One of the Roundtable’s key sources for updates about important behind-the-scenes developments that could potentially impact philanthropic freedom and excellence is Sandra Swirski of Urban Swirski & Associates, based in Washington, D.C. As the Biden administration takes shape, new significant steps will be taken, which may affect the philanthropic sector’s ability to continue to operate with the wide range of options it currently has now. In last week’s update, Sandra noted several “good to know” news items below.
On Monday, January 25, the U.S. Senate confirmed Janet Yellen as the next U.S. Secretary of the Treasury. From Sandra’s update on Yellen’s testimony during her January 19 confirmation hearing before the U.S. Senate Committee on Finance, she highlights that Yellen’s comments included:
“Janet Yellen Expected to Be Confirmed as Treasury Secretary
“…the Biden administration’s top priority initially will be providing additional COVID relief in the short term, followed by revisiting parts of the 2017 Tax Cuts and Jobs Act in the long term. Of note, Sen. Sheldon Whitehouse (D-RI) raised concern that the IRS was not doing enough to enforce tax-exempt policies, mentioning the ‘dark money’ that funded some of the organizations involved in the January 6th Capitol attack. Whitehouse asked Yellen if she would commit to a formal review of tax-exempt policies for 501(c) organizations, for which she said she would once she was up to speed on this issue.
“Included in a long list of follow-up questions for the record, Senator Chuck Grassley (R-IA) inquired about the Treasury Department regulating donor-advised funds to increase the flow of money out of them, and Senator James Lankford (R-OK) asked whether Dr. Yellen agreed the charitable deduction should be available to all taxpayers. For both, Dr. Yellen replied that she would look into them.”
Sandra also noted increased calls from members of Congress asking the IRS to investigate tax-exempt organizations for potential participation in illegal activities:
“Oversight Looms as Lawmakers Raise Concern Over Tax-Exempt Organizations That May Have Played a Role in Capitol Attack
“Following the attack at the Capitol on January 6th, some Democratic lawmakers are calling on Treasury and the Internal Revenue Service (IRS) to review the tax-exempt status of organizations that might have played a role in the attack and the events leading up to it. This comes amid reports that some organizations, funded by donor-advised funds, had a role in supporting groups that aided the attack. Some in the sector are also raising concerns that the charitable deduction is subsidizing hate, urging the sector to better self-regulate donations to hate groups…
“…We could see additional investigations and oversight as it relates to the role of tax-exempt organizations in the Capitol attacks in the coming months, especially those funded by anonymous giving through avenues like donor-advised funds. Stay tuned.”
Lastly, Sandra noted a new IRS regulation that could result in a heavier tax burden for those who work or volunteer for family foundations:
“Executive Compensation Regulations Finalized
“On January 11th, the Internal Revenue Service issued final regulations on tax-exempt organization executive compensation. As you may recall, the 2017 tax bill included a new provision that levies a 21 percent excise tax on compensation in excess of $1 million paid to nonprofit employees and officers, but while doing so also swept in compensation from “related organizations” like a family business. So, those who work or volunteer at a family foundation and draw a salary from a private business connected to the foundation could face a 21 percent excise tax on their combined compensation above $1 million…”
As Sandra says, stay tuned. We’ll be continuing to monitor these and many other developments at the federal level. It’s a new day in Washington, D.C., and the news will be reflecting that.