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Government Relations
Legislative Update May 20, 2009
Welcome to the Partnership's Legislative Update e-newsletter, highlighting national legislative issues of interest to charitable gift and estate planners.
In this Issue:
On May 12, the Wall Street Journal published an article, “Donors
Find Gift Annuities Can Stop Giving,” which raises concerns about gift annuity
programs that are largely unfounded. Read the Wall Street Journal
article here.
The Partnership has responded with a
letter to the editor, and other individuals and organizations, including the
American Council on Gift Annuities, have also responded. Although the negative
publicity is unfortunate, this article does provide an opportunity to remind
donors, legislators and the general public about the true benefits and safety of
gift annuities, based on the experience of thousands of charitable organizations
across the nation. The Partnership’s will share correct information with
legislators and regulators in Washington, DC.
Links to other responses to the WSJ article and resources to help planners
address concerns about gift annuities are available on the
PPP homepage.
Also, late last month, while commenting on the FY 2010 budget resolution and a
PPP-supported amendment to extend and expand the IRA Charitable Rollover (see
story below), Sen. Charles Grassley (R-IA), Ranking Member of the Senate Finance
Committee, labeled “split-interest trusts” as “worrisome.” He continued, “just
like with donor-advised funds and supporting organizations, the contribution
does not result in an immediate benefit actually providing services while the
donor receives a significant tax benefit at the time of the contribution.”
Senator Grassley concluded his remarks, “we should make sure that grant-making
entities, including split-interest trusts, are accountable for paying out
minimum amounts to actual charities before we allow them to receive IRA
rollovers.” Despite these remarks, Sen. Grassley did not object to the
PPP-supported amendment, which was ultimately included in the budget resolution
by the unanimous consent of the Senate.
PPP is working with staff for both Sen. Grassley and Sen. Byron Dorgan (D-ND),
the sponsor of the IRA Charitable Rollover amendment, as well as Sen. Baucus
(D-MT), Chairman of the Senate Finance Committee, to address Sen. Grassley’s
concerns and advocate for expansion of the IRA Charitable Rollover this year.
Both the House and Senate have now approved a fiscal year
2010 budget resolution, which contains a number of
provisions related to charitable giving issues. The budget
resolution is a non-binding document, setting out a blueprint
for how Congress will move major legislation over the next
year and how much discretionary spending will be available
through the annual appropriations process.
The resolution calls on Congress to pass legislation that
extends “incentives for enhanced charitable giving from
individual retirement accounts, including life-income gifts.”
This language was originally added to the Senate-passed budget
resolution by Sen. Byron Dorgan (D-ND), sponsor of the Public
Good IRA Rollover Act of 2009 (S. 864).
The resolution also provides for a permanent extension of the
estate tax at 2009 levels (thus doing away with the 2010
repeal). Under such an approach, individuals could exempt $3.5
million from taxes ($7 million for couples), with amounts
above that taxed at 45 percent. The exemption threshold would
also be adjusted for inflation in future years. President
Obama also supports this approach to estate tax reform.
On May 11, the Treasury
Department released its “green book,” which outlines the
Administration’s fiscal year 2010 tax proposals. This
publication, like the budget blueprint released by the White
House in February, proposes reducing from 35 percent to 28
percent the tax rate at which taxpayers earning more than
$250,000 could claim charitable deductions. The proposal has
faced widespread opposition from groups representing the
charitable sector and lawmakers have also gone on-the-record
against it.
The Partnership for Philanthropic Planning has issued a
statement in response to the Administration’s proposal.
The Partnership believes that tax incentives for charitable
giving send an essential message about the value our country
places on voluntary giving and the important role of charities
in meeting critical individual and community needs. The true
beneficiaries of the charitable donation are not the generous
Americans who make charitable gifts, but those in need who are
served by the work of charitable organizations.
Sen. Max Baucus (D-MT) and Charles Grassley (R-IA), Chairman
and Ranking Member, respectively, of the Senate Finance
Committee recently released a number of
legislative proposals
for financing health care reform legislation. Some of these
proposals would affect the work of nonprofit hospitals, which
compared to for-profit hospitals, receive several key
subsidies from the federal government. Specifically, under the
policy options released, nonprofit hospitals would be required
to maintain a minimal level of charitable activity, limit
charges to uninsured, indigent patients, and limit aggressive
collection actions. Hospitals that do not meet those
requirements would be subject to an excise tax. The Committee
is accepting public comments on these proposals, which can be
emailed to
Health_Reform@finance-dem.senate.gov.
Sen. Baucus and Grassley met with members of the Senate
Finance Committee to discuss these options on May 20. They
hope to mark-up heath care reform legislation in the Committee
as early as next month.
It still is unclear if the proposal to cap the tax rate for
itemized deductions, which includes the charitable deduction,
at 28 percent for wealthier individuals will also be on the
table as a way to finance health care reform (see story
above).
According to a plan ratified by the Senate Republican
Conference, Sen. Orrin Hatch (R-UT) will replace Sen. Charles
Grassley (R-IA) as the top Republican on the Senate Finance
Committee beginning in 2011. Sen. Hatch has served on the
Senate Finance Committee since 1991. Sen. Grassley will move
over to become the top Republican on the Senate Judiciary
Committee.
Under Senate Republican Conference rules, members are limited
to six cumulative years as Chairman of a committee, and six
cumulative years as Ranking Member. Since 2001, Sen. Grassley
has served as Chairman of the Finance Committee from 2003
through 2006. By the end of 2010, he will have served as
Ranking Member in 2001 through 2002 and 2007 through 2010. If
Republicans regained control of the Senate in the next
election, Sen. Grassley could technically serve as Chairman of
Senate Finance for two more years.
Lawmakers typically do not consider committee assignments this
far in advance, but the recent defection from the Republican
Party of Sen. Arlen Specter (D-PA), who was Ranking Member of
the Senate Judiciary Committee, set off this latest shuffle.
The IRS has released Publications
1457,
1458
and 1459
in which it illustrates the method for using actuarial factors
for certain income tax valuations of future interests.
Included is a new mortality
Table
2000CM, which is effective May 1, 2009. Compared to the
existing Table 90CM, life expectancies under the 2000 Table
are slightly greater each year until age 101; from age 102 up
to the maximum calculated age of 110 years there is actually a
decrease. The rate of increase in life expectancy ends at age
76. Gift planners will find that the increase in life
expectancy increases the value of an income interest, and
reduces the value of a remainder interest.
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