Chairman Grassley Pushes Through Charitable Reforms... But No Incentives
Yesterday, the Senate Finance Committee approved tax legislation (S. 1321), which includes a number of charitable reforms that aim to improve the transparency and governance of tax-exempt groups. Finance Committee Chairman Chuck Grassley focused on one provision in particular, which would double the fines and penalties for nonprofit groups engaged in inappropriate political activity. He said, “We’re seeing more and more charities used in the best interests of lobbyists and special interests, not the public. Some people are exploiting vagueness in the laws or a lack of enforcement to enrich themselves rather than serve the public. It’s unseemly for tax-exempt groups to function this way. It’s also unfair to the taxpayers who subsidize that behavior. That’s why I continue to try to tighten the laws governing tax-exempt groups and encourage the IRS to step up enforcement of the existing laws and go after bad actors.”
According to The Chronicle of Philanthropy, additional charitable reforms approved by the Senate Finance Committee yesterday would:
Require nonprofit groups to file their Form 990 tax returns electronically.
Force nonprofit groups that receive less than $25,000 annually in income to provide the Internal Revenue Service with basic information about their organizations every three years. Such groups are exempt from filing informational tax returns with the IRS.
Increase penalties for taxpayers who deliberately overvalue items donated to charity so they can get bigger tax write-offs than they deserve. In addition, the legislation would tighten the definition of who is qualified to appraise the value of donated items to avoid conflicts of interest and other problems.
Levy higher penalties on top officials at private foundations or charities who engage in illegal financial transactions with the organization, and stiffen the penalties for nonprofit officials who approve such transactions.
Allow the IRS to share with state regulatory officials more information about actions taken against nonprofit organizations in an attempt to improve enforcement of charity laws.
Abolish privacy rules that make it illegal for the IRS to tell the public when it has denied or revoked an organization's tax-exempt status, and allow the agency to make public documents in the organization's IRS file supporting that action.
Chairman Grassley unexpectedly rolled these reforms into S. 1321 though a manager’s amendment. Chairman Grassley’s action - moving select charitable reforms in a piecemeal fashion – likely illustrates his frustration that comprehensive legislation to crack down on nonprofit abuses of tax law has stalled in the Senate and not moved in the House due to fierce opposition from many in the nonprofit sector. This piecemeal approach, however, threatens to leave behind many of the charitable giving incentives that have been paired with charitable reforms in the past.
It is likely the full Senate will take up and pass S. 1321, including the charitable reform provisions. Right now, however, it is unclear if this will happen before the August recess, before the elections or in a lame duck session, although some point before the elections is most likely since Republicans will want to campaign on the legislation, which also eliminates an excise tax on telephone service. Technically, there is a companion bill in the House (H.R. 1898), which would also repeal the telephone excise tax, but it does not contain any of Chairman Grassley’s charitable provisions, and House Ways & Means Chairman Bill Thomas has not indicated if he will act on the legislation. However, now that these provisions have cleared the Senate Finance Committee, we can certainly expect Chairman Grassley to find some legislative vehicle to try to move them through Congress and to the President.
According to The Chronicle of Philanthropy, additional charitable reforms approved by the Senate Finance Committee yesterday would:
Require nonprofit groups to file their Form 990 tax returns electronically.
Force nonprofit groups that receive less than $25,000 annually in income to provide the Internal Revenue Service with basic information about their organizations every three years. Such groups are exempt from filing informational tax returns with the IRS.
Increase penalties for taxpayers who deliberately overvalue items donated to charity so they can get bigger tax write-offs than they deserve. In addition, the legislation would tighten the definition of who is qualified to appraise the value of donated items to avoid conflicts of interest and other problems.
Levy higher penalties on top officials at private foundations or charities who engage in illegal financial transactions with the organization, and stiffen the penalties for nonprofit officials who approve such transactions.
Allow the IRS to share with state regulatory officials more information about actions taken against nonprofit organizations in an attempt to improve enforcement of charity laws.
Abolish privacy rules that make it illegal for the IRS to tell the public when it has denied or revoked an organization's tax-exempt status, and allow the agency to make public documents in the organization's IRS file supporting that action.
Chairman Grassley unexpectedly rolled these reforms into S. 1321 though a manager’s amendment. Chairman Grassley’s action - moving select charitable reforms in a piecemeal fashion – likely illustrates his frustration that comprehensive legislation to crack down on nonprofit abuses of tax law has stalled in the Senate and not moved in the House due to fierce opposition from many in the nonprofit sector. This piecemeal approach, however, threatens to leave behind many of the charitable giving incentives that have been paired with charitable reforms in the past.
It is likely the full Senate will take up and pass S. 1321, including the charitable reform provisions. Right now, however, it is unclear if this will happen before the August recess, before the elections or in a lame duck session, although some point before the elections is most likely since Republicans will want to campaign on the legislation, which also eliminates an excise tax on telephone service. Technically, there is a companion bill in the House (H.R. 1898), which would also repeal the telephone excise tax, but it does not contain any of Chairman Grassley’s charitable provisions, and House Ways & Means Chairman Bill Thomas has not indicated if he will act on the legislation. However, now that these provisions have cleared the Senate Finance Committee, we can certainly expect Chairman Grassley to find some legislative vehicle to try to move them through Congress and to the President.
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