Friday, January 11, 2013

Welcome to 2013!

Since our last edition in December, Congress passed a bill to avert the fiscal cliff. Because of your support and efforts, ACR was successful in squashing proposals to cut, cap and limit the charitable deduction. But we are not out of the woods yet. More on this in the Washington Roundup below.

We anticipate a very busy year ahead and look forward to keeping you up to date on the issues that matter to our community.

The ACR newsletter is available below or online at www.acreform.com.

Upcoming Events

Washington Roundup

Both the House and Senate were out of session this week, after the new class of Congress members was sworn in on Thursday, January 3rd. President Obama has been occupied with filling cabinet positions vacated by officials leaving their posts. Most recently, the President nominated former White House Chief of Staff Jack Lew to become the new Secretary of the Treasury. Given that he has already been confirmed twice by the Senate for other positions, he is expected to be confirmed by the Senate in fairly short order.

Fiscal Cliff Averted For Now

The President signed the American Taxpayer Relief Act of 2012 (H.R. 8) into law on January 3rd, dealing with individual tax rates and delaying the automatic spending cuts, known as the “sequester,” until March 1st. Here is a quick recap of what the bill does and what is of interest to the charitable giving community:

• H.R. 8 permanently raises the income tax to 39.6% for individuals making more than $400,000 a year and families making more than $450,000.
• Permanently raises capital gains and dividends tax rates to 20% for the same $400,000/$450,000 earners.
• Permanently sets the estate tax at 40% with a $10 million per couple exemption.
• Reinstated the “Pease” limitation, a 3% reduction to itemized deductions for $250,000/$300,000 earners.
• Includes the set of "tax extenders" that the Senate Finance Committee approved last summer, including a modified one-year extension of the IRA Charitable Rollover provision.

The good news is the bill does not include a much discussed cap on itemized deductions. However, it does reinstate the smaller “Pease” limitation on itemized deductions for those making $250,000 (single)/$300,000 (married) or more. Pease is a provision that progressively decreases the value of itemized deductions on those earners. Although ACR is pleased the charitable deduction was preserved in the fiscal cliff agreement, we have some concerns about the Pease provision because it could reduce charitable giving. Our full statement is available here and our video on explaining Pease is here.

So What’s Next?

Congress merely delayed some of the most contentious parts of the fiscal cliff for just two months. The debt ceiling is set to be reached on or near March 1st, the same day the automatic spending cuts are due to take effect, and current funding for the federal government is set to run out on March 27th. This essentially creates another perfect storm of spending issues, expected to be just as hotly contested as the fiscal cliff tax debate. In fact, the White House has already insisted that the next debt deal must have just as much in tax revenue as spending cuts. The President has not specified exactly how to raise that new revenue, but since tax deductions, credits, and other areas of the tax code were not changed for the most part in H.R. 8, it is likely that is where he will start. Some believe that he will open negotiations by offering a plan similar to his original 2013 budget, which includes the 28% cap on all itemized deductions, including the charitable deduction. 

Republicans continue to be vehemently opposed to such proposals... On a longer timeline, it is important to note that tax reform is still on the table for 2013... (keep reading)

Consider This

Reading the Tea Leaves on 2013

While Congress inked a deal on New Year’s Day to avoid going over the fiscal cliff, we see that more as slowing the car down before we go over, rather than avoiding the cliff altogether.  Congress has arguably dealt with the “easier” elements of the cliff (tax rates, the alternative minimum tax, the estate tax and delaying the automatic spending cuts that were due to go into effect on January 1st) and left the harder elements (continuing to fund the government, raising the debt ceiling and revisiting what to do about automatic spending cuts) until March 1st.  So come February 28th expect us to be right back on the edge, staring into a deeper, darker hole than we faced this winter... (keep reading)

ACR Blog Roundup

The ACR blog (www.acreform.com/blog) highlights our thoughts on news of the day. For regular updates from our blog, follow us @ACReform on Twitter.

Following are blog postings since our last edition:

• Pease and the Fiscal Cliff: Video Analysis – For an analysis of how “Pease” - a tax provision reinstated in the fiscal cliff agreement - may impact your taxes and charity check out this video analysis with Evan Liddiard, CPA,  tax expert and former Senate Finance Committee staffer.
   
• Don’t Mess with the Charitable Deduction! – In a guest post, Alexander Reid, of counsel, Morgan Lewis & Bockius LLP, previewed his recently published article “Renegotiating the Charitable Deduction” in the January edition of the Exempt Organizations Tax Review of Tax Analysts. He explains that proposals to reform the charitable deduction tend to confuse the purpose of the charitable deduction with its economic effects.
   
• Watch this Video and Take Action – Facing challenges to the charitable deduction during fiscal cliff negotiations, organizations in the charitable sector produced a 2-minute video on the history of the charitable deduction, why it’s important, and what can be done to protect it.

Making Headlines

Charitable Deduction

As you know the final deal to avoid the fiscal cliff did not include a limit on the charitable deduction, but may still impact charitable giving. In a video interview with HuffPost Live Joanne Florino, ACR advisor and president of Triad Foundation Inc., discusses the impact of the fiscal cliff deal on charitable giving.

Efforts by the Charitable Giving Coalition to protect the charitable deduction have not gone unnoticed. The Chronicle of Philanthropy named the Coalition one of the “5 from the Nonprofit World Who Will Influence Public Policy in 2013” and highlighted ACR among the organizations pushing it forward.

Following is a selection of recent articles since the last newsletter on efforts to protect the charitable deduction:

• 1/7/13 Pease Limitation on Charitable Deductions Means Donors Pay More for Charity, BNA's Daily Tax Report
• 1/7/13 Charging Through the Back Door, Washington Free Beacon
• 1/4/13 Video: American Red Cross, Save the Children on Debt Deal Impact on Charities, Bloomberg TV
• 1/4/13 Fiscal Cliff Fix Turns Out Better than Expected for Nonprofits, Donors, but Impact yet to Come?, Crain’s Detroit Business
• 1/2/13 Nonprofits Call Cliff Deal a Victory on Giving Incentives, Chronicle of Philanthropy
• 1/2/13 Deductions Limits Will Affect Many, Wall Street Journal
• 1/1/13 Fiscal Cliff Deal Could Hurt Charitable Giving, Chronicle of Philanthropy
• 12/31/12 Nonprofits Eye Possible Cap on Charitable Deductions with Concern, Palm Beach Daily News
• 12/24/12 The Fate of Charitable Giving Resides on the Fiscal Cliff, Fox Business
• 12/18/12 Fiscal Cliff Driving a Wave of Charitable Giving, Money News

Here are a sampling of op-eds in support of preserving the charitable deduction:

• 1/6/13 Saving Federal Charitable Tax Deduction Benefits Us All, Seacoast Online (Richard Ober, New Hampshire Charitable Foundation)
• 1/3/13 The Fiscal Cliff Deal: Charity Takes a Hit, Forbes (Howard Husock, Manhattan Institute)
• 12/31/12 Charitable Deduction a Boon for Society, Baltimore Sun (Phillip N. Baldwin, U.S. Board of Trustees of United Way, and Ronald J. Daniels, Johns Hopkins University)
• 12/30/12 Charitable Deduction is Critical for Nonprofits and Communities, Philadelphia Enquirer (Jill Michal, United Way of Greater Philadelphia and Southern New Jersey)
• 12/18/12 The Charitable Tax Deduction Rewards a Selfless Act and Helps Many, Daily American (Bill McKinney, United Way of the Laurel Highlands)
• 12/18/12 Losing Charitable Tax Break A Societal Deduction, Huffington Post (Paul Clolery, NPT Publishing Group)
• 12/17/12 Don’t Get Rid of the Charitable Deduction, CNBC (John Carney)
• 12/16/12 Please Don’t Mess With the Charitable Deduction, New York Times, (Robert Shiller, Yale University)

Visit our Charitable Deduction Central for news, opinion, background and updates on the Charitable Giving Coalition’s efforts to protect the charitable deduction.
 

Comings & Goings (Nonprofit Leadership)

Council on Foundations: As part of its recent strategic redesign the Council on Foundation has announced several new hires, including Sue Santa to the role of senior vice president, public policy and legal affairs. Santa has served as senior vice president for public policy at The Philanthropy Roundtable for the past four years working on the ACR Team.
 

This Caught Our Eye

Philanthropy’s Economic Impact: John Tyler, general counsel and secretary of the Ewing Marion Kauffman Foundation, discusses a new study by the Philanthropy Collaborative on how much domestic foundation grants contributed to job creation, wages, gross domestic product, and tax revenues in 2010. Report: Economic Impacts of 2010 Foundation Grantmaking on the U.S. Economy

Benefit Corporations: On December 1, 2012 legislation went into effect in Massachusetts, permitting companies to begin incorporating as benefit corporations or converting to benefit corporations.

Nonprofit Disclosure: A pair of bills has been introduced in California that would increase the disclosure requirements for nonprofits engaged in political campaigning. California follows New York, which issued new regulations related to the disclosure of donor identities in December. Also see: Proposed Legislation Would Require Nonprofit Organizations Participating in California Political Campaigns to Disclose the Identity of Their Donors, Not For Profit/Exempt Organizations Blog

American History’s Greatest Donors: In its latest edition Philanthropy Magazine published a selection of profiles of the most notable philanthropists in U.S. history drawn from its newly launched Philanthropy Hall of Fame.

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