By Laura Kalick, JD, LLM in Taxation
Although tax legislation will likely wait until after the presidential election, Congress continues to introduce bills for when that day comes. Previous bills and budget proposals have attempted to reduce the benefits of the charitable deduction for taxpayers. The charitable sector demonstrated in numerous hearings that such a reduction would have a significant adverse impact on organizations’ ability to provide needed services. And now, Congress is exploring actions that could help protect the charitable deduction.
Senator John Thune (R-S.D.) introduced S. 2750 CHARITY Act (Charities Helping Americans Regularly Throughout the Year). This bill conveys that the goal of tax reform should be to encourage charitable giving, and Congress should ensure that the charitable deduction endures through a comprehensive rewrite of the tax code. The bill includes the following provisions:
- The Individual Retirement Account rollover from charities would be available for a rollover from a donor advised fund;
- The excise tax on private foundations’ investment income would be reduced to 1 percent;
- In order to enhance transparency, all Forms 990 would be filed electronically;
- The mileage rate for charitable volunteer services using an automobile would match the rate for medical expenses; and
- An exception to the excess business holding rules would allow a business received by a private foundation through a will or trust to be held by the charity if the business’s profits go to the charity.
Senator Tom Udall (D-N.M.) introduced S. 2648, Create Act of 2016, which includes a special rule allowing a donor who makes a qualified artistic charitable contribution (i.e., literary, musical, artistic or scholarly work, or contributes the copyright to a charitable organization) to deduct the fair market value of the contribution from gross income.
On the House side, “Preventing IRS Abuse and Protecting Free Speech Act” (HR 5053), introduced by Peter Roskam (R-Ill.-6), was passed. This bill prohibits the Internal Revenue Service from requiring a tax-exempt organization to include in annual returns the name, address or other identifying information of any contributor. The bill includes exceptions for:
- Required disclosures regarding prohibited tax shelter transactions; and
- Contributions by the organization’s officers, directors or five highest compensated employees (including compensation paid by related organizations).
As the sector stands by during the final months of election season, we’ll be watching and waiting for more developments in tax legislation.
This article originally appeared in BDO USA, LLP’s “Nonprofit Standard” newsletter (Summer 2016). Copyright © 2016 BDO USA, LLP. All rights reserved. www.bdo.com