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>> Federal: Corporate Integration: Chairman Hatch’s Tax Reform Plan
>> Federal: Grow Charity Now Lobby Day for Charitable Bills
>> Federal: Important, and Timely, Statement by Chairman Hatch on the Charitable Deduction
>> Consider This: House GOP tax plan
>> Top Reads: House Republicans Outline Vision for Tax Reform
The Senate and the House of Representatives are out of session and will return following the Fourth of July holiday.
As you may recall, last Friday Speaker Paul Ryan (R-WI) and Ways and Means Chairman Kevin Brady (R-TX) released a long-awaited tax reform blueprint aimed at simplifying the tax code. The big picture is that the blueprint reduces the current seven rates of taxes for individuals to three rates: a top rate of 33 percent, followed by 25 percent and 12 percent. It reduces the corporate rate to 20 percent and creates a separate top rate of 25 percent on income from small businesses. The blueprint also eliminates all tax benefits, except for charitable giving and home mortgage interest. The snapshot can be found here and the full blueprint can be found here.
The next step is for the Ways and Means Committee to put meat on the bones of this blueprint by adding in those all-important details. For example, the blueprint calls for “encouraging charitable giving through a tax incentive” (this section of the blueprint is worth a read and it begins on page 23 at the link above). That may be a charitable deduction like we have now, or it may mean something different. Over the next several months we’ll be working with the Ways and Means Committee Members to help shape that incentive for charitable giving.
Senate Finance Chairman Orrin Hatch (R-UT) is reportedly still working on his tax reform plan, known as corporate integration, though details are scarce. As you may recall, his plan would eliminate the double taxation on corporate earnings by allowing a corporation to take a deduction on the dividends paid to shareholders – even tax-exempt shareholders – who would then pay tax on that income. The Chairman has recognized the impact this could have on the non-profit sector, and Bloomberg reported that the delayed release could be the result of that issue. Most recently, Hatch has said it’s possible he won’t release his bill before lawmakers leave for their summer recess as he originally intended to do.
ACR, Independent Sector and the Council on Foundations hosted a fly in/speak out day two weeks ago with colleagues from the sector to seek cosponsors for active charitable legislation. Staff in Senate offices were especially familiar with the CHARITY Act, and many intended to get it in front of their bosses before the summer recess. In the interim, we’re asking that constituents reach out to their lawmakers to provide additional perspective on the bill.
Why are we doing this? There is likely going to be an opportunity to attach provisions to a final year-end tax bill and building momentum and support for the CHARITY Act now could help its chances of being included in that measure. A statement from Chairman Hatch in full support of the CHARITY Act proved to be the icing on the cake in garnering support for the bill during our fly-in. Hatch stated, “These provisions, taken together, will help advance the causes of worthwhile charities by allowing American taxpayers to more freely donate their own resources. That is a good thing in my book, and that is why I intend to help my colleagues on the Finance Committee process the CHARITY Act and enact it into law.” As you may recall, the CHARITY Act would expand the IRA charitable rollover to include distributions to donor-advised funds (DAFs), streamline the private foundation excise tax to a flat one percent, and express the sense of the Senate that the charitable deduction should not be diminished during tax reform, among other provisions.
On the House side, cosponsors are still being added to the Grow Philanthropy Act (H.R. 4907), which expands the IRA charitable rollover to DAFs. As of today, it has 24 cosponsors.
In Chairman Hatch’s formal statement referenced above, he also noted the importance of the charitable deduction as a show of support for our Grow Charity Now fly in. The following are highlights:
“And it is no secret that our economy has been growing much too slowly in recent years. That means that a healthy, well-resourced charitable community is essential to the well-being of those in need. As state and local governments grapple with budget deficits and revenue shortfalls and as Americans face unemployment, stagnant wages, and lower workforce participation, people in need are turning for help in ever greater numbers to churches, charities, shelters, and other social welfare groups.
But charities need resources to meet these needs, and charitable giving by generous and civic-minded Americans is where it all starts. That’s why I have defended the tax deduction for charitable giving and I have resisted attempts by some to raise revenue for reckless government spending by reducing the incentives for charitable giving. As my friend and colleague Senator Wyden, the Ranking member of the Senate Finance Committee has said: “The charitable deduction is a lifeline, not a loophole.”
It is essential that charities have sufficient resources to carry forward the good works our society so desperately needs them to perform. It makes perfect sense to provide the greatest tax incentive for giving to the donors with the greatest capacity to give. These donors, the ones in the high marginal tax brackets, are the very donors that are in a position to give substantial amounts to charity. It should come as no surprise that for nearly one hundred years the tax code has provided such an incentive.
And the charitable tax deduction is truly special. It is the only deduction that encourages you not to spend or invest your income, but to give it away. Every charitable gift has one thing in common: The donor is always left worse off financially, but society is made better.”
It’s been a busy few weeks in the policy arena, both inside and out of Washington. Among the Brexit vote, House floor sit-ins, and Senate filibusters, the House Republican blueprint for tax reform got lost in some shuffles – but certainly not in ours.
Titled, “A Better Way: Our Vision for a Confident America,” the House GOP tax plan was released last Friday and has received what we would describe as a muted response. Part of the reason for that is the timing (summer Fridays are slow news days). Another reason for the muted response is due to the fact that, at least for some sectors (including ours) the plan is a mixed bag. The GOP blueprint gets rid of all tax deductions except for two – the charitable and the mortgage deductions. That’s good news for us. At the same time, the plan expands the standard deduction which would dramatically reduce the number of taxpayers who itemize and take the charitable deduction – not such good news for us. Another plus? The plan has lower individual tax rates overall which will put more money in people’s pockets. Some of that will surely find its way in increased giving to the charitable sector – another positive for our sector.
So where do we think all of this is going? In the short term, House Republicans want their 35-page blueprint to be part of the conversation at the GOP convention beginning on July 18. They would also like their presumptive nominee, Donald Trump, to get on board.
Whether that will happen is an open question. What is certain is that House Republicans have laid down a marker that we need to take seriously and we expect it to play a significant role in the tax debate in the next Congress.
- National: House Republicans Outline Vision for Tax Reform
- National: Wall Street is sitting on billions meant for American charities
- National: The Undermining of American Charity
- National: Which Nonprofit Fields and Cities Receive Most from Donor-Advised Funds?
- National: DAFs Remain Fastest-Growing Charitable Giving Vehicles
- National: More Americans Give To Charity Than Vote
- Local: New plan includes gas tax hike, with sales tax cut
- Opinion: Donor-Advised Funds: The Good, The Bad And The Ugly
- Opinion: Poverty To Affluence: How A Charitable Gift Changed A Family
- ACR Blog: House GOP Releases Tax Reform Plan
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