August 12, 1999 | Read Time: 2 minutes
House and Senate Republicans have agreed on a compromise tax bill that contains numerous provisions that affect donors, charities, and foundations.
The lawmakers tentatively agreed to:
* Allow people age 701/2 and older to make tax-free withdrawals from individual retirement accounts for donations to a charity. (An earlier version of the bill would have also permitted people that age to make tax-free contributions from their I.R.A.’s through planned gifts such as charitable remainder trusts, but the idea was dropped.)
* Effectively abolish a controversial giving technique — “split-dollar plans” — in which charities and donors divide the proceeds of life-insurance policies bought with tax-deductible gifts.
* Remove limits on the amount that charities can spend on “grassroots lobbying” — efforts to rally popular opinion in support of or in opposition to a bill. Charities now are allowed to spend no more than 25 per cent of their total lobbying expenses on grassroots advocacy.
* Allow tax-exempt groups to receive rent, royalty, interest, and other payments from subsidiaries they control without counting the money as income, as long as the payments are made at fair market value.
* Exempt from taxation certain reimbursements to volunteers who use their cars in connection with their charity work.
The tax bill would phase out the estate tax. Some fund raisers are concerned that elimination of the estate tax might cause a significant decline in major gifts from the estates of wealthy donors. That’s because some donors have been motivated to give as a way to reduce the amount of estate taxes they must pay.
The compromise legislation dropped a Senate proposal to allow private foundations to increase their holdings of publicly traded voting stock of a corporation received by bequest from the current maximum of 20 per cent to 49 per cent in 2008. The provision reportedly was drafted to help Warren Buffett, the investor and philanthropist.
