October 25, 2007
Major Tax Bill Includes Key Charity Measures
By Peter Panepento
Washington
Congress is expected to soon consider sweeping tax legislation that would extend incentives for those who contribute money to charity from their individual retirement accounts and would remove tax restrictions on large nonprofit groups that invest in hedge funds.
Those measures are part of a tax-overhaul bill introduced today by Rep. Charles B. Rangel, a New York Democrat and the chairman of the powerful Ways and Means Committee, which sets federal tax policy.
The bill is aimed at repealing the controversial alternative minimum tax and at changing the tax structure for investment-fund managers. But it also includes several significant measures that would affect nonprofit organizations.
If approved, the bill would extend for one year a provision that allows those 70 1/2 and older to contribute up to $100,000 annually to charity from their IRA accounts without having to pay income taxes on the IRA distributions.
That incentive, which was part of the 2006 Pension Protection Act, is scheduled to expire at the end of the year. Organizations such as the Council on Foundations, the National Committee on Planned Giving, and Independent Sector have been pushing for its extension, saying it provides a major incentive for donors.
The Rangel bill would also allow tax-exempt organizations to invest directly in hedge funds and other investment funds without being subject to unrelated business income tax.
By eliminating the tax, nonprofit organizations would no longer have to invest hedge funds and other investment funds in offshore accounts to skirt the unrelated business income tax, Mr. Rangel said.
That move — which many universities and other large nonprofit organizations have requested — would cost the federal government about $1.34-billion over the next 10 years.
The Rangel bill would also extend for one year tax incentives that:
- Allows businesses to get an enhanced tax deduction for donating food to charities.
- Encourages businesses to contribute computer equipment to educational institutions.
Mr. Rangel said in a statement that the measures will help make the U.S. tax system more fair.
“The provisions in this bill would reform the tax code to provide a greater sense of equity and fairness that is so critical to our voluntary tax system,” Mr. Rangel said. “It has been more than 21 years since Congress and the administration rolled up their sleeves to discuss tax reform, and during that time the tax code has become a jumbled mess of outdated and inequitable provisions that cry out for simplification.”
The bill is likely to face opposition from House Republicans, who say it would increase taxes.
Rep. Phil English, a Pennsylvania Republican and a member of the Ways and Means Committee, for example, has already criticized the bill as “the mother of all tax hikes.”
“The Rangel proposal should illustrate for everyone the challenge of building a tax policy around a budget that demands a tax increase,” Mr. English said in a statement.
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