Tax Reform Update 11/10/17


The Senate GOP tax reform bill was unveiled on 11/09/17. Here is what we know today.

Click here for the Associated Press’s initial announcement on 11/09.

Click here for the summary of the Senate’s bill.

Click here for a summary of the House bill.

Here are a few articles that offer various perspectives on the Senate plan and how it differs from the House Plan.

What does this mean?

The Alliance for Charitable Reform has released very concise summaries of the House and Senate proposals and their impact on nonprofits. We believe it is IMPORTANT to read the section entitled “JCT Analysis.”

Here is an important excerpt from that section:

“The [Joint Tax Committee] memo confirmed two things. First, the number of those who will itemize will be greatly reduced, which was also a finding in a study released earlier this year by Indiana University’s (IU) Lilly School of Philanthropy; and second, charitable deductions will fall by $95 billion, or 40 percent, under the current House tax reform bill. To clarify, this does not mean that charitable giving will fall by $95 billion, only that the amount being claimed as a charitable deduction will fall. It confirms the ramifications for the charitable sector that comes with greatly reducing the number of those who will itemize.

In terms of actual charitable giving lost, the IU study found that as a stand-alone provision, increasing the standard deduction would reduce giving by $11 billion.”

How much is $11 billion? Remember that 1 billion is equal to 1,000 million. A reduction in giving of $11 billion amounts to 11,000 million dollars. To put that in perspective, it would mean the complete loss of funding for 11,000 hypothetical organizations raising $1 million dollars each. That is a tremendous loss when individual giving is just now returning to pre-recession levels in real terms. The time for organized lobbying has now largely passed. According to Sandra Swirski, Executive Director of Alliance for Charitable Reform, “It is IMPERATIVE at this point that legislators hear from their constituencies.”

In our opinion, we should be encouraging legislators to add an above the line “Universal Deduction.” This would go a long way toward reversing the current path of both bills that would result in taxing funds given to charity by the vast majority of donors.

By Robert Sharpe

Tax Reform Update 11/08/17

The GOP Tax Reform Bill appears to be moving along as scheduled at this time. It is now in the process of being marked up by members of the House of Representatives. You can follow that process by clicking here.

The overall goal is for the House to pass a bill this month and then send it to the Senate for consideration in early December. If the Senate and House can agree on terms, the President has indicated that he would like to sign the Tax Cuts and Jobs Act into law by Christmas, with most of the changes outlined in the plan to take effect in 2018.

Here are a few links with some basic info on the major aspects of the bill:

Media outlets from all over the spectrum are weighing in on various benefits and consequences of the current language of the bill.

And the Washington Post has an update on the Senate’s take on tax reform. Click here to read that story.

If you would like to read more details of the bill click here to view recent publications from the Joint Committee on Taxation regarding the “Tax Cuts and Jobs Act” (H.R.1). Click here to read “Deep Dive Into the Tax Cuts and Jobs Act – Part 1” by

Much remains to be seen about what the final bill will hold and when it might become law. Check back here for more updates.

by Barlow Mann

Tax Reform Update 11/02/17

The bill has been released. Here are a few helpful links with the bill and some more information, plus a video of a panel discussion about tax reform including Robert Sharpe and Sandra Swirski at The Philanthropy Roundtable Annual Meeting last week.

House Republicans Unveil Sweeping Plan to Slash Tax Rates” via The Hill

READ: The Republican Tax Plan” via CNN

Tracking Taxes: Live Coverage of the GOP Tax Bill” via Wall Street Journal

Done Deal on Taxes” via Politico

“House Releases Sweeping Plan to Cut Taxes” via Politico

GOP Tax Overhaul Plan at a Glance” via Fox News

Click here to view The Philanthropy Roundtable Annual Meeting tax reform discussion with Robert Sharpe.

Let’s Look at Some Key IRS Rulings, Part 1

The first is a bedrock ruling from 1978, Revenue Ruling (Rev. Rul.) 78-197. This ruling deals with the situation in which an individual gives closely held stock to a charity, and the donor’s corporation subsequently redeems (buys back) the stock.

In a terse ruling, the IRS said that the buy-back won’t be considered as a redemption of stock from the donor, which would stick the donor with dividend income, so long as when the gift is made the charity isn’t obligated and can’t be compelled to sell the stock back to the donor’s corporation.

This ruling represents a white flag on the IRS’s part, given that the IRS had lost a string of 1970s court cases involving this fact pattern. In those cases, it was apparent the donor’s corporation was going to offer to redeem the donated stock from the charity. It was also clear the charity would accept the offer. The key thing is that the charity was in fact free to accept or reject the corporation’s offer to redeem.

In essence, this ruling says the IRS won’t attempt to connect the dots if the charity itself is free to choose whether to connect the dots.

Rev. Rul. 78-197 has the force of law and may be relied upon by all taxpayers. It has spawned a number of private rulings (PLRs), which can’t be relied upon by taxpayers generally, but which make plain the IRS’s position on connecting the dots.

One PLR from the 1980s, for example, shows how willing the IRS has been to expand the application of Rev. Rul. 78-197. In this PLR, the donor planned to give closely held stock to a charity. All the players anticipated, but merely anticipated, that the charity would sell the donated stock to donor’s family member for fair market value. The IRS said, no problem, given that the charity would be free to sell or not sell.

We’ll pick up this buyer-in-the-wings thread next time. Click here to read Part 2.

By Jon Tidd, Esq

Tax Reform Update 10/26/17

There’s been a little movement in the tax reform bill. The House of Representatives passed the Senate’s 2018 budget, in effect moving tax reform forward. In addition, the House Ways and Means Committee has announced that tax reform debate will begin on November 6.

Here are two articles from “The Hill” with more details about these developments:

House Adopts Senate Budget, Takes Step Toward Tax Reform

Brady Announces Tax Bill Markup for Nov. 6

What Makes Up the Tax Law?

This is an important matter, because it goes to what can be relied upon in trying to answer certain gift planning questions.

The bedrock tax law is the Internal Revenue Code (IRC), which has passed both congressional houses and been signed into law by the president. (The Constitution speaks even more fundamentally to certain tax issues but operates largely in the background of the tax arena.)

The IRC is a series of broad strokes. Congress leaves the details to the Internal Revenue Service (IRS), whose job is to interpret, administer and enforce the IRC. The IRS’s interpretation of the IRC is found in various pronouncements:

  • The Regulations are the principal pronouncement. Here, for example, we find certain date-of-gift rules for charitable gifts and copious detail on charitable remainder trusts (CRTs). The Regulations have the force of law and are presumed to be correct.
  • Other IRC pronouncements include
    • revenue rulings, which have the force of law;
    • revenue procedures, which, for example, contain specimen CRT agreements and which have the force of law;
    • various IRS Publications on a plethora of topics, such as receipt and valuation requirements for charitable gifts, which cannot be relied upon and do not have the force of law: and
    • IRS private letter rulings, which are an important source of information about charitable gift planning but which can be relied upon only by the party who obtained the ruling.

Next time, we’ll begin looking at some important IRS rulings on charitable giving.  After that, we’ll turn to the courts and look at some equally important court opinions on charitable giving.

by Jon Tidd, Esq

Tax Reform Update 09/27/17

Congress and the White House announced today the release of the outline on tax reform they promised for this week. A public press event, “Release of Unified Tax Reform Framework,” is planned for today (Wednesday, September 27, 2017) at 2:15 p.m. ET. It will be live-streamed on

The nine-page document, “Unified Framework for Fixing Our Broken Tax Code,” offers a road map for the goals of a bill aimed at retooling the American tax code.

According to the framework, the goals of a tax reform bill include lowering taxes for small businesses, de-incentivizing overseas jobs and tax breaks for the middle class. The full framework can be downloaded here.

Making the Most Generous Time of the Year Work for Your Organization

As many fundraisers know, the last three months of the year can be the most productive time period for nonprofit fundraising. This may be especially true this year. With record highs in the stock market, charitable giving up and continuing to rise, and tax reform discussions looming, it may be particularly important to encourage more gifts before December 31st this year.

Here are some Sharpe Group articles and posts we’ve shared with a treasure of information on why year-end fundraising is so important and some strategies and tools for making this a banner year for gifts to your organization.

“Planning Your Year-End Fundraising Calendar,” August 2017 Give & Take

“Why Year-End Is the Most Generous Time of the Year,” October 2016 Give & Take

Click here for tools for encouraging year-end giving.

Year-end is also a particularly good time of the year to encourage gifts of stock and gifts from retirement plans.

In addition, here’s an article we published in the December 2015 Give & Take that looks at some science behind charitable giving.

All of us at Sharpe Group wish you luck in your year-end fundraising. Please contact us is you have other questions about year-end or planned giving fundraising.

By Barlow T. Mann

Congressional Outline for Tax Reform Expected Soon

Sharpe Group experts will be monitoring tax reform measures and news as talks continue and legislation is prepared. We’ll be posting updates on this blog.

According to this news story from NBC News which ran on September 14, a Congressional outline should be coming around Sep 25, but legislation is not yet ready to be introduced. Click here to read the full story.

Sign up for our weekly blog for more upcoming updates.

Barlow T. Mann, Sharpe Group COO

A Gift Planning Quiz

Here’s a quiz. Answers next time.

  1. Donor uses highly appreciated stock to pay a legally enforceable pledge. Why isn’t Donor treated as selling or exchanging the stock, so that Donor realizes a capital gain?

Hint:  If an individual pays a debt by transferring appreciated stock to the creditor, the individual is treated as selling or exchanging the stock and does realize gain.

  1. Donor, the CEO of ABC Corporation, a large and publicly traded company, owns some ABC stock that is subject to sale restrictions under S.E.C. Rule 144. Can Donor give this stock to a charity?
  2. The same individual as in #2 owns incentive stock options (ISOs) that allow her to buy ABC shares from ABC at a bargain price. Can she give any of her ISOs to charity?
  3. Donor owns real estate subject to a mortgage, but Donor is not personally liable on the mortgage debt. If Donor uses the real estate to fund a charitable remainder unitrust, will the funding of the trust be treated as a bargain sale?
  4. Donor promises (pledges) to create a $1 million charitable lead annuity trust that will pay $50,000 a year to Charity for 10 years. The annual payments will be used to discharge a previous pledge running from Donor to Charity for which Donor’s name was placed on a room. Will this arrangement violate the self-dealing prohibition?

Note:  If you get this one right you get an A+ on the quiz.

  1. Extra credit: Donor wants to create a sizable gift annuity at Charity for the express purpose of paying for a table at Charity’s upcoming gala dinner. Any tax problems here?

Join us next time for the answers to this quiz and see how you scored.

by Jon Tidd, Esq