Resources to learn more about the GOP tax reform plan

November 7, 2017

Resources to learn more about the GOP tax reform plan

from CNM President and CEO Tari Hughes:

 

CNM members,

You have likely heard about the GOP's tax reform plan, so we'd like to share a few resources with you as there are several items in the plan (as currently written) that will impact our sector. Just last week at CNM’s Meet the Funders session, we had discussion about potential impact on charitable giving as a result of the proposed changes. It’s on all of our minds. In fact, Indiana University estimates this change will reduce giving by up to $13.1 billion per year nationally.

 

Explore these recommended resources to learn more:

 

The Council on Foundations’ synopsis of the plan is also embedded below:

Earlier today, GOP leaders in the House—led by Speaker Paul Ryan (R-WI) and Ways and Means Chairman Kevin Brady (R-TX)—released the long-awaited text of their tax reform bill, the Tax Cuts and Jobs Act. In a press conference this morning, Chairman Brady stated that the bill is "focused entirely on growing our economy, bringing jobs back to our local communities, increasing paychecks for our workers, and making sure Americans are able to keep more of the money they earn."

The bill follows relatively closely to the signaling documents that have been released over the past year. Some of the key provisions included in this bill are:

  • Consolidates the number of individual tax brackets from seven to four, with rates of 12%, 25%, 35%, and 39.6%;
  • Increases the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples;
  • Doubles the threshold for income that is subject to the estate tax from $5 million to $10 million, and phases-out the estate tax, entirely, over a period of six years;
  • Repeals the state and local tax (SALT) deduction for income and sales taxes, but retains a deduction for state and local property taxes up to $10,000;
  • Expands the Child Tax Credit from $1,000 to $1,600.

The provisions that directly impact tax-exempt charities include:

  • Preserving the charitable deduction in its current form;
  • Simplifing the private foundation excise tax to a flat rate of 1.4 %;
  • Weakening the "Johnson Amendment"—which prohibits 501 (c)(3) organizations from participating in, or intervening in (including the publishing and distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office—specifically, for organizations that operate exclusively for religious purposes to allow political speech that is in the ordinary course of the organization's business and its expenses are de minimus.
  • Subjecting private colleges and universities that have at least 500 students and an endowment of at least $100,000 per student at the close of the preceding tax year to an excise tax of 1.4% on net investment income.
  • Eliminating the "Pease limitation," which places a limit on the total amount of allowable itemized deductions;
  • Increasing the adjusted gross income (AGI) limitation for cash contributions from 50% to 60%;
  • Eliminating the alternative gift substantiation exception, where the donee organization files separate documentation rather than provide a gift receipt to donors for contributions exceeding $250;
  • Treating "fringe benefits" for employees of tax-exempt organizations (i.e. on-premises gyms and other athletic facilities) as unrelated business taxable income (UBTI);
  • Requiring that an art museum claiming the status of a private operating foundation be open to the public for at least 1,000 hours every year to be recognized as such;
  • Exempting Private foundations from the excess business-holdings tax if they own a for-profit business under these conditions: (1) the foundation owns all of the for-profit business' voting stock, (2) the private foundation acquired all of its interests in the for-profit business other than by purchasing it, (3) the for-profit business distributes all of its net operating income for any given tax year to the private foundation within 120 days of the close of that tax year, and (4) the for-profit business' directors and executives are not substantial contributors to the private foundation nor make up a majority of the private foundation's board of directors. **Donor Advised Funds (DAFs) are explicitly excluded from this provision.
  • Requiring DAFs to disclose annually their policies on donor advised funds as well as the average amount of grants made.

 

We’ll be staying on top of the developments as they unfold and keep you apprised as we learn more. Now more than ever, it is important for nonprofits to articulate our stories and demonstrate our impact as we seek support for the important work we do.

Sincerely,

Tari 

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