Federal Bill Aimed at Nonprofit Financial Practices

Calls for disbursement of donor advised funds within five year window.

Head of the House Ways and Means Committee Rep. Dave Camp, Michigan Republican, announced a draft bill early last week that if enacted would levy a tax on nonprofits that pay employees $1-million or more and would require gifts to donor-advised funds to be deployed to charities within five years.

While not expected to pass, the bill sets the stage for future legislative efforts aimed at delivering more money directly to mission work. Large private-college endowments would face an excise tax as part of an effort to put pressure on colleges to lower tuition.

The more than 900-page bill is not expected to fare well during this mid-term season, but many tax experts say his proposal will pave the way for future debates, when a comprehensive bill stands a better chance of passage.

"This bill reflects the reason that nonprofits, at the local level, must be working closely with our Congressional and US Senate representatives. It underscores the need for a strongly united nonprofit sector that can be prepared to speak out and influence such legislation," noted Mary Ellen Jackson, Executive Director of the NH Center for Nonprofits and Board Trustee of the National Council of Nonprofits.
As currently written the bill would:

  • Subject nonprofits to a 25-percent surtax on executive compensation for each its five highest paid employees when their individual compensation exceeds $1-million.
  • Require money deposited in donor-advised funds to be paid out to a charity within five years. Organizations that sponsor a donor-advised fund and maintains legal control over fund deposits would be subject to a 20-percent excise tax on money remaining in an account after five years.

The Center will keep you updated on this tax bill and the potential implications of getting the money to nonprofit organizations so that they can meet the needs of the community.

Read more in the Chronicle of Philanthropy.

Read the National Council of Nonprofit's statement.

Post date: March 5, 2014
Topics: National Legislative Updates

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