[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
UNLOCKING CHARITABLE GIVING
=======================================================================
HEARING
before the
SUBCOMMITTEE ON RURAL ENTERPRISES, AGRICULTURE & TECHNOLOGY
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, MAY 25, 2006
__________
Serial No. 109-54
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
_____
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COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
SAM GRAVES, Missouri DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire ED CASE, Hawaii
STEVE KING, Iowa MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan RAUL GRIJALVA, Arizona
RIC KELLER, Florida MICHAEL MICHAUD, Maine
TED POE, Texas LINDA SANCHEZ, California
MICHAEL SODREL, Indiana JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
J. Matthew Szymanski, Chief of Staff
Phil Eskeland, Deputy Chief of Staff/Policy Director
Michael Day, Minority Staff Director
SUBCOMMITTEE ON RURAL ENTERPRISES, AGRICULTURE AND TECHNOLOGY
SAM GRAVES, Missouri, Chairman JOHN BARROW, Georgia
STEVE KING, Iowa TOM UDALL, New Mexico
ROSCOE BARTLETT, Maryland MICHAEL MICHAUD, Maine
MICHAEL SODREL, Indiana ED CASE, Hawaii
JEFF FORTENBERRY, Nebraska RAUL GRIJALVA, Arizona
MARILYN MUSGRAVE, Colorado
Piper Largent, Professional Staff
(ii)
C O N T E N T S
----------
Witnesses
Page
Blunt, The Honorable Roy Blunt (MO-7), Majority Whip and
Congressman, U.S. House of Representatives..................... 3
Lee, Mr. Benny, Chief Executive Officer, Top Innovations, Inc.... 5
Halterman, Mr. Michael W., Chief Executive Officer, Catholic
Charities of Kansas City--St. Joseph........................... 6
Aviv, Ms. Diana, President and CEO, Independent Sector........... 7
Maehara, Ms. Paulette, President and CEO, Association of
Fundraising Professionals...................................... 9
Appendix
Opening statements:
Graves, Hon. Sam............................................. 15
Prepared statements:
Blunt, The Honorable Roy Blunt (MO-7), Majority Whip and
Congressman, U.S. House of Representatives................. 16
Lee, Mr. Benny, Chief Executive Officer, Top Innovations,
Inc........................................................ 19
Halterman, Mr. Michael W., Chief Executive Officer, Catholic
Charities of Kansas City--St. Joseph....................... 22
Aviv, Ms. Diana, President and CEO, Independent Sector....... 26
Maehara, Ms. Paulette, President and CEO, Association of
Fundraising Professionals.................................. 29
(iii)
UNLOCKING CHARITABLE GIVING
----------
THURSDAY, MAY 25, 2006
House of Representatives
Subcommittee on Rural Enterprises, Agriculture and
Technology
Committee on Small Business
Washington, DC
The Subcommittee met, pursuant to call, at 9:45 a.m., in
Room 2360 Rayburn House Office Building, Hon. Sam Graves
[Chairman of the Subcommittee] presiding.
Present: Representatives Graves, Barrow.
Chairman. Graves. I will call the hearing to order.
And I would like to say good morning to everyone and
welcome you to the Small Business Committee, the Subcommittee
on Rural Enterprise, Agriculture, and Technology. Today's
hearing is entitled ``Unlocking Charitable Giving,'' and we are
going to examine just what can be done to ease the burdens on
people and businesses that wish to help their neighbors.
Americans are the most generous people in the world and
have shown time and time again their willingness to reach deep
into their pockets to help those in need. Americans contributed
large sums of money to people halfway across the world when the
tsunami ripped through southeast Asia. In fact, private sector
donations doubled--almost doubled--what our government
contributed. The U.S. Government pledged $857 million, and at
the same time U.S. private sector and corporate donations
totaled almost $1-1/2 billion.
Americans again opened their pockets, their hearts, to the
victims of Hurricanes Katrina and Rita. Americans contributed
$3.3 billion to help friends and neighbors. That in itself is
an astonishing amount, in my opinion. According to a February
27 Washington Post story, 54 percent of donations are
controlled--or 54 percent of the donations sent to those
victims of Hurricanes Katrina and Rita were faith-based
organizations.
This hearing is going to specifically look at H.R. 3908,
The Charitable Giving Act of 2005, which is introduced by
Representative Blunt and Representative Ford. The Charitable
Giving Act aims to leverage new support and resources for a
broad range of community and faith-based groups from the
private sector. Many of the charities that help those in need
are, in fact, faith-based. Seventy-five percent of food
pantries are religious organizations, 71 percent of food
kitchens are faith-based, and 43 percent of shelters in this
country are funded by faith-based providers.
While Representative Blunt's bill is a tax bill, it is in
concert with the President's faith-based and community
initiative. H.R. 3908 is designed to rally the armies of
compassion, as our President likes to say. The bill provides
tax incentives and other measures to encourage charitable
giving by individuals and corporations. This bill would also
allow the 86 million Americans who do not itemize on their tax
returns the opportunity to deduct a portion of their charitable
contributions.
I would like to thank Representative Blunt for being here
today and for introducing this legislation. I will now turn to
Representative Barrow for his opening statement.
[Chairman Graves' opening statement may be found in the
appendix.]
Mr. Barrow. Thank you, Mr. Chairman. You know, we have had
some tough times in America over the last five years, from the
terrorist attacks on 9/11 to some of the worst hurricanes we
have ever seen. But America is a great nation, because we rally
together in the face of adversity, and the generosity of
Americans all over is evidence of this.
Charitable giving is essential to our economy and our
welfare, and I am glad we are having this hearing to examine
the current state of charitable giving. It is not only natural
disasters and terrorist attacks that cause Americans to give to
charities, organizations all around the world rally support for
their causes, everything from curing cancer to educating
children and fighting homelessness.
Anybody who believes in these causes understands the
importance of contributing to charitable causes. Small
businesses are now exception. Eighty-five percent of small
firms regularly donate money to charitable causes, and another
two-thirds contribute services for free to community charities.
These small businesses are making a good investment in their
communities, and they know best what local charities are worth
supporting.
Our role in this Subcommittee is to see how these
entrepreneurs are part of the charitable giving equation, and
to make sure that America's charitable infrastructure is
effective and efficient. A working charitable system helps
those most in need, while also allowing and even encouraging
all of us to reach out to our neighbors.
I want to thank Representative Blunt for his leadership on
this issue and all the witnesses for coming in today. And I am
glad to announce my intent to sign on as a co-sponsor of the
Charitable Giving Act of 2005, and I am going to encourage all
of my colleagues to do the same. Together we can ensure that
our country is one of compassion and generosity.
Thank you, Mr. Chairman.
Chairman. Graves. Thanks, Representative.
All the statements of the witnesses and the members will be
placed in the record in their entirety. I want to say that and
again thank you, Representative Blunt, for being here. I
appreciate it and look forward to hearing your testimony.
STATEMENT OF THE HONORABLE ROY BLUNT, CONGRESSMAN, U.S. HOUSE
OF REPRESENTATIVES
Mr. Blunt. Thank you, Chairman. I am pleased to be here.
Mr. Barrow, thank you for your comments, and thank you for
joining us on this bill.
Let me first of all give a little background. I do have a
prepared statement and, as you suggested, Mr. Chairman, it will
be in the record.
My good friend Harold Ford and I introduced this
legislation at the beginning of the last Congress. The House
passed the legislation at the--I think it was near the end of
that first year of our introduction of this bill. I was
actually very optimistic at the time. The Senate had passed a
bill, not quite as good I thought but a good enough bill that
we could certainly go to conference and talk to our friends in
the Senate. And that got caught up in a number of struggles
internally in the Senate and between the House and the Senate.
We never had a conference on that bill, and so my optimism at
the time has to--has been tempered over time.
I think it is sad that for three years now after the House
passage this legislation has not moved forward. I was pleased
when the Senate recently put most of the elements of our
package in their tax bill for reasons of votes and limitations
of how much we could do in the Reconciliation Act. That
language wasn't maintained in the Reconciliation Act that we
recently passed, but still has an opportunity to be part of a
following tax package, I hope it is, and hope that our
negotiators can find a way to make that happen.
Let me just hit two or three high points here of the
legislation that Harold Ford and I introduced, and I would be
glad to answer a few questions. I know you have got a great
series of witnesses coming who are out there, both in the
faith-based community and the charitable community generally
every day. And something that you and Mr. Barrow and I all
appreciate and understand is that money given to charities
seems to go and obviously does go so much further than money
given to government.
So whatever the tax consequences of this bill might be, the
good of the community is benefitted dramatically by those
consequences. If you want to see a dollar really stretched,
give it to a charity that is effectively doing what it does,
combining that dollar with volunteer help, other kinds of
contributions. And that is one reason that Harold Ford and I
were so pleased to be able to introduce that and still continue
to believe that this needs to become a part of our Tax Code.
Two or three things I will mention. One, as you did, the
non-itemizers, 86 million Americans, two-thirds of the people
who pay taxes don't itemize their taxes. And the person that
gives generously to church and charity gets no more benefit for
that generous effort they make than the person that lives next
door that gives nothing to church and charity. And so this bill
would allow individuals who give more than $250 to be able to
have a deduction as a non-itemizer of up to $500.
Couples would take a deduction of up to $1,000. It not only
encourages charity, but it rewards those who give as opposed to
those who don't. They get to go beyond the standard deduction
that every non-itemizer gets to a deduction that at least
begins to reflect some of what they generously try to give.
There are $2-1/2 trillion locked up in IRAs today. Many
people don't have in their IRA what they need from themselves.
Others do--people who have got--who have for whatever reason
made a good investment with their IRA, have other pensions and
retirement benefits coming to them, and suddenly they realize
that an awful lot of the wealth that they have accumulated is
in this IRA that has significant negative consequences to try
to give out of that IRA.
Our legislation essentially removes those negative
consequences. If you are a university president like I was the
four years before I came to Congress, or if you are doing what
many of the next witnesses are part of every day out there
raising money, everybody has got a story of somebody who came
and said, ``Here is how I would like to give,'' only to find
out that the consequences of giving out of their IRA were so
negative that they are not willing to do that once they really
understand what is happening.
This would remove those negative consequences, make that
money in IRAs available for charitable giving, and have real
impact to churches and charities who would like to have access
to this money without tax penalties. We raised the cap on
corporate charitable contributions from 10 percent of the
company's taxable income to 20 percent. That would be
particularly helpful with small, privately held corporations
that are intensely active in often a specific thing in their
community, and would love to give 20 percent of their taxable
income now, can only give 10 percent.
We enhance deductions for food donations to where people
who are not only--not only restaurants and grocers, but also
farmers, ranchers, food producers could give money and would be
encouraged to give food rather--in a way that they are not now.
As I said, next to the family unit, the local church or
charity is really the best equipped to assist those less
fortunate, and we are continually--we want to look for ways to
do that. I think our bill includes many of those ways, and I am
hopeful that even this year we still have an opportunity to
work with the Senate and see these provisions become part of
the law. And I am grateful to you, Mr. Chairman, for wanting to
focus on this, because it does have significant impact on
businesses, big and small, and on the communities those
businesses are in.
[Congressman Blunt's testimony may be found in the
appendix.]
Chairman. Graves. Thank you, Representative Blunt. I do
have a question. I was curious, has there been any studies or
estimates on what could happen to charitable contributions if
we are able to implement--
Mr. Blunt. Well, there was a--on our bill obviously there
was a scoring of the bill, which was the scoring, $12 billion
was the scoring of the cost of the bill over three--over 10
years.
So if that was the cost of the bill you would have to
assume that something in the neighborhood of double that, more
than double that, would have been the charitable impact. You
know, I think this had a charitable impact of $25- to $30
billion of additional giving that would be there if, in fact,
this bill would pass, at a cost--no question-to the taxpayers
or to the Treasury of money.
But, again, I will go back to my initial comment that $30
billion would do so much more good, in my view, than $30
billion given to the government, let alone the $12 billion of
tax incentives that the government would have to provide in
order to put that money in the hands of the charitable
community and serve a need in a more effective way than the
government itself ever does.
Chairman. Graves. There is no doubt that you could get
triple the bang through private organizations than you could
through the government.
Mr. Blunt. Right.
Chairman. Graves. Representative Barrow.
Mr. Barrow. Thank you, Mr. Blunt.
Thank you for holding the hearing, and thank you for
calling attention to this bill. And, again, we are actively
talking both with the Senate and with the Ways and Means
Committee right now about what we can do to include this as
part of a further tax package this year. There is R&D
extensions. There definitely will be one more tax package this
year that, frankly, on our side of the building we believe
easily gets 60 votes in the Senate. So it didn't need to be
part of Reconciliation. It becomes part of permanent tax law.
I would really like to see all of these provisions, and
certainly some of these provisions, have an opportunity to be
part of that package, and your calling attention to it is very
helpful to help make that happen.
Mr. Blunt. Thank you.
Mr. Barrow. So thank you.
Chairman. Graves. We will go ahead and seat the second
panel and bring everyone up, and then I will introduce them as
we move through. So come on forward.
Today on our second panel we have Benny Lee, who is the CEO
of Top Innovations, Incorporated, in Kansas City, Missouri; we
have Michael Halterman, who is the Chief Executive Officer at
Catholic Charities of Kansas City and St. Joe, based out of
Kansas City; Diana Aviv, President and CEO, Independent Sector,
in Washington, D.C.; and Paulette Maehara, President and CEO of
the Association of Fundraising Professionals here in
Washington, D.C.
I appreciate everybody being here today, look forward to
hearing your testimony. We will start with Benny. Thanks for
coming in.
STATEMENT OF BENNY LEE, TOP INNOVATIONS, INC.
Mr. Lee. Good morning. Thank you, Mr. Chairman, Ranking
Member Barrow, and members of this Subcommittee for inviting me
to testify today. I am Benny Lee, Chief Executive Officer of
Top Innovations, Incorporated, in Kansas City, Missouri. I also
serve on the Board of Directors of the Greater Kansas City
Chamber of Commerce, the Board of Directors of the Heart of
America United Way, and the Board of Trustees of Park
University.
I also want to thank Tom Dugard from Heart of America
United Way for being here to support me today. Tom's hard work
helps a lot of people in Kansas City and across the country.
Kansas City welcomed me with open arms when I came to the
United States many years ago. And one of my top priorities has
been to give back to my community. Over the many years I have
been involved with non-profit organizations, I have learned
about the burdensome legal restrictions that discourage
charitable giving by individuals and corporations.
I am here today to testify about the importance of
charitable contributions and how the Charitable Giving Act of
2005 can help more Americans help their own communities. I have
seen first hand the positive impact charitable contributions
can have for those in need.
There are over 86 million Americans annually who file for
the standard deduction on their federal income tax returns.
Because they do not itemize, they receive no deduction for
their charitable giving. While many of these 86 million donate
to charity, they should receive a deduction for their
contributions.
As an entrepreneur, I also know the importance of the
charitable donations by businesses. Currently, the cap on
corporate contribution charitable deductions is limited to 10
percent of the taxable income. The Charitable Giving Act of
2005 would increase the cap to 20 percent, promoting increased
corporate support to faith-based and community organizations
across America.
In addition, this bill will encourage more Americans to
donate food to the hungry and technology to those who want to
learn but cannot afford to buy computers, for instance. We need
to change our current system, because the non-profit sector can
usually provide better, more cost-effective services than the
public sector.
At a regional level, Kansas City's Heart of America United
Way's 2-1-1 service began operations in March 2006 after more
than three years of planning. The 2-1-1 is a central
clearinghouse for those in need and for those individuals and
organizations that want to volunteer their time, resources, and
services in a 23-county area of Missouri and Kansas.
With news of the 2-1-1 service spreading, the burden on the
9-1-1 service infrastructure should be significantly reduced.
9-1-1 will be able to provide Missourians and Kansans with
better, more efficient service for police and fire emergencies
because of the work 2-1-1 is doing.
The 2-1-1 is operational 24 hours a day, seven days a week,
and is staffed by a team of trained specialists. The 2-1-1
program demonstrates the kind of benefits that the public
sector and non-profit sector can provide to their communities
when working together.
Americans are the most generous people in the world, but we
can do more to encourage charitable giving. I urge Congress to
pass H.R. 3908, The Charitable Giving Act of 2005.
Thank you.
[Mr. Lee's testimony may be found in the appendix.]
Chairman. Graves. Thanks, Benny.
Next, we are going to hear from Mr. Halterman. Thanks for
coming in. I appreciate it. Look forward to hearing your
testimony.
STATEMENT OF MICHAEL HALTERMAN, CATHOLIC CHARITIES OF KANSAS
CITY--ST. JOSEPH
Mr. Halterman. Honored Representatives, I thank you for the
opportunity to testify today regarding charitable giving.
Twenty-three percent of our agency's current revenues come from
charitable giving. Thus, the generosity of our donors assists
our agency in fulfilling its mission.
As partners with the government in meeting the needs of the
poor and the vulnerable, we have strived to broaden our
services in areas such as prison reentry, housing, senior care,
child welfare, and many other much-needed services. We also
have participated in serving evacuees from the recent hurricane
disasters.
As a leader of a faith-based organization, I believe
government policy should encourage charitable giving, since
non-profit and faith-based organizations fulfill a public role
that would otherwise need to be met by our larger social
structures, including the Federal Government and the state
governments. It is imperative that the government continues to
support including adequate funding for non-profit and faith-
based organizations who serve the poor and the vulnerable.
Faith-based providers' religious or ethical tenets must be
protected in order for such providers to continue to provide
services in partnership with the government. This kind of
protection has been recognized as necessary by the President's
Faith-Based Initiative. One of the most critical provisions of
the Care Act of 2005 is the non-itemized deduction which would
allow taxpayers who do not itemize to deduct their charitable
contributions.
It has been suggested to limit deductibility to
contributions over $250 annually. I would suggest that even
smaller contributions serve an important purpose. Faith-based
and non-profit organizations will address the many needs of our
society, but we cannot do more with less. With the moral
scandal of so much poverty in the richest nation on Earth, we
must continue to seek ways to increase charitable giving, but
also provide adequate government funding to meet the needs of
the poor and the vulnerable.
Thank you.
[Mr. Halterman's testimony may be found in the appendix.]
Chairman. Graves. Thank you, Mr. Halterman.
Diana, thanks for being here today.
STATEMENT OF DIANA AVIV, INDEPENDENT SECTOR
Ms. Aviv. Thank you, Mr. Chairman. I come before you as
President and CEO of Independent Sector, which is a national
coalition of charities, foundations, and corporate giving
philanthropy programs that collectively represent tens of
thousands of non-profit groups across the nation.
I am here as the Executive Director of the panel on the
non-profit sector, which is a collaborative effort by a broad
segment of charitable organizations which offered over 120
recommendations in its report to Congress on the charitable
sector last summer for actions that we can take together to
independently strengthen transparency, governance, and
accountability of charities and foundations.
The independent sector itself has worked for over 25 years
to build ethical, effective organizations, and to encourage
Americans to contribute time and financial resources to
charitable organizations. We were active supporters of the
Charitable Giving Act of 2003, which passed Congress by an
overwhelming margin, as you know, of 408 votes to 13, and we
are proud to support the Charitable Giving Act of 2005.
We thank Representatives Blunt and Ford for their
leadership in sponsoring a strong package of tax incentives in
both of these bills, and we are pleased that this Committee and
the House of Representatives is seriously considering these
important incentives this year.
The tax incentives of the Charitable Giving Act would help
Americans provide a more generous support to our nation's
charitable organizations. And I want to highlight two
provisions in that bill that would give tremendous impact on
the ability of America's charitable non-profits to raise
private funds to support the vital services they provide to
communities throughout our country and around the world.
The first provision, commonly known as the IRA Charitable
Rollover, would, as you know, permit tax-free distributions
from individual retirement accounts for charitable
contributions. Due to the strong economy and stock market gains
over the last several decades, many individuals have sufficient
funds in their IRAs to retire and make contributions to their
favorite charitable organizations.
But under current law those individuals must include any
withdrawals from their IRA in their taxable income, which may
then be offset in part by a charitable contribution--by a
charitable deduction. The size of the deduction--portion of a
gift is limited by such restrictions as the percentage of
adjusted gross income limitation on charitable deductions and
the overall limitation on itemized deductions. As a result,
very few individuals donate IRA funds to charity during their
lifetimes.
The Charitable Giving Act would remove those disincentives
by permitting a taxpayer who has reached age 70-1/2 to exclude
from his or her income any IRA funds withdrawn and transferred
directly to a charity. This proposal is widely supported in the
charitable community and could unlock substantial new resources
to support charitable organizations and their community
programs.
Currently, about one-half of American households have IRA
accounts, and the total value of these funds held in those
accounts is approximately two and a half trillion dollars. If
less than one-half of one percent of those funds were donated
to charity over the next two years, donations could rise by as
much as $12.5 billion, and we believe a lot more than that
would be donated.
The second provision, commonly known as the non-itemizer
deduction, would permit almost 85 million taxpayers who claim
the standard deduction on the individual income tax returns to
receive a deduction for a portion of their charitable
contributions. Our nation's Tax Code has been, and remains, a
powerful tool available to demonstrate that we Americans highly
value and support charitable giving.
We believe that tax policy should strongly encourage giving
by all Americans, not just by those taxpayers who itemize
deductions on their annual income tax returns.
Charitable giving decisions begin with a desire to help
others or belief in the work of a particular charitable
organization, and that that organization is making the world a
better place. But research has shown that tax incentives can
strongly influence when and how much we give. This new
provision will encourage non-itemizers who already give to
increase their donations, and it will provide an added push for
those who don't yet make contributions to support the
organizations that serve their communities.
House and Senate conferees are currently considering
adopting a package of tax provisions as part of a broader tax
package--of tax law changes that could be included with other
legislation now moving through Congress. That package includes
a number of giving incentives included in the Charitable Giving
Act, as well as tax reforms which reflect in large part the
recommendations of the panel in the non-profit sector to close
tax loopholes that have permitted abuse of charitable
resources.
I strongly encourage members of this committee to support
the adoption both of the critical tax incentives of the
Charitable Giving Act and the consensus tax reforms, which will
discourage wrongdoers from taking improper advantage of our
charitable sector for personal gain without harming the
independence of charitable organizations that is so critical to
their ability to contribute to the well-being of society.
Thank you so much for your time.
[Ms. Aviv's testimony may be found in the appendix.]
Chairman. Graves. Thank you, Ms. Aviv.
Ms. Maehara?
STATEMENT OF PAULETTE MAEHARA, ASSOCIATION OF FUNDRAISING
PROFESSIONALS
Ms. Maehara. Thank you, and good morning. I am Paulette
Maehara. I am the President and CEO of the Association of
Fundraising Professionals. AFP's considerable expertise in the
legislative field is really based on our combined experience of
our 27,000 members across North America and around the world,
including 800 in Missouri.
I want to thank Congressmen Blunt and Ford for their
continued perseverance on this issue, and, Congressman Graves,
I thank you for your leadership in this area as well.
We have over 180 chapters located in almost every state and
metropolitan area, as well as internationally. Our members
raise funds for a variety of different types of charities, some
of which you have already heard from today. And we cover almost
every conceivable issue, such as education, health care,
religion, environment, just to name a few.
In the State of Missouri alone, we have four chapters with
800 members, representing organizations like the University of
Missouri, Make A Wish Foundation, the Springfield Family YMCA,
and the Archdiocese of St. Louis. These groups can all benefit
from the provisions that are found in this bill, particularly
the IRA rollover provision, which you have already heard some
of the comments about.
AFP members are required annually to sign our code of
ethics and our standards of professional practice, which were
developed in 1964. The code of ethics is widely recognized in
the sector as the leading guide to best practices in
fundraising. The code is unique, because it is the only code in
the fundraising profession that is enforced.
This background I think is cited only to emphasize the
importance that AFP members place on ethical fundraising
practices.
Provisions in the Charitable Act would create powerful new
giving incentives that would greatly impact many organizations.
Measures such as the IRA rollover and the enhanced deductions
for contributions are all vital to our community. The
charitable sector has experienced unprecedented growth over the
last few years. With this increase in the number of charities
comes a proportionate increase in competition for charitable
dollars.
Because of this intense competition for charitable dollars,
overall giving has not kept pace with the growth in the sector.
At the same time the demands on charities and charitable
programs are increasing, government cutbacks have compelled
charities to fill the gap when it comes to servicing the
disadvantaged.
The extra funding that H.R. 3908 would create, especially
in this time of heightened demand on the limited pool of
charitable dollars, would be considerable.
I want to focus just briefly on two things. In AFP's view,
the most important and probably the most powerful provision is
the IRA rollover. Currently, individuals may withdraw funds
from a traditional IRA rollover without incurring any early
withdrawal penalty, once they reach the age of 59-1/2, although
these withdrawals will be taxed as ordinary income.
Under the so-called minimum distribution rules, an
individual must begin making withdrawals by April 1st following
the year in which he or she turns 70-1/2. In either case, when
a donor withdraws an IRA and funds it to a charitable gift, he
or she will pay income tax on that withdrawal, and although it
is offset to some degree by a charitable deduction.
As a consequence, as you have heard, few people make
contributions from their IRA rollover--from their IRA funds.
And we have lots of examples that we could cite, but it is
certainly an inhibitor to giving IRA funds. If the IRA rollover
provision were enacted, the donor who would reach a defined age
would be allowed to take a charitable contribution if they give
funds from their IRA.
I want to emphasize that IRA rollovers would encourage
charitable contributions of excess dollars, and many, many
Americans do have additional dollars in their IRA. We estimate
about $2-1/2 trillion. Interesting that all of our numbers are
the same. And we also believe that it would increase giving by
billions of dollars annually.
I want to just touch briefly on the University of Missouri,
who is right now conducting a campaign for faculty, staff, and
retirees. The IRA rollover would be a tremendous asset for the
University of Missouri. And like many universities across the
nation, the funds that have traditionally supported higher
education are no longer there. In fact, today state
appropriations provide only one-fifth of Mizu's total budget.
Student fees contribute about 15 percent, and private gifts
make up the difference. So private gifts become extremely
important.
And just to touch briefly on the proposal that would allow
individuals to not itemize their deductions, as written the
non-itemizer would have to exceed the floor in order to claim a
deduction. Legislation was also proposed this year that would
impose a minimum donation floor on both itemizers and non-
itemizers.
AFP strongly opposes the application of any floor to
charitable contributions for--and regardless of whether they
itemize or they do not itemize. Such a policy change would be
unprecedented and would essentially comprise a new tax on
charitable donors who feel that they must meet those threshold
requirements.
I appreciate the opportunity to come before you today and
share some of these thoughts, and I particularly appreciate the
support you have given.
Thank you.
[Ms. Maehara's testimony may be found in the appendix.]
Chairman. Graves. Thank you. Ms. Maehara alluded to it, but
the three biggest items in this bill you have are being able to
obviously deduct as a non-itemizer the IRA provision, and then
also increasing corporate donations from 10 to 20. You alluded
to the rollover--or the IRA as being the most important part of
that.
I am throwing this out to everyone. What do you think would
be the most important? What would generate the most donations
or charitable giving, if we only had one or possibly two of
these provisions instead of all of them? Because so many times
in bills you end up compromising, and you lose some of your
provisions, but I'd be curious to hear what everybody thinks
would be the most important component of that.
Ms. Aviv. Mr. Chairman, may I suggest that there are
several ways to look at that. One way is to say only support
one provision. Another one is to take a number of provisions
and see how they might be adjusted so that there are different
audiences that benefit, because in the case of the IRA rollover
the organizations, the charities that are able to tap into
that, and the donors who are able to benefit from that, are
different from the audiences or the donors who give to the non-
itemizer.
And the problem is that if we want--or the challenge is
that if we want to encourage charitable giving across our
society, we don't want to limit it only to those who have
enough in their IRA rollover, in their IRA account that they
can rollover some of that money because they are fortunate
enough and wealthy enough to do that.
The value of the non-itemizer is that it gets at much
smaller donors as well and allows them to participate and
encourages them to participate more. So I would hate to rob
Peter to pay Paul, and I think that there's a way to do both.
And if it has to be more modest, then we can look at that, but
I would suggest to you that it is not an either/or proposition
necessarily.
Chairman. Graves. Anyone else?
Mr. Halterman. I would just say that I would agree with
her. The needs are greater than the dollars out there. And
whatever can be done, no matter if it is the IRA rollover or
the contributions, I would like to see as many of the
provisions as possible.
Ms. Maehara. And, Mr. Chairman, we would agree with that. I
mean, obviously, we would like to have both. And as Diana has
pointed out, if there is a way to compromise in some of those,
we would certainly want to have that dialogue. And so if--you
know, our desire would be to see both happen.
Chairman. Graves. Okay.
Mr. Lee. Mr. Chairman, also, as we all know, every year the
contribution is more than $240 billion. Seventy-five percent
comes from small individuals, and that is--will disappear from
the, you know, deductible--you know, standard deduction will be
not shown, and that is the area we need to encourage people to
contribute.
Chairman. Graves. Thank you all. Does anybody see any
opposition to this? Any of you, do you see any opposition
coming from local communities or nationwide or organized
opposition?
Ms. Aviv. I think our local communities are upset that we
haven't been able to get this done sooner. It seems to them
like a no-brainer, and that seems like a silly thing to say,
because we know how things happen. But our communities are--we
have had no opposition on these issues.
I think the big question that has been asked from time to
time is the cost of these provisions relative to the money that
it will generate. You know, that was the question that you
asked Mr. Blunt in the previous panel. And I think that we have
got strong estimates, but in the end we will have to see
whether our estimates turn out to be true. But that is the only
question.
From our communities, the more resources we can generate
and the more we can stimulate giving, the better off they
believe they will be.
Ms. Maehara. I would certainly concur with that, and I
think the only other point I would add is that the considerable
growth of the sector has far outstripped the ability for
philanthropic dollars to fill those gaps. And so anything we
can do to add to that--and our membership across the United
States is totally in support of this. And as Diana said, we
would like to see this get done sooner.
Mr. Halterman. If you look at the donations for the
hurricanes, just in our diocese of Kansas City-St. Joseph, we
brought in almost $600,000. Some of that was used locally, and
some of it was sent to Catholic Charities USA for the affected
areas.
I don't think there would be opposition. I think the
American people want to help other people.
Mr. Lee. As we all know, the only consequence is reduce of
revenue. However, if we can increase the contribution and the
contribution is used on public sector, and public sector
usually can function much efficiently, as we all know, than the
government. So that is--there is a balance, and then eventually
the contribution will be more than the consequence of the tax
revenue.
Ms. Maehara. Just one other thing I would like to add. I
think the other issue that is on the table are some of the
reform issues that have come forward. And so there are concerns
related to those, at least some of those reform issues, so on
the concern side that would be a concern, depending on what
some of those reforms were. So--
Chairman. Graves. Okay. Do you all see any--the generosity
of the American public just astounds me every time. And, you
know, we continue to see disasters, and we end up throwing--the
government ends up throwing a lot of money at some of these
things. Hurricanes--both of the hurricanes always come to mind.
And there is always, you know, the inefficiency of the way
government works.
And I have heard stories. We had a lot of folks from my
district go down and try to help out and were either turned
away or weren't able to--weren't utilized, you know, in their
area. And the amount of money that goes in so many cases
unaccounted for through the government sector is just
unbelievable, and I believe the private sector is definitely--
you know, does so much better job, because, you know, you are
paying a lot closer attention. You have to stretch those
dollars a lot farther.
But do you see any--in the aftermath of like some of the
problems we had with Hurricanes Katrina and Rita, do you see
any disillusioned contributors out there, donors out there,
that just back away and aren't interested anymore? And we had
this even--you know, it might even be touched on, too, because
we had the tsunami and a lot of people donated to that. And
then, bam, right after that we had the hurricanes that came
along. I don't know if people were tapped out or a little
disillusioned.
But do you see a little bit of that, or does the generosity
just continue to flow through?
Mr. Halterman. We have not seen any change. In fact, at our
agency, even with the hurricanes and the tsunami and all of
that, our charitable giving has went up. I think a lot of
charitable giving is a local thing. I mean, people choose a
specific program or a specific agency, or whatever, and I have
not seen it go down at our agency.
Even the United Way, and I think he could talk more about
this, we have been able to hit the goals that have been set by
the Board of Directors there in the local area.
Ms. Maehara. There has been a lot of conversation about
donor fatigue. And every year AFP does a survey of our members,
asking them to compare their fundraising results from one year
to the next. In our survey results that we did just for 2005,
what we found is that 76 percent of our members are raising the
same or more than they did in prior year.
And over 80-some odd percent of them are meeting their
campaign goals, so it is certainly consistent with what Michael
has said.
Ms. Aviv. Mr. Chairman, what we also found is that people
tend, in the case of crisis, to dig deeper into their pockets
and add additional rather than to take the same amount and
redirect it just to the emergency. What we also know, in coming
back to the incentives, is that if there are additional
incentives people will then even give more.
Mr. Lee. The 2-1-1 really demonstrates the--in hurricane in
Florida, I think it covered like--almost like 65 percent or 70
percent of the area. So it is really very, very useful, but
that is the way to promote 2-1-1.
Mr. Halterman. Mr. Chairman, I would also like to add that
charitable giving is not just an urban approach. It is--our
charitable giving in our rural areas, because of some of our
programs and emphasis on rural community development, has
increased our giving in the rural areas, which is surprising
because the rural areas have not seen the economic boom that
urban areas have.
Chairman. Graves. Well, again, it never ceases to amaze me,
the generosity of the American public. And the purpose of this
hearing is to try to bring some more attention to 3908 to push
it along. We are going to try to give as much support as we
possibly can to Representatives Blunt and Ford and continue to
try to get this done.
We are very optimistic that we can hopefully get it done
this year on the tax bill. I think it would have a tremendous
impact if you all testified on charitable giving in the United
States, and it is just going to provide that many more
opportunities. And, again, I think the private sector can do a
lot better job than the government can when it comes to
directing the resources that need to be directed.
I want to thank everybody for coming today and appreciate
it. This is, again, very important. It provides more attention
and obviously more support towards this bill. You served a
great purpose today, and I thank you for coming in.
[Whereupon, at 10:33 a.m., the Subcommittee was adjourned.]
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