Washington Snapshot - July 25, 2013

Up on Capitol Hill . . .

Tax Reform

Finance Chairman Max Baucus gives us a sense of his timeline

It’s looking like we'll have a busy autumn …. Politico Pro reports that the next big milestone in tax reform could be on the horizon. Senate Finance Committee Chairman Max Baucus (D-MT) announced on Tuesday that he expects to mark up comprehensive tax reform this fall, between September and November.

Also, as expected, changes to tax exempt organizations could be addressed in tax reform, in response to the ongoing scandals at the IRS. While the thrust of this statement was aimed at 501(c)(4)s, he did include 501(c)(3)s in his remarks, saying "the tax code needs to be reformed. It is way out of date. A small example is all the tax exempt provisions – 501(c)(4)s, (3)s, and so forth have not been addressed since -- 40 or 50 years -- that may be addressed as well."

As reported last week, the “burgers and beer” camaraderie seems to be holding as members met again on Tuesday at local DC landmark Kelly’s Irish Times. Enjoy a great group photo of the event from CQ/Roll Call.

That being said, comprehensive tax reform will continue to face challenges as it moves forward. The most recent: House Speaker John Boehner (R-OH-8) weighed in for the first time in a while about tax reform on Face the Nation on Sunday. He said that tax reform should be linked to spending cuts and entitlement reform – two fundamental and partisan issues in and of themselves.

Blank or not, the deadline for Senators to submit their thoughts is Friday

On Wednesday, Finance Committee Democratic and Republican staff sent an e-mail to all Senators which included some cost estimates (so they would have more information with which to send a response to the blank slate request) and offering further assurance that the requests would remain private. Politico described the procedures to guarantee Members’ confidentiality as “Washington’s version of Fort Knox.” As you will recall from our earlier reports, this issue of whether senators’ submissions would be public or confidential remained unresolved for a while after Baucus and Hatch invited participation on filling the “blank slate.” They hoped that clarifying their process for confidentiality would increase participation from their colleagues.

But, it’s still unclear whether the Baucus-Hatch blank slate approach will yield results. A Tax Analysts survey of 59 Senators showed only a small number of them plan to submit a formal request to Baucus. We’re still hearing that there will be a range of responses from no-response, to verbal suggestions, to high level principles, to meaningful recommendations, to laundry lists of all issues that constituencies might raise. So, the value of the process remains unclear. We fully expect that Chairman Baucus is nevertheless undaunted and remains committed to moving a tax reform proposal in the fall. We’ll report next week on any details that emerge as the “blank slate” phase wraps. With the confidentiality assured by the committee leadership, details that emerge will likely come from those Senators who weighed in on the process and opted to share with the public their remarks.

The Council is adding its voice

Although we don’t know how tax reform will ultimately play out, the Council stays engaged to help shape the dialogue, educate, inform, react and respond. Importantly, we aim to raise the visibility of philanthropy and share your stories. Last week in Snapshot, we highlighted the Charitable Giving Coalition letter that was sent to Congress supporting the charitable deduction; as you all know, the Council plays an active role in this important coalition. This week, the Council sent a separate letter to House Ways and Means Committee Chairman Dave Camp (R-MI-4), Ranking Member Sander Levin (D-MI-9), Senate Finance Committee Chairman Max Baucus, and Ranking Member Orrin Hatch (R-UT), that reiterates our positions not only in support of charitable giving incentives, but also some of the other issues we’re watching closely.

A new coalition supporting charitable giving has emerged

The Faith and Giving Coalition, a coalition that formed about two months ago at the suggestion of the Association of Gospel Rescue Missions and National Christian Foundation, visited the Senate this week to encourage members to include the charitable deduction as they draft recommendations for the blank slate. The Faith and Giving Coalition will bring their unique perspective to the defense of the charitable deduction, and we are all the stronger when many organizations are linking arms.

As we read the Chronicle of Philanthropy report, we were struck by the very true and frank comments by Jonathan Imbody, vice president of the Christian Medical Association, who said “his organization had not previously lobbied to protect the charitable deduction. But the approach taken by Mr. Baucus and Mr. Hatch spurred his group to join the coalition.

‘When you read the letter that says they’re starting with a blank slate, that’s enough to get you going. If you want something included you’d better speak up.’”

And, a there’s a sign that the Administration is engaging

Politico Pro reported that Secretary of the Treasury Jack Lew met with Ways and Means Chairman Dave Camp and Senate Finance Committee Chairman Max Baucus on Tuesday to discuss tax reform. Baucus said after the meeting that “we’re making progress and moving forward.” Up to this point there has been little public engagement from the Obama Administration on tax reform.

Will tax reform cross the finish line? It might, but it’s probably not going to be pretty!

Former Senator Alan Simpson (R-WY) (of the Simpson-Bowles Commission), who is a highly influential voice in the tax reform discussion, is making the rounds on Capitol Hill and sums up the process of pulling a bill together, securing House and Senate leadership support and ensuring enough votes for passage as “giving birth to a live porcupine” …. a quote that will now probably linger in your brain for the weekend. (US News and World Report, July 19, 2013)

There are so many moving pieces, both formal and informal, that it will take time to get them aligned. Not surprisingly, some senators themselves say they are unable to predict what will happen this year in Wednesday’s Politico.

Simpson joined with former White House Chief of Staff Erskine Bowles in a July 21 Politco op-ed, saying that despite the uncertainty that the blank slate approach is causing, that is still the best path to reform. The Simpson-Bowles Commission took that same tack, calling it the “zero plan” in 2010.

What does all of this mean?

The blank slate closes on Friday. Chairman Camp has been meeting with his Republican committee colleagues, and we understand that he may meet with Democrats on the committee before the end of next week. Congress goes on August recess at the beginning of August.

But the work doesn’t stop. Tax committee staff in both the House and Senate continue compiling the information, assessing options and preparing legislation at the direction of their chairmen. August recess presents the opportunity for those of us in Washington to work with staff and for those out across the country to communicate with your Congressional delegations about your key issues and concerns. The Charitable Giving Coalition has put together a number of materials to help you communicate with your lawmakers over the August recess.

The process is long. It will take numerous twists and turns. It has many chapters ahead, likely well into 2014. What’s crystal clear is that the Council and our colleagues in the field must be engaged every step of the way because issues critical to both the philanthropic and charitable communities are on the table.

We strongly encourage our members – and other Snapshot readers – to remain informed and to participate in the process when you can. The Council is here to provide a full slate of resources, including background, talking points, communication support and media assistance.

The Max and Dave Tax Reform Road Show

Philadelphia details announced

On Wednesday, the House Ways and Means Committee announced specifics about the next stop on the tax reform road show. There are two events planned in Philadelphia, PA on Monday July 29, both with a focus on small business. These events will be closed to the public, but still offer an excellent opportunity to weigh in on the philanthropic sector’s priorities. Share your stories with local media, who will be focused on tax reform because of this visit, and keep the charitable deduction in the spotlight.

We have heard that a potential stop in New Jersey is being considered. As these details come to light we will reach out to our members.

IRS Scrutiny

Moving along slowly

As we mentioned last week, this will be a long saga. There were no major developments this week but Politico gives an overview of the IRS Inspector General J. Russell George’s recent efforts at damage control.

On Wednesday, Chairman Camp and Ranking Member Levin, of the Ways and Means Committee, joined forces in a letter to press Acting IRS Commissioner Danny Werfel to speed up the process of turning requested documents over to the Committee.

We will continue to monitor this and assess if this issue will intersect with tax reform or impact charitable organizations, but all in all, a quieter week on this front.

Out Across the Country . . .

Opinion pieces that caught our attention

Tim Delaney, CEO of the National Council of Nonprofits authored an opinion piece in The Hill, “The Lab Results Are In On Tax Reform.” We read the piece with great interest, and applaud Tim’s creative opening paragraph:“If the states serve as our policy laboratories, then the lab results are demonstrating conclusively what’s in the best interest of local communities. The results from red, blue and purple states are unmistakable: Charitable giving incentives deserve a permanent place in every reformed tax code.”

Susan Dreyfus, with the Alliance for Children and Families was in Roll Call this week with her commentary “Why Take Away America's Incentive To Give?” Susan hits home the critical message – preserving charitable giving incentives is about the communities we serve: “As lawmakers take on the gargantuan task of reforming our tax code, teams of lobbyists have already begun to line up to defend tax credits and exemptions that support special interests. There is one group of Americans, however, who do not have access to lobbyists and lawyers. They are the 1 in 5 American children who currently live below the poverty line. And a vital source of support for them may be in serious jeopardy.”

If you’re interested in reading commentary on tax reform, then we point you to a point-counterpoint in Monday’s USA Today. Their Editorial Board endorsed the blank slate approach and urged a simplified tax code, while Citizens for Tax Justice pushed for a tax reform plan that raises revenue.

There have been a series of posts in the Wall Street Journal that drew our attention. In the July 17th edition, it posted an op-ed entitled “How Big Government Co-Opted Charities.” Not surprisingly, WSJ heard from readers pushing back on that piece. Both John Ashman, of Association of Gospel Rescue Missions and Diana Aviv of Independent Sector posted interesting responses.

Joining the Conversation

As these great op-eds illustrate, it’s important to be part of the ongoing dialogue. And, the diversity of voices adds to the power of our collective messages in support of philanthropic and charitable organizations. If you are interested in writing an op-ed for your local paper please contact Brian Horn. And, if you’ve posted an op-ed recently, please bring it to our attention.

In the federal agencies...

The IRS is not at a complete standstill, despite the continuing scrutiny. This week, it issued two Private Letter Rulings, both of which are very fact specific but might be of interest to our readers.

In LTR 201329028, the IRS considered a request from a private foundation receiving income from a membership interest in an LLC, the sole activity of which was operating an investment hedge fund. The IRS held that the investment activities of the LLC will not generate unrelated business taxable income for the foundation.

In LTR 201329027, the IRS granted a private foundation an additional five years to dispose of excess shares of stock acquired from a bequest. The IRS found that the foundation made diligent efforts to dispose of the shares, although the foundation was unable to dispose of the shares except at a price substantially below fair market value.

Keep in Touch

Let us know how we are doing, or about any issue that you’d like to see highlighted in a future Snapshot, by touching base with any member of our government relations team.