AFP Government Relations Update: September 2017
September 29, 2017
1. Overall Legislative Environment/Tax Reform
Even with the release of a new tax Framework just recently (see below), the chances of any sort of tax reform seem a bit murky at this point, with factions with the Republican Party seemingly far apart on different elements of a tax bill.
Members of Congress and the Trump Administration have touted the need for tax reform during the August recess and through September. Given that vocal support for tax policy changes, it is still very possible to see a tax bill emerge. Just last week, the Senate Finance Committee held a hearing on tax reform. Accordingly, AFP has continued its education efforts on Capitol Hill to ensure Representatives and Senators understand the impact of tax reform on charitable giving.
We have been focusing a bit more on the Senate because the Senate could act as a bit of a backstop. House rules make passage of legislation much easier in that body. Thus, the “battle” over tax reform is likely to take place in the Senate.
The Trump Administration and Congressional Republican tax writers have released an initial tax reform plan, called the Unified Framework for Fixing Our Broken Tax Code.
The Framework significantly simplifies the tax code by drastically lowering rates for businesses, creating fewer income tax rates for individuals, adding a much larger standard deduction and child tax credit, and repealing the estate tax. It's not clear yet, however, just how closely Congress will follow the plan during its down deliberations, however, as the Framework was created behind closed doors by just six key players from the White House, Senate and House. The Framework is also very general, omitting key figures and numbers and not going into any detail about how to pay for most of the plan.
Of importance to charities, the charitable deduction is kept in its current form. However, the doubling of the standard deduction and reducing the top individual tax rates may be a huge, negative factor for charities, given research findings on how that would reduce giving every year (see below).
The Charitable Giving Coalition, which AFP chairs, has released a statement, expressing its disappointment with the Framework regarding the impact on charitable giving that could occur without additional giving incentives, such as the universal charitable deduction.
With a plan in place, AFP will be asking members to contact their Representatives and Senators in the very near future. Please be ready to respond and follow up to your chapter members with these legislative alerts so as many members as possible get involved.
AFP—as well as the Charitable Giving Coalition (CGC), which AFP chairs—have submitted comments to the Senate Finance Committee. The committee asked for comments about tax reform in July, which set the stage for the aforementioned hearing.
Both the AFP and the CGC comments focused on the impact of tax reform on giving and passage of the universal charitable deduction. According to a study completed by Independent Sector and the Lilly School, current tax reform ideas (doubling the standard deduction and capping the top tax rate at 35 percent) are estimated to reduce giving by almost $13 billion annually.
Our Solution: Adding the universal charitable deduction would overcome those losses and actually result in additional giving of almost $5 billion per year.
AFP’s comments also included a recommendation to expand the current IRA Rollover Provision through:
- Removing the $100,000 cap on rollovers from an IRA;
- Allowing IRA rollovers to occur when a donor is age 59½ or older.
- Permitting the creation of planned gifts through a rollover.
Both submissions noted the impact of fundraising and the charitable sector on the U.S. economy.
Grassroots action by AFP members across the U.S. may be needed at a moment’s notice. AFP will alert members and provide templates for messaging and information on how they can send emails and other communications.
Meetings with Tax/Giving Policy Experts
Part of the Charitable Giving Coalition’s strategy this year has been to meet with our tax and charity experts (tax law professors, think tank specialists, and former U.S. Treasury analysts) to hear their perspectives about tax reform and different giving incentives, including the universal charitable deduction. These meetings have helped inform the coalition’s strategy as the tax issues have become increasing complex.
The meetings have been fruitful in providing us different ideas about implementation of the universal charitable deduction and other giving incentives. They have also proven important in forcing the coalition to explain its position, find common ground when disagreements arise and develop potential compromises that may be necessary during tax reform debate.
Other Tax Reform Provisions
Earlier this year, the CHARITY (Charities Helping Americans Throughout the Year) Act and was introduced by Senators John Thune (R-S.D.) and Bob Casey (D-Pa.), along with original cosponsors Pat Roberts (R-Kan.) and Ron Wyden (D-Ore.). The bill contains variety of provisions to increase giving and make charity management and oversight more effective and efficient.
While the bill is not like to receive consideration by itself, it’s important because it has bi-partisan support and is sponsored by several Senate Finance Committee members, including Sen. Wyden, the Democratic Ranking Member of the Committee. If tax reform is approved, it’s likely some of these provisions could be included, depending on how extensive the bill is. The bill’s proposals include:
- Expansion of the current Charitable IRA Rollover to include donor-advised funds as permissible organizations for donors age 70½ to contribute funds to (up to $100,000 annually) from their Individual Retirement Accounts.
- Simplification of the formula used by foundations to calculate the federal excise tax imposed on investment income.
- Authorization of the Treasury Department to adopt regulations that align the simplified standard mileage tax deduction rate, which applies to the use of personal vehicles for volunteer charitable services, with the mileage rate that applies for medical and moving purposes.
- Requirement for nonprofits to file their annual returns electronically, which will promote transparency.
- Elimination of alternative rules for substantiating charitable contributions, which will help protect donor information and improve tax administration.
- Creation of a limited exception to the excess business holding tax rules to encourage philanthropic enterprises to donate profits to charity.
AFP will continue to monitor tax reform discussions and will alert AFP members as soon as action is needed.
2. Johnson Amendment
The House of Representatives passed a massive spending on Sept. 14 that contains a provision to weaken the Johnson Amendment, the law that prohibits charities from directly or indirectly attempting to influence an election or defeat of any candidate for public office.
The provision undermines the Johnson Amendment by prohibiting the Internal Revenue Service from spending any funds on determining if a house of worship or its affiliate broke the law. The only exception would be if the IRS Commissioner approves the investigation and Congress is notified well ahead of time.
The language is just one of several attempts this year by Congress and the White House to either weaken or outright eliminate the Johnson Amendment. The issue may come up again when Congress considers comprehensive tax reform. The Senate has yet to pass its spending bill this year, and it’s not clear yet whether or not this provision will be included in the legislation.
AFP announced its position on the Johnson Amendment earlier this year.
3. Public Policy Session at the Leadership Academy
Staff and volunteer leaders involved in AFP’s public policy programs are developing a session at this year’s Leadership Academy focusing on government relations and advocacy.
The session will be part update, part training, part program development and part sharing. You’ll receive up-to-the-minute intelligence from Capitol Hill, including a tax reform overview. You’ll also hear from chapter leaders and AFP’s own advocacy experts on how to build a successful policy program., including chapter and state Lobbing Days and similar events.
The Leadership Academy this year is in Cincinnati, Ohio, October 12-14. AFP encourages all chapters to attend, and urges you to send a representative to this important session.
4. AFP Political Action Committee
The purpose of the AFP Political Action Committee (PAC) is to provide the opportunity for individuals interested in the future of philanthropy and the profession of fundraising to contribute to the support of candidates for Federal office who believe, and have demonstrated their beliefs, in the principles to which philanthropy and the fundraising profession are dedicated. The Committee is non-partisan and dedicated to the protection and advancement of the fundraising profession and philanthropy in its various forms.
AFP encourages all U.S. members to contribute to the PAC. Information about giving to the PAC can be found on the AFP website: https://reports.afpnet.org/portal_add/pac/makegift_pac_form.cfm.
The PAC will be holding a reception at the AFP Leadership Academy on Friday, October 13, from 6:00 – 6:45 p.m. in the Salon H & I Rooms of the Hilton Cincinnati Netherland Plaza.
If you’d like to set up a meeting with your local member(s) of Congress, contact AFP IHQ at firstname.lastname@example.org, and we can provide talking points and other resources.