19 May 2017

ACR News 5.19.17 – New Research on Tax Policy and Charitable Giving

>> Federal: Washington Roundup
>> Federal: Tax Reform
>> Federal: Trump Nominates Kautter for Treasury Tax Policy Position
>> Federal: New Research on Tax Proposals and Charitable Giving
>> Federal: Private Foundation Excise Tax Simplification Act
>> Federal: Roadmap for Action in May
>> Consider This: Sharp(e) Data
>> Top ReadsBehind the Tax Reform Curtain


Washington Roundup

The House of Representatives returned to Washington on Tuesday after a week-long recess. They left town on May 5 on a legislative high following the passage of a health care reform bill on Thursday, May 4, and a 2017 budget signed by President Trump on May 5. Now that the lower chamber has taken care of health care, its first priority, we expect it to turn to tax reform, again. In the Senate, Republicans have already shown reservations about the House-passed health care bill, and they’re expected to take a month or two – that’s Speaker Paul Ryan’s (R-WI) hopeful timeline – to come up with their version. The timing of health care is important because the longer it takes to get done, the longer the timeline on tax reform.


Tax Reform 

Now that the House’s attention is fully on tax reform, we expect them to get more into the details. The Ways and Means Committee is expected to hold at least two hearings on tax reform, the first of which was held yesterday, entitled “How Tax Reform Will Grow Our Economy and Create Jobs.” Panelists largely focused on the business side of the tax code and the need for pro-growth tax reform, and individual provisions such as the charitable deduction were not addressed. The Committee is also expected to hold a hearing next Tuesday on international competitiveness, which will likely focus on the House GOP’s controversial border-adjustment tax proposal. As the tax reform process plays out, ACR is continuing our conversations with Ways and Means staff to ensure our priorities are addressed in a legislative draft.

On the Senate side, the border-adjustment tax doesn’t have a lot of fans. Without this provision, revenue-neutral tax reform becomes a lot more difficult, to the point where the White House has suggested not paying for tax cuts. Senate Majority Leader Mitch McConnell (R-KY) threw water on that idea on Tuesday, saying tax reform has to be revenue neutral.

The White House is expected to release a budget proposal for Fiscal Year 2018 next week. Following the release, Treasury Secretary Steven Mnuchin is scheduled to appear before the Ways and Means Committee on Wednesday and the Senate Finance Committee on Thursday to discuss the proposal.


Trump Nominates Kautter for Treasury Tax Policy Position 

Speaking of Treasury, President Donald Trump nominated David Kautter to be the assistant secretary of the Treasury for tax policy last week. The position will serve a key role in aiding the administration’s push for comprehensive tax reform, including developing and adding details to any proposal endorsed by the White House. Kautter was a partner at tax and audit firm RSM and previously worked at Ernst and Young and served as director of the Kogod Tax Center at American University.


New Research on Tax Proposals and Charitable Giving 

New research released yesterday by Independent Sector finds that expanding the charitable deduction to all Americans could increase charitable giving by nearly $5 billion annually, while other proposals – such as expanding the standard deduction – could reduce giving by as much as $13 billion.

The study, conducted by the Indiana University Lilly Family School of Philanthropy, provided estimates of the potential effects of tax policy changes proposed in the 2014 Tax Reform Act by House Ways and Means Committee Chairman Dave Camp (R-MI) and changes proposed more recently by the Trump White House that would affect charitable giving. The key findings of the research are:

  1. The current proposals would decrease charitable giving between $4.9 and $13.1 billion.
  2. Expanding the charitable deduction to non-itemizers would eliminate that $13.1 billion deficit caused by other tax proposals and instead produce a net gain in total giving of up to $4.8 billion.
  3. Current tax reform proposals would reduce charitable giving to religious organizations by as much as 4.7 percent and giving to other types of charitable organizations by as much as 4.4 percent.

You can find the full report here.


Private Foundation Excise Tax Simplification Act  

As you may recall, Reps. Erik Paulsen (R-MN) and Danny Davis (D-IL) introduced the Private Foundation Excise Tax Simplification Act, which streamlines the PF excise tax to a flat one percent, on Thursday, May 4. Original cosponsors on the legislation include Reps. Pat Tiberi (R-OH), George Holding (R-NC) and Richard Nolan (D-MN). This week, Reps. Kenny Marchant (R-TX) and Pat Meehan (R-PA) signed on as cosponsors as well. We are continuing to meet with lawmakers on the Hill to add more cosponsors to the legislation and will keep you apprised of our progress.


Roadmap for Action in May 

At the ACR Summit for Leaders in March, we presented a Roadmap for Action – a 12-month plan to engage with lawmakers and your community. We then hosted a webinar in April for those who may have missed the Summit. This month’s action item is to request an in-district meeting with your local Congressman, and you still have a week of recess from May 26 to June 2 to request one. You can find all the resources you need here.

We also want to share in your successes! April’s action item was to write a letter to the editor of a local paper about charitable giving and how you are engaging in your community and with lawmakers. If you have a submission that was published and you would like to share it with us, please email it to sbarba@urbanswirski.com. Additionally, May’s action item is the perfect opportunity to snap a photo with your Congressman and share with us and on social media. Some examples of how to share on social media can be found here.


Consider This – Bare Bones

Even with a lot of other things going on in DC, one issue we expect to be hearing a lot about over the next few months is tax reform, particularly in the House.

From where we sit, there is a lot of information out there to help inform the debate on the charitable deduction and its importance going forward. And we were delighted to hear Ways and Means Chairman Brady (R-TX) recently say, “We keep in place the home mortgage deduction and the charitable deduction.  In fact we are looking for ways to unlock more charitable giving.”

That piqued our interest.  If we were looking for ways to “unlock” more giving, just where should we be looking for those who have more capacity to give?

That brings us to Robert Sharpe with the Sharpe Group.  Sharp(e) in every sense of the word, Robert knows how to make data sing, even IRS data!  Trust us, that is no small feat.

Robert compiled several breakdowns of red state versus blue state giving and found that red states, in general, have above average giving as a percent of adjusted gross income. And in terms of percentage of donations, itemizers give about 80 percent of total donations with non-itemizers giving about 20 percent.

If you’ve had a parent 65 or older, dollars to donuts, you are familiar with their desire to unload on you that cut crystal celery tray or all that silver that you have no interest in polishing.  Translation, they are in giving, not consuming mode, which Sharpe’s data shows this holds true regarding charitable giving. In 2014, taxpayers 65 and older made up a full one-third of dollars donated, followed by 27 percent for those aged 55-65 and 21 percent for those 45-55.

These data points should help inform us as we move ahead to “unlock” more charitable giving.   As tax reform heats up, we will work to help the Chairman, and others, make that happen.


Top Reads


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