In an op-ed published June 21, 2023 in The Hill entitled “A constitutional overreach with dire consequences for philanthropy,” Jack Salmon, Philanthropy Roundtable’s director of policy research, examines why proposals to tax unrealized capital gains could have disastrous consequences for charitable giving.
Below are excerpts from the article:
“One critical aspect often overlooked is the detrimental impact it would have on philanthropy and charitable organizations. A newly released policy brief published by Philanthropy Roundtable notes how taxing unrealized gains poses a significant threat to the fabric of charitable organizations and the philanthropists who support them. By subjecting investors to taxes on gains they have not yet realized, the funds available for charitable giving would be drastically reduced. This reduction in resources would hamper the ability of charitable organizations to fulfill their crucial missions and provide much-needed support to vulnerable populations.
The case of Moore v. United States serves as a stark reminder of the constitutional concerns associated with taxing unrealized gains and highlights the grave implications it could have for the charitable sector. The U.S. Supreme Court will determine by the end of this month if it will be granted cert. If taxes on unrealized gains are deemed constitutional, it opens the door to further encroachments on property rights, wealth accumulation and even the assets of charitable foundations. The fallout for the charitable sector would be severe, with the potential to undermine the transformative work it does in communities across the nation.
The case of Charles and Kathleen Moore brings to light the real-world consequences of taxing unrealized gains. The Moores made a prudent investment in KisanKraft, an Indian company dedicated to empowering small-scale farmers through affordable power tools. Despite never receiving any financial gains from their investment, they derived immense satisfaction from knowing their capital was actively improving the lives of rural farmers. However, following the enactment of the Tax Cuts and Jobs Act in 2017, the Moores were unexpectedly burdened with an exorbitant tax bill.
The Moore case exemplifies the tangible impact of tax laws on investors and the potential consequences for the charitable sector. This looming threat could significantly impact the charitable sector, particularly for those individuals who regularly donate generous gifts to private foundations and other charitable causes. An ultimate ruling by the Supreme Court could carry profound implications for charitable organizations, wealth creators and the communities they support.”
To read the complete article, please visit The Hill.