Jun 1, 2010
Excise Tax
Background
Senator Charles Schumer (D-NY) introduced legislation in March 2009 to simplify the current two-tiered private foundation excise tax system to a single rate (S. 676). A similar bill, H.R. 4090, was introduced by Congressman Danny Davis (IL-7-D) in November. The bills propose a “revenue-neutral” rate, i.e., a rate that would provide the same federal revenue as the two-tier system. The revenue neutral number is determined by the Joint Tax Committee (JTC), which recently announced that a rate of 1.39% would achieve that goal.
Updates
As of June 30, 2011 - Senator Charles Schumer (D-NY) introduced legislation that would reduce and streamline the private foundation excise tax on investment income to a flat 1.39%. Last week, it was reported that Representative Erik Paulsen (R-MN) introduced companion legislation in the House. While neither bill is expected to be brought up while the debt limit and deficit reduction are dominating discussions on Capitol Hill, Rep. Paulsen’s bill indicates an understanding of the importance of the philanthropic sector and how the government can better stimulate grantmaking.
As of March 25, 2011 - Last week, Senator Charles Schumer (D-NY) re-introduced two bills from the 111th Congress. The first, a bill that had previously been introduced by former Senator Dorgan (D-ND) is the Public Good IRA Rollover Act (S. 557). The bill permanently extends the popular IRA Charitable Rollover provision,
and has nine cosponsors from both sides of the aisle. The second bill, S. 593, streamlines and reduces the private foundation excise tax to a revenue-neutral rate of 1.39%, and has eleven bipartisan cosponsors. We do not expect either of these bills to move as stand-alone legislation, or as part of a larger bill, anytime soon.
As of June 18, 2010 - Last week, Senator Chuck Schumer (D-NY) tried unsuccessfully to add his legislation to flatten the PF excise tax rate to 1.39% to the Tax Extenders bill being debated by the full Senate. What was the stumbling block? As the Chronicle of Philanthropy reports, Senator Charles Grassley (R-IA) submitted a letter calling on the Council on Foundations (COF) to provide additional data about the need for the legislation and its impact on foundation grantmaking. Specifically, Senator Grassley questioned whether this legislation would actually result in charities getting more funding, saying “[f]lattening the rate without mandating that the tax savings be paid out seems like it’s rewarding those who just do the minimum while hurting those who go above and beyond what’s required.”
COF responded quickly, but the inquiry by Senator Grassley likely precludes Senator Schumer’s legislation from being ultimately added to the tax extenders bill. We expect Senator Schumer to continue to try and add this legislation to future tax bills.