May 6, 2013; Joint Committee on Taxation
On February 13, 2013, just before an all-day hearing convened by the House Ways and Means Committee to rile up the entire nonprofit sector that the charitable deduction was in jeopardy, Committee chairman Dave Camp (R-MI) announced the creation of 11 working groups of committee members to examine issues connected to federal tax reform. The 568-page report issued by the task force, written by the staff of the Joint Committee on Taxation, includes a section on tax reform issues related to charities—the charitable deduction and more. We thought there might be specific recommendations coming from the task forces, conclusions about keeping the deduction as it is or capping it at President Obama’s 28 percent level or any of a number of alternatives. At least in this telephone book-sized document, it doesn’t appear that the task forces reached a specific conclusion about charities—or any conclusions at all.
Maybe readers can tell us about the value of this document. Pages 19 to 57 contain a thorough discussion of the present law around tax exempt organizations and charitable deductions. Pages 445 through 489 discuss the various well-known tax reform plans produced by the National Commission on Fiscal Responsibility and Reform (Bowles-Simpson), the Bipartisan Policy Center (Domenici-Rivlin), the Economic Policy Institute, the Center for American Progress, the Heritage Foundation, a plan from people associated with the American Enterprise Institute that was submitted to the Peter G. Peterson Foundation, and a few others. Both are useful summaries of key information needed in order to the concerns of nonprofits in the context of tax reform.
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Does the report actually make a recommendation for charities? Pages 491 through 497 summarize the range of suggestions sent to the working group on charities, co-chaired by representatives David Reichert (R-WA) and John Lewis (D-GA). The suggestions address the potential retention and modification of the charitable deduction, charitable deductions of property and inventory, public charity and private foundation operating rules, unrelated business income tax (UBIT), reporting and disclosure, charitable distributions from IRAs, and specific concerns related to Indian tribal governments. The suggestions are listed without commentary or analysis. Ways and Means has made all of the comments submitted to the working groups accessible online. Neat!
But the working group doesn’t evaluate the suggestions or make specific recommendations—nor did we anticipate that the two parties would come to agreement around the specifics of tax reform. Basically because of the furor ginned up by Ways and Means, the recommendations seem to preponderantly oppose changes in the charitable deduction, whether caps or floors, advocate for the elimination of the all-but-inconsequential Pease Amendment, and call on the committee to resist efforts intimated by some committee members (Charlie Rangel and Xavier Becerra) to incentivize giving for human needs, and thereby comparatively reduce the incentives for charitable gifts to cultural institutions (presumably museums and the arts). The summary doesn’t address Rep. Charles Boustany’s (R-LA) disturbing suggestion to provide a higher incentive for giving to charities that serve domestic needs—and to disincentivize giving to charities that serve non-U.S. populations. Much like the tenor of comments at the February 14th hearing, the suggestions summarized by the task force emphasize retaining, and even expanding, tax incentives for charitable giving, including incentives for enhanced donations of business inventories and food.
Lots of information for reference, but a dearth of analysis—and a completely passive investigation of the issues, dependent on suggestions from the powerful interests groups (hospitals, museums, universities, foundations, United Ways) that dominate national policy debates. The voices of constituencies less well represented in Beltway policy circles aren’t well reflected. Doesn’t this feel like an exercise of going through the motions?—Rick Cohen