[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




                                 _____

                 U.S. GOVERNMENT PRINTING OFFICE

28-740 PDF              WASHINGTON : 2006
_________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government 
Printing  Office Internet: bookstore.gpo.gov  Phone: toll free 
(866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250 Mail:
Stop SSOP, Washington, DC 20402-0001












                      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.]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


                                 
