Tax Changes Affecting Philanthropy

Issue

Each year, Congress and the Department of Treasury considers tax changes that can directly affect tax-exempt organizations including foundations and the broad nonprofit sector.

Council Position

Preserve a philanthropic ecosystem that strengthens civil society and supports communities where everyone thrives.

Spanning the ideological spectrum, the philanthropic sector both represents and supports communities across the country and around the world. Politicized attacks chill the ability and willingness of the sector to express that independence, damaging foundations’ capacity to advance the greater good. The Council urges Congress to protect the diversity, flexibility, and unique role of philanthropy as a bedrock of America society.

Active Legislation

Simplification of the Private Foundation Excise Tax

In December 2019, the private foundation excise tax was modified from the historical two-tiered system to a flat rate of 1.39%. when H.R. 1865 (116th Congress) passed on December 20 and took effect upon President’s signature. The legislative language can be found in Division Q, Title II, Section 206 of bill.

Due to the lack of written guidance at this point, the Council got clarification from its tax legislation experts that the reduction applies to taxable years “beginning after the date of enactment” (i.e., taxable years beginning after December 20, 2019). Thus, for a calendar-year foundation, the changes will not impact the 2019 tax year and will take effect in the 2020 tax year because such foundation’s taxable year begins January 1 of any particular year.

If a foundation’s financial year does not coincide with the calendar year, i.e., one whose tax year begins after December 20 but before January 1, it should consult its own financial advisor for how to proceed.