Legislative Update

1. Legislative Update Network of California Community College Foundations Symposium 2009 Manhattan Beach, CA October 29, 2009

2. Overview • CASE • Key Players • Context • Our Issues • Your Questions COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

3. What We Do Nonprofit Sector Higher Education Tax Issues - CASE COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

4. Key Players in DC • Senate Finance Committee • Chairman Max Baucus (D-MT) • Ranking Member Charles Grassley (R-IA) • House Ways and Means Committee • Chairman Charles Rangel (D-NY) • Ranking Member Dave Camp (R-MI) • Internal Revenue Service COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION 4

5. Early Morning Quiz • Can you name the six California members on the House Ways and Means Committee? 2. Which California Senator serves on the Senate Finance Committee? COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

6. Ways and Means • Rep. Pete Stark (D) • Rep. Xavier Becerra (D) • Rep. Mike Thompson (D) • Rep. Linda T. Sánchez (D) • Rep. Wally Herger (R) • Rep. Devin Nunes (R) COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

7. Finance 0 COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

8. Context • Weak Economy • Packed Agenda • Budget Deficit / Pay-As-You-Go • Mid-Term Elections COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

9. Bipartisanship? COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

10. Issues for 2009 What issues are on the congressional agenda for the remainder of 2009? COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

11. Remaining Issues • Health Care Reform • Afghanistan • Appropriations • Cap and Trade • Financial Regulatory Reform • Student Loan Bill • Unemployment • Estate Tax COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

12. Packed Agenda COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

13. Our Issues • Itemized Deduction Cap • Estate Tax • IRA Charitable Rollover • Endowment Payout • Governance Issues • Revenue Raisers COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

14. Itemized Deduction Cap • Current Law • Taxpayers making over $200,000 (married couples $250,000) - itemized deductions at 33 percent or 35 percent rate • Proposal in Pres. Obama’s FY10 budget plan • Taxpayers making over $200,000 (married couples $250,000) - itemized deductions capped at 28 percent rate • Revenue raised to cover portion of health care reform. • Modified Proposal • Itemized deductions capped at 33 percent and 35 percent when income tax rates rise in 2011. • Resistance from charitable community and on Capitol Hill COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

15. Marginal Tax Rates Prior to 2001 Taxable IncomeTax Bracket 0-26,250 15% 26,250-63,550 28% 63,550-132,600 31% 132,600-288,350 36% 288,350 and above 39.6% • EGTRRA 2001 (Bush tax cuts) • Itemized Deduction Rate = Tax Bracket COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

16. Current Marginal Tax Rates (2009) Taxable IncomeTax Bracket 0-8,350 10% 8,350-33,950 15% 33,950-82,250 25% 82,250-171,550 28% 171,550-372,950 33% 372,950 and above 35% • Itemized Deduction Rate = Tax Bracket COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

17. Tax Brackets in 2011 Taxable IncomeTax BracketDed. Rate 0-8,350 10% 10% 8,350-33,950 15% 15% 33,950-82,250 25% 25% 82,250-171,550 28% 28% 200,000 – xxx,xxx 36% 28% or 33% xxx,xxx – xxx,xxx 39.6% 28% or 35% • 11.6% gap with 28% cap • 4.6% gap with 35% cap COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

18. Outlook for Cap • CASE Opposes Itemized Deduction Cap • Senate & House Bills Do Not Include Cap • Amendments offered in Senate Finance • Other Revenue Raisers Unpopular • House surtax • Senate excise tax on “cadillac” plans COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

19. Estate Tax • Fully repeals in 2010, returns to pre-2001 level in 2011 • Partisan stalemate, Impact of Election • President Obama: Freeze at 2009 levels ($3.5 million; 45 percent rate) • Congressional Budget Resolution • CASE Supports Freeze at 2009 levels COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

20. Estate Tax Outlook • House Ways and Means Bill: Permanent freeze at 2009 levels • Senate Finance: Unclear • 60 votes in the Senate? • Likely Scenario: One Year Extension at 2009 levels. COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

21. IRA Charitable Rollover • Enacted in PPA • taxpayers age 70 ½ or older • $100,000 per year • 2 years (2008, 2009) • Extended as part of “Bailout” Bill (H.R. 1424) • Public Good IRA Rollover Act of 2009 • H.R. 1250 (Pomeroy, Herger) • S. 864 (Dorgan, Snowe) COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

22. Extenders Outlook • IRA Charitable Rollover an “extender” • tax provisions set to expire on Dec. 31, 2009 • other charitable incentives, R&D tax credit • Estate Tax “Must Pass” • Extenders along for the ride? • House: No; Senate: Unclear • Pay-as-you-go • Retro in 2010? COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

23. Endowment Payout • Sen. Grassley: Mandatory 5% payout for endowments with more than $500 million in assets. • Rep. Welch: Mandatory 5% payout, averaged over a 3 or 5 year period, for all endowments. • Economic Downturn • New Arguments • Action Unlikely in 2009 COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

24. Governance Issues • SFC Staff Discussion Draft (2004) • Board Structure • Independence • Conflicts of Interest • Compensation (AIG) • Investment Decisions COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

25. Revenue Raisers • Pay-As-You-Go Rules • Applying PF rules to colleges, universities • Increases in penalty excise taxes • jeopardy investment excise tax • New governance penalties COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

26. Resources COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

27. Questions? Brian Flahaven Director of Government Relations and Institutionally Related Foundations E-mail: flahaven@case.org Phone: 202-478-5617 COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION

28. Thank you. Questions?