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What’s at Stake for Charities and Foundations in Tax Debate

December 1, 2017
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As the Senate grapples with tax legislation, here’s how the pending bill compares with the House-passed measure on key issues that affect the nonprofit world. For further background information, see a Chronicle article about what charities have been doing to influence the legislation and advocates’ last-minute push.

HOUSESENATE
Standard deduction Doubles the standard deduction, which means fewer people will itemize and take advantage of the charitable deduction Doubles the standard deduction
Estate tax Doubles the exemption immediately; repeals the estate tax in 2024 Doubles the exemption but keeps tax in place for estates of more than $11 million
Executive compensation Places a 20 percent tax on compensation above $1 million for top 5 employees Places a 20 percent tax on compensation above $1 million for top 5 employees
Charitable-deduction limits Allows donors to deduct cash gifts of up to 60 percent of their adjusted gross income, up from the current limit of 50 percent Allows donors to deduct cash gifts of up to 60 percent of their adjusted gross income, up from current limit of 50 percent
Donor-advised funds Sponsoring organizations would have to report the average amount of grants made from accounts during the previous year and create a policy for inactive funds. No provision
Foundation excise tax Places a 1.4 percent excise tax on foundation investment gains. Current law provides for a 1 percent or 2 percent tax, depending on the foundation’s grant-making history. No provision
University endowments Places a 1.4 percent excise tax on the endowments of some large private universities Places a 1.4 percent excise tax on the endowments of some large private universities.
Johnson Amendment Nonprofits would be allowed to endorse and support political candidates and campaigns and still maintain their tax-exempt status. No provision

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As the Senate grapples with tax legislation, here’s how the pending bill compares with the House-passed measure on key issues that affect the nonprofit world. For further background information, see a Chronicle article about what charities have been doing to influence the legislation and advocates’ last-minute push.

HOUSESENATE
Standard deduction Doubles the standard deduction, which means fewer people will itemize and take advantage of the charitable deduction Doubles the standard deduction
Estate tax Doubles the exemption immediately; repeals the estate tax in 2024 Doubles the exemption but keeps tax in place for estates of more than $11 million
Executive compensation Places a 20 percent tax on compensation above $1 million for top 5 employees Places a 20 percent tax on compensation above $1 million for top 5 employees
Charitable-deduction limits Allows donors to deduct cash gifts of up to 60 percent of their adjusted gross income, up from the current limit of 50 percent Allows donors to deduct cash gifts of up to 60 percent of their adjusted gross income, up from current limit of 50 percent
Donor-advised funds Sponsoring organizations would have to report the average amount of grants made from accounts during the previous year and create a policy for inactive funds. No provision
Foundation excise tax Places a 1.4 percent excise tax on foundation investment gains. Current law provides for a 1 percent or 2 percent tax, depending on the foundation’s grant-making history. No provision
University endowments Places a 1.4 percent excise tax on the endowments of some large private universities Places a 1.4 percent excise tax on the endowments of some large private universities.
Johnson Amendment Nonprofits would be allowed to endorse and support political candidates and campaigns and still maintain their tax-exempt status. No provision

Correction: An earlier version of this chart mistaken said that the Senate plan would place a 1.4 percent excise tax on foundation investment gains. The Senate proposal had no provision on the excise tax.

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We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
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