Government Relations
Legislative Update January 6, 2010
Welcome to the Partnership's Legislative Update highlighting national legislative issues of interest to charitable gift and estate planners.
Congress adjourned for the year
without extending the IRA Charitable Rollover and estate tax, which means both
tax provisions now disappear until lawmakers take further action when they
return to work later this month. On the IRA Charitable Rollover, both Democratic
and Republican leaders have indicated they will try to retroactively extend the
provision within the first three months of 2010, although there continues to be
significant disagreement between the Senate and House over how to offset the
costs of any tax “extender” provisions. PPP continues to urge lawmakers to
retroactively extend the IRA Charitable Rollover as soon as possible.
Exactly how Congress will address the estate tax, however, remains unclear. It
is possible lawmakers will vote to reinstate the 2009 estate tax rules and make
them retroactive to January 1, 2010. Republican lawmakers may also try to push
for a tax rate lower than the 2009 level and insist that it last for at least
two years. There is also some interest in phasing in a lower tax rate over a
period of years.
The House approved the Wall Street Reform and
Consumer Protection Act of 2009 (H.R.
4173) before adjourning for the year. The
legislation would, among many other things,
create a new federal agency to deal with
consumer financial protection issues. Earlier
versions of the legislation provided this new
agency with expansive authority over the work of
fundraisers and charitable gift planners. PPP
and several other national charities, however,
were successful in pushing for an exemption for
activities relating to charitable giving. This
exemption was added to the legislation by an
amendment offered on the House floor. The Senate
is expected to begin work on companion
legislation to H.R. 4173 over the next couple
months, and PPP will remain actively involved in
the process.
The IRS announced
annual changes affecting charitable
deductions when charities provide low-cost
premiums to contributors in fundraising
campaigns. The IRS said that a charity could
tell a donor that gifts are fully deductible in
2010 if the donor gave $48 or more and received
a premium worth $9.60 or less; the donor
received premiums that had a fair-market value
equal to no more than 2 percent of the amount of
the contribution, or $96, whichever was less;
and/or the donor received appeals that contained
small items (e.g., mailing labels) that were
worth a total of no more than $9.60. These
figures were updated by the IRS to account for
inflation.
The
IRS has released
Publication 526 for use in preparing 2009
returns. The publication describes what
qualifies as a charitable contribution and how
to claim a deduction for a charitable donation.
The publication highlights two areas of the law
that changed in 2009. First, if a taxpayer’s
adjusted gross income is more than $166,800
($83,400 if married filing separately), he or
she may have to reduce the amount of certain
itemized deductions, including charitable
contributions. Second, several charitable giving
provisions have expired and will therefore not
apply in 2009. These provisions relate to the
Midwestern Disaster Area and a special rule for
donations of food.
The
IRS has released a
news release to remind individuals and
businesses making contributions to charity of
several important tax provisions that have taken
effect in recent years. Among the provisions
described by IRS in the news release are special
charitable contributions for certain individual
retirement account owners, rules for clothing
and household items, and guidelines for monetary
donations.
According to a
report released by the IRS, tax deductions
claimed by Americans for charitable
contributions rose to $193.6-billion in 2007, an
increase of 3.7 percent from the $186.6-billion
claimed in 2006 (or about 0.9 percent after
adjusting for inflation). The increase was due
largely in part to “other than cash”
contributions, which went up by 11.6 percent
from 2006.
The IRS has released a
compliance guide for
charities that discusses the type of activities
that could jeopardize an organization’s
tax-exempt status. Among the topics discussed in
the guide are federal informational tax returns
or notices that must be filed by charities,
record-keeping, governance considerations,
changes to be reported to the IRS, required
public disclosures, and resources.
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