Day Two of the Independent Sector Public Policy Action Institute kicked off with a session on tax reform moderated by Kyle Caldwell, Charles Stewart Mott Foundation, and divided into five hot topics.
Charitable Deduction. Richard Schmalbeck, Duke University School of Law, discussed the availability of a charitable contribution deduction only to itemized filers and the 28 percent cap for high-income taxpayers proposed by President Obama, which he supported as a possible solution. Sue Nelson, America Heart Association, began by stating that she did not expect major tax reform in the next five years and noted that the sector has diverse levels of interest on the issue of the charitable deduction.
Non-cash Contributions. Victoria Bjorklund, Simpson Thacher & Bartlett LLP, discussed policy issues surrounding the general 30 percent deduction rule but startled the audience by noting that the IRS has a 100 percent win rate on the denial of deduction cases involving noncash contributions and defective substantiating paperwork (Forms 8283 and 8282). Seth Turner, Goodwill Industries International, Inc., discussed the potential adverse impact on Goodwill of policies that would diminish the incentive of noncash contributions.
UBIT/Commercial Activity. Jill Manny, National Center on Philanthropy & the Law, NYU School of Law, discussed basics of UBIT and the commerciality doctrine and noted the unlikelihood of reform hitting these areas. Exactly how much unrelated business activities are permissible to a charity remains vague, but a bright line test doesn't seem practicable. Angela Williams, YMCA of the USA, emphasized the need for nonprofits to be part of the conversations on tax reform because they are the starting point of conversations for years to come. She mentioned the Business Coalition for Fair Competition's advocacy against earned income activities of nonprofits, reminding the audience of the need for a counterpoint.
Community and Private Foundation Issues. David Shevlin, Simpson Thacher & Bartlett LLP, discussed the equivalency determination repository; differing conflicts of interest rules for public charities, private foundations, and donor-advised funds (can they be harmonized?); the wide spectrum of investments that don't all fit into legally defined categories; and donor-advised funds (will the still-forthcoming IRS regulations treat them like private foundations?). Sue Santa, Council on Foundations, echoed the need for strong advocacy by the sector, the importance of drawing a line in the sand to protect against a chipping away of the charitable deduction, and the work of Charitable Giving Coalition. She also noted the proposed tiering of the charitable sector, dividing charities into different classes subject to different tax treatments.
Nonprofit Advocacy and Political Activity. Nina Ozlu Tunceli, Americans for the Arts Action Fund, discussed proposals limiting 501(c)(4) political activity following the recent IRS controversy that range from 0 to 49 percent. Greg Colvin, Adler & Colvin, started by calling on foundations to remove the prohibition against lobbying from their grant agreements. He then noted the problems with the lack of guidance on political intervention (what it is and how much is permitted) and the solution proposed by the Bright Lines Project.