The Johnson Amendment, encouraging charitable giving, federal tax regulations and post-graduate scholarships top the list of policy priorities for the Council on Foundations (CoF) for 2020-2021. The CoF also does not support a change in the mandatory payouts by foundations.
The Washington, D.C.-based CoF’s public policy council recently released the priorities list and the rationale for the targeting.
The policy position is that the CoF supports the Johnson Amendment, which has been under attack the past few years. The Johnson Amendment helps ensure that all 501(c)(3) nonprofits are protected from having to engage in political activity.
Qualifying nonprofits cannot engage in political campaign activities, including endorsing or opposing political candidates or other actions that are viewed as intervening in elections to public office. Organizations that violate the Johnson Amendment risk losing their tax-exempt status.
The CoF will also continue to support the charitable sector’s involvement in public policy in accordance with current rules and regulations, according to the policy statement’s authors.
When it comes to enhancing funding, the CoF will develop an inclusive policy that targets a Universal Charitable Deduction or Credit and expanding the IRA Charitable Rollover.
The Tax Cuts and Jobs Act (TCJA) (P.L. 115-97) in 2017 expanded the standard deduction (raising it from $6,500 to $12,000), reducing the number of taxpayers who itemize deductions, including their charitable contributions. For the 2019 tax year, the Tax Foundation estimates that just fewer than 14 percent of taxpayers will itemize their taxes.
Enacting the universal charitable deduction would extend a tax deduction for charitable giving regardless of whether taxpayers claim the standard or itemized deductions, according to the council’s statement. This would diversify the pool of charitable donors, given that higher-income taxpayers are much more likely to itemize their deductions than those with lower incomes, according to the policy statement.
The CoF also supports enacting a charitable tax credit, which a few states have enacted for donations to specific types of charities, and expanding the IRA Charitable Rollover. When it comes to IRAs, one option is to lower the age threshold to be able to take advantage of such rollovers and to encourage the increased use of donor-advised funds (DAFs) by allowing IRA distributions to be transferred to DAFs, according to the policy statement’s authors. Another option is to allow individuals to make donations tax-free through IRA rollovers beginning at age 65 to split-interest trusts (e.g., charitable gift annuities or charitable remainder trusts).
When it comes to higher payouts by foundations, the CoF public policy is that the current 5 percent payout matches with historic levels of growth of investment income at private foundations.
Increasing the payout requirement for private foundations and creating a new mandate for DAFs would unnecessarily limit philanthropy’s ability to respond to future crises, according to the policy statement’s authors. If similar proposals to impose a 10-percent payout had been adopted following the tragedy of Sept. 11, 2001, or the Great Recession of 2008, philanthropy would now have fewer resources and a significantly reduced ability to respond to Covid-19. “The payout rate should be based on facts and research,” according to the authors, and the contention is that the current 5-percent payout rate is an accurate reflection of the historic return on assets earned by foundations.
Finally, the CoF supports efforts to strengthen foundations’ ability to administer post-graduation scholarship grant programs to stimulate regional economic growth and help address the growing student debt crisis.
The policy statement is available here … https://www.cof.org/public-policy/2020-2021-policy-priorities