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National
Committee on Planned Giving®
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Legislative Update
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July 25, 2008
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Welcome to NCPG's
Legislative Update e-newsletter, highlighting national
legislative issues of interest to charitable gift and estate
planners. NCPG
members may access more detailed information on these, and many
related
issues, in the Government Relations section on NCPG's web site at www.ncpg.org.
In
this Issue:
 IRA Charitable Rollover,
Other Tax
Extenders Stalled in Senate
Over the last few weeks, the Senate has failed
to
invoke cloture on a motion to proceed to a House-passed tax
extenders bill
(H.R. 6049), which includes
a
one-year retroactive extension of the IRA Charitable Rollover, among
other
provisions. NCPG is hopeful the Senate will attempt to vote on
these
tax extenders again before the August recess.
The
stalemate on
tax extenders legislation is due to disagreement between Democratic
and
Republican leaders over whether to off-set the various tax extenders
with provisions
that raise revenue for the federal government and whether to include
and
off-set a one-year fix to the alternative minimum tax.
NCPG
continues to
work in Washington to push for a retroactive extension of the IRA
Charitable Rollover as soon as possible and then expansion to allow
for
life-income gifts. Accordingly, NCPG encourages all members to
contact
their Senators and ask them to support the tax extenders
legislation. To
view a sample letter and talking points, click here.
Back to Top
Lawmakers Express Strong
Support
for Life-Income Gifts
Last month, the Senate and House approved the
fiscal
year 2009 budget resolution conference report. NCPG is pleased
to
report the final conference report expresses support for a
deficit-neutral
reserve fund that would, among other things, reinstate and expand
the IRA
Charitable Rollover to more closely track S. 819, the Public Good
IRA
Rollover Act. Specifically, section 236 of the conference report
states the
"Chairman of the Senate Committee on the Budget may revise the
allocation . . . and other levels in this resolution for one or more
bills
. . . or conference reports that would . . . extend enhanced
charitable
giving from individual retirement accounts, including life-income
gifts . .
.” The budget resolution is a non-binding document, setting
out a blueprint
for the annual appropriations process. Inclusion of the IRA
Charitable
Rollover and mention of life-income gifts in particular represents a
significant step towards a permanent and expanded provision.
Prior to approval of the budget resolution conference report,
Senators
Dorgan (D-ND) and Snowe (R-ME), the sponsor and lead co-sponsor of
S. 819,
respectively, sent a letter to Senate Finance
Committee
Chairman Baucus urging him to reinstate and expand the IRA
Charitable
Rollover. The letter cites NCPG's survey data, which found that
approximately 900 charities have reported more than 8,500 individual
IRA
distributions, with a total value of nearly $140 million.
Back to Top
IRS Issues Ruling on Dividing
CRTs
The IRS has issued Rev. Rul. 2008-41. The
document
addresses two situations in which a charitable remainder trust is
divided
pro rata into two or more separate trusts. Such divisions are common
when
the income recipients desire to separate their interests and when
joint
income recipients divorce.
Back to Top
Lawmakers Seek to Enact
Charitable
Giving Incentives Aimed at Midwestern
States
A number
of
Senators and Representatives from the Midwest, including Senate
Finance
Committee Ranking Member Charles Grassley (R-IA), are trying to move
legislation that would provide certain relief to nine Midwestern
states (Arkansas,
Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, and
Wisconsin) affected
by this
year’s floods, tornados, and storms. The legislation, modeled after tax
legislation that
helped victims of the Kansas tornado in 2007 and the hurricanes in
2005,
would allow individuals and corporations to get
unlimited
charitable deductions for donations to relief efforts in the
affected areas
through the end of this year. It would increase the standard
mileage
deduction rate for people who use their vehicles for disaster relief
to 35
cents per mile. Also, the proposal would extend through 2009
provisions that expired at the end of 2007 that allow for
“enhanced
deductions” for certain donations to
charities. Congressional leaders
indicate they may try to split up this legislation and attach it to
larger
tax and appropriations bills that are expected to move soon.
Back to Top
NCPG Submits Comments on
CRTs and
Waiver of Spousal Election
NCPG recently submitted comments to the IRS on
Revenue
Procedure 2005-24, which requires a spousal waiver of their
“right of
election” against assets held in a Charitable Remainder
Annuity Trust or
Charitable Remainder Unitrust in order to protect the tax exempt
status of
these Charitable Remainder Trusts. NCPG’s comments state that
the Rev.
Proc. “introduces unnecessary obstacles to the creation and
administration
of charitable remainder trusts and that it will significantly
diminish the
charitable contributions of generous Americans.”
The comments go on to state the Revenue Procedure “would
impose significant
additional burdens on taxpayers, charities and their advisors to
address a
problem that appeared to be essentially non-existent. The Rev. Proc.
would
also result in the inadvertent disqualification of many charitable
remainder
trusts solely because a proper spousal waiver was not
obtained.” NCPG feels
that most, if not all, of the situations contemplated by the Rev.
Proc. can
be addressed using the private foundation termination tax under
Section 507
and the self-dealing prohibition of Section 4941. The comments
conclude,
“NCPG members are concerned that if the waivers contemplated
by the Rev.
Proc. are required to create and maintain a qualified CRT, there
will be
numerous situations in which an otherwise valid CRT that would never
be
invaded could be disqualified due to the lack of the required
waiver. We
strongly urge the Service to not pursue implementing the Rev.
Proc.”
Back to Top
IRS Responds to NCPG
Concerns with Redesigned Form
5227
In
response to
changes brought about by The Pension Protection Act of 2006, the
IRS issued a substantially revised Form 5227,
Split-Interest Trust Information Return, for reporting by charitable
remainder trusts, pooled income funds, and charitable lead trusts
for the
2007 tax year.
On March 31, 2008 NCPG sent a letter to the IRS
regarding the
revision to make Form 5227 available for public
inspection. There is
concern among trustees of CRTs, particularly charities, that
donors’
privacy will become an issue once these forms are filed. On
April 28,
NCPG received a response from the
IRS. In
part, the letter states that "I.R.C. =A7 6104(b) does not
protect the
name of the trust, whether it may incorporate the name of a
contributor or
non-charitable beneficiary or otherwise." The letter goes
on to
say however, that the IRS has no current plans to make copies of
Form 5227
available on DVD as they do with the Form 990s.
Back to Top
Lawmakers Seek to Increase
Charitable Mileage Deduction Rate
A handful
of bills
have been introduced recently that would increase the mileage
deduction
rate for charitable vehicle use. For example, the Reimbursing
Our
American Drivers (ROAD) Act (S.3032/H.R.6283) was introduced by
Senator
Chuck Schumer (D-NY) and Representative John Lewis (D-GA),
respectively, to
permanently increase to 40 cents per mile the standard deduction
rate. In addition, H.R.6368 was introduced by Representative
Kevin
Brady (R-TX) to increase the mileage deduction rate for volunteer
use of
personal vehicles for charitable purposes to 36 cents per mile to
reflect
the rise in fuel prices since the beginning of the year. Other
legislation on this topic is currently pending in the Senate Finance
and
House Ways & Means Committees.
Under
current law,
the charitable mileage deduction rate is set by statute, while the
business
deduction can be adjusted by the IRS. Last month, the IRS increased the business
deduction
rate to 58.5 cents per mile, which is now more than four times the
charitable deduction rate of 14 cents per mile.
Back to Top
IRS Advisory Committee on
Tax
Exempt Organizations Cautions Against “Good Governance”
Mandates
The IRS Advisory Committee on Tax Exempt and
Government Entities released a report,
which
cautions the IRS against mandating “good governance”
practices for exempt
organizations. The report states that “efforts to promote good
governance
are fraught with complexity.” The report continues,
“There are over
1.2 million organizations described in section 501(c)(3) today.
Effective
governance practices among these organizations will vary depending
on
numerous factors, including size, sophistication, location,
available
resources, and activities. Moreover, while we may all agree that
governance
matters, it is not at all clear that requiring specific governance
practices
results in greater compliance with the tax laws.” The
report does
provide, however, 12 recommendations that aim to “provide a
framework that
will assist the IRS as it seeks to balance the desirability of
promoting
good governance against the potential deleterious consequences to
the
sector.”
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National Committee on Planned
Giving©
233 McCrea
Street, Suite 400
Indianapolis,
Indiana 46225
Phone: (317)
269-6274
Fax: (317)
269-6276
E-mail: ncpg@ncpg.org
Web: www.ncpg.org
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