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Last week, the Chief Tax Counsel for Senate Finance Chairman Orrin Hatch (R-UT) said corporate integration still remains under consideration as part of overall tax reform. Recall that corporate integration, a plan that Chairman Hatch has been working on for several years, would streamline the taxation of corporate earnings to just the shareholder level. This poses an issue for tax-exempt shareholders who would potentially have a new tax liability if this sort of legislation was ever put in place. We will continue to actively monitor any developments with this proposal and react accordingly.
On Friday, June 9, the House Freedom Caucus held a panel discussion on tax reform. At the event, Freedom Caucus Chairman Mark Meadows (R-NC) said a “real proposal” for tax reform should be completed by the House before the end of July, but reiterated the group’s push to stay in session in August if the plan is not complete. They did not specifically discuss the charitable giving incentive, but we plan to work with our colleagues in the sector to educate these members on the critical need to maintain the full scope and value of the charitable deduction in tax reform.
Also last week, the White House Director of Legislative Affairs reiterated the Treasury Secretary’s call on Congress to raise the debt ceiling before the August recess. According to estimates, the Treasury is approaching the debt ceiling this year, and it will need to be raised to prevent a default this fall. Raising the ceiling gives the Department of Treasury increased borrowing authority, but is often viewed as an opportunity by lawmakers to get other policies included in must-pass legislation. It’s important to note that raising the debt ceiling is one of many must-pass items on Congress’s to-do list this year, which will need to be solved before lawmakers can complete tax reform.
On Tuesday, Senators John Thune (R-SD) and Bob Casey (D-CA) introduced S. 1343 – the Charities Helping Americans Regularly Throughout the Year (CHARITY) Act – which includes three provisions strongly supported by the Alliance for Charitable Reform: a flat one-percent private foundation excise tax, an expansion of the IRA rollover to include distributions to donor-advised funds (DAFs), and a sense of the Senate urging Congress not to diminish the charitable deduction during tax reform. Senate Finance Ranking Member Ron Wyden (D-OR) and Senate Finance Member Pat Roberts (R-KS) are original cosponsors of the legislation.
ACR issued a press release on the legislation that can be found here. Now that the bill has been introduced, ACR staff will work with our colleagues in the sector to educate staff and add cosponsors to the legislation.
On the House side, ACR staff continues the cosponsor search for the Private Foundation Excise Tax Simplification Act (H.R. 2386), which was introduced by Reps. Erik Paulsen (R-MN) and Danny Davis (D-IL) in May. The legislation would streamline the private foundation excise tax to a flat one percent. Cosponsors include Reps. Pat Tiberi (R-OH), George Holding (R-NC) and Richard Nolan (D-MN), who were original cosponsors at introduction, as well as Reps. Pat Meehan (R-PA), Kenny Marchant (R-TX), Jackie Walorski (R-IN) and Tom Rice (R-SC), who have signed on since introduction. Thank you to everyone who has helped secure these cosponsors. If you’re interested in and willing to reach out to lawmakers in the following states so seek support for this legislation, please email firstname.lastname@example.org: Arizona, California, Florida, Illinois, Kansas, Michigan, Missouri, Nebraska, New York, Ohio, Pennsylvania, South Dakota, Tennessee, Texas and Washington.
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 join a tele-town hall with your Congressman if they offer them. You can find all the resources you need here. Additionally, you can sign up for town hall alerts at townhallproject.com.
We also want to share in your successes! May’s action item was set up a meeting with your Congressman in the district. If you have a photo that was taken during your visit and you would like to share it with us, please email it to email@example.com. Some examples of how to share on social media can be found here.
Among the numerous partners in the charitable sector that have been meeting with lawmakers about the potential impact of tax reform is religious givers. The religious subsector still receives the highest share of giving – $122.94 billion or 32 percent of total giving according to the 2017 Giving USA report – and would be significantly impacted by policy changes that could harm charitable giving.
“The changes that will be made in tax reform will be in place for a generation, so now is the time to make sure that members of Congress understand what the issues are,” said Brian Walsh, executive director of the Faith and Giving Coalition.
Walsh’s coalition is made up of faith-based organizations and communities who provide resources to those in need. Its sole focus is making sure charitable giving continues to be protected in the tax code.
“It’s important to know that a five percent reduction in charitable giving would have significant consequences for many needy people and for many small congregations who already are struggling just to keep the lights on. I think this is an issue that resonates with members of Congress and their staff so they need to be told about it,” Walsh said.
A study released last month from Independent Sector and the Indiana University Lilly Family School of Philanthropy examined the effect current tax proposals, such as an increase in the standard deduction and a decrease in the top marginal tax rate, would have on charitable giving. It’s a study Walsh has been sharing often on Capitol Hill. The study found that giving across the board would be reduced by 4.6 percent, or as much as $13 billion, and religious giving in particular would be reduced by 4.7 percent should these proposals become law.
“There is nothing objectionable in those proposals from our perspective and we do not oppose an increased standard deduction. It’s the unintended consequences of those provisions that cause concern. Our job is to make sure lawmakers are aware of these unintended consequences and that there will be a $13 billion hit on charitable giving unless a universal charitable deduction is enacted,” Walsh said.
Increasing the standard deduction would cause a drop in giving because it would dramatically reduce the number of people who itemize to approximately five percent of taxpayers, according to the House Republican blueprint for tax reform released last year. This makes 95 percent of taxpayers ineligible to claim a charitable deduction. The Independent Sector/Indiana University study found that enacting a universal charitable deduction – which would allow all taxpayers to claim a charitable deduction whether or not they itemize – would not only negate this drop, it would cause giving to increase.
“The universal charitable deduction is a great solution, particularly for religious giving. If you implement a universal charitable deduction along with an increased standard deduction, you not only offset that $13 billion, you also get an increase in giving of $5 billion which is a net benefit and a positive for the charitable sector,” Walsh said.
The intricacies in complicated and comprehensive tax legislation can often be lost, and Walsh is hoping the efforts of his group and others in the nonprofit sector can continue to educate lawmakers in a year where tax reform is as likely to occur as any time since 1986.
“Right now, Congress is not as focused on the impact of tax reform on the charitable sector. Much of what members of Congress read about regarding tax reform and charitable giving glosses over the indirect impact on charitable giving, even though the charitable deduction would technically not be touched under these proposals. Our job is to make sure they are aware of these issues,” Walsh said.
- National: Americans gave $390 billion to charity last year
- National:Donations Grew 1.4% to $390 Billion in 2016, Says ‘Giving USA’
- National: Could US tax reform drive down charitable giving?
- National: House Republicans seek to preserve tax deductions for mortgage interest, charitable giving
- National: Thune, Casey Introduce Bill to Encourage Year-Round Charitable Giving
- National: Will Trump’s Tax Reforms Reduce Giving to Churches?
- National: President’s tax reform push enters next phase
- Local: Legislature considers restoring charitable giving tax credits
- Local: No one’s charitable in this partisan fight over giving
- Opinion: Giving USA’s Numbers for 2016 Pose Historic Challenge to Nonprofits
- Opinion: EDITORIAL: Protect charitable deductions in tax reform
- Opinion: Opinion: Enhanced Incentives for Charitable Giving Make Good Tax Policy
- ACR Blog: CHARITY Act Introduced in US Senate
- ACR Blog: Johnson Amendment Debate Unveiled
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