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CoF's 2010 Legislative Agenda

March 18, 2010

With the healthcare reform bill staggering toward passage and financial reform legislation chasing its tail in the Senate, members of the 111th Congress must be looking forward to their spring recess. When they return in April, they'll be asked to reach agreement on a jobs bill, some sort of cap-and-trade legislation, gays and lesbians serving in the military, and the administration's 2011 budget proposal, among other things.

And maybe, just maybe, they'll find time to address a few issues of importance to the nonprofit and philanthropic sectors. Earlier today, the Council on Foundation's Monica Wroblewski e-mailed me the council's 2010 legislative agenda. It includes the following proposals:

Priority Issues

Expansion and Extension of the IRA Charitable Rollover
The council supports the expansion of the IRA charitable rollover to include gifts to donor-advised funds, supporting organizations, and private foundations; gifts above $100,000; and planned gifts. We also support the reinstatement and extension of the IRA charitable rollover to make it appli­cable to the 2010 tax year and beyond.

Enact a Revenue-Neutral Excise Tax on Net Investment Income
The council supports a revenue-neutral simplification of the private foundation excise tax to a single flat rate that will encourage increased giving by private foundations. The tax was enacted in 1969, along with other taxes that penalize self-dealing, failure to make adequate minimum distribution, excess business holdings, jeopardizing investments, and taxable expenditures.

Today, almost every foundation is seeking to maintain its present grant commitments, despite the dramatic reductions of its endowment's value. It is critical we encourage foundations to continue this level of giving and not allow them to be penalized in the future with a higher excise tax. Accordingly, we will continue to work with Congress to enact a revenue-neutral legislative proposal to create a single flat rate excise tax on net investment income.

Maintain Current Law on Charitable Deduction Rates
Changes to the link between an individual's tax rate and the charitable deduction rate they can claim make the tax code more complex and threaten to reduce the charitable giving needed to support worthy nonprofits across the country. At a time when charities are faced with increasing demands from their communities, it is important that public policies support and encourage charitable giving. The council strongly supports maintaining the current law with respect to itemized charitable deductions.

Other Legislative Issues

Program-Related Investments (PRIs) Promotion Act
The council supports federal legislation that would create a timely and consistent process for foundations to request IRS approval prior to making program-related investments (PRIs) involving low-profit limited liability companies (L3Cs) and other business entities. We will identify champions in the House and Senate to introduce a legislative proposal which calls for the support of PRIs by foundations. With the assistance of colleague entities, we will follow the activities in the various state legislatures that are considering the passage of the PRI concept.

Enhanced Deduction for Food Donations to American Indian Tribes
Should Congress decide to extend the enhanced charitable deduction for contributions of food inventory, the council supports a technical correction to the provision to include American Indian tribes as qualified recipients of food donations.

Reinstatement of the Estate Tax
The estate tax is an important incentive to charitable giving during a donor’s lifetime, as donors use charitable gifts to reduce their estates and the taxes they would otherwise pay on those estates. The council supports the reinstatement of an estate or inheritance tax that continues to provide robust incentives for charitable giving. However, the council also supports reform of the tax to create an appropriate exemption level, such as the current $3.5 million per spouse, for smaller estates, farmers, and small business owners, while retaining a high enough marginal rate, such as the current 45 percent rate, as an incentive for the wealthiest taxpayers to give generously.

UBIT Exemption for Hedge Fund Investment Income
The council supports changing the tax code to create an exception to the debt-finance income rules that would allow all tax-exempt entities to invest in hedge funds and similar investment partnerships without being subject to unrelated business income tax (UBIT). The exception is mod­eled on the exception to these rules that currently exempts pension funds and universities from UBIT when they invest in debt-financed real estate. However, this exception would be available to all tax-exempt entities, including foundations.

What do you think? Are these the right proposals? What else should be on the list? Use the comments section below to share your thoughts, opinions, concerns....

-- Mitch Nauffts

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