The U.S. House of Representatives earlier this month passed the “America Gives More Act,” a piece of legislation that includes several charitable giving incentives and also modifies the excise tax on private foundation investment income. As this Nonprofit Quarterly article points out, the legislation still needs to get past a Democrat-controlled Senate that has shown some opposition—not to mention the White House, which also has shown strong opposition.
The bill’s components and projected cost. One key provision is the reauthorization of charitable gifts from IRAs made by individuals age 70.5 and older—these individuals can donate up to $100,000 of their required distribution amounts to charities without first recognizing any income on that donated amount. In addition, the bill:
- Extends the time period for making deductible charitable contributions to April 15 (instead of December 31);
- Reauthorizes and permanently extends an enhanced tax credit for donations of food inventories from corporate donors to nonprofit for food pantries serving the poor. The enhancement allows S corporations, partnerships, and individual proprietors to receive the same enhanced incentives that C corporation food inventory donors would get, including being allowed to deduct food inventory donations up to 15 percent of their taxable income;
- Makes permanent the tax deduction for donations of charitable easements; and
- Reduces the private foundation excise tax on investment income to one percent (eliminating the two-tier tax that many argued incentivized less giving by foundations).
The costliest provision is the IRA rollover, projected to cost about $8.4 billion between 2014 and 2024. The other provisions are projected to cost between $1.7 and $2.8 billion each for the same period.
Democrat opposition to the bill. Soon after the House vote, the White House issued a statement outlining its points of opposition:
- The charitable giving provisions in the bill primarily benefit wealthier taxpayers, and add to the deficit without any budget offsets;
- While making permanent tax incentives that primarily benefit wealthier individuals, House Republicans have let other provision that directly benefit the poor (e.g., some improvements to the Earned Income Tax Credit) expire;
- Other tax incentives that are awaiting reauthorization and extension could add another $500 billion to the deficits; and
- Frustration with House Republican’s refusal to extend long-term unemployment benefits.
Other issues to consider. The Nonprofit Quarterly article makes some interesting points related to the legislation. Given that the House recently cut the IRS tax enforcement division budget by 25 percent, Democrats could use this as an opportunity to build in some enforcement mechanisms—perhaps by directing the remaining private foundation excise tax toward this effort. In addition, nonprofits should consider rallying around tax incentives that aren’t necessarily tied to charitable giving, such as the earned income tax credit and extension of long-term unemployment benefits. These type of incentives can help reduce the need that otherwise must be met by charitable contributions.
With just a few days left for Congress before a five-week recess beings, it looks like any development on this legislation is still a ways out. We’ll continue to monitor this and other charitable giving issues; check back for updates.