Michele,
Just hours ago, the House Committee on Ways & Means released an updated legislative text for their markup tomorrow. Our team continues to read through the bill language to understand the impact to the philanthropic and broader charitable sector. We wanted to provide a high-level overview of several of the provisions that will directly impact both your organizations and your grantees:
- Reinstatement of partial deduction for charitable contributions of individuals who do not elect to itemize
- Creates a temporary $150 (individual) / $300 (couples) charitable deduction for taxpayers who do not itemize.
- Increase in the rate of tax on net investment income of certain private foundations
- Creates a tiered increase in the private foundation net investment income excise tax.
- Private Foundations with assets:
- Less than $50 million remain at 1.39 percent
- Between $50 million and $250 million: 2.78 percent
- Between $250 million and $5 billion: 5 percent
- More than $5 billion: 10 percent
- 1-percent floor on deduction of charitable contributions made by corporations
- Establishes a certain minimum level, equal to 1-percent of taxable income, before a corporation could receive a tax deduction for their charitable contributions
- Expanding application of tax on excess compensation within tax-exempt organizations
- Expands the 21 percent excess compensation tax to additional highly compensated employees at nonprofit organizations.
- Termination of tax-exempt status of terrorist supporting organization
- Similar to a bill passed by the House last Congress, this policy provision gives the Secretary of the Treasury the ability to designate an organization as a ‘terrorist supporting organization’. While the language is similar to last year’s bill, there are some slight changes that we will share in the larger summary.
- Qualified elementary and secondary education scholarships
- Creates a tax credit of up to $5,000 for contributions to public charities that primarily offer scholarships to certain elementary or secondary students
We know there are additional provisions that could impact the sector. We continue to analyze this language, and we will post a complete analysis on our website. If you have questions, please reach out to our Government Affairs team at govt@cof.org.
What This Means
While the excise tax provision targets private foundations, it will decrease the charitable resources available to nonprofits across the country and will impact every part of the philanthropic sector. Amid drastic cuts in federal funding, the last thing Congress should do is take more dollars away from nonprofits and communities.
Council President and CEO Kathleen Enright just issued a statement in opposition to the tax increase.
What You Can Do
We need your voice now to keep charitable dollars where they can do the most good. Tell your members of Congress to oppose the excise tax increase today using our action alert and phone script. Lobbying against an increase to the private foundation excise tax falls within the self-defense exception for private foundations, though be sure to follow your organization’s policies when it comes to lobbying.
Join us this Thursday, May 15, at noon Eastern to hear key aspects of the proposed bill, a review of what happens next, and how you can use your voice to speak up for the charitable sector.
And please let us know how an increase in the excise tax will hurt your grantmaking. Your stories will help us demonstrate to Congress the damaging real world impact of this provision.
