NPOs Win Some, Lose Some In New Spending Bill
NPOs Win Some, Lose Some In New Spending Bill

The Legacy IRA Act is in, but the universal charitable deduction for non-itemizers and an expansion of the child tax credit are out of the omnibus spending package speeding its way through Congress to avert a federal government shutdown. The government has been operating on continuing resolutions.

And as previously reported in The NonProfit Times, earmarks are a major element of the $1.7 trillion spending package. The bill next goes to the House of Representatives for reconciliation and then to President Joseph Biden for his signature.

Sen. Patrick Leahy (D-Vermont), chair of the Senate Committee on Appropriations, released a summary of the package which includes $772.5 billion for non-defense discretionary programs and $858 billion in defense spending.

The original standalone Legacy IRA Act in the Senate (S. 243) introduced by Sens. Kevin Cramer (R-North Dakota) and Debbie Stabenow (D-Michigan), would have expanded eligibility for the IRA charitable rollover by lowering the age threshold from 70 1/2 to 65, raised the annual IRA charitable rollover from $100,000 to $130,000, and indexed that figure for inflation, and would have allowed seniors to make a tax-free IRA charitable distribution through life income plans, such as a charitable gift annuity or charitable remainder trust, up to $400,000 annually. 

In the House, a modified version (H.R 2909) was introduced by Reps. Don Beyer (D-Virginia) and Mike Kelly (R-Pennsylvania), which allowed for a one-time, tax-free distribution from IRAs to split interest entities of $50,000 and indexed the IRA charitable rollover for inflation beginning after 2022. 

According to Ali Bedford, vice president at Integer LLC, an advocacy firm that works on nonprofit tax policy, what was ultimately included in this spending bill aligns closer with the House modified version in that it would index the IRA charitable rollover for inflation and allow for a one-time distribution of up to $50,000 from IRAs to charitable gift annuities and charitable remainder trusts. 

“With passage of the bipartisan Legacy IRA Act, Congress would incentivize charitable giving to countless nonprofits nationwide that continue to face significant financial and operational obstacles in the wake of the pandemic,” Raymond P. Vara, Jr., chairman of the board of the American Heart Association (AHA) said via a statement. “The Legacy IRA Act builds upon the IRA Charitable Rollover, which was enacted in 2006 and has generated millions of dollars in new or increased contributions to local and national charities.”

The AHA was one of roughly 60 of the nation’s largest charities and faith-based organizations pushing for the Legacy IRA Act. 

When it comes to earmarks — officially known as Congressionally Directed Spending — there are plenty. At this writing there are 8,800 line items that could be considered earmarks. According to analysis by the Bipartisan Policy Center, for example, members of the House of Representatives are limited to 15 individual requests, an increase of five for Fiscal Year 2022. So called “Community Project Funding” (earmarks) is capped at 1% of discretionary spending estimated at approximately $16 billion.

So far, there hasn’t been rewarding of punishing senators and members of Congress based on partisanship, according to various analysts projecting the split is about 60% for majority and 40% for minority.

There has been a push for several years by leaders of the nonprofit sector for a universal charitable deduction for non-itemizers. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted in December 2020 extended through the end of 2021 four temporary tax changes originally enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

One of those extensions was for the universal charitable deduction for non-itemizers, which expired in December 2021. Lobbying to have it in last year’s spending plan failed and did so again. It allowed a tax filer to claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction increased to $600 for married individuals filing joint returns.

“The Charitable Giving Coalition (CGC) is disappointed that a restoration of the charitable deduction for non-itemizers was not included in the year-end bill that Congress introduced on Tuesday,” according to a statement from the group. “The CGC has worked for years to protect the scope and value of the charitable deduction and to expand the access of the deduction to all taxpayers, regardless of their income and tax filing status”

Members of the coalition participated in the CGC’s Grow Giving Now D.C. fly-in to the Capitol last month, during which they met with more than 60 offices in the House and Senate to advocate for the restoration and expansion of the non-itemizer deduction in year-end legislation. The CGC also sent a letter to leadership calling for the restoration and expansion of the deduction. The letter was signed by more than 650 organizations from every state in the country.

“The Omnibus Spending bill is not a complete bust, because many nonprofit subsectors and organizations will benefit from spending provisions,” said Tim Delaney, president and CEO of the National Council of Nonprofits. “Plus, having an Omnibus bill that runs for a full fiscal year is far better for everyone, including nonprofits, than the alternative of having just another continuing resolution that expires early in 2023.”

It would be “an immense understatement to say the nonprofit community is ‘disappointed’ that Congress failed to include the bipartisan bill to restore the universal charitable deduction, or the bipartisan bill to increase volunteer mileage rate for the first time in 25 years, or other bipartisan relief called for all year long by nonprofits across the country,” said Delaney.

According to David L. Thompson, vice president of public policy at the National Council of Nonprofits, “It’s hard to say that a 4,155-page bill only includes the bare minimum, but that’s essentially what the Omnibus bill is – a minimalist approach, the lowest common denominator to get something, anything, passed.”

Congress left out a lot of industries seeking tax relief, Thompson said. “For example, businesses did not get their desired write-off provisions. Nonprofits on the frontlines of disaster response and recovery still need further relief now, not at the end of next year. The charitable sector’s priorities tend to be popular and bipartisan. But, sometimes, that is not enough.”