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The IRS announced on January 4 that it will be prepared to receive 2017 tax returns on January 29, 2018. Taxpayers may submit returns between that date and April 17, 2018.
The April date is delayed because April 15 is on a Sunday. In addition, Monday, April 16, 2018, is Emancipation Day in the District of Columbia. Because the last tax filing day must be on a normal business day, the actual due date this year is Tuesday, April 17, 2018.
One uncertainty for the filing season is the Tax Extenders Act of 2017. It was filed on December 20 by Senate Finance Committee Chairman Orrin Hatch (R-UT). The Tax Extenders Bill may permit 2017 deductions or credits for geothermal heat pumps, fuel cells and small wind turbines.
This is also the second year that employers, financial institutions and payroll service providers must adhere to early reporting requirements. They now generally must issue IRS Forms W-2 and W-3 by January 31, 2018. This early reporting requirement was created in the PATH Act by Congress to facilitate early filing by taxpayers.
Congress Returns to Budget Negotiations
In December 2017, Congress passed a continuing resolution to fund the government until January 19, 2018. After returning to Washington, members of both parties began negotiations over the budget year that ends September 30, 2018.
Some senators think that it will not be possible to complete the budget negotiations prior to January 19. It may be necessary to pass another a short-term continuing resolution. Sen. Richard Shelby (R-AL) suggested the negotiations have not "been settled" for the year. The short-term continuing resolution may last until the end of February.
Sen. Chuck Schumer (D-NY) spoke to media outlets on January 4. He stated that he has "some leverage to make sure that the middle class is protected." Schumer continued to explain that while the Senate used budget reconciliation to pass the Tax Cuts and Jobs Act in December, "they cannot use reconciliation [on this], so Democrats can be there like Horatio at the bridge."
Schumer was observing that the Republicans now have a narrow 51 to 49 majority and will require 60 votes for a budget bill. Therefore, a budget bill will be a bipartisan solution.
Senate Majority Leader Mitch McConnell (R-KY) also spoke to media outlets on January 4. He stated, "We are in intense talks about all these issues, obviously spending caps with a particular emphasis on meeting the needs of the Defense Department among my members. We need to take care of children's healthcare, Section 702 related to national security and a variety of other issues that either expire or need to be dealt with."
Editor's Note: The budget bills will be a primary subject of negotiation by both parties. House and Senate members will be running in primary elections by June, so they will attempt to resolve the budget issues prior to that time.
Nonprofit Advocacy in 2018
With the doubling of the standard deduction to $24,000 for married couples and $12,000 for single taxpayers in 2018, the Joint Committee on Taxation estimates the number of itemizers will decline from 45 million in 2017 to about 18 million in 2018. Nonprofits are concerned that the 27 million taxpayers who now take the standard deduction will give less to charity in 2018. If these taxpayers do not itemize, some may reduce their giving.
Because the Tax Cuts and Jobs Act is the largest tax reform in three decades, there will be a technical corrections bill. Nonprofits hope to encourage Congress to make pro-charity changes in this bill.
Jamie Tucker, Director of Public Policy at Independent Sector, noted, "I think history shows that any time there is a big movement or a big package, there always is an opportunity to make corrections moving forward. I think when Members of Congress see the practical effects of some of the changes, there is generally some momentum behind talking about solutions or corrections. Those could be opportunities for us to step in and improve things from a charitable giving side and also address a number of other issues."
Hadar Susskind, Vice President of Public Policy at the Council on Foundations, outlined three goals for future discussions. These goals include creating a universal charitable deduction, simplifying the private foundation excise tax and permitting IRA charitable rollovers to donor advised funds.
Editor's Note: There are two potential IRA rollover bills from 2017 that may be introduced again. The CHARITY Act (S. 2750) was cosponsored by Sen. John Thune (R-SD) and Sen. Ron Wyden (D-OR). It would permit IRA charitable rollovers to donor advised funds. The Legacy IRA Act (H.R. 1337) was cosponsored by Rep. Kevin Cramer (R-ND) and Rep. Earl Blumenauer (D-OR). It permits IRA owners over age 65 to make charitable rollovers to a standard unitrust, an annuity trust or an immediate charitable gift annuity.
Applicable Federal Rate of 2.6% for January -- Rev. Rul. 2018-1; 2018-2 IRB 1 (17 Dec 2017)
The IRS has announced the Applicable Federal Rate (AFR) for January of 2018. The AFR under Section 7520 for the month of January is 2.6%. The rates for December of 2.6% or November of 2.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2017, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return. Federal rates are available by clicking here.