Last week I attended Foundations on the Hill as part of a group from Minnesota and North Dakota that met with staff and members of the House and Senate to ask for their support on issues affecting philanthropy. I teamed up with several MCF members to visit with the staff of Representatives Bachmann (R-06), Ellison (D-05), Peterson (D-07) and Walz(D-01). We also had a chance to meet Congressmen Ellison and Walz.
It was an exciting time to be in Washington and advocate on behalf of the philanthropic community. There was strong support for philanthropy and an interest in how grantmakers are responding to the economic downturn. After the meetings, it made me realize how lucky Minnesotans are to be represented by such smart, hard-working people.
Our meetings focused on four main issues:
Estate Tax Reform: MCF supports an estate tax with reasonable thresholds and rates and opposes full repeal of the estate tax. Most of the Minnesota delegation agreed with this position.
IRA Charitable Rollover:Through 2009, taxpayers aged 70 ½ or older can make tax-free distributions of up to $100K from their IRAs to charitable organizations. However, gifts to donor-advised funds do not qualify for the incentive. MCF supports legislation that expands and permanently extends the IRA Charitable Rollover to include gifts to donor-advised funds, supporting organizations, and private foundations and eliminates the $100,000 cap. The congressional staff generally agreed with this position.
Excise Tax: Private foundations that are exempt from federal income tax are generally subject to a 2% excise tax on their net investment income. However, the tax is reduced to 1% in any year in which the foundation’s percentage of distributions for charitable purposes exceeds the average percentage of its distributions over the five preceding taxable years.
President Obama’s proposed budget calls for replacing the 2-tier structure of the excise tax with a single rate of 1%. The private foundation excise tax bill (S. 676) would remove the current two-tiered excise tax and replace it with one flat rate. The proposed rate, which will be determined by the Joint Committee on Taxation, would be set between 1 and 2 percent at a revenue-neutral level.
Recognizing the current economic downturn and fiscal challenges Congress is facing, MCF supports pursuing a revenue-neutral excise tax. Again, the congressional staff that we met with generally agreed with this position.
Charitable Deduction Rates: President Obama’s 2010 budget outline calls for tax changes that would affect individuals and families in the two highest tax brackets. The proposals include reducing the value of itemized deductions that families earning more than $250,000 or individuals earning more than $200,000 can take in charitable donations. The change is intended to help pay for health care reform.
A reduction in the charitable deduction rate will reduce the incentive for donors to give, thus reducing the amount of money available to support nonprofits. At a time when charities and nonprofits are faced with increasing demands from their communities, it is important that policies support and encourage charitable giving.
In general, the congressional staff agreed with the President’s proposal but understood that reducing the deduction rates would negatively affect giving. To learn more about this issue, check out this information from The Center on Philanthropy at Indiana University, the Center on Budget and Policy Priorities and the Tax Policy Center (Urban Institute and Brookings Institution).
