IRA Charitable Rollover Tax Provision Important for Giving
The House Ways and Means Subcommittee on Select Revenues held a hearing today on extending certain tax provisions. One issue of importance to philanthropy is on how to extend the IRA charitable rollover tax benefit, which recently expired. The IRA charitable rollover is good for charity because it provides individuals a tax incentive to give money to charity out of their IRA accounts rather than keeping it and being taxed. It also allows individuals to participate in philanthropy who may not otherwise have extensive cash resources to give away, other than funds from an IRA. Several members of Congress spoke out in favor of the IRA charitable rollover in today’s hearing.
Rep. Diane Black (R-TN) said the IRA rollover “encourages behavior that benefits our communities” and that it is “one of those cherished traditions we don’t see anywhere else in the world and would think that [Congress] would want to continue this”. Rep. Wally Herger (R-CA) called for extension of the charitable IRA rollover and enactment of the “Public Good IRA Rollover Act”. (You can read his full statement on the IRA charitable rollover below.)
Also, Rob Collier, President and CEO of the Council of Michigan Foundations submitted testimony for the record on behalf of the Council on Foundations in support of the IRA charitable rollover provision that you can read here. The statement provides a quick, concise read on the history of this provision and what it means to charity. You can check out all the information about the hearing from the House Ways and Means Committee website here.
We will continue to follow this issue as it gains momentum on the Hill and we hope the IRA charitable rollover will be extended next year.
Statement by Representative Wally Herger (R-CA)
Chairman Tiberi and Ranking Member Neal, thank you for the opportunity to testify. As our Committee works to reform the tax code, it is important to closely examine the merits of the various “tax extender” provisions.
One tax extender I strongly support is the charitable IRA rollover provision. First enacted in 2006, this policy allows IRA owners to make tax-free charitable contributions from their savings. Our country has a long and proud tradition of charitable giving and meeting human needs through voluntary private generosity, rather than relying solely on taxpayer-funded programs. The tax deduction for charitable contributions recognizes the importance of this tradition, and the charitable IRA rollover extends this favorable tax treatment to retirement savings.
Maintaining incentives for charitable giving is especially important in tough economic times, and several organizations in my Northern California district have told me that this provision has been very helpful to them. I and Mr. Blumenauer have introduced the Public Good IRA Rollover Act to permanently extend the charitable IRA rollover. Our legislation would also make some important modifications, such as allowing tax-free rollovers to donor-advised funds, which help to keep foundations focused on local community needs.
Packard, Gates, Hewlett and Moore Foundations sponsor course
Determining the lines of what could constitute lobbying can sometimes be tricky. Many foundations are, and should be engaged in what is going on in Washington and in their states. But staying within the law and avoiding any violations on lobbying and advocacy rules can be difficult to navigate, even for the experts. To help provide some clarity on these issues, earlier this week the David and Lucile Packard, Bill & Melinda Gates, William and Flora Hewlett, and Gordon and Betty Moore foundations launched a free online course to help well-intentioned foundation staff stay out of trouble with the IRS and the law.
We went through the course and found it to be a very helpful resource. The format is engaging and the case studies presented provide real-life situations that we all might find ourselves in someday. The course is only focused on federal rules for private foundations and is divided into three modules. The first two modules cover general principles and rules while the third provides practical application.
It is important for you to speak out and spread the word about all the good your organization does. It’s how you build support for your mission and ensure our country remains as the leader for charitable activity. But for any foundations out there who have ever thought about engaging in advocacy, this course is definitely worth a look to make sure you’re staying on the straight and narrow. You can find the course by going to http://www.learnfoundationlaw.org/courses.html
In an expected move, the Senate voted down the Buffett Rule today by a vote of 51 to 45. 60 votes were needed. The Buffett Rule levy’s a minimum tax of 30% on higher-income earners and, for purposes of this tax, eliminates all credits and deductions except for the charitable deduction. By singling out the charitable deduction, supporters of the bill acknowledge that the charitable deduction is different from all other deductions and credits because it is the only incentive designed to encourage Americans to give away their money. However, ACR believes that entrepreneurship and wealth-creation is vital to sustaining charitable giving. A minimum tax levied on high-income earners ultimately leaves them with less to give and it is these Americans that, study after study has shown, give the most. ACR looks forward to many further conversations with decision makers in the coming months about how we can encourage private giving, not reverse it.
Tax experts from across the political spectrum gathered today at the Urban Institute for a Tax Policy Center panel on how our decision makers should approach tax policy this year and beyond. Today’s panelists included Douglas Holtz-Eakin, president of the American Action Forum, David Levine, former chief economist, Sanford C. Bernstein & Co., Donald Marron, director of the Urban-Brookings Tax Policy Center and Diane Lim Rogers, chief economist of the Concord Coalition.
As you know, tax policy is an issue we are following very closely as it could have implications for philanthropy and charities. One issue of note to our community was discussion on the charitable deduction and other incentives to give. While there was some disagreement among the panel on a range of tax policy issues, there was a general consensus that the charitable deduction is a valuable piece of our tax code and that there is a strong community of support behind it. Douglas Holtz-Eakin raised the issue of putting our federal budget into perspective when we talk about raising taxes or eliminating deductions. What should we ask the rich to do—should we expect them to pay more taxes but also continue to give more to charity? Lim Rogers argued that we should reduce the charitable deduction to lower levels, perhaps to the rate President Obama has repeatedly proposed. Interestingly, there was little talk of the tax code possibly being entirely re-written, leaving to conventional wisdom that tax reform could very well likely be in the details. This means we must continue to be proactive about educating members of Congress and other policy makers about the value of philanthropy in America.
All of these economists were very interesting to hear from and we will continue to follow them. We will post the entire video when it becomes available.
Protecting the intent of philanthropic donors has always been a core priority for The Philanthropy Roundtable, and therefore, for ACR. As we have mentioned in previous posts, Jeffrey Cain recently released a short guidebook on how donors should approach their giving in order to ensure their philanthropic objectives are met, both when they are alive and after they die. The Roundtable’s President, Adam Meyerson, wrote in a March 9th Wall Street Journal op-ed, “When Philanthropy Goes Wrong”, that “…one of the great scandals in modern philanthropy is that trustees and staff of grant-making institutions all too often pay little attention to the principles governing their founders’ charitable giving”. In this op-ed, he highlighted the Ford Foundation as an example of why it was important for donors to make clear the intentions for their philanthropic contributions.
In response, Marta Tellado from the Ford Foundation, wrote to the Wall Street Journal, (see “Ford Foundation Follows its Charter”) defending Ford’s good work in many philanthropic areas. She wrote, “Whether in funding the fight against apartheid, the green revolution, the civil rights movement or the creation of Sesame Street, the Ford Foundation has helped hundreds of millions of people around the world live freer, better, more prosperous lives.”
Adam Meyerson posted a response to Ford on The Roundtable’s website, which can be found here. This piece, again, stresses the importance of philanthropists clearly defining their charitable giving objectives, neglecting to do so at their own peril. He points to the Ford charter, which vaguely states “to administer funds for scientific, educational and charitable purposes, all for the public welfare,” offering very broad guidance, leaving much to interpretation of the Foundation leadership at any given time.
It is an interesting exchange and one worth reading for more practical applications on preserving donor intent. We should all be pondering this subject as funding available for grants ebbs and flows and demand from the public for philanthropic results grows. If priorities and principles are clear from the outset, philanthropic endeavors will have a better shot at success.
The full exchange between Meyerson and Tellado is available here: http://www.philanthropyroundtable.org/topic/donor_intent/the_ford_foundation_and_donor_intent
Naomi Schaefer Riley has good nuggets of wisdom in her recent article in Philanthropy Daily about some of the challenges faced by celebrities and large foundation philanthropists. Riley points out that although quietly wealthy individuals have the ability to write checks, celebrities often have the more important ability to bring awareness and volunteers to a cause. She also highlights some important things for which philanthropy has a specific, and irreplaceable role in our society:
“There is an argument, a good one, that foundations have a unique role to play in civil society, that unlike government or business, philanthropy can afford to think about the long term. Foundations don’t need to see results during one fiscal year or one election cycle….If foundations like Gates and Broad and Walton are aggressive and impatient, if they want to see real results in this area, it is because they know that for decades foundations have been dumping money down the hole of public education and have little to show for it. Any reasonable person staring down that hole for too long will also become impatient. And even a little aggressive.”
In addition to the message Riley is sending about philanthropic effectiveness, we want to point out two other important underlying tenants in this article (which you can read in its entirety here http://www.philanthropydaily.com/?p=8715):
1) Philanthropy DOES play a different role in society than either business or government. While philanthropy can draw from good principles in those sectors, philanthropy has different objectives and responsibilities. Some in the nonprofit sector have recently started to articulate this topic more publicly (see Kevin Murphy’s article in the Huffington Post) and we hope to continue hearing this message.
2) Donor intent, above all else, must be respected to ensure the integrity of America’s philanthropic tradition. Philanthropists should think hard about this when planning their charitable missions. One of ACR’s core objectives is to safeguard the freedom of donors and private foundations to carry out their diverse charitable goals and missions, in order to preserve their distinctive contributions. Jeff Cain recently authored a guidebook, “Protecting Donor Intent” that is a must read on this topic. You can download the guidebook for free here.
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