15 July 2016

ACR News 07.15.16 – GOP Tax Reform Blueprint Gets Analyzed

>> Federal: Washington Roundup
>> Federal: Tax Foundation Score of GOP Tax Reform Blueprint
>> Federal: Corporate Integration: Chairman Hatch’s Tax Reform Plan
>> Federal: Charitable Legislation
>> Consider This: Pokemon Go
>> Top ReadsSchwab Charitable Distributes $1.2 Billion in Grants in Fiscal Year 2016

Washington Roundup

The Senate and the House of Representatives left for their summer recess this week and will return September 6.  The Republican Convention begins on July 18 in Cleveland and the Democratic Convention begins on July 25 in Philadelphia.

Tax Foundation Score of GOP Tax Reform Blueprint

As you may recall, 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 on June 24. The blueprint reduces and consolidates individual rates, and eliminates all tax deductions, except for the charitable giving and mortgage interest deductions. The snapshot can be found here and the full blueprint can be found here.

Last week, the Tax Foundation released its analysis of the blueprint, predicting it would cost $191 billion over the next decade after taking into account the expected increase in economic activity. Republicans have said they intend for the final legislation to be revenue-neutral (i.e. not adding to the deficit) when scored on a “dynamic basis,” which means taking increased economic output into account. Also last week, Chairman Brady (R-TX) said presumptive Republican nominee Donald Trump’s tax staff reacted positively to the blueprint.

The Ways and Means Committee will now put together official legislative text based on feedback from stakeholders. Over the next several months, we’ll weigh in with the committee to help shape the charitable giving incentive.

Corporate Integration: Chairman Hatch’s Tax Reform Plan 

Senate Finance Chairman Orrin Hatch (R-UT) is still working on his tax reform plan, known as corporate integration. Now that lawmakers have left town for their summer recess, it appears we won’t see a draft until September at the earliest. His plan would eliminate the double taxation on corporate earnings by allowing a corporation to take a deduction on the dividends paid to shareholders, who would then pay tax on that income – even tax-exempt shareholders.

Charitable Legislation

You may recall Senators John Thune (R-SD) and Ron Wyden (D-OR) introduced the CHARITY Act (S. 2750) in April, which would streamline the private foundation excise tax to one percent, expand the IRA charitable rollover to include donor-advised funds (DAFs), and express the sense of the Senate that the value of the charitable deduction should not be diminished during tax reform, among other provisions important to the sector. On the House side, Rep. George Holding (R-NC) is sponsoring a bill that would expand the IRA rollover to DAFs, and Rep. Erik Paulsen (R-MN) is sponsoring a bill that would streamline the PF excise tax to a flat one percent. We’ve continued our outreach on these pieces of legislation following the Grow Charity Now fly-in in June, and now look to further educate staff on the importance of the legislation while lawmakers are back in their districts. Our efforts got a big boost when Chairman Hatch made a statement in the Congressional Record in support of the legislation, and we want to capitalize on that momentum. There’s a possibility of a year-end tax bill after elections in November, and we intend to keep our priorities on the radar so we can get some or all of the provisions included.

Consider This

In this week’s column we intend to explain the phenomenon of Pokemon Go.

Not really. We don’t understand it either.

What we have been following closely is just where the Presidential campaigns will ultimately come down on issues that matter to our sector. So far, so (relatively) good.  You will recall that in 2009, President Obama proposed capping the charitable deduction at 28 percent for those making more than $250,000 and in 2012 Republican Presidential Candidate Mitt Romney proposed an overall cap on deductions, including the charitable deduction. Neither proposal was ideal from where we sit.

We’d like to avoid a repeat of these types of proposals coming from the Presidential campaigns in the days and weeks ahead. The best way to do that is to remain visible and vocal with the Trump and Clinton campaigns, something we’ve worked hard to do – through the media and otherwise – over the last six months or so.

We also need to be mindful that our sector’s engagement needs to be about more than just the charitable deduction because we can be affected by any number of decisions. Exhibit A is the Administration’s overtime regulations which will impose a significant financial burden on some foundations and charities – soon. The regulations go into effect on December 1, 2016.  It took a while for some stakeholders in the sector to appreciate the effect of those regulations.

So once again, we are touting the benefits of staying ever-vigilant when it comes to what we care about. We need to understand and appreciate the potential upsides and downsides we face when it comes to public policy, particularly in years with big elections like this one.

Perhaps one day, we will work on getting you details about Pokemon Go. It just won’t be this day.

Top Reads

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