Friday, August 10, 2012

Read the latest updates below or online.

ACR Blog Roundup

Washington Roundup

Both the House and Senate are on summer recess and will return on September 10th. Here is an update on major pending tax and legislative issues.

Bush-era Tax Cuts Expiring at Year-End

Congress left town last week for a 5-week recess without agreeing on how to handle the year-end “fiscal cliff,” which refers to the set of tax increases and spending cuts totaling over $1 trillion that will take effect beginning January 1, 2013.  While the House and Senate held symbolic votes on different proposals to extend the current Bush-era tax cuts, no real progress was made... (CONTINUED)

Federal Budget Cuts Set to Take Effect on January 1st

Earlier this month Congress passed and the President signed into law a bill that requires the Administration to provide a detailed plan of how it will implement the federal budget cuts that are scheduled to take effect January 1st.  As you may recall, half those spending cuts will come from defense programs and half from domestic programs (including education, environmental and social welfare).  By early September the President must begin to identify which programs are at risk.  We anticipate a firestorm of response.  Economists have forecasted that the cuts, combined with the January expiration of the Bush-era tax cuts, would slow growth and could send the country back into a recession. As reported “companies could begin scaling back their employment rolls once they learn the precise nature of the planned cuts from the Obama report.”

IRA Charitable Rollover Not Dead Yet

Before leaving Washington, the Senate Finance Committee passed a bill that extended more than 50 expiring tax provisions, including the IRA Charitable Rollover provision.  This provision would reinstate the rollover retroactive to the beginning of 2012 and extend it through 2014.  The next step is for the full Senate to debate and vote on it.  We expect that to happen in September, at the earliest.  The House, however, has signaled it won’t take up a similar bill until the lame duck session after the November election.

Preparing for Tax Reform in 2013

On Thursday, August 2nd the House passed a bill (H.R. 6169) that included a timeline and an expedited process for consideration of a tax reform bill in 2013 as well as a handful of tax-reform benchmarks.  The bill stipulates that tax reform must: (1) consolidate the individual tax brackets down to two; (2) reduce the corporate rate to no more than 20 percent; (3) repeal the alternative minimum tax; and, (4) move to a territorial tax system for foreign profits.  This bill is important because it serves as the first attempt at articulating the “expedited process” that Ways and Means Committee Chairman Camp (R-MI) called for in June.  While the Senate is not expected to take up H.R. 6169, the House’s fast track language could serve as some guidance.

Consider This

Passing Tax Extenders – an Olympic event on the Hill

Everyone in Washington is talking about doing tax reform next year but just how heavy a lift is that going to be?  Well, if trying to get a grab bag of already passed tax provisions known as “extenders” out of the Senate Finance Committee is any indication, the answer is that an Olympic-worthy lift is in order.

Going forward, the widely accepted notion is that “reform” should bring the business and individual tax rates down by eliminating or reducing targeted tax breaks. With that goal in mind... (Continued)

Making Headlines

Tax Reform/Charitable Deduction

Fiscal Cliff: Washington is sounding an alarm over “Taxmageddon” or the “fiscal cliff” that the nation faces at end of this year due to tax increases and spending cuts slated to take effect simultaneously. The Washington Post provides a question-and-answer on sequestration and what to expect.

Renowned economist and Yale professor Robert Shiller comments in the New York Times on several issues related to tax rates and incentives, including the charitable deduction.  According to Shiller, “We need to accompany any tax increases with an affirmation and a broadening of the tax system’s support of philanthropy.”

Tax Reform: As discussion of tax reform mounts, Pete Domenici and Alice Rivlin once again offer their tax reform plan, which lowers individual rates to two brackets and converts the charitable deduction to a 15 percent refundable tax credit for charitable contributions, as a way forward for Congress.

Senator Charles Grassley (R-IA) suggests,“[a]s we consider how tax incentives help students and families pay for college, we should consider whether and how these incentives also increase costs.”

States/Local

Payments in Lieu of Taxes (PILOTs): Inspired by PILOT measures in Boston and other cities, Lawrence, NJ, and Haverhill, MA, are asking their charitable communities to start or increase their contributions.

Social Impact Bonds: Massachusetts has announced the selection of seven nonprofit social service providers to participate in the nation’s first social impact bond program. Also see: Massachusetts Announces Nonprofit Partners in 'Pay for Success' Experiment, Philanthropy News Digest

Transparency

Giving Pledge: The Foundation Center has launched a new section on its website called Eye on the Giving Pledge that provides profiles and grantmaking information on the 81 signatories of the Giving Pledge, the effort by Warren Buffett and Bill and Melinda Gates to encourage the wealthiest Americans to commit at least half of their assets to charity.

This Caught Our Eye…

501(c)(4)s: A group of ten Republican senators have urged the IRS Commissioner to resist changing regulations for 501(c)(4) tax-exempt organizations in response to public pressure over their campaign-related activities. Click here for past coverage of this issue.  Also see: Senators Warn IRS to Ignore Political Pressure to Rewrite Super-PAC Rules, The Hill, and Senators Warn IRS Not to Change Rules for Tax-Exempt Political Groups, Accounting Today

New York Attorney General Eric T. Schneiderman has launched a probe into the finances of  certain 501(c)(4)s and requested tax returns and other financial information. Also see: AG Widens Probe of Tax-Exempt Groups, Albany Times Union

Social Innovation Fund: The Corporation for National and Community Service has announced the recipients of its 2012 Social Innovation Fund grants totaling $42 million to charitable organizations active in the areas of youth development, economic opportunity, healthy futures, and other pressing social needs. Also see: Social Innovation Fund Awards $42-Million, Chronicle of Philanthropy

American Nonprofits: A newly formed national association aims to help nonprofits with finance issues.

Combined Federal Campaign (CFC): The CFC Commission established last year to propose reforms to the CFC has released a report of 24 wide-ranging recommendations designed to improve the program amid declines in donations. One recommendation shifts the burden of CFC costs from donors to participating charities. Report: Federal Advisory Committee Report on the Combined Federal Campaign. Also see: Report Urges Changes to Federal Charity Program, Washington Post

Social Media: According to a new report by the Center for Effective Philanthropy, only 16 percent of grantees surveyed reported using social media created by the foundation funding them or its staff and they don’t find it particularly useful. Report: Grantees’ Limited Engagement with Foundations’ Social Media

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