KPMG report: Tax proposals for exempt organizations in Biden Administration’s budget for FY 2023

Two proposals related to tax-exempt organizations

Biden Administration’s budget for FY 2023

The U.S. Treasury Department on March 28, 2022, released details of tax proposals in the administration’s budget recommendations for FY 2023 in the “Green Book.”

  • Read Treasury’s “Green Book” [PDF 2.45 MB] for FY 2023—General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals.
  • Read KPMG’s report of initial impressions of the tax proposals in the FY 2023 budget: TaxNewsFlash

Two proposals relating to charitable organizations and charitable giving were included in the Green Book.

Proposals related to charitable organizations

Private foundation contributions to donor advised funds not qualifying distributions

The proposal provides that a private foundation distribution to a donor advised fund (DAF) would not be a qualifying distribution unless:

  • The DAF distributes the funds by the end of the following tax year as a qualifying distribution
  • The private foundation maintains records or other evidence confirming that the DAF distributed the funds as qualifying distributions within the required time

Currently, private foundations generally must distribute 5% of their non-charitable use assets annually, but they cannot count amounts distributed to a related entity or another private foundation unless the funds are in turn distributed by the end of the following tax year as qualifying distributions. The proposal would effectively treat distributions by private foundations to DAFs the same as distributions to other private foundations.

The proposal states that it would be effective after the date of enactment.

Denial of deduction for certain conservation easement contributions

The proposal would deny a section 170 charitable contribution deduction for a conservation easement contributed by a partnership if the amount of the contribution exceeds two and a half (2½) times the sum of each partner’s relevant basis in the partnership. However, the proposed deduction restriction would not apply in the case of certain family-owned partnerships or if a three-year holding period were satisfied.

This proposal would be effective generally for contributions made in tax years ending after December 23, 2016 (or, in the case of contributions to preserve a certified historic structure, for contributions made in tax years beginning after December 31, 2018).


For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | ruthmadrigal@kpmg.com

Preston Quesenberry | pquesenberry@kpmg.com

Carrie Garber Siegrist | carriesiegrist@kpmg.com

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.