TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, June 14, 2013

Senate Releases Tax Reform Option Paper on Tax-Exempt Organizations and Charitable Giving

Senate LogoThe Senate Finance Committee  yesterday released its Ninth Tax Reform Option Paper on Tax-Exempt Organizations and Charitable Giving:

This document is the ninth in a series of papers compiling tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system. This compilation is a joint product of the majority and minority staffs of the Finance Committee with input from Committee members’ staffs. ... The paper sets out the following broad goals for reform in this area:

  • Maximize the efficiency and effectiveness of any incentives for charitable giving that are retained or reformed;
  • Consider whether the availability of tax incentives for charitable giving should be broadened to more taxpayers;
  • More tightly align tax-exempt status with providing sufficient charitable benefits;
  • Closely examine the relationship between political activity and tax-exempt status;
  • Reconsider the extent to which tax-exempt organizations should be allowed to engage in commercial activity; and
  • Improve the accountability and oversight of tax-exempt organizations.

The paper outlines the following broad policy options with more specific proposals detailed in the paper:

  1. Repeal the charitable contribution deduction
  2. Fundamentally reform the charitable contribution deduction
  3. Attempt to increase the effect of charitable incentives on charitable giving
  4. Incrementally reform the charitable contribution deduction


  1. Tax all commercial activities of tax-exempt
  2. Revise the requirements for tax-exempt status for organizations engaged in commercial activity
  3. Revise the UBIT rules for organizations engaged in commercial activity
  4. Tighten rules on conversion from tax-exempt to for-profit status
  5. General reforms to tax-exempt entities


  1. Limit political activity of 501(c)(4), (c)(5) and (c)(6) organizations
  2. Change the categories of tax-exempt organizations that may engage in political activities
  3. Reform reporting and disclosure rules
  4. Clarify that payments to 501(c)(4) organizations are excluded from the gift tax
  5. Expand the prohibition on 501(c)(4) organizations engaging in lobbying from receiving any federal funds to include contracts.


  1. Reform the taxation of private foundations
  2. Reform the taxation of endowments
  3. Ensure that donor-advised funds and supporting organizations are directing resources for charities
  4. Limit executive compensation by tax-exempt organizations
  5. Reform reporting requirements
  6. Develop enforcement methods other than revocation of tax-exempt status as the only penalty for noncompliance

Congressional News, Tax | Permalink

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