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AFP Submits Comments to Senate on Tax Reform, Charitable Incentives

AFP has submitted comments to the Individual Income Tax and Business Income Tax Working Groups of the Senate Finance Committee, calling on the Senate to keep the charitable deduction in its current form and look for other incentives to encourage charitable giving, including the IRA Rollover Provision.

Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) created five separate bipartisan Finance Committee Tax Working Groups in January to spur congressional comprehensive tax reform efforts in the 114th Congress.  The groups will analyze current tax law and examine policy trade-offs and available reform options within the group’s designated topic areas.

Policy focus areas for the working groups include: 1) Individual Income Tax; 2) Business Income Tax; 3) Savings and Investment; 4) International Tax; and 5) Community Development and Infrastructure.

Sustaining the Investment in the Charitable Sector

AFP’s comments focused on keeping the current charitable deduction intact, noting numerous research and studies which showed how giving would drop under several different proposals recently floated by the White House and Congress.

AFP also noted how different the charitable deduction is compared to other incentives:

The charitable deduction is unique in that it is an incentive for people to give their money away. The mortgage deduction is for buying a house. Scholarship, education and health deductions relate to money spent on you and your family. But the charitable deduction involves a selfless, generous motivation—giving to a cause that might never directly benefit you.

Making the IRA Rollover Permanent

AFP then called on the Senate to look at expanding charitable giving incentives, starting with the IRA Rollover provision. While the IRA Rollover has been signed into law on numerous occasions, it has always been a temporary provision, and the sector has yet to feel its full impact on giving.

In its comments, AFP quoted Robert Carroll, former deputy assistant secretary for tax analysis at the U.S.  Department of Treasury, about the difficulties that arise in allowing provisions to be extended for a short amount of time, then having to reapprove them:

There are also a large number of provisions – expiring provisions – often extended a year at a time. In principle, the periodic extension of expiring provisions provides Congress an opportunity to reconsider and reevaluate their effectiveness, but the lack of their permanence may undermine the ability of taxpayers to rely upon and base decisions on the benefits they provide.

AFP urged Congress to make the IRA Rollover permanent and look for other provisions that would encourage charitable engagement.

Next Steps

It is unclear currently how the recommendations and input will be used, and what will ultimately will come of the tax reform discussion in the U.S. Senate. With a presidential election year upcoming, the pressure will be on Congress to get any significant work conducted this year, and it may be difficult to find any common ground and compromise on potentially controversial issues (such as tax reform).

The Finance Committee may decide to examine certain aspects of tax reform and move through smaller proposals. Paul Ryan (D-Wisc.), the chair of the House Ways and Means Committee, has also expressed his interest in tax reform, so the House and Senate may be able to put together a deal. However, whether President Obama would ever sign such legislation is unclear.

AFP will continue to monitor the situation and apprise members of any updates and if their engagement is needed.

To see a copy of AFP’s comments, click here.

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