Until recently, few Americans knew the names of these three Treasury officials, long-time public servants whose talent and many years of hard work elevated them to prestigious government positions. But many now recognize, if not their names, the issues with which they have been intimately associated. Each has moved into the spotlight recently after putting out a statement, report, or blog dealing with a very controversial aspect of tax administration: employer mandates under the new health care reform law, or Obamacare, in the first case; and tax exemption for social welfare organizations with such labels as “tea party” or “progressive” in the last two. Continue reading
Charitable organizations form a vital part of America’s safety net. Ideally, foundations would be able to make greater payouts in hard economic times when needs are greatest. Unfortunately, the design of today’s excise tax on foundations undermines and in fact discourages such efficiency.
In the recent recession, the impact of the excise tax was especially pernicious, as it penalized those that maintained their level of grantmaking. Continue reading
To help clarify whether IRS incorrectly, unfairly, or illegally targeted the Tea Party and other conservative groups, here are the answers to a few basic questions. Continue reading
Extending the charitable deduction deadline is a move with precedent: the government has used it to encourage giving following a natural disaster. President Barak Obama signed a provision allowing charitable donations toward the Haiti earthquake made from January 11 to March 1, 2010, to be deducted on 2009 tax returns. President George W. Bush signed a similar law allowing donations for tsunami relief made through January 31, 2005, to be deducted in 2004.
These provisions aim to increase giving at a time when need is critical. In reality, such temporary laws have limited effect because many do not know about these one-off incentives.
Consider instead the marketing possibilities of more permanent incentives to allow charitable deductions made by April 15, aka tax day, to be applied to the previous year’s tax returns. Continue reading
U-stream has now posted at 2-part video of my testimony yesterday before the Ways and Means Committee on “Tax Reform and Charities.” In addition to my own testimony, the first panel heard presentations from Kevin Murphy, President of the Council on Foundations; David Wills, President of the National Christian Foundation; Brian Gallagher, President & CEO of United Way Worldwide; Roger Colinvaux, Professor of Catholic University DC Law School; Eugene Tempel, Dean of the Indiana University School of Philanthropy; and Jan Masaoka, CEO of California Association of Nonprofits. Continue reading
The debate over the charitable deduction mistakenly pits those who acknowledge that the government needs to get its budget in order against those who recognize the extraordinary value of the charitable sector. The tax subsidy for charitable contributions should be treated like any other government program, examined regularly, and reformed to make it more effective. In fact, the charitable deduction can be designed to strengthen the charitable sector and increase charitable giving while costing the government the same or even less than it does now. Continue reading
If reforms to the charitable deduction decrease giving among high-income donors, certain types of charities will be affected more than others. As the graph below from a 2012 Bank of America Study indicates, high-income donors give mostly to education, followed by organizations such as trusts and foundations that primarily support other nonprofits (referred to as giving vehicles). Thus, changes to tax law affecting only high-income taxpayers would disproportionately affect donations to educational institutions. Continue reading
Q: Why are itemized deductions getting so much more attention in budget negotiations than other tax breaks?
A: Itemized deductions show up on tax returns, so they are among the most visible of all tax subsidies or adjustments. Other tax breaks tend to be harder for politicians and the public to understand. Continue reading