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Tax Policy Remains on the Congressional Agenda

Posted By Adam Donaldson, Monday, February 9, 2015
Updated: Monday, February 9, 2015

February 9, 2015

By Adam Donaldson, ABAG Member Services Director

Tax policy remains on the Congressional agenda in Washington, DC that will positively impact charitable giving and foundation grants.

On February 4, 2015, the House Ways and Means Committee passed several bills that incentivize giving. The bills include making permanent charitable "tax extenders," such as the IRA charitable rollover and simplifying the private foundation excise tax on investment income to a single rate of 1%. The House of Representatives is likely to bring a bill for a vote as early as Wednesday, February 11, 2015.

The Association of Baltimore Area Grantmakers joins other regional associations of grantmakers, the National Council of Nonprofits and Council of Foundations in its supportof these policies.

In particular, ABAG believes simplifying the private foundation excise tax is a commonsense policy that should be passed. Private foundations are required to pay an annual excise tax on their net investment income equal to either 2% or 1%. The two-tier, or different rate, system unfortunately creates a disincentive for foundations to give more grants to nonprofits and expends time and money working with accountants rather than communities in need of help.

When ABAG asks its foundation members about the tax, they share an acceptance of a tax, but bemoan the uncertainty and complex calculations that the tier system sparks each year. Their experiences confirm that a tiered tax discourages larger grants in response to emergencies, natural disasters, or great opportunities. The current system also delays funds reaching nonprofit organizations until end of year calculations.

Here is a full list of the charitable bills passed by the Committee:

  • H.R. 637, "To amend the Internal Revenue Code of 1986 to make permanent the rule allowing certain tax-free distributions from individual retirement accounts for charitable purposes."
  • H.R. 640, "To amend the Internal Revenue Code of 1986 to modify the tax rate for excise tax on investment income of private foundations."
  • H.R. 644, "To amend the Internal Revenue Code of 1986 to permanently extend and expand the charitable deduction for contributions of food inventory."
  • H.R. 641, "Conservation Easement Incentive Act of 2015."

Between Republicans and Democrats and the House and the Senate, there will be debate about the cost of the tax expenditures and whether the policies should be considered independently now or part of comprehensive tax reform. These larger debates are important and not to be ignored, but ABAG’s role in the process is to keep promoting good policies that support charitable giving.

Last week, the House Ways and Means Committee agreed in support of charity.

Stay informed on legislation affecting philanthropy and nonprofit organizations via ABAG's Public Policy Updates blog, where ABAG also announces current position statements and policy work undertaken on behalf of members and the philanthropic sector.

Tags:  Charitable Tax Deduction  Public Policy  Tax Policy 

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Adam Donaldson says...
Posted Friday, February 13, 2015
On Thursday, February 13, the House of Representatives passed the America Gives More Act of 2015 (HR644) by a vote of 279 to 137, almost identical to the vote on a similar bill last July - reported the National Council of Nonprofits. The White House has announced that President Obama would likely veto the legislation, or any similar tax legislation, which is not “paid for” by identifying new revenue or identifying budget cuts. The vote was not enough to override a veto. The bill now goes to the Senate; Senators have said they prefer to address charitable giving incentives within comprehensive tax reform and swift action is not expected.
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