THE ISSUE
President's FY 2014 Budget
President Obama unveiled his nonbinding federal budget request to Congress for fiscal year 2014 on April 10, 2013. The $3.77 trillion budget plan includes a mixture of revenue increases and spending cuts, as well as investments in education, job creation, and infrastructure. The budget proposal:

• Replaces the $1.2 trillion in automatic, across the board sequestration spending cuts with over $1.8 trillion in deficit reduction over 10 years through a series of revenue and spending proposals including:
• Nearly $583 billion in new revenue from:
  
• Capping all itemized deductions, including the charitable deduction on income above $250,000 for joint filers ($200,000 for individuals)
  
• Establishing the "Buffett Rule" - 30% minimum effective tax rate for joint-filing taxpayers on income in excess of $1 million. (The minimum tax rate is phased-in linearly beginning at $1 million and is fully phased in at $2 million; the charitable deduction would be the only tax deduction allowed under the Buffett Rule)
  
• $400 billion in health-related savings that build on the Affordable Care Act
  
• $200 billion in mandatory program spending cuts
• $200 billion in discretionary spending cuts (split evenly between defense and non-defense spending)
  
• $230 billion in savings from inflation calculation cost-adjustments (Chained CPI)
  
• $200 billion in savings from reduced interest payments
  
• Proposes to permanently set the estate tax at 2009 levels ($3.5 million individual exemption; 45% top rate)
• Reduces and eliminates 215 programs and other initiatives for a savings of $25 billion in FY 2014.

Treatment of Charitable Deduction
President Obama's FY 2014 budget request again includes a provision to cap at 28 percent the value of itemized deductions, including the charitable deduction, on income above $250,000 for joint-filers. This marks the fifth consecutive budget that the president has proposed capping the charitable deduction.

Analysis of the President’s Budget

• Independent Sector summary (IS member password required)
• Administration FY 2014 budget fact sheet

Tax Issues (IS member password required)
President Obama's FY 2014 budget proposes limiting the rate at 28 percent on income above $250,000 a year that joint filers may take itemized deductions, including the charitable deduction; implements the Buffet Rule provision that would effectively replace the current alternative minimum tax (AMT); permanent;y sets the estate tax at 2009 levels; and calls for a single 1.35% excise tax rate on investment income of private foundations. The budget also proposes the creation of temporary 10% tax credit for for-profit and nonprofit employers that create jobs and increase wages.

• View the Treasury's revenue explanations of the President's FY 2014 budget
  

Spending Items (IS member password required)
President Obama's FY 2014 budget of $3.77 trillion sets total discretionary spending at $1.1 trillion. The budget proposes increased funding for several education and infrastructure related initiatives. The budget also includes targeted investments in programs that support low-income individuals, including, rental assistance and food and nutrition benefits.

E-filing of the Form 990
The Administration proposes to phase in a requirement that all tax-exempt organizations file their Form 990 information returns electronically and requires the IRS to release those data in a machine-readable format in a timely manner.  If enacted by Congress, the accessibility of machine-readable data would enable donors and foundations to access tax-exempt organization data more easily and make it easier to perform robust analyses that could facilitate improved capital flows to the sector.

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Background

What's in the Federal Budget?
The budget consists of three primary components:

• Revenue – money coming in
• Spending – money going out
• Impact on the debt

Spending initiatives are then divided into three categories:

• Mandatory or entitlement spending – for social safety net programs like Social Security, Medicaid, assistance and food programs for needy families, and the State Children's Health Insurance Program.
  
• Defense discretionary spending – includes the salaries of soldiers and sailors, research and development, and the acquisition of weapons, vehicles, and other technology.
  
• Non-defense discretionary spending – guides the operations of nearly every federal government agency and program and largely determines how much federal assistance state and local governments will receive. Spending categories include: agriculture, education, housing, health and human services, the environment, arts, and transportation.

The Federal Budget Process in Practice
In practice, each year varies -- Congress frequently modifies this schedule when it is unable to agree on a joint budget resolution or appropriations legislation. On the occasions when Congress and the President have not agreed on all 12 appropriations bills, Congress must pass a stop-gap measure, known as a continuing resolution, which provides temporary funding for all of the departments, agencies, and programs covered in the unfinished bills. Continuing resolutions can last for only a few weeks -- in order to provide the House, Senate, and President time to work out differences -- for the remainder of the session of Congress, or longer.

The Federal Budget - Legislative Process
Legislative activity on the federal budget generally takes place between the months of February and September, although spending and tax priorities contained within a budget document are often determined well before the president makes known his budget for the upcoming fiscal year.

February	On or by the first Monday in February, the President presents a budget proposal to Congress after the state of the union. The President's budget request includes proposed funding levels for discretionary and mandatory programs and changes to the tax code, as well as the level of deficit or surplus on which the government should run.
February through April	Taking into consideration the President's budget request and their own priorities, the House and Senate Budget Committees each develop a budget resolution outlining how much the government must spend according to 19 broad categories or budget "functions," how much revenue the government must collect, and the level of deficit or surplus on which the government will run. In particular, the resolution determines the total level of discretionary funding that will be available for the upcoming fiscal year. The full Senate and House each approve their respective resolutions, before meeting in conference to agree on a single, joint resolution, which does not require the President's approval.
April/May through Early Fall	The Appropriations Committees of each chamber consist of 12 subcommittees and set allocations for each one based on the budget resolution. Following hearings, each Subcommittee drafts a bill proposing spending levels for the programs and agencies under its jurisdiction, adhering to the overall discretionary spending level set by the budget resolution. After passage by the Subcommittee, the bill is sent to the full Appropriations Committee for passage.
Summer through Early Fall	Following passage by the Appropriations Committee, the individual appropriations bills are voted on separately in the House and Senate. After passage by their respective chambers, the bills are sent to a conference committee where the differences between the two chambers' bills are resolved.
September 30	The budget is enacted after the President has signed each individual appropriations bill.