February 23, 2010
The fate of a number of charitable giving tax incentives that have expired remains unclear, though there is talk of renewing them and even expanding the scope of the IRA charitable distribution provision, according to congressional staff members who work on tax policy.
Gordon Clay, an attorney on the staff of the Joint Committee on Taxation, and Theresa Pattara, tax counsel for Senate Finance Committee Republicans, spoke in Washington February 19 at the 46th Washington Nonprofit Legal and Tax Conference. In addition to the charitable giving incentives, the staffers, both of whom said they were speaking on their own behalf, discussed nonprofit hospital reforms, university endowments, and a probe of mega-ministries.
Clay said the charitable giving tax breaks and other extenders expired at the end of 2009. Though it is not clear what is going to happen to them, many people think Congress will consider them again this year. He suggested they could be renewed retroactively, as they have been before.
One of the expired provisions provides an exclusion from gross income for some distributions that taxpayers make from their IRAs to public charities. Clay said there are proposals that would not only extend the provision but would expand it to include donor-advised funds, supporting organizations, and private foundations as eligible recipients of distributions. There also are proposals to lift the $100,000 cap on distributions, he said.
Pattara agreed there is interest in expanding the types of entities eligible to receive charitable IRA distributions and increasing the distribution amount. But she added it is difficult to predict whether that will happen.
"Right now it seems difficult enough just to get anything done that is just pure extension," Pattara said.
Other expired provisions address contributions of inventory. The permanent provision under current law that provides an enhanced deduction for inventory contributions is fairly narrow; contributions have to be made by C corporations and can go only to 501(c)(3) organizations, Clay explained.
But there are three expired provisions that broaden eligibility for the enhanced deduction. A food inventory provision allows businesses other than C corporations to qualify, and another provision allows the enhanced deduction to apply to donations of books to public schools, not just to 501(c)(3) entities, Clay said. Finally, there is a provision that allows contributions of computer equipment to schools and public libraries, he said.
Hospital Reforms
Pattara noted that healthcare legislation approved by the Senate December 24 included several nonprofit hospital reforms, including mandated community needs assessments, required financial assistance policies, and prohibitions against hospitals charging the indigent and uninsured more than the top rates they charge insured patients. She expressed hope that the provisions will remain in the bill.
"We believe it's a strong, bipartisan proposal and it's not something that's political," Pattara said.
Pattara also recalled that Finance Committee ranking minority member Chuck Grassley, R-Iowa, last fall introduced amendments designed to help the IRS obtain information on exempt organizations' governance practices and challenge high compensation amounts. One would instruct the IRS to require exempt organizations to provide information about their governance and management practices on their annual information returns. The other would eliminate the rebuttable presumption of reasonableness, the three-pronged process that exempt organizations can follow when setting executive compensation and that critics say makes it difficult for the IRS to challenge high salaries.
Pattara said that although Grassley ultimately did not seek a vote on the amendments, he remains interested in making sure the IRS has enough leeway. (For previous coverage, see Doc 2009-20972 or 2009 EOTT 180-3 .)
Use of Endowments Questioned
Grassley also remains interested in how large universities are using their endowments to help students afford tuition, according to Pattara. She said that as tuition rates continue to skyrocket, endowments are paying out less, and that some schools that said they would help more families with scholarships are backing off that commitment.
"They're pulling back at a time of greatest need," Pattara said.
Ministries
Pattara also said a Finance Committee report on the expenses and business practices of large, media-based ministries is "sitting in the wings." She added that though Grassley originally sent letters to six ministries in 2007, since then the inquiry has become more expansive.
Source: EO Tax Today, February 19, 2010
Source: EO Tax Today, February 19, 2010
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