Policy Update

Nonprofit Reforms and Anti-Terrorism

11/16/2005

Source: National Council of Nonprofit Associations (NCNA)

Several nonprofit reforms and incentives were included in the Senate Finance Committee's reconciliation bill last night. Incentives include the following:

A deduction for a portion of charitable contributions made by individuals who do not itemize their tax returns, with a floor of $250 ($500 for joint filers) and no cap.

Tax-free distributions from individual retirement arrangements (IRAs) for charitable contributions.

Modification of charitable deduction for food inventories from the present law that enhanced deduction for eligible contributions of food inventory.
Modifications to encourage contributions of capital gains real property made for conservation purposes.

Increased incentive for S corporations to make charitable contributions. 

Reforms related to record keeping and substantiation of charitable donations.

Donor advised funds: imposes a five percent payout requirement, establishes requirements for payouts every three years and disallows distributions to donors and advisors.

Supporting organizations: imposes a payout of the greater of 85 percent of its income from the prior taxable year or five percent of the aggregate fair market value of all the assets of the organizations other than assets directly used for program support.

Donative value of clothing and household items: imposes the creation of a standard for estimating the donative worth of clothing and household goods through a guide written and published by the Internal Revenue Service (in consultation with donee organizations). 

There are a number of other anti-abuse provisions, including a
provision that modifies the deduction for facade easements.

For more information, see http://www.ombwatch.org/article/articleview/3177/1/403 .

WHAT THIS MEANS: The non-itemizer deduction and IRA rollover are wins for the sector. It appears that there may still be some negotiation on the reforms listed above. As we expected, NCNA's priority -- federal funding for capacity building - was not included. We need to create a strategy to move that forward next year, especially given that there will not be a comprehensive nonprofit bill.

Combined Federal Campaign Watch List Ruling

The Office of Personnel Management (OPM) withdrew a regulation that required all nonprofits participating in the Combined Federal Campaign (CFC), the federal government's workplace charitable giving program, to screen employees and donation recipients for possible terrorist ties. The new final rule, which applies to 2006 CFC applicants, requires participating charities instead to certify that they are in compliance with existing anti-terrorist financing laws.

More info>>

WHAT THIS MEANS: NCNA stood with ACLU and other groups in fighting the rule that required CFC nonprofits to check terror watch lists. This is a win for the sector in that nonprofits now must certify that they do not violate existing laws, but does not require them to follow rules that may compromise freedoms of speech and association.