don’t understand what grant making is all about.
It shouldn’t be a surprise that policy makers don’t understand us. After all, the public doesn’t. A Philanthropy Awareness Initiative study found that more than half of “engaged Americans” could not name a single foundation on the first try, and fewer than one in six could cite an example of how a foundation had affected his or her community.
Policy makers need to know more about philanthropy and the billions of dollars we put to work every year to promote innovation and employment and to facilitate good health and productivity. In fact, as a study by the Philanthropic Collaborative demonstrated, every dollar foundations spend produces more than $8 in local and economic benefits.
Just as important, policy makers need to understand that philanthropy epitomizes the uniquely American spirit that combines self-empowerment with support for our neighbors—a spirit that existed long before there was a charitable tax deduction.
Our elected officials need to know more about us because inaccurate or incomplete information is likely to lead to policies that hurt philanthropy, and by extension hurt the communities we serve.
The best way for policy makers to learn about philanthropy is for more foundations to communicate directly with them. At a time when government money is tight and lawmakers are looking for more resources, foundations can no longer modestly rely so much on letting our activities speak for themselves or letting our grantees and trade groups do our talking for us.
Grant makers certainly benefit from organizations like the Council on Foundations, Independent Sector, the Philanthropy Roundtable, and others that are dedicated to a vibrant, relevant philanthropic sector. These organizations work energetically to promote and protect philanthropy. Their roles and work remain essential and valuable. But their efforts will be strengthened if more individual foundations strategically communicate directly about the vital work they do.
In many cases, individual foundations offer perspectives that are distinctively theirs—whether a private foundation that does research on important policy issues or a community foundation that attacks problems at the grass-roots level and provides essential assistance to local nonprofits. Many foundations can offer useful expertise and on-the-ground knowledge to legislative staff members looking for anecdotes, new ideas, or a fresh perspective.
For example, research by the Ewing Marion Kauffman Foundation that details what kind of businesses are more likely to add jobs to the work force has been shaping policy. The findings turned conventional wisdom on its head because they showed that young companies create more jobs over all, even when counting for the number of start-ups that don’t survive.
Also, Kauffman’s work showing the disproportionate tendency of highly skilled immigrants to start and expand businesses has contributed to new conversations on immigration reform, including introduction of bills in Congress to authorize “start-up visas.” Both sets of Kauffman’s research have been cited multiple times on the floors of Congress and have contributed to a surge in policies and legislation designed to spur start-ups.
Community foundations might engage policy makers from a different angle. While some foundations focus on specific causes, they often serve more generally as charitable endowments in communities. They typically operate at the grass-roots level, engaged in quality-of-life issues such as education, housing, social welfare, arts and culture—everything “charitable.” They understand community needs, organizations, and the people who are served, and they can help policy makers do likewise.
For example, the Community Foundation for Greater Atlanta’s efforts to help young people make the transition out of Georgia’s foster-care system led to new state legislation to help teenagers reach that milestone.
The foundation used its relationships with state and local elected officials and leaders of the child-welfare agency to assist lawmakers as they drafted and passed legislation that increased funding and other support to help young people improve their health, get a better education, and build financial assets—while also ensuring they had a say in what would happen to them after they left foster care.
This legislation could have an important role in turning around the current situation, in which 75 percent of foster children end up unemployed or in low-paying jobs after they leave the foster system and must provide for themselves.
People in philanthropy do a disservice by believing that policy makers will fully appreciate these contributions to society if we don’t tell them directly. So we believe that more foundations need to overcome their historic—even misinformed—reluctance to engage.
One reason for that reluctance seems to be the mistaken belief that direct contact with an elected official or staff members is considered lobbying, which private foundations are in most cases prohibited from doing. To the contrary, the law permits foundations to do a great deal to directly inform and educate policy makers and their staffs.
For instance, foundations whose missions are dedicated to changing policies in the arts or health care or any other cause are allowed to let members of Congress and the executive branch know about the results of their work.
They may even have a responsibility to do so: If a private foundation is investing millions to influence public policy in its chosen field but then fails to at least consider taking its work to relevant policy makers, is it doing everything it can to achieve its mission?
As Dean Zerbe, a former aide to Sen. Charles Grassley, Republican of Iowa, tells us:
“It’s really important for the foundation community—including individual foundations—to be engaged with members of Congress and their staffs. Foundations can and should speak out about the work they do to help those in need and strengthen our communities.”
If more foundations reach out to elected officials, it is society that will benefit the most. Policy makers will benefit because they will know more about their communities, their constituents, and philanthropy’s contributions. Foundations will benefit because, after investing many dollars in their missions, their experiences, information, and lessons might be used to shape better public policy.
A critical benefit for everyone is that policy makers and the public will better understand the extensive diversity of philanthropy’s scope and the pitfalls of one-size-fits-all approaches to policy, whether specific to philanthropy or otherwise.
For instance, philanthropic dollars are often put to work locally to test innovative approaches, but what works in Kansas City may not work in Atlanta. Because many foundations understand what works and what doesn’t, we should be sharing our perspectives with elected officials so they can avoid imposing generic policy solutions that won’t work nationwide. This outreach will ensure that government spends its dollars efficiently.
More foundations need to help policy makers understand that we do much more than give away money. As lawmakers are considering policies that affect philanthropy, they need to know that our work is about empowering ideas, meeting needs, and inspiring communities.
There are seats at the table for foundations, but we have to claim them.
Alicia Philipp is president of the Community Foundation for Greater Atlanta. John Tyler is general counsel at the Ewing Marion Kauffman Foundation in Kansas City, Mo.
This article originally appeared in the Chronicle of Philanthropy and has been published here with permission of the authors.
ACR News 02.21.14 - Tax Reform Bill Coming, Wyden Takes Over
>> Federal: Wyden Takes Over Senate Finance Committee
>> Federal: Camp Getting Closer
>> Federal: Debt Ceiling Drama
>> Federal: ACR Summit for Leaders
>> Consider This: DC’s Focus
>> Top Reads: Dave Camp defies skeptics
Both the House of Representatives and Senate are on recess this week for President’s Day and will return to Washington next week.
Last week, the Senate approved Senator Ron Wyden (D-OR) as Chairman of the Senate Finance Committee, replacing outgoing Chairman Max Baucus (D-MT) who is on his way to China to serve as U.S. Ambassador.
In terms of Wyden’s immediate tax agenda, he said extenders, the package of annually expiring tax incentives (like the IRA charitable rollover), should be the first priority for the Finance Committee in 2014. He also said that extending these provisions for a year could “serve as a bridge for broader reform.” In contrast, House Ways and Means Chairman Dave Camp (R-MI) insists tax extenders should be dealt with through comprehensive tax reform and isn’t ready to give up hope on tax reform yet for this year (more on this below). We believe these expiring provisions will be dealt with sometime this year but it may be late in 2014 – after the midterm elections in November.
From an insider’s perspective, Wyden has long been known for big ideas (including his own tax reform bill), and we don’t expect him to be shy about pursuing significant policy changes in his new post. Wyden is more liberal than former Chairman Max Baucus, and he represents a decidedly blue state, leading Democrats to believe he will be a stronger advocate for their agenda. However, he is also known for his bipartisanship, which gives Republicans some hope. Even Grover Norquist, the anti-tax advocate, had kind words about Wyden’s rise: “He’s one of the most sensible Democrats. While there probably shouldn’t be any Democrats on the Senate Finance Committee, if you have to have one, Ron Wyden would be a fine choice.”
Finally, Senator Mark Warner (D-VA) was tapped to fill the seat vacated by Senator Baucus’ departure.
On Wednesday, an aide to House Ways and Means Chairman Dave Camp (R-MI) said that the Chairman plans to release his draft tax reform plan next week. The aide noted that Chairman Camp did not have the green light from House Republican Leadership to mark-up a bill in Committee but that Speaker John Boehner (R-OH) would not stop him from releasing a reform plan. “No one [in leadership offices] are doing backflips that he’s doing this, it’s just, at this point, what’s the point of telling him no if this is what he wants to do and he thinks this is going to sell it?” the aide said.
It is unclear what form this document will take, as it is currently being described as a “discussion draft.” This could be legislative text or analysis of provisions with associated “scores” (the amount of revenue the government gains or loses through tax provisions). Regardless, when Camp’s plan is made public it will no doubt attract substantial attention, in part because of the three years of hearings and volumes of public input that have helped to shape the plan. That said, it’s one step in a long process that now includes a new Chairman of Finance who has his own, and very different, priorities. We are watching this closely and will send you any late-breaking news.
Before leaving town, the House voted 221 to 201 to pass a ‘clean’ debt limit increase – one without any additional legislative proposals – to lift the debt limit. Recall that the debt limit refers to the total amount of money the government is allowed to borrow to meet its existing payment obligations. Shortly after it passed the House, the Senate also passed the legislation by a 55 to 43 vote and the President signed it into law over the weekend. The bill eliminates the debt limit until March 15, 2015, at which point it comes back into effect and is set at whatever level of debt the government holds at that time. After that date, the Treasury Department can use “extraordinary measures” to avoid defaulting on loan repayments until Congress increases or eliminates the limit once more. As you may recall, the debate over increasing the debt limit brought the country to the brink of the “fiscal cliff.” Obviously, that won’t happen this year. Each party correctly concluded that there was little advantage to going to the brink.
As you have undoubtedly noticed, there is a lot going on with issues affecting the nonprofit sector: the Camp tax reform bill, the President’s budget proposal, a new Senate Finance Committee chairman. These are just a few of the matters that will be discussed at the 2014 ACR Summit for Leaders taking place on March 5. The Summit offers a half-day of programming to provide an insiders’ look at the political issues impacting philanthropy and nonprofits, as well as guidance on how to effectively advance your cause in Washington. Click here to register!
In the Washington tax world, all eyes are focused on three things.
First, we expect Ways and Means Chairman Camp to release a tax reform discussion draft next week. Releasing it is big news. But we aren’t convinced that rank and file Republicans are interested in pressing too hard on whatever he comes out with, given that it will inevitably have winners and losers in it. Indeed, many are saying tax reform distracts from the bigger message on the flaws in Obamacare.
Second, what will be the priorities of Senator Wyden (D-OR), the new chair of the Finance Committee, be? Sure, he has talked about extending expired tax provisions, but what next? The amount of tea leaf reading and prognosticating on that question has been beyond fulsome. We think it is fair to say that there will be some sharp differences from his predecessor, both in the way he runs the Committee as well as his priorities. Time will tell.
And third, “House of Cards.” Not really tax-related but a town-wide obsession. If you haven’t watched, we’d recommend playing it safe on the DC metro the next time you ride. We will leave it at that.
- Federal: Dave Camp defies skeptics, plans tax bill next week
- Federal: House GOP to go after IRS
- Federal: Left and Right Object to I.R.S. Plan to Restrict Nonprofits’ Political Activity
- Federal: The rise of Ron Wyden
- Federal: Gifts Surge From Rich U.S. Donors
- Opinion: Parks, Schools and Bill de Blasio: Risking Mediocrity For Fairness
- Local: Foundations play important role in community
- ACR Blog: Camp Tax Reform Bill to be Unveiled
- ACR Blog: With Malice Toward None
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