MCF Calls on Congress to Support Universal Charitable Giving Tax Deduction and Other Tax Reforms

Wednesday, November 1, 2017

Below is the text of a letter MCF has sent to each member of Minnesota's Congressional delegation.

MCF is calling upon congress to consider the following as they make tax reform decisions:

Protect the value of the charitable giving tax deduction

Establish a universal charitable giving tax deduction

Do not repeal the estate tax

Do not repeal or revise the Johnson Amendment

Simplify the private foundation excise tax

Authorize IRA rollover exemptions for contributions to donor advised funds held by community foundations.

Read the text of of the bill.

Read a section-by-section summary of the bill.

Letter to Minnesota's Congressional Delegation -

Protecting the Value of the Charitable Deduction

Charitable Giving Tax Deduction - MCF opposes changes to federal tax law that will diminish the value of the charitable giving tax deduction. Taken as a whole, the currently proposed changes are likely to reduce charitable giving nationally by $13 billion a year.  This is according to research by the Independent Sector.  While proposals for tax reform include retaining the charitable giving tax deduction, they also propose doubling the standard deduction. The result is rather than 35% of tax filers responding to the incentive provided by the charitable giving tax deduction, only 5% of tax filers will have that opportunity.

Congress has the opportunity to get this right; to both achieve the simplification that comes from doubling the standard deduction and increasing charitable giving.  MCF has long-supported a charitable deduction for individual taxpayers who do not itemize their deductions or pay Alternative Minimum Tax. We think a way to maintain the value of the charitable giving tax deduction is to create an  ‘above the line,” universal deduction that extends to 100% of tax filers. HR 3988, the Universal Charitable Giving Act of 2017 introduced by Rep. Mark Walker (NC – R) moves us in the right direction. However, MCF supports an approach to the universal deduction that does not include caps on charitable giving deduction and is projected to increase charitable giving by $4.8 billion a year.

Estate Tax - MCF supports wealth transfer taxes, such as the estate tax and gift tax. It may be useful to adjust rates and thresholds in ways to encourage private investment or other policy objectives. However, the estate tax is a powerful tool for encouraging chartable giving or creating private foundations to have enduring impact. We are also concerned about the impact that eliminating the estate tax would have on the federal government’s ability to keep up its commitments in the public / private partnerships that are so critical to meeting basic human needs, strengthen communities, and achieve inclusion and equity goals.

Keeping Nonprofits Nonpartisan

Johnson Amendment - MCF strongly opposes any change in current law that prohibits tax exempt organizations from participating in partisan, political activity. The so called “Johnson Amendment” should not be changed. Passed in 1954, the Johnson Amendment prohibits organizations from engaging in election activities that would help or hurt candidates running for office that if they are eligible to get tax exempt donations. That means no candidate or party endorsements, no campaigning, and no political contributions. Minnesota’s nonprofits are scrupulous about adhering to this prohibition.

More than 4,000 religious leaders, 89 percent of evangelical pastors, over 4,800 charitable nonprofits, houses of worship, and foundations, along with the Minnesota Council on Foundation and the Minnesota Council of Nonprofits believe the Johnson Amendment helps us all serve people and solve community problems without political pressure or interference. If the repeal is enacted, it will do lasting damage to the nonprofit sector by turning charities into political organizations.

Minnesotans believe in a strong nonprofit community. We rank near the top of almost every measure of charitable giving, volunteering, and nonprofit activity and the sector employs nearly 12% of our workforce. We donate our dollars to do good. We don’t want people to be showing up at the door of a housing assistance agency, a rec center, the local community clinic, their college or university, or local food shelf only to be pressured into voting for a particular candidate.  We don’t want our nonprofit organizations to be funneling our tax exempt donations into campaign contributions.

Tax exempt organizations should be focused on service, care and the community good, and not on winning the next election.

Improving the Impact of Philanthropy

Private Foundation Excise Tax Simplification - MCF supports HR2386, a bill introduced by Minnesota Representatives Paulsen (Dist.1 – R), Peterson (Dist. 7 – DFL), and Nolan (Dist. 8 – DFL). The proposal to simplify the private foundation excise tax will increase the ability of private foundations to respond to unusual and urgent community needs, for example, in times of disaster. It will also significantly reduce administrative costs to satisfy the complexities of the current two-tier rate. Rep. Paulsen first introduced this bill in 2011. It has had bipartisan support in both the House and the Senate. The simplified, single-rate private foundation excise tax is a change that will increase the impact private foundations have in the communities they serve.

IRA Rollover - MCF also supports extending the IRA rollover exemption to contributions made to donor advised funds that are managed by community foundations. In 2015 the IRA rollover extension was made permanent, but only for rollover contributions to community foundations. However, the donor advised funds held as permanent assets by community foundations were excluded from this change. Nonprofit community foundations perform an important service linking donor advised fund-holders with local community needs and opportunities. IRA rollover contributions to community foundations should all be treated the same, including those made to donor advised funds.

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