Charities cut out of tax legislation: none of panel on the nonprofit sector proposals made it into bill.

Congress finally approved the 2005 tax reconciliation bill but it did not include significant charitable reform. Instead, charitable reform may be added to a pension reform bill, H.R. 2830, that was in conference at presstime.

The Senate passed the $70 billion tax reconciliation bill, 5444, on May 11 after the House approved the measure a day earlier by a vote of 224-185. The charitable incentives were removed from the tax reconciliation bill due to budget limitations in the Senate. It was signed by President George W. Bush.

The pension reform bill is viewed as "must-do" legislation, according to Independent Sector (IS), however, it is not protected from a filibuster like the tax reconciliation bill. IS called the recent developments "a window of opportunity to see a more complete package enacted."

Rep. Bill Thomas (R-CA) and Sen. Charles Grassley (R-IA) have agreed in principle to charitable incentives and reforms, but the details of the package remain to be worked out, according to IS. The nonprofit advocacy group also reported that Thomas might want to include new proposals.

And, according to IS, Grassley could be interested in adding other provisions from the Panel on the Nonprofit Sector's recommendations, such as enhanced electronic filing requirements and funding for community education. A provision addressing abusive tax shelters was included in the tax reconciliation bill that is broader than one recommended by the panel, according to IS.

H.R. 2830 was still in conference negotiations between members of the House and Senate at presstime. While officials said there is no timeline on when it might come up for a vote, according to reports, Grassley was hoping to have it passed my Memorial Day. Others following the measure on The Hill were skeptical about any vote by the holiday considering other pressing issues before Congress, namely immigration reform, and warned that getting the incentives into the pension reform bill are anything but a done deal.

The nonitemizer deduction, a provision that has been met by mixed opinions within the nonprofit sector, would remain the same as was proposed in the CARE Act, according to IS. Taxpayers who claim the standard deduction would be able to take a deduction for charitable contributions more than $250, up to $500. There would be no floor on deductions for itemizers, which had been proposed to be $210. The IRA rollover provision also would be similar to the never-passed CARE Act in that the ages would be the same. The provision would be in place for one year.

Though things can change daily in Washington, IS President Diana Aviv said the intention is to include charitable measures in the pension reform legislation, with both Thomas and Grassley interested in some kind of agreement on reforms and incentives. The White House has indicated some interest as well, she added, though there are so many variables at this point it's too soon to tell what the final bill will include.

IS sent a letter to congressional leaders early last month, urging the passage of charitable reforms and incentives, many of which came from the more than 120 recommendations of the Panel on the Nonprofit Sector in June, 2005.

Through May 12, 25 organizations had signed on to a letter urging members of Congress to include charitable giving tax incentives like those in the Senate version of H.R. 4297 in another tax bill. Among the organizations signed on were the American Heart Association, YMCA, United Way, March of Dimes, and nonprofit associations of California, Colorado, Michigan, Montana and South Carolina.

More than two dozen members of the Republican Study Committee signed a letter addressed to Thomas and Grassley warning of "unintended consequences" of charitable provisions in the tax reconciliation bill, such as the proposed tax increases on private foundations and restrictions and regulations on clothing and household donations to local charities. The letter also urged the Internal Revenue Service (IRS) to enforce existing laws instead of "tax increases and revenues raisers ... under the 'guise' of reform."

Earlier in the year, a group of more than 60 nonprofits sent a letter to Congressional representatives specifically opposing the nonitemizer

deduction among the charitable reforms. The American Institute for Cancer Research (AICR) was among those opposed. Kelly Browning, executive vice president of AICR, remains concerned about the potential for a charitable giving floor for itemizers. "Until I actually see it in writing, I'm skeptical," he said.

"The biggest issue is IS has asked members of the nonprofit community to sign on in support of this trailer bill, but have said they don't know what's going to be in the legislation yet. After the problems we found when we looked at the last piece of legislation, when they put in a floor for itemizers, it's like asking us to buy a pig in a poke again.

"IS has a very poor track record as far as protecting charities from some of these more outlandish provisions that were in the previous bill," Browning said. "IS didn't do a very good job, yet they continue to tell people they speak for the nonprofit sector; that's troubling. They're speaking for everybody, but taking positions that my organization doesn't believe in. IS seems to be supporting anything Grassley wants to do."