Ways and Means Passes Charitable Tax Provisions

The House Ways and Means Committee met today to markup several important bills focused on the charitable sector. The actions included making permanent charitable “tax extenders,” such as the IRA charitable rollover and simplifying the private foundation excise tax on investment income to a single rate of 1%. All four bills were passed out of the Committee, and will move to a full House of Representatives vote. Council staff were present for a first-hand look at the action.

Here is a full list of the charitable bills passed by the Committee on Wednesday:

H.R. 637, “To amend the Internal Revenue Code of 1986 to make permanent the rule allowing certain tax-free distributions from individual retirement accounts for charitable purposes.”
H.R. 640, “To amend the Internal Revenue Code of 1986 to modify the tax rate for excise tax on investment income of private foundations.”
H.R. 644, “To amend the Internal Revenue Code of 1986 to permanently extend and expand the charitable deduction for contributions of food inventory.”
H.R. 641, “Conservation Easement Incentive Act of 2015.”
The Vote

The votes broke down along party lines, with Republicans passing them out of Committee. Many of the Democratic members who commented during the three-hour long markup spoke in strong support of the substance and purpose of these provisions, citing examples of how these charitable incentives have supported and improved conditions in their districts.

But, Democrats voted against the measures for two reasons. They objected that:

1.     None of these bills were “paid for” with spending offsets in other places, and

2.     They were being “cherry picked” and not considered within the broader context of comprehensive tax reform.

House Ways and Means Chairman Paul Ryan (R-WI-1) took the position that the provisions did not require offsets because they were essentially permanent law. The Chairman noted in his opening statement that “all of these ideas have broad, bipartisan support. Most of them have been part of the tax code for years. It’s about time we got around to making them permanent—instead of all these back-to-the-future extensions. Let’s make them permanent. Give people certainty. Move America forward.”

Congressman Aaron Schock (R-IL-18), who sponsored the bill to make permanent the IRA charitable rollover, commented during the markup: “charitable donations and the incentives we provide… [are] never about the person giving the contribution. We put these incentives in law for the people who benefit.”

Co-sponsor Danny Davis (D-IL-7), made clear that this bill would help to put more philanthropic dollars into communities, stating – “the rollover is another example of a smart federal investment.” He cited examples of his Chicago constituents who not only rollover their IRA distributions, but also contact his office about the future of the provision.

Congressman Erik Paulsen (R-MN-3), who sponsored the legislation to simplify the private foundation excise tax, said in his opening statement: “This will ensure that charitable giving decisions are actually based on the needs of our communities rather than the tax code.”

Representative Davis again voiced his support, saying, “when philanthropy thrives – communities thrive.”

What’s Next

These bills will now need to be voted on by the full House. It is unclear when that will be, but we will keep you updated.

Council President and CEO Vikki Spruill released the following statement after Wednesday’s markup:

The Council on Foundations applauds the Members of the House Ways and Means Committee for their commitment to supporting a strong philanthropic sector. We would like to thank them for reintroducing these measures so quickly in the new Congress, in order to provide much needed certainty to both donors and foundations. The four charitable bills passed by the Committee today will encourage charitable giving and strengthen philanthropy’s ability to serve communities across the country.

Simplifying the private foundation excise tax to a flat rate of one percent will allow private foundations to spend more resources on communities in need, rather than on tax compliance. The measure will lift an administrative burden and direct more focus to the work of the foundation rather than navigating a complicated tax provision that creates a perverse incentive to give less, not more, in times of need. We would like to thank Congressman Erik Paulsen and Congressman Danny Davis in particular for sponsoring this bill.

We are also especially pleased that the Committee voted to make the IRA charitable rollover permanent. This provision has long been a priority of the Council, and we thank Congressman Aaron Schock for his leadership on this bill. A permanent IRA charitable rollover will give individual donors certainty when planning their charitable gifts, which means more money will flow to charitable causes.

We thank the Members of the House Ways and Means Committee for moving these bills forward, and we look forward to working with the full House of Representatives to move these provisions toward becoming law as quickly as possible.

What You Can Do

You can send a simple email to your member of Congress asking them to speak out in support of this bill!