IRA Rollover, Excise Tax Included in CHARITY Act

April 6, 2016       Mark Hrywna      

Legislation introduced in the Senate today would expand the IRA charitable rollover to include distributions to donor-advised funds (DAF) and create a 1-percent private foundation excise tax. The measure also contains a non-binding sense of the Senate that states charitable giving should be a goal of comprehensive tax reform.

The Charities Helping Americans Regularly Throughout The Year Act (S. 2750) or CHARITY Act, was introduced by Sen. John Thune (R-S.D.) and Senate Finance Committee Ranking Member Ron Wyden (D-Ore.). The Alliance for Charitable Reform (ACR) will be seeking co-sponsors for the bill next week as part of Foundations on the Hill, kicking off on Tuesday.

“Last year, the charitable sector helped to pass a permanent extension of the IRA charitable rollover. The bill introduced today builds on that victory,” ACR Executive Director Sandra Swirski said in a statement.

The IRA charitable rollover currently excludes gifts to donor-advised funds (DAF). Streamlining the private foundation excise tax from its current two-tiered form into a flat rate of 1 percent has been an ACR priority for several years.

Republicans and Democrats in the House of Representatives passed a flat 1-percent private foundation excise tax in the America Gives More Act in both 2014 and 2015, according to Joanne Florino, senior vice president of public policy at The Philanthropy Roundtable. “This is a policy that has strong bipartisan support and allows private foundations to focus their resources on grantmaking,” she said.

No one expects comprehensive tax reform to make it to the president’s desk by Jan. 20, 2017 but introduction of a bipartisan bill is smart policy and politics, according to David Thompson, vice president of public policy for the National Council of Nonprofits. “It lays down the marker that these issues are nonpartisan and solid policy, and dares anyone who disagrees to come forward. And it gives nonprofits and foundations the opportunity to point to positive policy solutions rather than anticipate and/or challenge bad ideas,” he said.

Some or all of the components could be included in tax legislation later in the year so it is good to get the legislative language out there to let the vetting process begin,” Thompson said.

Given the presidential election year, it’s hard to say what will pass and what won’t but this is the kind of bill that could garner bipartisan support and potentially get enacted, said Steve Taylor, vice president of public policy for United Way Worldwide. “Even if it’s not enacted, introduction of the bipartisan bill by two top tax policy leaders makes a powerful statement about charitable giving as a priority,” he said. “And it’s a great marker for larger budget or tax reform bills.”