Right now the debate on the fiscal cliff is consuming mainstream media and all conversations in Washington, D.C. Deficit reduction, the cliff, and tax reform all have major implications for philanthropy. Here are the three issues the Council on Foundations is watching and will continue to monitor for you in the days ahead.
1. Maintain the Current Charitable Deduction Rates
Now that the elections are over, the president and congressional leaders are in talks to prevent the nation from going over the fiscal cliff. While it’s unclear exactly what’s being discussed, it’s likely that a proposal to cap all itemized deductions, including charitable giving, is on the table. The Charitable Giving Coalition—a group of more than 40 diverse charitable organizations including the Council, the Forum of Regional Associations of Grantmakers, and the Philanthropy Roundtable—has joined forces to protect the charitable deduction. The coalition will be on Capitol Hill this week to explain to lawmakers why any cap on charitable deductions would undermine giving and have long-lasting, negative consequences.
2. IRA Charitable Rollover
Prior to adjourning for the August recess, the Senate Finance Committee passed bipartisan legislation to continue dozens of expired or soon-to-expire tax breaks—including the IRA charitable rollover—through 2013. The bill would reinstate the IRA rollover for two years (retroactive to January 1, 2012), allowing individuals age 70½ or older to take tax-free distributions from their IRAs (up to $100,000 per taxpayer per taxable year). Unfortunately, the legislation does not expand the provision to allow donor-advised funds, supporting organizations, and private foundations to qualify for this incentive. According to recent published statements from House Ways and Means Committee Chairman Dave Camp (R-Mich.), tax extenders likely will not move as a stand-alone piece of legislation but as an add-on to a fiscal cliff agreement.
3. Simplification of the Private Foundation Excise Tax
In the current Congress, Sens. Charles Schumer (D-N.Y.) and Richard Burr (R-N.C.) introduced a private foundation excise-tax bill (S.593), while Reps. Erick Paulsen (R-Minn.) and Danny Davis (D-Ill.) introduced H.R. 2311. These proposals would revise current law and simplify the complicated two-tier excise tax through a flat rate of 1.39 percent The Joint Committee on Taxation deemed this proposal to be a revenue raiser of $86 million over 10 years. Even so, the foundation community is supportive of the law’s revision because it would allow foundations to plan their grantmaking more effectively by letting them know what their tax rate will be.
Shelton Roulhac is senior policy analyst at the Council on Foundations.