Washington Snapshot - December 12, 2014
House Fails to Make Charitable Extenders Permanent
Party-Line Vote and White House Veto Threat
Yesterday, we told our readers in a breaking news alert that the House failed to advance the Supporting America’s Charities Act (H.R. 5806), a milestone bill that would have widely benefited philanthropy and charitable organizations across the country. The Council worked diligently with our colleagues throughout the charitable sector to garner support for this bill. This POLITICO ad was among many efforts the Council undertook with our partners to urge House members to pass the Supporting America’s Charities Act.
While this vote failed and the IRA charitable rollover has not yet been passed into law for 2014, there is still hope that the Senate will pass the 1-year retroactive extension passed a few weeks ago by the House. We will alert you immediately if it passes.
The vote broke down along party lines, with 275 Members voting for the bill and 149 Democrats voting “no.” Some Democrats did break ranks, with 47 voting “yes.” Those who voted against the bill did so generally on two grounds. First, they argued that the provisions are not offset with spending cuts elsewhere. Second, they aligned with the White House, which threatened that the President would veto the bill. Ultimately, the bill failed to garner the two-thirds votes necessary to overcome procedural challenges.
In a Statement of Administration Policy, the White House emphasized that the Administration “supports measures that enhance non-profits, philanthropic organizations, and faith-based and other community organizations in their many roles, including as a safety net for those most in need, an economic engine for job creation, a tool for environmental conservation that encourages land protections for current and future generations, and an incubator of innovation to foster solutions to some of the Nation’s toughest challenges.” Yet, the White House said the President would veto H.R. 5806 if it came to his desk for a signature because the bill “would add $500 billion or more to deficits over the next ten years.”
Member Floor Statements Demonstrate Support for Charities
The Council is deeply disappointed that this critical bill did not advance. However, despite the failure of the bill to pass, several House members expressed overwhelming support for the policies advanced by the charitable provisions in the Supporting America’s Charities Act.
In a passionate floor statement in support of the bill that he introduced, outgoing Ways and Means Chairman Dave Camp (R-MI-4) urged his colleagues to “support America’s charities and those that benefit from their work and make these policies permanent.” As the holiday season approaches and the year draws to a close, Camp told his colleagues, “now is not the time for those who so selflessly donate to wonder what tax surprises are waiting for them, no more than it is the time for charitable organizations to grow uncertain about their futures.”
Representative Jim Gerlach (R-PA-6), a co-sponsor of H.R. 5806, dismissed the notion that a 1-year extension of these provisions was enough. “That 1 year is 2014, the year we’re already in,” he said. “We only gave [nonprofits and donors] 21 more days of decision-making time—that is pitiful.”
On the Democratic side of the aisle, Ranking Ways and Means Committee Member Sander Levin (D-MI-9) explained that he was voting “no” because of the cost of the bill. “This is about fiscal responsibility and fiscal priorities,” he said on the House floor, emphasizing his strong support for charitable organizations and the underlying giving incentives in the bill. Other Democrats echoed Representative Levin’s concerns.
Statement from Council President & CEO Vikki Spruill
Council President & CEO Vikki Spruill released a statement following the vote:
The Council on Foundations is disappointed that the United States House of Representatives failed to advance the “Supporting America’s Charities Act.” The provisions in this bill would have had a real and positive impact on communities across the country served by the philanthropic sector. This action is especially troubling as we enter the holiday season, when our country comes together around the ideal of charity that unites us all.
We will continue to work closely with members of Congress to see that these charitable provisions are enacted into permanent law. Permanence would allow donors and charitable organizations alike to better plan their charitable investments—resulting in more dollars flowing to charitable causes.
The Council acknowledges the tireless leadership of outgoing Ways and Means Committee Chairman David Camp on these key charitable issues. We strongly encourage his successor, Chairman Paul Ryan, to continue this important work to positively impact communities across the country.
Next Steps on Charitable Tax Extenders
As we noted, the House previously passed a bill extending all 55 tax extenders—including the charitable provisions—for 1 year, retroactive for 2014. This bill, H.R. 5771, will likely now be taken up and voted on by the Senate. We will keep our readers apprised of any Senate activity on the bill.
And, though the bill did not pass this time around, we are nonetheless encouraged by the strong support for the underlying policies in the bill. We will work with the 114th Congress to advance a bill next year to make these charitable provisions permanent law.
Other Tax News from the Hill
Camp Introduces Tax Reform Act as H.R. 1
As our readers will recall, outgoing House Ways and Means Chairman Dave Camp (R-MI-4) released a tax reform discussion draft in February of this year, the Tax Reform Act of 2014. You can find the Council’s summary of the provisions impacting nonprofits and foundations here. Yesterday, Chairman Camp formally introduced the Tax Reform Act of 2014 as H.R. 1—a placeholder he has been saving for this legislation all year.
In a statement for the Congressional Record, the Chairman asked his congressional colleagues to continue where he will leave off with tax reform when he retires in a few days. “I hope that the formal introduction of this proposal in the House today will help spur further action on this critical issue in the 114th Congress,” the Chairman stated.
While there is no time remaining in the 113th Congress to take up tax reform, this symbolic gesture and the major steps taken by Chairman Camp to advance the tax reform conversation will influence future tax-writers. The Council thanks Chairman Camp for his years of service in Congress and his time as Ways and Means Committee Chairman. His legacy is sure to be carried on as committee members in the 114th Congress look to his bill to move forward with comprehensive reform.
Incoming Finance Chairman Orrin Hatch Releases Tax Reform Analysis
On a very busy tax news day, incoming Senate Finance Committee Chairman Orrin Hatch (R-UT) released a 340-page “in-depth” analysis of areas that are ripe for tax reform. While the document did not outline any specific legislative proposals, it discussed the current state of the law and reform proposals that have been introduced to date.
The stated purpose of Senator Hatch’s analysis is to “continue the conversation on tax reform” started by Senate Finance and House Ways and Means hearings in 2013. The document also explains the numerous reasons why the incoming Chairman believes that tax reform must happen swiftly, including: promoting efficiency and economic growth; achieving a more equitable tax code; simplification; and bringing the outdated tax code into the 21st century.
Senator Hatch also expressed his optimism and dedication to reaching an agreement on tax reform in the near future. “I am willing to work with anyone – Republican or Democrat – to fix our country’s broken tax code,” he said.
The Council’s Public Policy team is delving into Senator Hatch’s analysis and will cover any areas that impact charities and foundations in next week’s Washington Snapshot.
Congress Averts Government Shutdown
Late last night, the House passed a $1.1 trillion spending package to keep the federal government operating through the next fiscal year. The final vote, which POLITICO describes as coming “after a high drama day of behind the scenes arm twisting and vote counting,” was 219 to 206.
Following the House vote, the Senate passed a 2-day spending bill to avoid the government shutting down at midnight and to give them more time to pass and consider the House-passed bill. The heated debate over the “cromnibus” spending bill stemmed from controversial “policy rider” provisions—changes to laws that go beyond spending measures.
In particular, some congressional Democrats were unhappy with a rider that will unravel part of the Dodd-Frank act and allow banks to more easily trade derivative investments. There is also a provision on campaign finance that would allow an individual to give up to $324,000 annually to national political parties. Currently, individuals can only give $32,400 per year to a political party.
After the Senate takes up and passes the House bill (which they are expected to do), the President will sign it into law and the government will be funded through September 2015.
Trending in Legal Affairs
Grants to Individuals: Good Samaritan Funds
Sometimes, making a grant to an individual person can further a community foundation’s ability to fulfill its charitable mission. Grants to individuals for the purpose of relieving poverty is a “charitable purpose.”
To help community members who have suffered injury, death or other loss due to unexpected circumstances, many community foundations have set up a permanent “Good Samaritan Fund” programs. Because community needs vary, a “Good Samaritan Fund” blueprint unfortunately does not exist for those interested in setting up these programs. However, the Council’s Legal Affairs team and the Community Foundations National Standard Board (www.cfstandards.org) offer the following suggestions:
- Ensure that all referrals come from an existing social service agency, hospital or other organization accustomed to reviewing individuals’ needs. The community foundation should not be assessing income levels and spending requirements.
- Ensure that checks can be processed and delivered quickly.
- Ensure that no one raises money for the fund by promising that any particular individual or family will be receiving aid.
- Consider establishing a rule that payments will only be made to vendors for goods and services provided to aid recipients (i.e., the electric company, a hospital or pharmacy) after submission of bills.
For more information on setting up a Good Samaritan Fund or on any other tricky legal matters, please contact the Council’s Legal Affairs team at legal@cof.org.
Philanthropy News and Op-Eds
Extending Donation Deadline to April 15
Gene Steuerle, a senior fellow at Urban Institute who the Council works with regularly, published an interesting op-ed this week in the Chronicle of Philanthropy on extending the charitable contribution deadline to April 15th. This provision was included in the House-passed America Gives More Act (H.R. 4719) from this past summer.
“A great deal of evidence suggests that simply changing the charitable-deduction deadline could increase giving significantly,” Steuerle states.
For example most taxpayers tend to not know their marginal tax rate until they go to file their taxes, he says. As a result, at the end of the tax year when they go to file, the incentive to give to charity would be higher if it could reduce the amount that taxpayers owe on their returns. “There is absolutely no time like tax time, not even the end of the year, when people are so tuned into taxation after toting up their annual income and charitable gifts,” Steuerle notes.
Steuerle also believes that an extended giving deadline would save the government money. “[The April 15 option would provide $3 to $5 on average to charity for every dollar of revenue loss,” he explains.
Ultimately, Steuerle concludes that extending the charitable giving deadline to April 15th of the tax year “would be among the most cost-efficient ways possible to increase giving.”
California Rule Change on Non-Voting Board Members
Starting January 1st, a change to the California Nonprofit Corporations Code takes effect that will impact nonprofit board members. The change will prohibit nonprofits from having non-voting or “ex officio” members on their boards.
The change means that executive directors and others who are invited to attend board meetings will also be entitled to vote, unless they are expressly prohibited from doing so in an organization’s bylaws.
