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

 

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Charitable Giving Coalition’s "Protect Giving Day" - December 5th

Posted By Adam Donaldson, Wednesday, December 5, 2012
Updated: Wednesday, December 5, 2012
December 5, 2012
 
By Adam Donaldson, ABAG Member Services Director
 
Hundreds of charities and philanthropic leaders are in Washington today participating in the Charitable Giving Coalition’s "Protect Giving Day.”

As the sector works to communicate with law makers that the charitable deduction is a vital incentive for philanthropic giving, organizations are going door to door but also using new media.

Check out these great infographics:
 

 


Sources:
http://www.councilofnonprofits.org/infographic-danger-capping-deductions
http://www.cof.org/about/protectgiving.cfm


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Will Grantmakers Fill the Gap Created by Changes to Charitable Tax Deduction?

Posted By Adam Donaldson, Monday, November 19, 2012
Updated: Thursday, November 29, 2012

November 2012

By Adam Donaldson, ABAG Member Services Director

Grantmakers detest saying no to worthy nonprofit organizations struggling to meet increased community needs in our recovering economy. But across the country, government dollars are cut; charitable giving is flat; and requests are up.

Get ready to say "no” more often.

Potential changes to incentives for charitable giving in the tax code are an ongoing part of deficit reduction and tax reform discussions in Congress and at recent Presidential debates. President Obama would cap the charitable deduction at 28 percent for high-income taxpayers. Governor Romney has suggested a cumulative cap on itemized deductions to pay for his plan to lower tax rates.

Either legislative change will result in less charitable giving and undermine a proud tradition of American philanthropy.

Research shows that the charitable deduction encourages taxpayers to give more of their income to charities than they would otherwise have given. The Center for Philanthropy at Indiana University estimates that the 28 percent cap proposal would result in a reduction of $2.43 billion in giving. Further, high income individuals provide a significant proportion of giving. Based on recent IRS and census data, tax filers who reported an AGI of at least $200,000 represent about 3 percent of the population, but they also make up almost half – $78 billion – of the $164 billion claimed as charitable deductions.

People give for many reasons but incentives, such as the charitable deduction, make a difference. Each of us has this personal experience, and we witness greater charitable gifts and the creation of foundations at "tax events” -- when wealth is transferred or when a successful entrepreneur sells a company.

Grantmakers and nonprofits require public policies that encourage charitable giving to serve those in need and profoundly improve the quality of life for many people. Many regional associations of grantmakers, including the Association of Baltimore Area Grantmakers, Council of Michigan Foundations, Donors Forum of Illinois, and Minnesota Council of Foundations, have committed to preserving the full value of the charitable deduction. These associations will be among hundreds attending Foundations on the Hill March 19-20 to meet with Members of Congress about the charitable deduction and other policies critical to philanthropy.

Current grantmakers cannot fill the gap in nonprofit need nor afford the loss of the charitable deduction. Tax policy is complicated – dare to admit – even boring, but to promote philanthropy, we all need to learn more about tax policy and decide to whom we will say "no.”

Contact Adam [adonaldson@abagrantmakers.org] to learn more about Foundations on the Hill and other actions you can legally take to help preserve the charitable deduction.

Resources:

Charitable Deduction Research

Council on Foundations Issue Paper


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Global Grantmaking Just Got Easier

Posted By Adam Donaldson, Monday, October 1, 2012

We learn today from a NGOsource press release that the U.S. Department of the Treasury and the IRS have recommended a significant change in the process for determining whether a foreign nongovernmental organization (NGO) meets U.S. standards for charitable giving.

To learn more about the proposed regulatory changes, join a Council on Foundations' conference call briefing on October 5, from 1 to 2 p.m. ET (call 888-430-8705; the participant code is 6464742.)

In "Reliance Standards for Making Good Faith Determinations," published in the Federal Register, Treasury and the IRS propose regulations that lessen the administrative and financial burdens for U.S. grantmakers to engage in international philanthropy. The guidance broadens the range of professionals on whose written advice a private foundation may rely when making such grants. Previously, reliance on the written opinion of counsel of the private foundation or grantee was permitted. The proposed regulations expand that class of professionals to attorneys, certified public accountants, or enrolled agents who are subject to certain professional conduct rules of the IRS, thereby removing one key obstacle to the creation of an equivalency determination repository. The regulations were issued in proposed form but private foundations may begin to rely upon them immediately.

The process of evaluating whether a non-U.S. NGO is equivalent to a U.S. public charity has been subject to rules that have not changed for 20 years. Congratulations to the Council on Foundations and other advocates who have worked on this issue on behalf of all foundations.

For more information, please read the Council on Foundations Explanation of Proposed Treasury Regulations.

Tags:  Council on Foundations  international 

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WEBINAR 9/26/12 - Evaluating the Charitable Deduction and Proposed Reforms

Posted By Adam Donaldson, Wednesday, September 12, 2012

After the November election, Congress is likely to consider possible reforms to the charitable deduction. The Association of Baltimore Area Grantmakers is one of several regional associations with a public position opposing proposals to cap the charitable deduction for federal taxpayers. Join Regional Association staff and members to hear the findings of a recent Urban Institute report that offers a basic overview of charitable giving, discusses the various rationales that have been offered in its support, and examines various proposed reforms.

Presenter: Eugene Steuerle, Urban Institute.

Register by September 24th at https://cc.readytalk.com/r/h0449db5ow0z

View Urban Institute Report Online

The webinar is open to staff and members of regional associations only. It is presented by the Government Relations Committee of the FORUM of Regional Associations of Grantmakers. ABAG Member Services Director Adam Donaldson is a member of the committee.

Tags:  deduction 

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Save These Dates – Post-Election

Posted By Adam Donaldson, Wednesday, June 13, 2012

Philanthropy should anticipate continued political attention on deficit reduction and tax reforms, regardless of who serves as President or wins local offices this fall. Taking a lesson from other advocates, foundations will be looking to meet with elected officials and staff as soon as possible to educate them on the issues addressed by philanthropy and the important role of the sector.

The Council on Foundations, the Forum of Regional Associations of Grantmakers, and the Alliance for Charitable Reform (ACR) have announced the dates for next year’s Foundations on the Hill (FOTH) conference: March 19–20 in Washington, D.C. Registration should open as early as October at www.foundationsonthehill.org.

This is an opportunity to bring a collective voice to charitable giving incentives, foundation regulations, and social causes. In 2012, 219 foundation and grantmaking representatives from 35 states and the District of Columbia visited nearly 230 congressional offices proclaiming that philanthropy is an independent, innovative investment in improving our communities.

Grantmakers for Children, Youth and Families (GCYF), the Grantmakers Income Security Taskforce (GIST) and Grantmakers In Health (GIH) have also issued a save the date for "Post-Election Philanthropy: Votes, Values, and Vision,” December 17-18, 2012 in Washington, DC. The partners aim to inform grantmakers about the outcomes of the national, state and local elections and what it suggests in terms of opportunities and challenges for the short-and medium-term, and provide a forum for funders to identify strategies for individual and collective action.

Less than one hour from Washington, DC, Maryland-based funders can take advantage of these events and more – to place local issues in the national context and to bring national attention to local challenges and opportunities.

Tags:  Foundations on the Hill 

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Hearing on Operations of Tax-Exempt Organizations

Posted By Adam Donaldson, Monday, May 14, 2012

By Adam Donaldson, ABAG Member Services Director

Rep. Charles Boustany Jr. (LA.), chairman of the House Ways and Means Subcommittee on Oversight, said the subcommittee will hold the first in a series of hearings May 16, 2012 to look at the operations of tax-exempt organizations. The hearing will take place on Wednesday, May 16, 2012, in Room 1100 of the Longworth House Office Building, beginning at 10:00 A.M.

In announcing this hearing, Chairman Boustany said, "Oversight of the tax-exempt sector is an important priority for the Subcommittee, and it has been an area that both Republicans and Democrats agree needs greater attention. In my letter to the IRS last October, I asked the IRS about recent efforts to address certain concerns that have been raised regarding the operation of tax-exempt organizations, including corporate governance issues and mishandling of funds by officers. It is now time for the Subcommittee to hear from members of the tax-exempt community for a more complete picture of the current state of affairs. This review allows us to examine the state of the tax-exempt sector, as it currently exists today and consider this information as we continue the Committee’s efforts toward comprehensive tax reform. In both cases the goal is the same - to ensure that the tax-exempt sector is operating in an efficient manner and that the laws governing tax-exempt organizations are being applied fairly and evenly.”

ABAG will be monitoring the activity of the House Ways and Means Subcommittee and look for opportunities to share examples of the great work performed by foundations and nonprofit organizations.

Tags:  House Ways and Means  tax 

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Senate Democratic Steering and Outreach Committee

Posted By Adam Donaldson, Monday, May 14, 2012

Senate Democratic Steering and Outreach CommitteeOn March 21–22, the Association of Baltimore Area Grantmakers joined more than 200 philanthropic leaders at Foundations on the Hill, to communicate philanthropy’s value to federal lawmakers — and to show how the sector is using its financial resources to provide innovative solutions to some of the nation’s most pressing social problems and helping communities recover from the recent economic downturn.

In conversations with Members of Congress and their staff, ABAG focused on local investments in youth and education. Our members contributed more than $34.2 million to education efforts in Maryland through more than 800 grants, with emphasis on K-12 education, including summer and after school programs and teacher training.

The Senate Democratic Steering and Outreach Committee invited Adam Donaldson, Member Services Director, along with other regional association leaders and Jeff Clarke, interim president and CEO of the Council on Foundations to the US Capitol Building for a dialogue with Senators on how to promote partnerships between federal government and local philanthropy. Among the Senators attending were Senators Mark Begich (AK), Robert Menendez (NJ), and Maria Cantwell (WA).

Tags:  Foundations on the Hill 

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ABAG Participates in #FOTH

Posted By Buffy Beaudoin-Schwartz, Thursday, March 22, 2012

March 21, 2012 

Tweets from yesterday's Foundations on the Hill #FOTH: 

ABAG Member Services Dir, Adam Donaldson, is headed inside for a Senate Comm meeting re: philanthropic-public partnerships. #FOTH 

ABAG is on The Hill! Knowledge * Connections * Leadership #FOTH ow.ly/i/wpDz 

ABAG's Ongoing Public Policy Updates: ht.ly/9Na4P #FOTH 

ABAG is proud to participate in #PolicyWorks- check it out: ht.ly/9Nai5 #FOTH 

ABAG's Grantmaker Resources on Public Policy: ht.ly/9NaaT #FOTH 

"#Socialmedia made for discovering who cares about your issue" - Aaron Sherinian, UN Foundation re: charity deduction #FOTH 

"There's no scarlet L on nonprofit's forehead" via Cleta Mitchell. "You can lobby." #FOTH 

"Tax Reform is coming. Desire to look at the whole rather than niche deductions" - via congressional tax staff panel #FOTH

Regional associations of #grantmakers, like ABAG, are valued voices & expert resources on issues critical to #philanthropy & society. #FOTH

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Excise Tax Survey for ABAG Members

Posted By Adam Donaldson, Monday, March 5, 2012

Understanding the Effects of Excise Tax Proposals

On Wednesday, March 7, 2012, ABAG invited its private foundation members via a survey to report the potential effects of changes proposed by the White House and Congress to the foundation excise tax. ABAG members who still need to complete the survey should contact adonaldson@abagrantmakers.org.

Thank you in advance for your attention to this important issue. ABAG is your VOICE to advance policies that promote charitable giving and volunteerism, preserve the independence of private foundations, or prevent excessive regulation of the philanthropic and nonprofit sector that would impede the ability to carry out charitable activities. We will participate in Foundations on the Hill in March and find other opportunities to educate our Members of Congress, if the survey responses express a unified position regarding the excise tax.

Obama FY2012 Budget Proposal Includes a Simplified Excise Tax for Private Foundations

On February 14, 2011 the Obama Administration's released its fiscal year 2012 budget proposal. The budget includes a provision calling for a single, 1.35 percent excise-tax rate on investment income of private foundations. The proposed change would be effective for taxable years beginning in 2011. The Administration estimates that permanently setting the rate at 1.35 percent would result in a federal government revenue loss of $55 million over ten years. The lower rate is apparently sufficiently more efficient for the Treasury Department to administer to justify the minor revenue loss.

BACKGROUND FROM COUNCIL ON FOUNDATIONS

Internal Revenue Code section 4940 requires private foundations to pay an annual excise tax equal to 2 percent of their net investment income. However, the tax is reduced to 1 percent in any year in which a foundation's distributions (measured as a percentage of assets) exceeds the average payout rate of the foundation calculated over the preceding five years. Not only must the current distribution percentage exceed the previous five-year average, but it must do so by an amount at least as much as the 1% tax savings the foundation will enjoy. This "maintenance of effort test" was intended to ensure that the tax savings be used for additional charitable expenditures and not just "pocketed" by the foundation. Congress stated upon enactment of the excise tax that it was meant to fund IRS operations relating to the non-profit sector. Whether or not a foundation qualifies for the 1% reduction, it is still required to make annual minimum distributions (equal to approximately 5% of assets) under Code section 4942.

Disincentive Effect: The current two-tier system serves as a disincentive to increased giving, especially in times of crisis or economic turmoil. A 2006 study by Professors Richard Sansing of Dartmouth and Robert Yetman of the University of California found that current law can have "countervailing effects on foundation behavior." The study noted that current law "creates a tax-induced incentive" to reduce contributions in "difficult economic times" such as we are now experiencing "because a high distribution this year makes it more difficult to qualify for the lower rate during the next 5 years." That is particularly true if, as in the recent past, asset values have declined sharply, thus reducing the denominator by which payout rates are calculated. In such instances, foundations subject themselves to higher tax rates in future years unless they also reduce the dollar amount of their giving at a time when such support is most needed.

Penalizing Extraordinary Giving: Any increase in annual giving, relative to the foundation's assets, will necessarily increase the five-year average payout. Significant increased giving can occur when a foundation seeks to respond to an extraordinary event, such as Hurricane Katrina, the September 11th attacks, during tough economic times or another crisis. An increase in giving relative to endowment can also occur where grantmaking remains stable, but endowment values decline. Many private foundations are seeking to maintain, or increase, prior grant commitments during these difficult times. Honoring those commitments causes payout rates to increase, and penalize them with higher taxes when their grants return to more sustainable levels.

Simplification: A flat excise tax rate will simplify tax planning, especially for smaller foundations. The calculation of distributions necessary to qualify for the reduced tax is a moving target because it depends on the 12-month average asset balance of the foundation, which cannot be known until the end of the year, and on the foundation's investment income, which may not be fully known until well into the following year. Foundations must base their annual budget on assumptions about the market and community needs, which can change dramatically. Foundations spend considerable time and money every year ensuring the amount spent by the end of year is neither too high nor too low, thus allocating valuable resources to accountants and lawyers rather than grantees.

Opposition: Views among the philanthropic community are not monolithic. Some foundations are able to successfully manage their distributions in order to qualify for the 1% rate year after year. For those foundations, any rate above 1 percent will be a tax increase. Though all foundations acknowledge the problems of current law, and all foundations would benefit from the administrative savings resulting from a single rate, not all enthusiastically favor a change in the law which could increase their particular tax liabilities. Also, some Congressional staff have expressed their belief that the current two-tiered rate structure incentivizes increased giving above and beyond the minimum distribution required by law. While supportive of the idea of simplification, they believe any proposal to amend the structure should retain incentives for foundations to annually increase their giving.

The Council on Foundations, an association of some 2,000 foundations and corporate giving programs, supports a simplified, flat excise tax. This content is presented for informational purposes only and may not reflect the specific views of the Association of Baltimore Area Grantmakers or its individual members.

Tags:  excise-tax  tax 

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Position Statement on Community Investment Tax Credit Program

Posted By Adam Donaldson, Wednesday, February 29, 2012
On February 28, 2012, the Association of Baltimore Area Grantmakers (ABAG) sent letters to Maryland legislators urging the General Assembly to support incentives for charitable giving, including House Bill 731 to increase the annual allocation of tax credits under the Community Investment Tax Credit Program (CITC) from $1 million to $2.5 million. The CITC helps grow private giving to nonprofit organizations to meet the public needs of communities across Maryland.

ABAG believes strongly in the role of tax incentives to promote private giving for public good, and we are pleased to have the state partner with philanthropy through the CITC program. The CITC program allows the state to select strategic investments and monitor high quality nonprofits. Over the past 12 years, the Community Investment Tax Credit program has leveraged nearly $20 million in charitable contributions to 300 projects across the Maryland.

ABAG has a history of supporting the CITC program, including a Daily Record column published May 14, 2010.  Community Investment Tax Credits complement other State funding programs which offer resources to assist communities with revitalization efforts. As part of an annual, competitive application process, 501(c)(3) nonprofit organizations apply to the Maryland Department of Housing and Community Development for tax credit allocations. Nonprofit organizations utilize the tax credits as incentives for individuals and businesses to donate money, goods or real property to support operational and programmatic costs associated with specific, approved projects delivering services to communities across Maryland. Businesses and individuals that donate to qualified organization’s approved project(s) can earn tax credits equal to 50% of the value of the money, goods or real property contribution. These tax credits are in addition to the deductions on both Federal and State taxes as a result of the charitable contribution.

Learn more from the Department of Housing and Community Development.

Tags:  general assembly  position statement  tax 

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