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home > legislative update > 09.20.07
 House of Representatives:
The Oversight Subcommittee of the House Ways and Means Committee has scheduled a hearing to “review whether charitable organizations are serving the needs of diverse communities.” The hearing is scheduled for 2 pm on Tuesday, September 25th and will take place in 1100 Longworth House Office Building. Hearings are generally available for real-time viewing via the Ways and Means Committee website at waysandmeans.house.gov.
We understand that representatives from the Ford Foundation, the American Red Cross, the Community Foundation for Greater Atlanta, and the Greater Twin Cities United Way are scheduled to testify at this hearing. To submit your comments for the record, please click here.
For more information, including background on the hearing, please click here.
Also noteworthy in the House, Representative Jim Ramstad (R-MN) announced this week that he will not seek re-election for a 10th term in Congress. As you may know, Congressman Ramstad serves on the House Ways and Means Committee where he is also the Ranking Member of the Oversight Subcommittee (with jurisdiction over the tax-exempt community). Ramstad’s retirement will leave a seat to be filled by House Republican Leadership on one of the most prestigious and powerful committees in the House of Representatives.
 Congress in the Fall: We are anticipating a long and busy Fall. This could include Congress taking up some provisions important to the tax-exempt community. The following is a preliminary list of what we know now and will be updated as the waning days of the session unfold:
- UBIT Blocker Revenue Raiser – While the recent “credit crunch” has diverted some attention from the hedge fund community, they are not completely off the radar screen, particularly as Members hunt for revenue to pay for other priority tax cuts. In fact, there is growing sentiment in Congress that managers of these types of investments are making enormous profits without being sufficiently scrutinized. As a result, legislation that would subject certain offshore investments to the unrelated business income tax (UBIT) is very much in play. The most likely destination for such a provision is the higher education tax bill which is currently stalled in the Senate Finance Committee. We expect that consideration of this legislation will be pushed back into late October.
In the meantime, we understand the Senate Finance Committee will hold a hearing next week on international taxation. It is expected that UBIT issues will be discussed at this hearing. For additional information on the UBIT blocker legislation, please click here.
- IRA Charitable Rollover – Current law mandates that taxpayers 70 ½ years old and over make annual distributions from their Individual Retirement Accounts (IRAs). These distributions are counted in an individual’s adjusted gross income, and subsequently, taxed. As a result of the Pension Protection Act of 2006, individuals 70 ½ and over are able to make contributions of up to $100K from their IRAs to a public charity without having to count the distributions as taxable income. This provision – dubbed the IRA Charitable Rollover – is set to expire at the end of the year. Many in the community would like to see this provision extended AND expanded. For example, there is a powerful movement in the community to extend this provision for at least another year AND expand it to allow individuals to also make contributions from their IRA to donor-advised funds and supporting organizations. However, top tax-writing committee staffers are skeptical the provision can be expanded this year due to revenue constraints.
- Senate Finance Committee’s Markup of Good Governance Provisions: Last summer, the Senate Finance Committee marked up the “Taxpayer Protection and Assistance Act” which contained numerous provisions that would change the rules for tax-exempts. Some of those provisions were included in the Pension Protection Act. We understand that some of the remaining provisions (highlighted below) may be included in an upcoming markup in the Senate Finance Committee as early as next week, including:
- Increased disclosure to the public of IRS written determinations about 501(c)s
- Increased reporting and disclosure to the public of capital gains/loss transactions by private foundations
- An expedited review process of tax-exempt applications from organizations providing social services
- Increase the amount of penalty taxes for certain lobbying and campaign activities by 501(c)(3)s
 Congress’s End Game: Quite often Congress is unable to consider and individually pass each “must pass” piece of legislation, such as appropriations bills and expiring tax provisions. Congress is left at the end of a year with several options including combining several pieces of legislation into one large bill referred to as an Omnibus Bill. Omnibus bills often include items such as appropriations bills, controversial tax bills and other hard-to-get-consensus items. We expect an Omnibus bill this year, and we expect it to be a vehicle for tax items -- possibly affecting the tax-exempt community as well.
 Update from the IRS:
Form 990: As you may know, the IRS recently proposed a new draft Form 990. Along with unveiling the new draft document, the IRS sought comments from the community on how the form would help organizations be more transparent while providing a more “user-friendly” experience for tax professionals.
Now, after the comment period has ended, the IRS has posted a comprehensive list of all comments they received on their new form. To view organizations’ comments to the IRS on the draft Form 990, please click here.
Congressionally-Mandated Study – As you may know, the IRS is working on a study of donor-advised funds and supporting organizations, mandated in the recently enacted Pension Protection Act. We expect this study to be completed by November at the earliest. |
