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Charity Aid, Relief, and Empowerment Act of 2002 (CARE)

(2/7/02) The Treasury announced Thursday (2/7/02) a bipartisan charitable giving compromise bill that included some of the administrations goals including tax incentives and faith-based charity support incentives. The bill is entitled the Charity Aid, Relief, and Employment Act of 2002 (CARE).

Key aspects would allow certain IRA holders (those over 67 years old) to make tax-free charitable distributions from their IRA accounts, would allow charitable deductions on tax returns for non-itemizers, would allow the creation of up to 900,000 Individual Development Accounts (IDA's) by lower income Americans who would see matching contributions by sponsoring financial institutions (both would not be subject to income tax) and would encourage charitable contributions from corporations by increasing the percentage limit.

"In the aftermath of September 11(Th.), many Americans have eagerly reached out to support their favorite charities and non- profits. At the same time, the recent decline in the economy has pinched many hardworking Americans' pocketbooks making it more difficult to contribute those precious dollars that charities rely on to continue their good works," said Secretary Paul O'Neill. "As the economy begins to rebound, we must seize this window of opportunity to provide incentives to encourage all Americans to support charities."

The proposal to allow tax-free withdrawals from IRAs for individuals over the age of 67 is seen by many in the nonprofit community as significant. Because current law requires donations from IRAs to be included in taxable income and then offset by a charitable donation, some taxpayers who are unable to deduct all their charitable donations are discouraged from making donations from their IRA. This proposed bill would allow direct donations as well as indirect donations, such as those using a charitable remainder trust, charitable gift annuity or pooled income fund, to be made without including the amount as taxable income.

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Stimulus Plan Dead In Senate

(2/6/02) Amid reports that the economy was beginning to pick up on its own, the Senate failed to pass any legislation that will boost the economy but did manage to increase unemployment benefits.

Republicans and Democrats, after weeks of seeking political advantages, failed to bring an economic stimulus bill to the table and the likelihood of any such action appears to be slim. Besides disagreeing on the methods to stimulate the economy, it appeared both sides wanted to have the opportunity to take credit for any improvement in the economy during the coming congressional elections, which may have a significant impact on which party has control.

However, both sides were able to come together to pass a measure extending unemployment benefits for an additional 13 weeks. This would place the limit on benefits at 39 weeks instead of the current 26. This now goes to the House for consideration.

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Bush Pushes Volunteerism

Volunteerism was a central component of President George W. Bush's State of the Union address. Bush announced the creation of the USA Freedom Corps, a partnership of volunteer organizations including the Citizens Corp, AmeriCorps, Senior Corps and Peace Corps.

In his annual address to Congress, Bush asked Americans to "commit at least two years, 4,000 hours over the rest of your lifetime, to the service of your neighbors and your nation." The Freedom Corps will focus, among other things, on homeland security and emergency response to major catastrophes.

In addition to announcing the Freedom Corps initiative, Bush stated that the administration hopes to recruit more than 200,000 new volunteers for the existing AmeriCorps and Senior Corps programs. Moreover, he renewed a promise to double the number of volunteers to the Peace Corps in the next five years.

Bush also touted the importance of nonprofits and their impact on local communities. He urged Congress to consider the philanthropic sector's needs in the coming session. "Members, you and I will work together in the months ahead on other issues: productive farm policy, a cleaner environment, broader home ownership, especially among minorities and ways to encourage the good work of charities and faith-based groups," said Bush.
From AFP News

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Religious School Tuition Payments Not Deductible

In a recently announced decision, the Ninth Circuit Court of Appeals held that tuition paid to a religious school was not deductible. In Michael Sklar, et ux. v. Commr., No. 00-70753 (29 Jan 2002), the Ninth Circuit Court of Appeals found that the Sklars could not prove excess value justified a "quid pro quo" deduction in that the tuition payments were comparable to other private schools.

In addition, the court found that the constitution bars the government from making any determination of a deductible and nondeductible portion of the tuition without "an excessive government entanglement with religion." The Sklars had attempted to show that a percentage of the education is purely religious and in addition to the percentage that is comparable to a public school education.

The Sklar's children are attending a private school that teaches the basic tenets of their orthodox faith and the school requires tuition payments for attendance.

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Stimulus Plan From Sen. Daschle

Sen. Thomas Daschle (D-SD), Majority Leader of the Senate, recently proposed a shortened version of the stimulus package. At the end of 2001, the White House, House Republicans and Senate Democrats were unable to agree on a stimulus package. The Republicans proposed acceleration of the income tax cuts and a repeal of the corporate alternative minimum tax. Democrats recommended an increase in funding for healthcare for unemployed workers. The gap was too large to be bridged in the time available in December.

Sen. Daschle has now proposed a smaller version of a stimulus bill with a focus on the areas of agreement. He states, "In the interim, I propose that we break the impasse on economic recovery legislation by adopting a nonpartisan, commonsense approach. Let's immediately pass what we agree on and keep working to find common ground in the areas where we still disagree." The stimulus bill by Sen. Daschle has 4 major sections:

1. Extending unemployment benefits by 13 weeks.
2. Tax rebate checks for low-income taxpayers.
3. Bonus depreciation of 30% for one year for businesses.
4. Medicaid assistance of $5 billion for the states.

The Republican response to Sen. Daschle's proposal could be described as hopeful. Senate Minority Leader Trent Lott (R-MS) noted, "It's a process that could get us into considering the bill and reaching a conclusion."
From GIFTLAW.COM

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Gifts of Real Estate

The significant increase in the value of real estate during the last dozen or so years has provided an excellent growth in equity as well as an attractive consideration for donation. It is important to note that state laws vary as to the use of real estate as a gift and it is best to check with your attorney or tax expert as to specific laws and regulations in your state. It is also important to realize that not all real estate holdings are acceptable as charitable donations even though they may qualify under law. We would be happy to discuss that aspect with you.

Seniors may find that using real estate as a gift provides attractive tax considerations and reduces maintenance and financial obligations. Real estate may consist of a second home, commercial property, undeveloped lots and farms. A gift may provide the donor with a simplified financial picture and also avoid the bother, hassle and taxation of a commercial sale. Please let us know if you would like to discuss the possibility of donating real estate.

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Sen. Kennedy on Estate Tax

In a speech at the National Press Club about a month ago, Sen. Ted Kennedy said, ``Whatever the merits or demerits of last year's tax bill, it was enacted in what now seems a very different and distant time. We must think anew, and act responsibly.''

Sen. Kennedy stated that some tax cuts scheduled under the recent estate tax legislation to take effect in 2004 and later should be postponed to allow the government to solve other pressing priorities such as education and a Medicare prescription drug benefit. ``Future additional tax breaks for the wealthy do not deserve a higher priority than strengthening education, or covering prescription drugs under Medicare, or protecting Social Security, or meeting other urgent national priorities,'' Kennedy said.

The tax cut, he said, was enacted prior to a recession that eroded surplus projections and before the Sept. 11 terror attacks that caused significant new defense and homeland security spending.

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