04 May 2020

Washington Roundup: COVID-19 Relief and Expanding the Charitable Deduction

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: COVID-19 Relief Update
>> Federal: Congress: Expanding the Universal Charitable Deduction
>> Federal: Treasury: Update on Tax on Family Foundations
>> States: California DAF Bill Set for Movement
>> National: Top Reads

Congress: COVID-19 Relief Update

Congress recently passed and the president signed an additional $310 billion in funding for the Paycheck Protection Program (PPP), along with some additional funds for hospitals and vaccine development. As you may recall, the PPP is a loan (and grant) program created in the CARES Act to help small businesses and nonprofits keep workers employed, and its original funding was depleted within two weeks of enactment, so lawmakers were pressed by nonprofits to expand its funding.

The interim funding bill was passed by unanimous consent in the Senate, for which members were not required to be present, and by voice vote in the House to maintain social distancing. However, following its passage, Senate Majority Leader Mitch McConnell (R-KY) said he is not interested in passing any more legislation remotely. So, this week the Senate returns to Washington, where senators are expected to resume business as (somewhat) usual.

Our Take: While the House contemplates when it will be safe to return to Capitol Hill, perhaps as early as next week, the Senate is likely to continue confirming appointees and possibly begin working on a fourth COVID relief bill. Although the first few relief bills were negotiated and passed quickly, the next round will likely take longer to hash out, as lawmakers will be weighing how the CARES Act landed in their communities and addressing the gaps they are seeing.

Congress: Expanding the Universal Charitable Deduction

As you may recall, the CARES Act that was signed in March included a temporary universal charitable deduction, capped at $300, which is available to nonitemizers (so people who take the standard deduction on their tax returns) who make cash gifts to charity in 2020. The universal charitable deduction has been an ACR priority for several years, and its inclusion in the relief bill is a welcome recognition of the importance of incentivizing charitable giving with a tax deduction. However, ACR and our colleagues in the charitable sector agree that more can be done, so we are working with key House and Senate offices to expand the cap and possibly extend the expiration.

During the CARES Act negotiations, Senator James Lankford (R-OK) pushed a provision that would increase the $300 cap to one-third of the standard deduction, so $4,000 for individuals and $8,000 for married couples filing jointly. Cosponsors of the bipartisan amendment include Senators Chris Coons (D-DE), Tim Scott (R-SC), Amy Klobuchar (D-MN), Mike Lee (R-UT) and Jeanne Shaheen (D-NH), marking the first time a universal charitable deduction proposal has seen support from both sides of the aisle in the Senate. Though the amendment was not considered in March, we expect Senator Lankford and the cosponsors to continue advocating for the expansion of the UCD in order to encourage more charitable giving in a time of great need.

On the House side, Rep. Mark Walker (R-NC) introduced the CHARITY 2022 Act (H.R. 6490), which would increase the cap on the temporary universal charitable deduction to one-third of the standard deduction – same as the Lankford amendment – and make it available through tax year 2022.

This week, ACR joined with members of the Charitable Giving Coalition on a letter urging lawmakers support efforts, like the above, that would expand the UCD’s cap and extend its availability to future years.

Our Take: The charitable deduction is effective in encouraging donors to give more money to charity, and the need for donations is currently at an all-time high. In order to allow organizations to continue to provide services to communities across the country, lawmakers should increase, or eliminate, the cap on the universal charitable deduction to incentivize all gift sizes.

Treasury: Update on Tax on Family Foundations

Regulations that address the excise tax on executive compensation that could hit family businesses and foundations are under review at the Office of Information and Regulatory Affairs (OIRA), one of the last steps of the regulatory process. As you may recall, the 2017 tax bill created a new 21 percent tax on executive compensation over $1 million at nonprofits and “related organizations.” However, the interpretation of related organizations is broad, and unfortunately many family foundations and businesses have been swept up into this tax.

Last year, ACR met with Treasury officials and submitted a letter highlighting our concerns. We expect the regulations pending review will include an exemption for officers of foundations who are volunteers, but based on recent information, other exemptions like minimal time or compensation are unlikely to be included.

Our Take: This tax not only presents a financial burden to many family foundations and family businesses, but it could also stymie participation in civil society by business leaders. We expect the forthcoming regulations will address some of these concerns, but some might have to be dealt with on Capitol Hill.

States: California DAF Bill Set for Movement

Last year, Assemblywoman Buffy Wicks introduced a bill (AB 1712) that would grant broad authority to the California Attorney General to collect information on donor-advised funds, presenting real donor privacy concerns. The bill was pulled from consideration in 2019 and reconsidered in January of this year. However, the sponsor eventually pulled the bill entirely, citing an intention to introduce a more targeted bill this spring.

In February, Assemblywoman Wicks introduced a new bill (AB 2936) that would establish a classification of DAFs and sponsoring organizations, therefore granting the AG the ability to engage in rulemaking to implement reporting requirements. Different than AB 1712, this bill does not dictate what information the AG can collect.

Our Take: The current bill language is vague, so it is unclear whether the eventual legislation will pose a threat to donor privacy. At the same time, the state senate is prioritizing COVID-related legislation, so whether this bill has any chance of consideration in the upper chamber remains to be seen. ACR submitted a letter to the Assembly Judiciary Committee this week to encourage lawmakers to respect donor privacy as they create new regulations. Stay tuned for more.

Top Reads