Public Policy
Independent Sector Policy Update
May 19, 2006
Charitable Incentives/Reforms May Move on Pension Bill
Congress has passed the tax reconciliation bill (H.R. 4297) without a package
of charitable giving incentives and reforms, though it is possible that
the provisions will be added to pension reform legislation (H.R. 2830).
Legislators working out differences in House and Senate pension reform legislation
said on May 18th that they are making progress, but it may not be possible
to finish before Memorial Day. Also unclear are the exact contents of a
“trailer” package of tax extenders and other provisions that
may be attached to the pension legislation. House Ways and Means Committee
Chairman William Thomas (R-CA) has said that some of the charitable incentives
and reforms that Senate Finance Committee Chairman Charles Grassley (R-IA)
wants to include require further study and may not be ready in time for
the pension bill. More on
charitable incentives and reforms.
Ways and Means Subcommittee to Hold Hearing On Charities and Employment
Tax Compliance
The House Ways and Means Oversight Subcommittee has scheduled a May 25th
hearing on charities and employment tax compliance. The hearing will focus
on compliance by charities with their employment tax obligations. The
Subcommittee has asked GAO to review whether any charities participating
in the Combined Federal Campaign (CFC) have outstanding tax debts. The
subcommittee advisory on the hearing lists the following issues for examination
include whether the IRS is effectively using its regulatory authority
over charities to ensure that they pay their taxes; whether charities
with substantial tax debt should maintain their tax-exempt status; whether
charities with tax debt should participate in the CFC; whether the OPM
performs effective background checks on the charities participating in
the CFC, and whether there are tax-exempt organizations with significant
tax debt that receive other benefits, such as grants, from the federal
government. See the Subcommittee’s
website for more information.
Independent Sector Calls for Increased Funding of IRS Enforcement Activities
On May 4, 2006, IS submitted testimony
(PDF) to the Senate Appropriations Subcommittee
on the Treasury urging lawmakers to increase FY 2007 federal appropriations
for IRS tax enforcement activities. IS urged lawmakers to, at a minimum,
meet the President’s FY 2007 budget request, which would increase
the IRS enforcement budget by $137 million over FY 2006. IS noted that
increased resources for IRS tax law enforcement would continue Congress’
recent efforts to restore the IRS enforcement program; help protect the
integrity and credibility of the charitable sector by providing resources
to audit organizations’ annual returns and deter and penalize wrongdoers;
and foster greater compliance by funding additional education of charitable
organizations about existing tax law. More
on appropriations for IRS enforcement.
IRS Posts New Resources on Form 990 and Political Activity
The IRS has posted new material on its website to aid charities in compliance
with its regulations. One page lists frequently
asked questions with respect to filing the Form 990 information return.
The FAQ’s are based on questions received after changes to the Form
990 for tax year 2005. Also available is the script
(PDF) from a March 2006 phone form that the
IRS held on Form 990. The IRS has also consolidated on one page links
to various guidance and rulings with respect to political activity by
501(c)(3) organizations: IRS
Resource Page on Political Activity.
IRS Expands on Compensation Initiative; Releases Report on Abuses by Credit
Counseling Agencies
Continuing its investigation into nonprofit compensation practices, the
IRS will send 200 compliance check letters and will undertake 50 examinations
focusing on loans made to tax-exempt organizations insiders. The IRS plans
to publish the results of the investigation as early as August. The agency
will also be issuing a questionnaire to hospitals with 60 questions on
executive compensation and the community benefit standard. Lois Lerner,
the IRS Exempt Organizations director, said the questionnaire is just
for information gathering purposes now.
The IRS also recently released a report outlining the results of over
40 audits the agency conducted during the last two years of tax-exempt
credit counseling agencies. In each case, the audits resulted in the revocation,
proposed revocation, or other termination of tax-exempt status. The IRS
will take additional action, including issuing expanded guidance; sending
compliance inquiries to 740 other credit counseling agencies not already
under audit; and tightening its review of new applications by credit counseling
firms for tax-exempt status. More
on the credit counseling initiative.
House Passes Lobbying Reform Bill
The House passed its lobbying reform bill (H.R. 4975) on May 3rd by a
narrow margin – 217-213. The Senate passed its bill (S. 2349) in
March by a vote of 90 to 8. Differences in the two bills will have to
be resolved before final passage. A major difference in the two measures
is the restrictions on Section 527 organizations included in the House
bill and not in the Senate version.
Disclosure requirements in the House bill are similar to the Senate provisions,
including increased disclosure for earmarks, lobbying reports filed quarterly
and electronically, and reporting campaign contributions from lobbyists.
The House bill would also require lobbyists to report any gifts of over
$10 to legislators and their staff, whereas the Senate bill bans all gifts.
Both House and Senate bills would require lobbyists (and organizations
that lobby) to report donations they make to entities named for, established
by, or controlled by a legislative official. The House bill lists factors
that will be used in determining whether the legislator controls the organization.
A bi-partisan amendment adopted on the House floor eliminated the bill's
original moratorium on privately-funded travel. The ethics committee must
recommend standards for approving privately-funded travel by June 15,
2006. In the interim, such trips will be allowed if they are pre-approved
by a two-thirds vote of the House ethics committee. More
on lobbying reform legislation.
FCC Adopts Final Rule on Established Business Relationship Exemption for
Faxes
On May 3, 2006 the Federal Communications Commission adopted a final rule
for determining when faxed advertisements may be sent within an established
business relationship (EBR). The rule implements changes made by the Junk
Fax Prevention Act that was enacted in July 2005. The EBR exemption relieves
fax senders from obtaining prior permission from a recipient in order
to fax an unsolicited advertisement, as long as an opt-out notice and
opportunity to opt-out are provided to fax recipients, and the fax number
was obtained voluntarily. Nonprofits will not have to first to obtain
a member's permission in order to send faxes promoting conferences, publications,
or membership solicitations, for example. The new rules will become effective
on August 1, 2006. More on the
fax rule.
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