Bench & Bar

JAN 2018

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13 BENCH & BAR | ENDNOTES 1. Note: Due to publishing deadlines, this article was submitted for publication on December 4, 2017, prior to final Congressional action on the Tax Cuts and Jobs Act. 2. It is estimated that U.S. companies have stockpiled $2.6 trillion offshore. e Institute on Taxation and Economic Policy, "Fortune 500 Companies Hold a Record $2.6 Trillion Offshore," March 28, 2017, available online at https://itep.org/fortune-500-companies-hold- a-record-26-trillion-offshore/. 3. For example, during their first terms in office, Congress passed then-President Ronald Reagan's Economic Recovery Tax Act by August 1981; then-President Bill Clinton's budget deal in August 1993; then-President George W. Bush's Economic Growth and Tax Relief Reconciliation Act by May 2001; and then-President Obama's children's health insurance legislation and $800 billion stimulus bill by August 2009. See e.g., Kat Lucero, "Experts think tax reform possible in 2017" (Nov. 11, 2016) available at http://thehill.com/ policy/finance/305359-experts-think-tax-re- form-possible-in-2017. 4. e Big Six includes Republican leadership in the House, Senate, and White House. Spe- cifically, they are: National Economic Council Director Gary Cohn, Treasury Secretary Ste- ven Mnuchin, Senate Majority Leader Mitch McConnell of Kentucky, Senate Finance Committee Chairman Orrin Hatch of Utah, House Speaker Paul Ryan of Wisconsin, and House Ways and Means Committee Chairman Kevin Brady of Texas. 5. See "Unified Framework for Fixing Our Broken Tax Code," available at https://www. treasury.gov/press-center/press-releases/Doc- uments/Tax-Framework.pdf, which includes specific goals for lowering business and indi- vidual tax rates. 6. See 115th Congress, H.R. 1, "Tax Cuts and Jobs Act," available at https://waysandmeans- forms.house.gov/uploadedfiles/bill_text.pdf. 7. Because the most common tax-exempt orga- nization is a charitable organization described under Section 501(c)(3) of the Internal Revenue Code – which includes nonprofit corporations organized and operated for religious, charitable, scientific, or educational purposes – unless otherwise specified, the author's comments will focus on these creatures of federal tax law. 8. See, e.g., "Tax-Exempt Organizations and Charitable Giving: e Senate Finance Committee Staff Tax Reform Options for Dis- cussion," June 13, 2013, at https://www.finance. senate.gov/imo/media/doc/06132013%20 Tax-Exempt%20Organizations%20and%20 Charitable%20Giving.pdf (last checked Nov. 1, 2017). 9. See, e.g., "Hearing on Tax Exempt Organi- zations," a Hearing Before the Subcommittee on Oversight of the Committee on Ways and Means, held May 16, 2012, available at https:// waysandmeans.house.gov/wp-content/up- loads/2017/07/20120516OS.pdf (last checked Nov. 1, 2017). 10. Chye-Ching Huang and Chloe Cho, "Ten Facts You Should Know About the Federal Es- tate Tax," Center for Budget and Policy Prior- ities, Oct 30, 2017, available online at https:// www.cbpp.org/research/federal-tax/ten-facts- you-should-know-about-the-federal-estate- tax. e authors explain that so few estates pay the tax because the exemption amount has increased from $650,000 per person in 2001 to $5.49 million per person in 2017. 11. IndyStar, "Trump tax plan: His complete speech in Indy" (Sept. 27, 2017) available online at https://www.indystar.com/story/ news/2017/09/27/trump-tax-plan-re- vealed-speech-indianapolis/710606001/. 12. See supra, fn. 3, at pg. 6. e Framework did not specify if this repeal would be permanent. 13. See e.g., supra fn. 5, Section 1602 of the Tax Cuts and Jobs Act, "Repeal of Estate and Generation-Skipping Transfer Taxes." 14. See Section 11061 of the Senate Tax Cuts and Jobs Act, "Increase in estate and gift tax exemption." See e.g., Laura Davison and Sahil Kapur, "'Death Tax' Would Live in Plan Senate Is Considering, Hatch Says," BNA Bloomberg (Oct. 31, 2017). 15. Dr. Rooney is a Professor of Economics and Philanthropic Studies and the Executive Associate Dean for Academic Programs at the Indiana University Lilly Family School of Philanthropy. His CV is available online at https://philanthropy.iupui.edu/doc/profiles/ rooney-patrick-cv1.pdf. 16. Patrick Rooney, "Why Nonprofits Should Weigh In on Proposals to Repeal Estate Tax," Nonprofit Quarterly (Oct. 23, 2017), available at https://nonprofitquarterly.org/2017/10/23/ nonprofits-weigh-proposals-repeal-estate-tax/. 17. Congressional Budget Office, "e Estate Tax and Charitable Giving" ( July 2004) available at https://www.cbo.gov/sites/ default/files/108th-congress-2003-2004/re- ports/07-15-charitablegiving.pdf. 18. Aaron Dorfman, "Estate Tax Repeal Would Be Devastating for Philanthropy in America" Huffington Post (Oct. 19, 2017). 19. Id. 20. Robert McClelland, "Charitable Bequests and the Repeal of the Estate Tax: Technical Paper 2004-08," Congressional Budget Office ( July 2004), p. 14 available at https://www.cbo.gov/ sites/default/files/108th-congress-2003-2004/ workingpaper/2004-8_0.pdf (noting "a 95 per- cent confidence interval around this estimate of 16 percent to 28 percent"). 21. See "Giving USA 2017: Total Charitable Do- nations Rise to New High of $390.05 Billion" ( Jun. 12, 2017), available at https://givingusa. org/giving-usa-2017-total-charitable-dona- tions-rise-to-new-high-of-390-05-billion/. 22. e Treasury Secretary's wife, Ms. Linton, may have made more headlines than the Secretary during their visit to Kentucky. See e.g., e New York Times, "Mnuchin's Wife Mocks Oregon Woman Over Lifestyle and Wealth," (August 22, 2017) available at https:// www.nytimes.com/2017/08/22/us/politics/ mnuchin-louise-linton-treasury-instagram. html. 23. Per the Framework, a proposed standard deduction of $24,000 for married taxpayers filing jointly is nearly double the $12,700 deduction in 2017. For single filers, a proposed standard deduction of $12,000 is nearly twice the $6,350 deduction in 2017. 24. See Council on Foundations Statement on House Tax Reform Legislation (Nov. 2, 2017) available at https://www.cof.org/news/ council-foundations-statement-house-tax-re- form-legislation. Today, about one-third of all taxpayers itemize their deductions. See Scott Greenberg, "Who Itemized Deductions," Tax Foundation (Feb. 22, 2016), available at https:// taxfoundation.org/who-itemizes-deductions/. 25. See Leonard E. Burman, et. al, "An Analysis of the House GOP Tax Plan," 8 COLUMBIA J. OF TAX LAW 257, at 262 (2017). 26. See New I.R.C. § 199A (providing a 20% deduction to pass-through tax payers on "Rual- ified Business Income"). 27. See Tax Policy Center, "How large are individ- ual income tax incentives for charitable giving?" available online at http://www.taxpolicycenter. org/briefing-book/how-large-are-individu- al-income-tax-incentives-charitable-giving. 28. See Joseph Rosenberg, et. al., "e New Debate over a Charitable Deduction for Nonitemizers," Tax Policy Center (Oct. 2016), available at http://www.taxpolicycenter. org/sites/default/files/publication/135446/ the-new-ebate-over-a-charitable-deduc- tion-for-nonitemizers.pdf 29. See 115th Congress, H.R. 3988, "'Universal Charitable Giving Act of 2017", available at https://www.congress.gov/115/bills/hr3988/ BILLS-115hr3988ih.pdf. 30. See "Independent Sector Launches Aware- ness Campaign to Expand the Charitable Deduction" (April 4, 2017) available at https:// www.independentsector.org/news-post/ giving100-launch-release/. e Independent Sector is a membership organization that works to strengthen America's nonprofit (or independent) sector. Its members include leaders from foundations, voluntary organiza- tions and corporate giving programs. For more background, see https://www.learningtogive. org/resources/independent-sector. 31. See Section 3803 of the House Tax Cuts and Jobs Act, "Excise tax on excess tax-exempt organization executive compensation," and Section 5103 of the House Tax Cuts and Jobs Act, "Excise tax based on investment income of private colleges and universities." 32. See Section 5001 of the House Tax Cuts and Jobs Act, "Clarification of unrelated business income tax treatment of entities treated as ex- empt from taxation under Section 501(a)", and Section 5002 of the House Tax Cuts and Jobs Act, "Exclusion of research income limited to publicly available research". 33. See Section 13702 of the Senate Tax Cuts and Jobs Act, "Unrelated business taxable income separately computed for each trade or business". 34. See "Hatch Opening Statement at Finance Committee Hearing on Business Tax Reform" (Sept. 19, 2017), available at https://www. finance.senate.gov/imo/media/doc/9.19.17%20 Hatch%20Opening%20Statement.pdf. 35. e charitable deduction narrowly missed inclusion in the original 1913 federal income tax law. See Joseph J. orndike, "How the Charity Deduction Made the World Safe for Philanthropy," Dec. 12, 2012, Tax Analysts at http://www.taxhistory.org/thp/readings.nsf/ ArtWeb/972168BE A0B68D8585257B160048DD4A?Open- Document, citing J. S. Seidman, "Seidman's Legislative History of the Federal Income Tax Laws, 1938-1861," pgs. 944-945 (1938). 36. See David Sherfinski, "Ways and Means chair- man would accept a tax code overhaul to jump- start economy," e Washington Times (Aug. 16, 2017) available at http://www.washington- times.com/news/2017/aug/16/kevin-brady- would-deepen-federal-deficit-to-jump-s/.

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