Washington Snapshot - January 30, 2015
House to Take Up Charitable Bills
McCarthy's Memo Gives Signals
According to a memo that House Majority Leader Kevin McCarthy (R-CA-23) circulated this week, the House is anitcipated to introduce and markup bills on the three charitable tax extenders: the IRA charitable rollover, enhanced deductions for conservation easements, and enhanced deductions for donations of food inventory. The bills are expected to be the same as the language in last year’s Supporting America’s Charities Act (H.R. 5806).
This situation is still developing, the Council will be closely monitoring it, and keep you apprised of any updates. We are expecting that a markup would happen in the Ways and Means Committee next week.
News from the Hill
Finance Committee Democrats Give Their Own Principles for Tax Reform
Democrats on the Senate Finance Committee sent a letter to Chairman Orrin Hatch (R-UT) laying out their own principles for tax reform. The letter lays out seven key principles. Accounting Today in a report on the letter emphasized that the Member’s first priority is that “the tax reform process should go through “regular order.”" Other principles included in the letter were that the tax system should be made more progressive, should support domestic jobs, should provide an adequate revenue base, be fiscally prudent, take into account Joint Committee on Taxation (JCT) estimates, and ensure that the corporate tax system is competitive internationally.
Ranking Member Ron Wyden (D-OR) said, “these seven core principles highlight beliefs that must contribute to any consensus tax reform product in order to grow the economy and support the middle class. As we move forward in pursuit of comprehensive tax reform, it’s critical that we establish clear goals, outline transparent principles, create a process framework and come to the table willing to find common ground.”
Brookings Institution Event: "Dynamic Scoring: Now What"
We reported to you several weeks ago about a measure passed by the House to implement dynamic scoring on major bills introduced in Congress. On Monday morning the Brookings Institution hosted an event focused on the issue of dynamic scoring. Not surprisingly, panelists were split on the positives and negatives for dynamic scoring. Nonetheless, it will be the modus operandi for any major tax proposals ahead. The Council was on hand as panels discussed what dynamic scoring is, macro analysis by the Joint Committee on Taxation (JCT) and mechanics of its implementation, the Camp tax reform plan, and dynamic scoring for non-tax bills.
We recognize that this is a technical issue. That said, it will have an influence on the environment within which we’re advancing the interests of our members and discussing philanthropy’s value to communities. For those interested, you can watch a recording and read the materials from the event on Brookings’ website.
House Committee Questions Affordable Housing Program
New opportunities may be emerging for foundations to consider mission related investments in housing programs. On Tuesday, Federal Housing Finance Agency (FHFA) Director Mel Watt testified before the House Financial Services Committee about his decision to fund the Capital Magnet Fund (CMF) and the National Housing Trust Fund (NHTF) with recent profits of Fannie Mae and Freddie Mac. Grants made from the two funds are used by CDFIs and other local organizations across the country to leverage further private dollars for housing development.
In an op-ed in The Hill defending the programs, several CEOs representing CDFIs and other community development groups wrote, “CMF has attracted substantial private investment. . . . The $80 million allocated [in 2010] has led to more than $1 billion invested.”
Foundations were involved in funding a quarter of the projects from the 2010 round of grants.
Critics of the programs argue that the profits of Fannie and Freddie should return to the US Treasury instead. Rep. Ed Royce (R-CA-39) introduced legislation – the Pay Back the Taxpayers Act – to block Watt’s plan. "Anyone who witnessed the financial crisis knows exactly how this will play out," Royce said in a statement. "A larger government presence in housing distorts the market and promotes a boom-and-bust cycle that leaves taxpayers holding the bag."
Bill Introduced to Stop Political Targeting by IRS
On Wednesday, Ways and Means Committee Chairman Paul Ryan (R-WI-01) and Peter Roskam (R-IL-06) along with Senators Jeff Flake (R-AZ) and Pat Roberts (R-NE) introduced House and Senate bills to stop political targeting by the IRS. H.R.599 and S.283 would prevent the IRS from changing how it handles 501(c)(4) applications.
Roskam released a statement saying, “Americans should never feel silenced or threatened by their own government, and yet the IRS regulations targeting tax-exempt organizations would clamp down on political engagement, impeding even non-partisan efforts like voter registration drives and candidate forums. This legislation will stop IRS abuse and protect the American people’s fundamental right to speak out on the issues they care about.”
Last year, the Council submitted formal comments to the IRS in response to proposed rules on the political activity of 501(c)(4)s. You can read more in last year’s Snapshot. IRS Commissioner John Koskinen said last fall that the agency would issue new rules in early 2015. We will continue to monitor this issue closely.
IRS Publication on Charitable Contributions Released
The IRS has updated Publication 526. The publication, which applies to 2014 returns, explains the regulations, qualifications, types, and amounts of charitable deductions donors can make.
If you have questions about a donation, please contact the Council’s Legal Affairs team at legal@cof.org.
Trending in Legal Affairs
Granting Scholarships to Study Abroad
A community foundation that administers scholarships received an application from a student planning to attend a college in England. According to the foundation’s grantmaking policy, grants to international organizations were prohibited.
Our Legal Affairs team was asked: Would this grant violate the community foundation’s grantmaking policy? And, are there any stipulations that prohibit scholarships to international schools?
Our assessment is that this scholarship would not violate the foundation’s grantmaking policy. Since scholarships are considered “grants to individuals,” the foundation need not concern itself with the complexities of international grantmaking. This would be true even if scholarship checks were written to international institutions.
The U.S. Department of Education website maintains a list of international colleges and universities that would qualify for U.S. financial aid.
For more information on this or any other tricky legal matters, please contact the Council’s Legal Affairs team at legal@cof.org.
Access to the Council’s legal team is a valuable member benefit. Council attorneys are available to discuss your legal questions and to provide legal information by telephone, email and through our various publications and newsletters. This information is intended for educational purposes and does not create an attorney-client relationship. The information is not a substitute for expert legal, tax or other professional advice tailored to your specific circumstances, and may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.
Philanthropy News and Op-Eds
Donor Advised Fund Debate to Heat up in New Congress
While it is still unclear exactly what will happen with tax reform this year, the Council and others in the field are prepared to deal with the scrutiny of donor advised funds, which gained much attention after appearing in former Ways and Means Committee Chairman Dave Camp’s tax reform discussion draft last year.
A recent article in The Chronicle of Philanthropy looks at what could be taken up during this new session of Congress as well as the implications of actions taken during last year’s Lame Duck session.
Sue Santa, Senior Vice President for Public Policy and Legal Affairs at the Council, commented on Congress’ failure to pass Supporting America’s Charities Act during the Lame Duck session in December, Santa said “That political wrangling could not be put aside to help the charitable sector was a bit hard to swallow. If that’s a signal for what’s going to happen going forward, it’s very discouraging.”
As for potential action on donor advised fund issues, Vikki Spruill noted that several stakeholders interested in the future of donor advised funds were continuing active engagement on Capitol Hill.
Sandra Swirski of the Alliance for Charitable Reform, stated “it's go time” for foundations to be advocating on this and other issues that could impact the sector. And Diana Aviv of Independent Sector echoed a strong message the Council has been expressing since Chairman David Camp introduced his tax reform discussion last year: attempts to force donor advised funds to pay out their assets could mean trouble for how Congress treats all nonprofit endowments and reserves.
