Bill Overview
Title: DITCH Act
Description: This bill denies an organization a tax exemption if it holds any interest in a disqualified Chinese company or fails to timely transmit required annual reports. A disqualified Chinese company is any corporation incorporated in China, or that invests more than 10% of its stock in certain Chinese entities, including entities controlled by the Chinese Communist Party. The Department of the Treasury may grant organizations a waiver of the denial of the tax exemption under specified circumstances. Organizations that hold any interest in a disqualified Chinese company must file annual reports describing each interest held in the company, the period during which such interest was held, and whether the organization has been granted a waiver.
Sponsors: Rep. Gallagher, Mike [R-WI-8]
Target Audience
Population: Individuals associated with organizations holding investments in disqualified Chinese companies
Estimated Size: 1000000
- The bill targets organizations that hold interests in disqualified Chinese companies, specifically those incorporated in China or with significant investments in certain Chinese entities.
- Non-profit organizations and other entities that rely on tax exemptions will be directly impacted if they do not comply with the new regulation.
- Organizations that have financial ties or investments in Chinese companies face the risk of losing tax exemptions, prompting them to reconsider their investments or organizational structures.
Reasoning
- The bill targets organizations with investments in disqualified Chinese companies, affecting non-profit organizations that may lose tax exemption benefits.
- Many non-profit organizations may have international investments, including in Chinese companies, due to global operations or portfolio diversification interests.
- The policy could lead to financial restructuring in organizations aiming to maintain tax exemptions, impacting employees and beneficiaries.
- Given the estimated American target population of 1,000,000 individuals potentially affected, we aim to interview a diverse representation across typical scenarios.
- Cost constraints suggest focusing on prominent policy impacts, particularly how losing tax exemptions affects organizations' financial health and subsequently wellbeing of individuals involved.
Simulated Interviews
Non-profit CEO (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- The policy forces us to rethink our investment strategy.
- Losing tax exemption means reallocating funds from operational budgets if we don't divest.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 7 |
| Year 2 | 5 | 7 |
| Year 3 | 4 | 8 |
| Year 5 | 4 | 8 |
| Year 10 | 6 | 8 |
| Year 20 | 7 | 9 |
Non-profit financial officer (San Francisco, CA)
Age: 60 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- The DITCH Act could severely cripple our financial growth plans.
- Concerned about how it affects both immediate and long-term financial health.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 8 |
| Year 2 | 6 | 8 |
| Year 3 | 5 | 8 |
| Year 5 | 5 | 9 |
| Year 10 | 7 | 9 |
| Year 20 | 7 | 9 |
Strategic investment consultant (Boston, MA)
Age: 35 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- This will complicate investment advising and require more stringent reporting.
- Could push organizations to reconsider familiar yet high-risk portfolios.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 8 |
| Year 3 | 6 | 8 |
| Year 5 | 7 | 8 |
| Year 10 | 8 | 9 |
| Year 20 | 8 | 9 |
Small business owner (Chicago, IL)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 7/20
Statement of Opinion:
- Indirectly affects us; if non-profits lose tax benefits, our business might suffer.
- Potential loss of clientele depends on whether they divest strategically.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 8 |
| Year 20 | 8 | 8 |
Non-profit fundraiser (Austin, TX)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 6/20
Statement of Opinion:
- Worried about our ability to attract large donors if their tax situations worsen.
- Need to strategize for sustainable funding without depending heavily on affected funds.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 8 |
University professor (Seattle, WA)
Age: 40 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 2.0 years
Commonness: 8/20
Statement of Opinion:
- Important to critically evaluate the cost of certain investments in regions like China.
- The act adds complexity to research involving Chinese economic data.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 9 |
| Year 5 | 8 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Policy analyst (Washington, D.C.)
Age: 55 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 9/20
Statement of Opinion:
- The policy is a necessary consideration in the geopolitical landscape.
- Expect organizations to prioritize compliance but might challenge smaller entities.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 7 |
| Year 3 | 6 | 7 |
| Year 5 | 7 | 8 |
| Year 10 | 7 | 8 |
| Year 20 | 8 | 8 |
Corporate lawyer (Miami, FL)
Age: 31 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- Law will complicate compliance frameworks, increasing demand for legal advisory.
- Ensures organizations strategically handle foreign investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 8 |
| Year 5 | 7 | 8 |
| Year 10 | 8 | 9 |
| Year 20 | 9 | 9 |
Retired non-profit director (Los Angeles, CA)
Age: 65 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- Policy could encourage healthier investment practices for non-profits.
- Worried about smaller organizations lacking resources to manage sudden changes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 8 |
| Year 3 | 6 | 8 |
| Year 5 | 7 | 9 |
| Year 10 | 7 | 9 |
| Year 20 | 8 | 9 |
Environmental activist (Denver, CO)
Age: 52 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 7/20
Statement of Opinion:
- Foundation partnerships may be strained if their tax benefits are threatened.
- Ultimately could affect our environmental initiatives if not resolved.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 8 |
Cost Estimates
Year 1: $15000000 (Low: $10000000, High: $20000000)
Year 2: $12000000 (Low: $9000000, High: $15000000)
Year 3: $12000000 (Low: $9000000, High: $15000000)
Year 5: $12000000 (Low: $9000000, High: $15000000)
Year 10: $12000000 (Low: $9000000, High: $15000000)
Year 100: $12000000 (Low: $9000000, High: $15000000)
Key Considerations
- The scope of the policy enforcement and organizational logistics will determine the extent and success of the disinvestment from disqualified companies.
- The collaboration between IRS, Treasury, and other agencies will influence administrative efficiency and cost management significantly.
- Shifts in funding sources or investment patterns outside Chinese holdings can influence broader economic activities and tax impacts over time.