Had both chambers approved the legislation, individuals over the age of 70 would have been able to make a charitable donation from their individual retirement accounts to community foundations. And the givers would have been able to deduct their gifts from their federal returns, whether they itemize or not.
“The Care Act is likely to lead to more charitable gifts to Grand Rapids Community Foundation and the many nonprofits that Grand Rapids Community Foundation supports,” said Molly Parker, vice president of development at GRCF.
Under the current law, individuals who make gifts from their IRA assets pay income tax and receive an offsetting charitable deduction. But those gifts are limited. Gifts to private foundations can’t exceed 30 percent of a taxpayer’s income.
The new legislation would make that giving easier, as it doesn’t relate the amount of the gift to income, and it eliminates the need for a deduction.
But even though members of the House and Senate both overwhelmingly passed their respective versions of the bill, the Care Act — a name derived from the House version — wasn’t acted on this session. That’s bad for foundations that need extra revenue, and for elderly donors who don’t itemize and need a year-end deduction.
Kevin Anderson, director of government relations and public policy for the Council of Federations, told the Business Journal that at least his organization doesn’t have to start all over again with a new group of lawmakers when Congress convenes next month.
“We will have to work on getting it passed next year. And that’s a guessing game because it’s hard to predict what sort of priority not only Congress but the White House will put on moving it forward next year — particularly during an election year, which always complicates things,” Anderson said from his office in Washington, D.C.
He said things get complicated because weird politics go on during an election year, as priorities can change when jobs are at stake. Still, Anderson noted that the administration has called this bill a priority in the past, part of the president’s faith-based initiatives, and he hopes it remains one next year. But Anderson has his doubts because those faith-based initiatives that President Bush is so fond of were pulled from the bill.
“The White House has gone around, in a roundabout way, implementing a lot of those faith-based initiatives through executive order. So to the extent that was their real priority, they may see this as less of a priority now,” said Anderson.
Of course, there are other items on the agenda. Iraq and the economy are two certain ones and inflation and rising interest rates could become two more next year. Also, the Care Act isn’t one of those hot-button issues that give lawmakers a chance to get lots of media attention. On top of that, the bill has become a bit of a political football.
“It passed both houses overwhelmingly, but there just isn’t a burning desire in the belly of most members of Congress to pass the Care Act. So, it’s always been a White House priority, which is why it got held up,” said Anderson.
The bill hasn’t made its way into a conference committee where members of both chambers can iron out their differences. Nor does it look like one chamber will accept the other chamber’s version, simply because that doesn’t happen very often.
Anderson said that Senate Democrats held it up at the conference level, as they felt they were being squeezed on some issues like the Medicare bill that became law a few weeks ago.
“They refused to allow what they viewed as sort of a Republican-White House priority to swiftly make its way through the conference committee and on to the president,” he said.
The bill requires that donors must be 70.5 years old to participate because law requires that those individuals begin withdrawing money from their IRA accounts and that is the age when cash gifts can be made. Deferred IRA gifts can be made at 59.5 years of age, but Congress doesn’t want people to give away cash at that age when the average American will likely live another 15 to 20 years.
The bill is extremely important to foundations because in the past when non-itemizing Americans were allowed to deduct a portion of their charitable donations, giving rose.
In 1985, these taxpayers gave $9.5 billion to charity when they could deduct half their gifts. In 1986, when a non-itemizer could deduct an entire gift, contributions from these taxpayers jumped to $13.4 billion. In today’s dollars, those gifts would total roughly $15 billion and $21 billion, respectively.