April 11, 2016; ThinkAdvisor
Sens. John Thune (R-SD) and Ron Wyden (D-OR) have introduced S. 2750, the CHARITY Act. (The acronym is meant to spell out the somewhat awkward “Charities Helping Americans Regularly Throughout The Year.”) The 11-page bill begins by expressing the “sense of the Senate” that the charitable deduction should be preserved, seen as an important statement to lawmakers seeking to rewrite the tax code. The bill’s five key changes are:
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- Making donor-advised funds (DAFs) eligible beneficiaries for IRS rollover gifts
- Reducing the excise tax rate on foundation investment income from two percent to one percent and relieving foundations from having to calculate payout rates from previous years
- Requiring all nonprofits to file their annual Form 990 electronically, and require the IRS to make all Form 990 information available in machine-readable format “as soon as is practicable”
- Increasing the standard mileage deductibility rate for volunteers to that for medical and moving purposes
- Allowing more favorable tax treatment of business profits when the business has been donated to a foundation, the business operates independently from the foundation’s donors, and all net operating income has been donated to the foundation.
NPQ has reported on legal action to require the IRS to make Form 990 data available in machine-readable format. The IRS has resisted this due to the administrative costs involved and its limited budget, which has been sorely pinched by Congress for several years. Compelling nonprofits to file their 990s electronically would help the IRS. The Treasury Department would have latitude to establish a two-year transition period to accommodate smaller nonprofits for whom immediate electronic filing would create an “undue burden.”
Without additional cosponsors, and with its being filed in an election year, the bill is unlikely to become law in its present form. However, it establishes legislative language and a starting point in dialogue that could result in its provisions being included in a larger budget or appropriations bill later this year.—Michael Wyland