| |
Government Relations
Legislative Update March 1, 2012
Welcome to the Partnership's Legislative Update highlighting national legislative issues of interest to charitable gift and estate planners.
President Obama released his
fiscal year 2013 budget and for the fourth consecutive year he is proposing
to limit the value of itemized deductions including the charitable deduction
at 28 percent for couples with incomes of more than $250,000 and individuals
with incomes of more than $200,000 (see page 39). This year, however, the
Presidents budget proposal also lays out broad principles of tax reform and
includes the so-called "Buffet Rule," which would require that individuals
earning more than $1 million per year pay at least a 30% effective tax rate.
Notably, under this iteration of the Buffet Rule, the charitable deduction
would be preserved as the text of the Presidents plan states that the rule
should be implemented in a way that is equitable, including not disadvantaging
individuals who make large charitable contributions (also see page 39).
The Presidents fiscal year 2013 budget also includes a number of
other tax provisions of great interest to exempt organizations. For example,
the budget calls for reinstatement of the IRA Charitable Rollover, which expired
at the end of 2011.
Building on a
proposal first put forth by President Obama
during his State of the Union
address (and then incorporated in his fiscal
year 2013 budget), Senator Sheldon Whitehouse
(D-RI) and nine other Democratic Senators have
introduced the Paying a Fair Share Act (S.
2059), which would require that individuals
earning more than $1 million per year pay at
least a 30% effective tax rate. Similar to the
Presidents proposals, this legislation would
also provide a special carve out for charitable
giving by permitting wealthy taxpayers to
receive a credit equal to the value of the
charitable contributions deduction under the
regular income tax. In the House, Representative
Tammy Baldwin (D-WI) and 15 Democratic
Representatives have introduced companion
legislation (H.R.
3903).
The Senate Finance Committee recently held a
hearing on Extenders and Tax Reform: Seeking
Long-Term Solutions where lawmakers discussed
how to address the more than 60 tax provisions
including the IRA Charitable Rollover that
expired at the end of 2011 and what role these
provisions should play in individual and
business tax reform. Video of the hearing,
statements from Senators, and witness testimony
are available
online.
Lawmakers are currently
under pressure to retroactively extend many of
these expired tax provisions. The cost of such
an extension, however, continues to remain a
significant hurdle to final enactment. Excluding
a patch for the Alternate Minimum Tax, which
is typically grouped with any tax extenders
package that moves through Congress, the cost of
a one-year extension of all expiring provisions
is estimated at $30 billion to $35 billion over
10 years. PPP continues to push on Capitol Hill
for inclusion of the IRA Charitable Rollover in
whatever tax extenders package may be under
consideration this year.
The IRS Exempt Organizations division released
its fiscal year 2012
work plan, which details the areas where the
IRS will deploy resources over the coming year.
The document suggests the tax agency will use
the vast amount of information it has collected
on the new Form 990 to examine organizations
that report unrelated business income activities
on Form 990 but have not filed a Form 990-T. The
IRS notes there are organizations that
consistently report significant gross receipts
from unrelated business income activities but
declare no tax due. In the coming year, the IRS
will also look at connections between certain
governance practices and tax compliance and
focus on serious allegations of impermissible
political intervention. The work plan also
provides very brief updates on the divisions
projects on colleges and universities and
private foundations.
For yet another year, the annual Dirty
Dozen list of tax scams put out by the IRS
includes abuse of charitable organizations and
deductions. The IRS release states that the
agency continues to uncover the intentional
abuse of 501(c)(3) organizations, including
arrangements that improperly shield income or
assets from taxation and attempts by donors to
maintain control over donated assets or the
income from donated property. The release also
states that the IRS is investigating schemes
that involve the donation of non-cash assets
including situations in which several
organizations claim the full value of the same
non-cash contribution.
|
|
