29 June 2020

Washington Roundup: Universal Charitable Deduction Bill, California DAF Legislation & New Charitable Giving Data

The ACR newsletter tracks with the end of congressional sessions to highlight the most important developments here in Washington. The timing will vary, based on the congressional calendar, but you can expect a newsletter from us about once a month. In the meantime, we’ll be sharing significant developments through our email News Alerts and in real time on our Twitter feed (@ACReform) through our #HillScoop a.nd #SectorScoop updates.

>> Federal: Congress: New Senate Bill to Expand the Universal Charitable Deduction
>> Sector: Recent Data on Charitable Giving
>> Congress: Hearing on Supporting Charitable Giving During the COVID-19 Crisis
>> State: California DAF Legislation Moves to the Senate
>> Treasury: Proposed Regulations for New Tax on Family Foundations
>> National: Other News You Can Use
>> National: Top Reads

Congress: New Senate Bill to Expand the Universal Charitable Deduction

Last Monday, six senators introduced a bill that would expand the new, but temporary universal charitable deduction, available to taxpayers who do not itemize their deductions. The bill would increase the current $300 deduction to about $4,000 for individuals and $8,000 for married couples, and the deduction would be available on both 2019 and 2020 tax returns. The Universal Giving Pandemic Response Act (S. 4032) was introduced by senators James Lankford (R-OK), Chris Coons (D-DE), Mike Lee (R-UT), Jeanne Shaheen (D-NH), Tim Scott (R-SC) and Amy Klobuchar (D-MN) and is meant to encourage all Americans to give to charity during this time of increased need.

On the House side, Reps. Mark Walker (R-NC) and Chris Pappas (D-NH) introduced an identical version on Wednesday, signaling bipartisan and bicameral support for the measure. As you may recall, Rep. Walker is no stranger to supporting the sector. Earlier this year he introduced the CHARITY 2022 Act, which would create a similar universal charitable deduction available through 2022.

Our Take: Critics of the expanded universal charitable deduction are pointing to recent charitable giving data (see next section) that shows an increase in 2019 giving, suggesting making the charitable deduction available to all Americans isn’t necessary. However, that single data point is not necessarily the full picture, and other concerning trends make the universal charitable deduction even more important to advance in a year during which we’re facing mounting challenges.

Sector: Recent Data on Charitable Giving

On June 16, Giving USA, an initiative of the Giving Institute, released their annual report, which shows that Americans gave an estimated $450 billion to charity in 2019, a 2.4 percent inflation-adjusted increase from 2018. The report indicates a growing economy led to increases in charitable giving last year, but it’s important to keep in mind these numbers reflect a different economic climate than what we are currently in.

Despite the growth in charitable dollars given last year, recent data from the Fundraising Effectiveness Project shows that individual giving declined 6 percent in the first quarter of 2020 compared to last year. And, the number of donors dropped by 5.3 percent in the same time, consistent with the nearly two-decade decline in the number of households giving to charity.

Our take: Taking one data point, like the 2019 increase in giving, in isolation can be misleading in the context of larger trends. ACR is most troubled by the decline in donors, which you can read more about on our most recent blog post, and we’ll continue working with our colleagues in the Charitable Giving Coalition to expand charitable giving incentives and drive more resources to communities across the country.

Congress: Hearing on Supporting Charitable Giving During the COVID-19 Crisis

On June 9, the Joint Economic Committee, a bipartisan, bicameral committee comprised of ten members each from the Senate and the House, held a hearing to discuss the importance of charitable giving and an expanded universal charitable deduction during the current health crisis. While the JEC doesn’t have the power to legislate, they are able to make policy recommendations to Congress.

During the hearing, Sens. James Lankford (R-OK) and Jeanne Shaheen (D-NH) discussed their efforts to expand charitable giving through a universal charitable deduction, and Dr. Una Osili from Indiana University and Bill Crim from the United Way of Salt Lake City spoke on a separate panel to provide the perspective from the charitable sector.

Our Take: The JEC hearing was an important step in getting lawmakers on the record in support of the universal charitable deduction, but it also showed where we could see some pushback – the House. Only one House member, Vice Chair Beyer (D-VA), voiced tepid support for the universal charitable deduction. While there was broad agreement on the committee that nonprofits are doing important work in the wake of the current crisis, we’ll need to continue to work with our colleagues in the sector to build support in the House and the Senate for the bills introduced in both chambers to expand the universal charitable deduction (see above for details).

State: California DAF Legislation Moves to the Senate

On June 10, the California Assembly passed a bill (A.B. 2936) that would create a new classification for donor-advised funds and sponsoring organizations and allow the Attorney General to engage in rulemaking to implement reporting requirement on the giving vehicle. The bill now moves to the Senate where it is expected to be considered during the second half of July.

As you may recall, this bill is different than the bill (A.B. 1712) Assemblywoman Wicks introduced last year, and eventually pulled from consideration, that raised donor privacy concerns because it would have instructed the AG to collect information on donors. However, ACR still has concerns about donor privacy in the new bill as it would grant the AG authority to implement reporting requirements that could contain identifiable information on donors.

Our Take: The bill is expected to be considered by the Senate Judiciary Committee in late July. ACR is making the case for donor privacy protections to be included in the bill – the letter we submitted to the sponsor can be found here – and we’re bringing that perspective to the conversation through op-ed placements and social media, for now. We’ll continue working with our allies in California to advocate for donor privacy and help prevent bad policy from being enacted. Stay tuned.

Treasury: Proposed Regulations for New Tax on Family Foundations 

Earlier this month, the IRS issued proposed rules to further clarify the 21 percent excise tax imposed on family foundations whose executives “earn” more than $1 million from the foundation and family business. As you may recall, the 2017 tax bill included a new provision that levies a 21 percent excise tax on compensation in excess of $1 million paid to nonprofit employees and officers, but while doing so also swept in compensation from “related organizations” like a family business. So, if a family foundation has an officer who draws salary from the family business and the family foundation, their compensation above $1 million could be taxed at 21 percent.

The proposed rules exempt volunteer executives who do not receive any compensation from the foundation or nonprofit as long as they spend the majority of their working time at the for-profit related organization. However, executives who receive any compensation, even minimal, from the foundation or a related nonprofit could be subject to the tax.

Our Take: We understand the volunteer exemption helps a lot of organizations that might have been impacted without this guidance, but we’re working to understand what types of organizations are still swept in. If you have any feedback about how you might be impacted, please email sbarba@urbanswirski.com.

Other News You Can Use

On June 17, the Treasury Department and Small Business Administration released simplified loan forgiveness applications for Paycheck Protection Program participants, which include 501(c)3 nonprofits. The first application, the “EZ” forgiveness application, is for self-employed borrows who did not reduce workers’ salaries by more than 25 percent during the pandemic. All other recipients who don’t meet those requirements can use the also simplified five-page forgiveness application. Both applications give borrowers the option of using the original 8-week covered period if their loan was made before June 5 or an extended 24-week covered period.

You may recall, the Paycheck Protection Program is a loan (and grant) program created in the CARES Act to help small businesses and nonprofits keep workers employed. These changes to the loan forgiveness application come after outcries that the previous loan forgiveness application was too complicated. The new applications, which come just as the first batch of loan recipients become eligible for forgiveness, should streamline the process for nonprofits and small businesses.

Top Reads