Box 7, Folder 12, Document 20

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Report of Action by House Ways and Means Committee
as of Wednesday, August 6, 1969

The House Ways and Means tax reform bill, which will be debated
on the House floor this week, contains several important provisions
relating to foundations and their grantees. At its last meeting,

the Action Council went on opposition to many of -the

Committee's earlier proposals.

This is a report on the final action of the Ways and Manne Committee
1. Definition of Private Foundations. Private foundations have
been newly defined to include groups such as the Urban Coalition
and the Brookings Institution, in addition to seauee such as the

Ford and Carnegie foundations. _As such they are now subject to

an income tax and new limitations on their activities.

2. An annual tax of 7 1/2 per cent was imposed on net invest-

ment income. ' |

Explanation: The original tentative proposals had recommended

a tax of 5 per cent. It is estimated that revenue increases at

71/2 per cent will produce $65 million in the first year.

This is, in fact, a tax on beneficiaries of foundations rather
than on foundations. The Coalition may now have to pay a tax

on its next investment income.

3. Restrictions on Activities. The newly defined foundations

(including the Coalition) would be prohibited from:

a) Carrying on propaganda or otherwise attempting to
influence Lagiatation;

b) Attempting to influence legislation through attempting
to affect public opinion, and chrowal private com~
munication with a member or employee of a legislative
body, or with any other person who may participate
in the formulation of legislation (Except through
‘making available the results of nonpartisan analysis
or research).

Explanation: This is 3 modification of the original tentative
proposals which prohibited foundations from engaging in any

activities intended to influence the decision of any governmental

body. It is intended to tighten up the rules against lobbying.

Under present law, a foundation may influence legislation if
this is not a substantial part of its activity. The new legislation

‘would remove this test and allow no influencing of legislation.

The Committee Report explains»that these provisions are designed
to prohibit grassroots campaigns for the purpose of influencing

legislation. Further, foundations may discuss broad policy

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questions with congressmen and government agencies; they are

precluded from “direct attempts to persuade congressmen and

government officials to take positions on specific legislative

Voter Registration. Foundations would be prohibited from,

engaging in voter registration drives unless grants aie made .to
a 501i (e) (3) group thats

.a) operates in five or more states

b) receives support from five or more organizations, none

of which provides more than 25 per.cent of. its support.:

~* eSLanation: The tentative proposals would have prohibited

_ foundations from engaging in any voter registration activity ox
‘paying for any such activity. The bill moves away from that
strict view. The League of Women Voters Education Fund and the
Southern Regional Council are specifically mentioned in the

a Comtiittee Report as examples of dkuandenriene which would be


permitted to engage in voter registration.

But other registration and education programs-~-now conducted by

numerous smaller groups in less than five states--will be pro=

hibited from receiving foundation support.


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The House bill will, in all probability, be passed by the full

- House this week under a "closed" rule. Floor amendments to tax


- bills generally are not permitted, and passage of the tax reform

‘bill seems assured.

The Action Council and many of its cooperating groups have worked
to modify the tentative proposals of the Ways and Means Committee

so that the vital activity of foundations and foundation-related

organizations can go forward.

Our attention now turns to the Senate and the Finance Committee
in particular which will begin considering tax reform proposals

after the August Congressional Recess.

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