Charitable Giving and Tax Reform in the 115th Congress Planned Giving Group of New England November 08, 2017

Camp Bacchus tax reform efforts of 2013 How we got here Camp Bacchus tax reform efforts of 2013 Camp Proposal of 2014 (1,000 + pages) Ryan “Better Way” Proposal of 2016 (35 pages) Trump Unified Framework Proposal (9 pages)

H.R. 1 “Tax Cuts and Jobs Act” Introduced November 2nd Mark up period November 6th – 9th Bring to floor under a closed rule November 13 Passage in House by Thanksgiving

H.R. 1 “Tax Cuts and Jobs Act” Corporate rate reduced from 35% to 20% Creates a 25% rate for “pass through” businesses, which includes a “guard rail” provision allowing these entities to either claim only 30% of income as pass-through income or classify a high percentage of income as business income

H.R. 1 “Tax Cuts and Jobs Act” Four Individual Tax Brackets 12%, 25%, 35%, 39.6% Standard Deduction $12,000 individuals and $24,000 married couples filing jointly Eliminates personal exemptions and almost all itemized deductions

H.R. 1 “Tax Cuts and Jobs Act” Charitable Deduction is maintained but use will be limited by standard deduction AGI limitation is raised from 50% to 60% for cash contributions to public charities and certain private foundations. 5 year carryover period is retained Pease limitation is eliminated

H.R. 1 “Tax Cuts and Jobs Act” Estate Tax exemption doubles to $11 million individual and $22 million for couples Estate tax is phased out entirely over six year period 2018-2024

H.R. 1 “Tax Cuts and Jobs Act” Executive Compensation 20 percent Excise Tax Applies to compensation in excess of $1 million paid to organization’s five highest paid employees Includes cash and the cash value of all remuneration paid in a medium other than cash. Exempts payments to a tax-qualified retirement plan UBIT extends to all 501(a) entities including pension plans Excludes research income from UBIT only if research is made publicly available

H.R. 1 “Tax Cuts and Jobs Act” Excess Business –Holdings Tax Allows private foundations to wholly own for-profit businesses when received by gift or bequest so that the profits of such businesses can be dedicated to funding the private foundation’s charitable mission. Johnson Amendment Repeals the Johnson Amendment as it relates to certain churches to make statements relating to political campaigns in the ordinary course of their activities

H.R. 1 “Tax Cuts and Jobs Act” Private Foundation Excise Tax Creates a new 1.4% excise tax rate on private foundations net investment income (eliminating the current two-tiered structure) Endowments Imposes a 1.4% excise tax on private college and university endowments for institutions that have at least 500 students and assets (other than those used directly in carrying out the institution’s educational purposes) valued at $250,000 or more per full-time student

H.R. 1 “Tax Cuts and Jobs Act” Donor Advised Funds Requires DAFs to disclose annually the average amount of grants made from their funds as well as their policies on inactive funds Substantiation Requirements Repeals substantiation exception for gifts reported by donee organization Mileage Rate Adjusts the charitable mileage rate for inflation

H.R. 1 “Tax Cuts and Jobs Act” Private Operating Foundation Would not recognize an art museum as a private operating foundation unless it is open to the public for at least 1,000 hours per year College Athletics Repeals special rule that provides a charitable deduction of 80% of the amount paid for college athletic seating rights

The Path Forward Budget Resolution passed in October allowing for reconciliation which requires only 50 votes in Senate Senate is drafting and revising their own bill based on H.R. 1. Bill is now expected to be released Thursday Senate Committee markup to begin November 13 Senate intends to introduce and pass a bill before Thanksgiving

Senate unlikely to change the current estate tax The Path Forward Senate unlikely to change the current estate tax Senate likely to make entire bill sunset after 10 years Will vulnerable Democrats (6) break unity with party to overcome potential Republican no votes. Senate and House bills will need to go through conference procedure to pass for president to sign Goal remains to have a bill signed before Christmas

Universal Charitable Deduction Issues of Focus Universal Charitable Deduction H.R. 3988 “Universal Charitable Giving Act of 2017” H.R. 1337 “Legacy IRA Act” Johnson Amendment

CGP “Day On Capitol Hill” Over 50 participants 70 Meetings with Legislators Educate legislators about the charitable deduction Asked for support of a Universal Charitable Deduction

Why Should We Care? Economics In the State of Massachusetts 33,722 Non-profit organizations 455,900 employees nearly 17% of the workforce $118.8 billion in revenue $334.6 billion in assets

Stay Informed of Latest Developments Role of CGP in Advocacy Stay Informed of Latest Developments Inform National Membership Support a Unified Voice for Charitable Giving Partner with Leading National Organizations Leverage State and National Membership in Advocacy Efforts

Uncertainty is Opportunity Interpret changes for donors, clients and organizations Educate ourselves on changes to vehicles and tools Stay focused on donors and build relationship Philanthropy is not tax policy

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