[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
TAX REFORM AND CHARITABLE CONTRIBUTIONS
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 14, 2013
__________
Serial No. 113-FC02
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
TAX REFORM AND CHARITABLE CONTRIBUTIONS
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 14, 2013
__________
Serial No. 113-FC02
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
21-128 WASHINGTON : 2017
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Washington, DC 20402-0001
COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
C O N T E N T S
__________
Page
Advisory of February 14, 2013 announcing the hearing............. 2
WITNESSES
Naomi L. Adler, Esq., President and CEO, United Way of
Westchester and Putnam, White Plains, NY....................... 292
John Ashmen, President, Association of Gospel Rescue Missions,
Colorado Springs, CO........................................... 207
Diana Aviv, President and CEO, Independent Sector, Washington, DC 115
John A. Berry, CEO and Executive Director, Society of St. Vincent
de Paul Georgia, Atlanta, GA................................... 213
LaKisha Bryant, President and CEO, United Way of Southwest
Georgia, Albany, GA............................................ 231
Nicole Lamoureux Busby, Executive Director, National Association
of Free and Charitable Clinics, Alexandria, VA................. 154
Brent E. Christopher, President and CEO, Communities Foundation
of Texas, Dallas, TX........................................... 178
Roger Colinvaux, Associate Professor, Columbus School of Law, The
Catholic University of America, Washington, DC................. 36
William C. Daroff, Vice President for Public Policy and Director
of the Washington Office, The Jewish Federations of North
America, Washington, DC........................................ 193
Tim Delaney, President and CEO, National Council of Nonprofits,
Washington, DC................................................. 260
Vinsen Faris, CFRE, Executive Director, Meals-on-Wheels of
Johnson and Ellis Counties, and Chairman of the Board of
Directors, Meals On Wheels Association of America, Washington,
DC............................................................. 126
Scott D. Ferguson, President and CEO, United Way of the
Chattahoochee Valley, Columbus, GA............................. 226
Brian A. Gallagher, President and CEO, United Way Worldwide,
Alexandria, VA................................................. 31
Cynthia Gordineer, President and CEO, United Way of Forsyth
County, Winston-Salem, NC...................................... 296
Mark W. Huddleston, President, University of New Hampshire,
Durham, NH, on behalf of the American Council on Education, the
Association of American Universities, and the Association of
Public and Land-Grant Universities............................. 93
Lisa Ireland, Executive Director, United Way of Orleans County,
Medina, NY..................................................... 341
Tory Irgang, Executive Director, United Way of Southern
Chautauqua County, Jamestown, NY............................... 345
Mike King, President and CEO, Volunteers of America, Alexandria,
VA............................................................. 242
Bill Kitson, President and CEO, United Way of Greater Cleveland,
Cleveland, OH.................................................. 287
Earle I. Mack, Chairman Emeritus, New York State Council on the
Arts, Manhattan, NY............................................ 314
Jan Masaoka, CEO, California Association of Nonprofits,
Sacramento, CA................................................. 54
Terry Mazany, President and CEO, The Chicago Community Trust,
Chicago, IL.................................................... 172
Jill Michal, President and CEO, United Way of Greater
Philadelphia and Southern New Jersey, Philadelphia, PA......... 139
Larry Minnix, President and CEO, Leading Age, Washington, DC..... 221
Kimberly Morgan, CEO, United Way of Western Connecticut, Danbury,
CT............................................................. 167
Kevin K. Murphy, President, Berks County Community Foundation,
and Chairman of the Board, Council on Foundations, Arlington,
VA............................................................. 17
Leslie Osche, Executive Director, United Way of Butler County,
Butler, PA..................................................... 183
John M. Palatiello, President, Business Coalition for Fair
Competition, Reston, VA........................................ 325
Karen Rathke, President and CPO, Heartland United Way, Grand
Island, NE..................................................... 302
William N. Rieth II, President and CEO, United Way of Elkhart
County, Elkhart, IN............................................ 135
Anthony L. Ross, President, United Way of Pennsylvania,
Harrisburg, PA................................................. 336
Pamela King Sams, Executive Vice President for Development,
Children's National Medical Center, Washington, DC............. 149
Jake B. Schrum, President, Southwestern University, Georgetown,
TX, on behalf of the Council for Advancement and Support of
Education...................................................... 110
C. Eugene Steuerle, Fellow and Richard B. Fisher Chair, The Urban
Institute, Washington, DC...................................... 6
Conrad Teitell, Chairman, Charitable Planning Group, Stanford,
CT, on behalf of the American Council on Gift Annuities........ 100
Eugene R. Tempel, Ed.D., Founding Dean, Indiana University School
of Philanthropy, Indianapolis, IN.............................. 48
Ruth S. Thomas, Vice President of Finance and Administration,
SAT-7, Easton, MD.............................................. 201
Jimalita Tillman, Executive Director, Harold Washington Cultural
Center, Chicago, IL............................................ 250
Andrew Watt, President and CEO, Association of Fundraising
Professionals, Arlington, VA................................... 320
Rand Wentworth, President, Land Trust Alliance, Washington, DC... 159
David Wills, President, National Christian Foundation,
Alpharetta, GA................................................. 24
SUBMISSIONS FOR THE RECORD
A Mother's Wish Foundation....................................... 356
Alexander Reid................................................... 358
American Academy of Pain Medicine Foundation..................... 361
American Alliance of Museums..................................... 363
American Camp Association........................................ 366
American Health Care Association................................. 368
American Lung Association........................................ 369
American Red Cross............................................... 372
Americans for Fair Taxation...................................... 373
Amy Fitterer..................................................... 383
Association for Healthcare Philanthropy.......................... 386
Association of Art Museum Directors.............................. 391
Association of Baltimore Grantmakers............................. 398
Association of Christian Schools International................... 400
Association of Fundraising Professionals......................... 401
Audrey Meyers.................................................... 410
Barbara Bilton................................................... 412
Barbara J. King.................................................. 413
Bentz Whaley Flessner............................................ 415
Canine Comfort, INC.............................................. 419
Casa Esperanza................................................... 420
Center for Fiscal Equity......................................... 422
Colorado Nonprofit Association................................... 425
Convoy of Hope................................................... 428
Council of Michigan Foundations.................................. 432
Council of New Jersey Grantmakers................................ 434
Cynthia Pellegrini............................................... 436
Dan P. Hagler.................................................... 438
Dance USA........................................................ 439
Deborah J. Kuzdal................................................ 442
Dr. Judson Shaver................................................ 443
Easter Seals statement........................................... 445
Eligius G. Walker................................................ 446
Ellen Foell...................................................... 447
Eric R. Bridges.................................................. 450
Evangelical Council for Financial Accountability................. 452
Feeding America.................................................. 459
Florida Philanthropic Network.................................... 463
Food Donation Connection......................................... 466
Ford Bell........................................................ 473
Forgotten Harvest................................................ 476
Girl Scouts of the USA........................................... 480
Glen E. Leirer................................................... 482
Goodwill Industries International................................ 483
Goodwill Industries of the Columbia Willamette................... 486
Grant Oliphant................................................... 489
Great Kansas City Community Foundation........................... 492
Habitat for Humanity International............................... 493
Hope Community Resources......................................... 495
Illinois Council of the Blind.................................... 496
Indiana Association of United Ways............................... 498
Indiana Grantmakers Alliance..................................... 499
James Ledoux..................................................... 500
James M. Bennett................................................. 501
Jesse Rosen...................................................... 504
John W. Vettel Jr., LtCol, USAF (Ret)............................ 512
Junior Achievement of Western Massachusetts...................... 513
Kelly Kuhn....................................................... 515
Ken Engle........................................................ 518
Larry Minnix..................................................... 520
Laurie Baskin.................................................... 528
League of American Orchestras.................................... 532
Leo Linbeck...................................................... 540
Lorie A. Slutsky................................................. 550
Lutheran Family and Children's Services of Missouri.............. 557
Lutheran Services in America..................................... 558
Mary's Shelter................................................... 561
Matt Scorca...................................................... 562
Matthew Smith.................................................... 566
Matthew W. Hessler............................................... 573
Mental Health America............................................ 574
Mercy Medical Airlift............................................ 575
Michael Alvarez.................................................. 577
Michael E. Rountree.............................................. 582
Michigan Nonprofit Association................................... 583
Mike Maloney..................................................... 586
Mountain State Council of the Blind.............................. 587
NAEIR............................................................ 589
National Council of Nonprofits................................... 595
National Kidney Foundation....................................... 605
National Religious Broadcasters.................................. 607
National Restaurant Association.................................. 609
Neal Denton...................................................... 613
New Jersey Conservation Foundation............................... 616
Nicole Lamoureux Busby........................................... 618
Northern Arizona University Foundation........................... 621
OPERA America.................................................... 625
Oregon Food Bank................................................. 629
Partnership for Philanthropic Planning........................... 632
Patrick Burkett M.D.............................................. 637
Pediatric Palliative Care Coalition.............................. 638
Peter Roberts.................................................... 639
Philanthropy Northwest........................................... 643
Robert Aiken..................................................... 650
Robert Collier................................................... 654
Robert F. Sharpe, Jr............................................. 656
Silicon Valley Community Foundation.............................. 663
Sophia Siskel.................................................... 665
Southeastern Council of Foundations.............................. 666
The Beacon Hill Institute........................................ 668
The Community Foundation......................................... 698
The EHL Consulting Group......................................... 700
The Evangelical Lutheran Good Samaritan Society.................. 702
The FairTax and Charitable Giving................................ 703
The Giving Institute and Giving USA Foundation................... 706
The Leukemia and Lymphoma Society................................ 711
The Nature Conservancy........................................... 715
The Nonprofit Association of Oregon.............................. 719
The Restoration Foundation....................................... 722
The Samuel Roberts Noble Foundation.............................. 723
Theatre Communications Group..................................... 734
Thomas P. McCabe................................................. 738
University of South Carolina..................................... 739
Valerie S. Lies.................................................. 742
Vikki Spruill.................................................... 745
Volunteers of America............................................ 755
TAX REFORM AND CHARITABLE CONTRIBUTIONS
----------
THURSDAY, FEBRUARY 14, 2013
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 9:41 a.m., in
Room 1100, Longworth House Office Building, Hon. Dave Camp
[Chairman of the Committee] presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Tuesday, February 5, 2013
No. FC-02
Camp Announces Hearing on
Tax Reform and Charitable Contributions
Congressman Dave Camp (R-MI), Chairman of the Committee on Ways and
Means, today announced that the Committee will hold a hearing to
examine the itemized deduction for charitable contributions as part of
the Committee's work on comprehensive tax reform. The hearing will take
place on Thursday, February 14, 2013, in Room 1100 of the Longworth
House Office Building, beginning at 9:30 a.m.
Any individual or organization interested in providing oral
testimony at this hearing with respect to the charitable contribution
deduction should contact the Committee's tax office to discuss the
possibility of receiving an invitation, pursuant to the procedures set
forth below. (See ``Details for Submission of Request to Be Heard.'')
In addition, anyone not scheduled to give oral testimony may submit a
written statement for consideration by the Committee and for inclusion
in the printed record of the hearing.
BACKGROUND:
Section 170 of the Internal Revenue Code provides a deduction to
the roughly one-third of taxpayers who itemize their deductions for
charitable contributions. Taxpayers may contribute on a deductible
basis to institutions such as churches, uni-
versities, hospitals, museums, and certain other tax-exempt
organizations. Certain limits apply to the deduction, such as
percentage-of-income limits and purposes for which contributions may be
made, and the recently reinstated overall limitation on itemized
deductions for taxpayers above certain income thresholds.
Proposals to limit the deduction for charitable contributions have
appeared in recent years, in some cases as part of broader tax reform
proposals that lower rates and in other cases for the purpose of
raising taxes to fund specified levels of government spending. Examples
of some of these restrictions include: Limiting the tax rate against
which contributions may be deducted; a dollar cap on total itemized
deductions; a floor below which contributions may not be deducted; and
the replacement of the deduction with a tax credit available regardless
of whether the taxpayer itemizes. Different types of limitations could
have varying effects on giving.
As part of the Committee's ongoing commitment to pursue
comprehensive tax reform in an open and transparent manner, the
Committee is holding this hearing to allow stakeholders and members of
the public the opportunity to share their perspectives on the deduction
and on various proposals to modify it.
In announcing this hearing, Chairman Camp said, ``Public charities
and private foundations perform invaluable services for our society,
especially during this time of economic slowdown and high unemployment.
These organizations depend upon the goodwill of the American people--
the most giving and charitable people in the world. Because of the
critical role that charities play, the Committee must hear directly
from the charitable community before considering any proposals as part
of comprehensive tax reform that might impact their ability to obtain
the resources they need to fulfill their missions.''
FOCUS OF THE HEARING:
The hearing will examine the itemized deduction for charitable
contributions as part of the Committee's work on comprehensive tax
reform. It also will receive testimony from witnesses on previous
proposals to modify the deduction and its value.
DETAILS FOR SUBMISSION OF REQUEST TO BE HEARD:
Requests to be heard at the hearing must be made to the Committee
on Ways and Means either by telephone at (202) 225-5522 or by e-mail at
tax.reform@ mail.house.gov. Please include the phrase ``charitable
deduction'' in the subject line of the message and submit the request
no later than the close of business, Thursday, February 7, 2013. The
request should include a brief summary or outline of the proposed
testimony.
In view of the limited time available to hear witnesses, the
Committee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled to give oral testimony
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the deadline for submitting requests.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
written comments for the hearing record must follow the appropriate
link on the hearing page of the Committee website and complete the
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for
which you would like to submit, and click on the link entitled, ``Click
here to provide a submission for the record.'' Once you have followed
the online instructions, submit all requested information. ATTACH your
submission as a Word document, in compliance with the formatting
requirements listed below, by the close of business on Thursday,
February 28, 2013. Finally, please note that due to the change in House
mail policy, the U.S. Capitol Police will refuse sealed-package
deliveries to all House Office Buildings. For questions, or if you
encounter technical problems, please call (202) 225-3625 or (202) 225-
2610.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
not alter the content of your submission, but we reserve the right to
format it according to our guidelines. Any submission provided to the
Committee by a witness, any supplementary materials submitted for the
printed record, and any written comments in response to a request for
written comments must conform to the guidelines listed below. Any
submission or supplementary item not in compliance with these
guidelines will not be printed, but will be maintained in the Committee
files for review and use by the Committee.
1. All submissions and supplementary materials must be provided in
Word format and MUST NOT exceed a total of 10 pages, including
attachments. Witnesses and submitters are advised that the Committee
relies on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental
sheet must accompany each submission listing the name, company,
address, telephone, and fax numbers of each witness.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.
Chairman CAMP. Good morning, and thank you for joining us
today. As part of the Committee's ongoing commitment to pursue
comprehensive tax reform in an open and transparent manner, the
Committee is holding today's hearing to allow stakeholders and
members of the public the opportunity to share their
perspectives on the deduction for charitable contributions.
For today's hearing, we granted all timely requests to
testify in person, so that national and local leaders in the
charitable community could educate us about the work they do
each day, and what Congress should consider as we explore
comprehensive tax reform.
I realize that this open-door approach is a bit different
than the way we typically structure hearings. But looking back
to the 1986 Tax Reform Act, the last comprehensive tax reform
endeavor, it turns out that this is a Ways and Means tradition.
Then-Chairman Dan Rostenkowski, a Democrat from Illinois,
employed the same method for gathering stakeholder input. Much
like he did, I believe that including the voices of the
stakeholders who are working every day in our communities is
critical to understanding how the policy decisions we make in
Washington will affect people back home.
We want to ensure that whichever policies we ultimately
decide to pursue are crafted in a way that makes the Tax Code
simpler, fairer, and easier to comply with. In the case of the
charitable community, we also want to make sure that tax reform
allows you to continue to meet and fulfill the mission of each
of your organizations.
Our Nation's public charities and private foundations
perform invaluable services for our society at home,
nationally, and, in some cases, across the globe. This is
especially true during times of economic slowdown and high
unemployment, challenges we have struggled with mightily over
the past years. These are also the same organizations that step
up and respond to individual moments of crisis: Hurricanes,
floods, earthquakes, fires, acts of terrorism, and community-
specific tragedies as well.
It is in those moments that these organizations come face-
to-face with humanity and the generosity of men and women who
answer the call for help. Oftentimes that means lending a hand
to their own families, friends, and fellow church-goers. These
organizations depend upon the goodwill of the American people,
the most giving and charitable people in the world. And our
response, along with their service, underscores the truth that
charity begins at home.
Over the last several months, we've heard a lot about the
different ways that the Tax Code might be changed that could
affect the charitable community and the valuable services it
provides. Examples of some of these changes include limiting
the tax rate against which contributions may be deducted; a
dollar cap on itemized deductions, as the President has
repeatedly proposed; a floor below which contributions may not
be deducted; and the replacement of the deduction with a tax
credit available regardless of whether the taxpayer itemizes.
Different types of limitations could have varying effects
on giving. Because of the critical role that charities play,
the Committee needs to hear directly from the charitable
community before considering any proposals as part of
comprehensive tax reform. And let me be clear on this point: We
want to hear from this community before considering proposals.
This hearing is not about your responding to what we have
already done. Instead, it is about gathering your input so that
any policies that might be considered will be crafted with you
and the communities you serve in mind.
So, I would like to thank all of you for being here today.
We've assembled six panels of witnesses who have indicated a
strong desire to share their perspectives. All of you have a
unique story to tell, and we look forward to your testimony.
Thank you again for being here today, and thank you in advance
for your patience. I know it will be a long day.
I will now recognize Mr. Levin for his opening statement.
Mr. LEVIN. Thank you very much. And welcome. And welcome to
all of you who will be testifying.
We are holding this hearing on an important but not very
immediate topic. What is not being done is to address the
sequester that looms immediately. There are 5 legislative days,
only 5 legislative days, remaining before the sequester kicks
in and begins to do severe damage to our economy.
Just last week the nonpartisan Congressional Budget Office
warned about the prospects of inaction, noting that it would
slash GDP growth by 30 percent this year. This Committee should
be focused on reviewing the economic consequences of inaction,
and finding a bipartisan solution.
Again, that is not to say that the topic for today's
hearing is unimportant. Quite the contrary. In their last two
budgets, House Republicans have proposed cutting the top
marginal rate to 25 percent, creating a $5 trillion revenue
loss. Some of the proponents have suggested one way, one major
way, to fill that hole is by cutting loopholes and acting on
the largest deductions and credits, which includes the
charitable deduction. Such action needs to be looked at
carefully, as I have long suggested. Carefully.
The charitable deduction is among the 10 largest tax
expenditures in the Code, benefitting almost 1.1 million
charities, and more than 70--37 million Americans who
contribute to section 501(c)(3) organizations every year. In
2010 it is estimated that individuals donated $2.10 billion--
$210 billion to charitable organizations, of which they claimed
$170 billion on their tax returns. As we know, there are
already deduction limitations in place for the very wealthiest
Americans through the so-called Pease Provision that was
reinstated during the action that Congress took on New Year's
Day to avoid the fiscal cliff.
I would be interested in knowing from our witnesses today
how further limitations would affect their organizations.
Yesterday, in announcing the working groups that we have set up
on a bipartisan basis, I said that the process helps us
undertake in-depth fact-finding on a variety of important
issues related to tax reform, including the charitable
deduction. The testimony we hear today may help us, Mr.
Chairman, kick off that effort. Thank you.
Chairman CAMP. Thank you, Mr. Levin. Now it's my pleasure
to welcome our first panel of the day, whose experience and
insights will be extraordinarily helpful as the Committee
considers this important issue.
Two of the witnesses on our first panel are constituents of
Committee Members, and I will ask those Members to formally
introduce them when it's their turn to testify. So I will begin
by introducing Mr. Steuerle. And then, after Mr. Steuerle's
testimony, I will recognize Mr. Gerlach to introduce his
constituent, Mr. Murphy. I will then proceed to introduce and
recognize our next three witnesses before recognizing Mr. Young
to introduce his constituent, Mr. Tempel. And after Mr.
Tempel's testimony we will hear from Ms. Masaoka.
So, with that, let's get started. Gene Steuerle is a
Richard B. Fisher Chair and Fellow at The Urban Institute, and
is a familiar face here at the Committee. Mr. Steuerle served
as Deputy Assistant Secretary of Treasury for Tax Policy, and
was an Economic Coordinator of the 1984 Treasury study that led
to the 1986 Tax Reform Act.
So, Mr. Steuerle, you and all of today's witnesses will be
recognized for 5 minutes for your oral remarks. And everyone's
full written statement will be made part of the official
hearing record.
Mr. Steuerle, welcome back to the Committee, and you may
proceed when you are ready to testify.
And, as you know, as you get near the end of your remarks,
a yellow light will appear. You have just about 30 seconds to
conclude your remarks, and it will be a hard-timed stop. So,
Mr. Steuerle, welcome.
STATEMENT OF C. EUGENE STEUERLE, FELLOW AND RICHARD B. FISHER
CHAIR, THE URBAN INSTITUTE, WASHINGTON, DC
Mr. STEUERLE. Thank you, Chairman Camp, Mr. Levin, and
Members of the Committee. It's my honor once again to testify
to you--before you today on the relationship between tax reform
and charitable contributions. My testimony centers largely on
one simple point, that a tax subsidy like that for charitable
contributions should be treated like any other government
program, examined regularly and reformed on occasion to make it
more effective.
The good news is that the charitable deduction can be
designed both to strengthen the charitable sector and increase
charitable giving without costing revenues. In fact, revenues
can be raised and charitable contributions raised at the same
time.
So, what's the trick? Simply put, take the revenues that
are spent with little or no effect on charitable giving, and
reallocate those revenues toward measures that would encourage
giving more effectively. For example, to increase giving,
Congress can allow people to make contributions up until the
time they file their tax returns, or April 15th. I believe that
this would save at least $3 in charitable giving for every
dollar of revenue loss.
Congress could also create a charitable contribution for
all taxpayers, not just itemizers. It could remove or reduce
the dysfunctional excise tax on foundations.
Congress can more than pay for these changes with little or
no reduction in giving if it would put a floor into deductions
which would have little effect on giving, and reform subsidies
that tend to be highly ineffective and invite abuse, such as
the deduction for household goods and clothing. I provide a
somewhat longer list in my testimony, with further details.
Now, certainly, reform must take into account the extent to
which IRS already does not and cannot properly enforce the
rules for many charitable contributions. A chart in my
testimony attempts to clarify my point by demonstrating the
effect of three changes to the charitable tax law standardized
to produce approximately $10 billion in revenues. In one
example I show that this would have almost no cut-back at all
in the amount of giving that is done.
Now, it would be much easier for Congress to reform the
charitable deduction if the Committee were to request the
assistance of the Joint Committee and the Treasury to provide
estimates not just of the revenue effect of proposals, but
their effect on the amount of giving that would take place.
It would also help if the IRS would develop better methods
for informing Congress through audits and related follow-
through of the extent to which deductions for certain types of
gifts were legitimate, not legitimate, and actually, most
importantly, unable to be verified or enforced one way or the
other. This approach to tax reform and charities is very
different from one that derives from across-the-board cuts or
caps. These tend to operate very much like sequestration, in
the sense of their arbitrary effect across items.
Now, certainly, some subsidies should be kept. Examples in-
clude subsidies for home ownership or health insurance, where
we mainly want to subsidize the first dollars of spending,
rather than for second homes or for expensive health insurance.
But just the opposite applies to charitable contributions,
where it's the last, not the first dollars of giving that are
the ones that we want to subsidize.
Now, although I focus here on the formal measures of
revenues and giving that a charitable incentive might entail,
it also affects--this incentive also affects society in other
immeasurable ways. It sends a positive signal about the type of
society we seek, and our duties to one another. It promotes a
general spirit of giving, and the development of mediating
institutions. It reduces tensions that arise from the unequal
distribution of power and wealth. And it promotes a more
altruistic society, providing benefits beyond just what is
transferred to ultimate donees.
Finally, note that the cost of reduced charitable
deductions is born, to no small extent, by those who would have
benefited from the deductions: The museum visitor, the student,
the recipient of food from the food bank, rather than the
taxpayer, who can adjust to any additional tax burden simply by
reducing his or her own contributions. Thank you.
[The prepared statement of Mr. Steuerle follows:]
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Chairman CAMP. Thank you. Mr. Gerlach.
Mr. GERLACH. Thank you, Mr. Chairman. Mr. Chairman, thank
you for your recognition and for your leadership in initiating
a comprehensive review of the Tax Code, and today specifically
for looking at charitable deductions.
In addition, I appreciate the Chairman giving Kevin Murphy,
with the Berks County Community Foundation, the opportunity to
discuss the good work he does in the sixth congressional
district of Pennsylvania. Kevin serves as President of the
Berks County Community Foundation in Reading, Pennsylvania. In
addition, he currently serves as the Chairman of the Board of
Directors of the Council on Foundations, a national association
of nonprofit foundations.
The Berks County Community Foundation was founded in 1994
to promote philanthropy and improve the quality of life for
over 400,000 residents of our county. Additionally, the Council
on Foundations represents over 2,000 grant-making foundations
and corporations with assets over $300 billion.
Kevin is a graduate of Penn State University, and he also
holds a master's degree in community leadership from Duquesne
University. His experience as president of a medium-sized
community foundation has given him valuable insight on how to
assess the importance on charitable provisions in the Tax Code,
and how the proposed changes to it would affect my constituents
in Pennsylvania, and all of us across the country.
I look forward to his testimony today. And again, I want to
thank the Chairman for allowing his opportunity to provide
testimony to the panel.
Chairman CAMP. Thank you, Mr. Gerlach. Welcome, Mr. Murphy.
You are recognized for 5 minutes.
STATEMENT OF KEVIN K. MURPHY, PRESIDENT, BERKS COUNTY COMMUNITY
FOUNDATION, AND CHAIRMAN OF THE BOARD, COUNCIL ON FOUNDATIONS,
ARLINGTON, VA
Mr. MURPHY. Good morning and--Mr. Chairman, Ranking Member
Levin, Members of the Committee. Congressman Gerlach, thank you
for that kind introduction and for your friendship and
partnership in the work we do in the community.
In my role at Berks County Community Foundation I've worked
every day for the last 19 years with local donors who are
interested in designing and implementing charitable gifts that
do the most good for our community with the resources they
have. I have to say that, doing that work on the ground, I've
become concerned that the conversation here within the beltway
about the charitable deduction has become remarkably unglued
from the reality of the community that Congressman Gerlach and
I work in.
The discussion reached a high point--or perhaps a low
point--when the Washington Post recently editorialized that the
charitable deduction overwhelmingly benefits the wealthy.
Ladies and gentlemen of the Committee, I submit to you that the
charitable deduction, and its encouragement of charitable
giving, is hardly a loophole or a benefit for the rich, and, in
fact, forms the final safety net in our Nation.
I'd like to share with you what the charitable deduction
means in our community. This is a backpack. It's one of about
400 backpacks that are sent home every Friday with elementary
school children in Berks County by the Greater Reading
Foodbank. And it's filled with as much food as we can get an
elementary school student to carry home. And, for most of the
students who take it home, it's the only food they'll have for
the whole weekend. We even had to get backpacks with wheels on
them, because some of the children were too small to carry
this.
I think we should all take a moment some time today to
imagine what it's like to be a 6-year-old child, and for that
backpack and this food to be the only thing that stands between
you and hunger for the weekend. Before we sent these backpacks
home, many of these children showed up sick on Monday mornings,
having not eaten.
What's important for the Members of the Committee to
understand about these backpacks is that there are no Federal,
State, or local government dollars invested in this program.
These backpacks are funded entirely through charitable
contributions from our community. And, yes, some of the people
who made those contributions deduct that contribution from
their income tax. But we cannot allow ourselves to lose sight
of the fact that the person who benefits from those charitable
gifts isn't the donors; it's those hungry children.
Seventy-five years ago, President Roosevelt established the
March of Dimes to raise money from Americans to fight polio.
Millions of donors have given to that cause. And today, the
Bill and Melinda Gates Foundation projects there will be no
cases of polio in the world by the close of this decade. And
there hasn't been a case of polio in the United States since
1979. You see, it's the people who don't get polio who are the
beneficiaries of the charitable deduction.
In my home town of Reading we consider ourselves fortunate
that Terry McGlinn, who founded the Colonial Oaks Foundation,
and his family were able to donate the money to build a cancer
center at our local hospital.
Mr. Chairman, I have 17-year-old twin boys. They are great
young men and I am very proud of them. But any of you who know
17-year-old boys know that some days you think they forgot to
turn their brains on in the morning. But Carver and McQuillin,
on their spaciest days, know that they are the beneficiaries of
the McGlinn's generosity in establishing the cancer center
because their mother, my wife, is still alive 7 years after
having been diagnosed with cancer and treated at the McGlinn
Regional Cancer Center. Cancer survivors and their families are
the beneficiaries of the charitable deduction.
Feeding hungry children, eradicating disease, building
cancer centers, these aren't loopholes for the rich. These are
solutions for our community. The charitable deduction stands
alone among provisions in the Tax Code and encouraging behavior
that benefits society, not the taxpayer. It's a simple
statement of economic truth that any charitable contribution
one of my donors makes leaves them with less money than they
had before they made the gift.
Now, the value of the tax deduction may be an interesting
debate for tax economists here in the beltway. President Reagan
once said, ``An economist is someone who sees something that
works in practice and wonders if it will work in theory.'' I
assure you that the charitable deduction works in practice for
our communities. Let's do nothing that threatens the ability of
the food bank to send this backpack home.
Thank you, Mr. Chairman, Mr. Levin.
[The prepared statement of Mr. Murphy follows:]
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Chairman CAMP. Thank you, Mr. Murphy. We will now hear from
David Wills, who is President of the National Christian
Foundation. Mr. Wills has practiced in charitable giving,
planning, and tax-exempt organizations for the last 22 years,
and is testifying on behalf of the Alliance for Charitable
Reform.
Mr. Wills, welcome. You are recognized for 5 minutes.
STATEMENT OF DAVID WILLS, PRESIDENT,
NATIONAL CHRISTIAN FOUNDATION, ALPHARETTA, GA
Mr. WILLS. Thank you. Good morning, Chairman Camp, Ranking
Member Levin, Members of the Committee. My name is David Wills,
and I serve as the President of the National Christian
Foundation. Thank you for the opportunity to testify before you
today.
Chairman CAMP. Is your microphone on?
Mr. WILLS. Yes, it is.
Chairman CAMP. Oh, okay. You may want to pull it just a
little bit closer. Thank you.
Mr. WILLS. The National Christian Foundation serves the
giving needs of almost 10,000 families across our country. In
2012, these families contributed over $870 million and made
grants of over $600 million to over 14,000 charities across our
country. I have been privileged to serve families that give
from $10,000 a year to $10 million a year, from those that give
from their income and those that give from their wealth, from
people that tithe to people that reverse tithe--living on 10
percent and giving away 90 percent. One thing that they have in
common is that they take advantage of the charitable income tax
deduction.
It is the generosity of these people that in many ways
makes America great. De Tocqueville once said, ``America is
great because she is good. If America ceases to be good,
America will cease to be great.''
Today I am testifying on behalf of the Alliance for
Charitable Reform, a project of the Philanthropy Roundtable,
which represents over 600 private charitable donors and
foundations across the U.S. And I want to make three quick
points: First, the charitable deduction is distinctive from any
other credit or deduction; second, any cut, cap, or limit to
the deduction will dramatically decrease giving; and finally,
if the charitable deduction is limited, those who will be
harmed most are people served by charities, not donors.
The charitable deduction is unique and should be considered
separately. It's the only incentive that encourages people to
give away their wealth. All others involve consuming more or
acquiring more. Yet policymakers and the President have
proposed limits on the deduction as one solution to our
Nation's fiscal crisis. Their proposals would decrease giving
by billions per year.
While any limit on the charitable deduction is ill-advised,
so are back-door tax increases aimed at the deduction, and I
would encourage you to carve out the charitable deduction from
the Pease limitation, as well. One of our donors in central
Florida saw the Pease Provision as a major factor when planning
his giving. He originally hoped to give his business to charity
over time. Last year it became clear to him that the rates
could go up and the deduction could go down, and so he gave his
business in 2012, over $2 million worth of giving. He now
knows, because of the Pease rule that's been implemented, that
he made the right decision. It would have dramatically cut his
giving.
Some argue that the deduction only financially benefits the
wealthy. However, this simply isn't true. The charitable
deduction provides no financial gain to any donor. It simply
reduces the cost of giving, which encourages more giving.
Limiting the deduction will result in donors paying taxes on
what they give away, and the net will be less to charity. When
you give a dollar away, you have a dollar less, and the
deduction doesn't give that dollar back.
In the case of NCF, our donors are varied, but there is no
doubt that the charitable deduction affects their behavior. In
December alone we estimate that over $50 million was given
strictly because people were fearful that the charitable
deduction would be limited.
A donor from Detroit, Michigan, decided to make several
years' worth of charitable contributions and move it into 2012,
over $300,000. He did it because he knew that if the deduction
was limited, the cost to make a gift would go up and the
charities he cares about most would be hurt. And he didn't want
his giving to decline to these organizations.
Another of our donors from the Los Angeles area decided to
give away the balance of his profit-sharing plan, almost
$80,000. He moved it all into 2012, because he was concerned
that the charitable deduction would be cut. In fact, he ended
up giving over 50 percent of his adjusted gross income last
year to maximize the charitable deduction.
Let me be clear. The deduction not only affects how much
people give; it also affects the timing and the number of
organizations they support.
What we are really talking about here today are spending
cuts. Already this year we have gone to every tax-paying
American and asked them to decrease their spending so the
government can spend more. If you limit the deduction, you will
next be going to charities to ask them to decrease their
spending, as well. Do we, as a Nation, want to knock on the
door of the AIDS clinic, the homeless shelter, the boys and
girls clubs, or your houses of worship, and ask them to
decrease their spending so the government has more to spend?
We have avoided making this decision since 1917, when the
deduction was created. And I ask you today to avoid limiting
the deduction going forward. Thank you for listening.
[The prepared statement of Mr. Wills follows:]
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Chairman CAMP. Thank you, Mr. Wills.
Next we will hear from Brian Gallagher, who is President
and Chief Executive Officer of United Way Worldwide. Mr.
Gallagher oversees a network of 1,800 affiliates in over 40
countries, and is also an active member of the World Economic
Forum.
Mr. Gallagher, welcome, and you are recognized for 5
minutes.
STATEMENT OF BRIAN A. GALLAGHER, PRESIDENT AND CEO, UNITED WAY
WORLDWIDE, ALEXANDRIA, VA
Mr. GALLAGHER. Thank you, Chairman Camp and Ranking Member
Levin. Members of the Committee, thanks for the opportunity to
testify today in front of the Committee. On behalf of the
United Way network in the United States, I urge the Committee
to preserve or even expand the charitable deduction for all
donors.
United Way is the largest privately-supported nonprofit in
the world. Certainly largest in the United States. There are
1,200 local United Ways in just about every county, city, and
town across America. We raised last year just under $4 billion;
97 percent of that came from private donors. We are not a
publicly-supported nonprofit. And we work in the basic building
blocks of life: Education, income, and health.
We have 10 million donors a year, 2.5 million volunteers.
We have 500 people who have given us $1 million or more. We
have 26,000 people who gave us $10,000 or more per year. We
have 55,000 women who last year gave $150 million to their
local United Way. And yet our average gift is $290. I say that
because, while we do studies and modeling and so forth, we know
donors. We've known donors for over 100 years, high-net-worth
donors, middle-income donors, white people, people of color,
women, men. And this will affect their giving, if we were to
curb the incentive to give charitably in the U.S.
I am a little sheepish to say that there are 13 local
United Ways testifying today. The fact is that when you opened
up the hearing and asked anyone who wanted to testify, they all
wanted to testify.
And I would encourage--it's our most important public
policy priority. But you are going to hear the stories from
different communities, from Cleveland and Philadelphia, Butler,
Pennsylvania, Winston-Salem, North Carolina, Grand Island,
Nebraska. And you are going to hear the same story: This will
affect giving.
Consider just what the cap at 28 percent would do to just
giving to United Way. Our most conservative estimate is that it
would reduce giving to United Way across the country by $100
million. That's like wiping out the United Ways in Philadelphia
and in Cleveland. Or take the 10 mid-sized and small United
Ways that are going to testify here today. That wipes out all
of them, that $100 million. So when we use terms like ``modest
effect,'' it's not that modest when you start looking at
backpacks like that, or local nonprofits that are doing this
kind of work.
A mere 2.5 percent reduction in giving to United Way means
that 1.3 million fewer times will we provide a job training
service
for an unemployed person, early childhood development for a
low-income child, mentoring or tutoring for a young person at
risk. All the proposals that have been floated around
Washington and around the country have two things in common: It
will limit the value of the deduction for at least some group
of donors, and it will result in reduced giving. It will.
In fact, I personally believed, having worked with these
donors, that the estimates are very, very conservative. If you
reduce the incentive, you should expect that donors will
essentially make up the difference on the cost increase in the
size of their gift. It's really not a tax on the wealthy, as
much as a transfer to government of the money that would have
gone to nonprofit organizations.
As already said, the charitable deduction is not a
loophole. There is no personal gain. No one is getting a house,
no one is getting a business benefit. They are just benefitting
their community. By keeping the charitable deduction tied to
the tax rate, we are simply not penalizing people for giving
their money away. And every dollar that they give, every cent
that they give, goes to their community.
Rather than limiting the deduction, we have for years
proposed that we make the incentive fairer, and make it open to
all taxpayers, those that itemize and those that don't itemize.
We know that we are coming to government cuts at all levels--
local, State, Federal--in terms of human services and social
services. We know it. We expect it. Now is not the time, then,
to take incentive away from the private sector to provide those
services in our communities.
The last two points I would make, that at a time when we
are looking for new systems and for new approaches to job
training systems, to education reform, we should be putting
incentive into innovation in local communities. This isn't just
about charitable giving; this is about private citizen
engagement. That's where problems, social and economic
problems, get solved in our communities.
And finally, I find it incredibly ironic that, as the
Chairman said, we work in over 40 countries around the world--I
personally and we institutionally, over the last few years,
have been giving counsel to the governments in England, in
France, in China, in India, in terms of how to put greater
incentive for charitable giving and volunteerism into their Tax
Code, while we are considering rolling it back.
This is what's made America great. It's core, it's fabric
of who we are.
I would ask us and ask you to preserve the incentive for
people to stay involved in their communities and helping one
another. Thanks very much.
[The prepared statement of Mr. Gallagher follows:]
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Chairman CAMP. Thank you, Mr. Gallagher. Next we will hear
from Roger Colinvaux, Associate Professor of the Columbus
School of Law at The Catholic University of America. Professor
Colinvaux has done extensive research and published numerous
papers on the topic of charitable contributions, and he has
previously appeared before this Committee, as well.
Mr. Colinvaux, welcome, and you are recognized for 5
minutes.
STATEMENT OF ROGER COLINVAUX, ASSOCIATE PROFESSOR, COLUMBUS
SCHOOL OF LAW, THE CATHOLIC UNIVERSITY OF AMERICA, WASHINGTON,
DC
Mr. COLINVAUX. Thank you, Chairman Camp, Ranking Member
Levin, Members of the Committee.
My testimony focuses on two things: First, the various
rationales for the charitable deduction; and second, on non-
cash contributions.
First, on the rationales. There is no consensus on
rationale, but there are two broad approaches. One is that the
deduction makes sense to measure income. In other words, the
tax base is defined not to include charitable expenses. The
other rationale is that the deduction is a kind of subsidy or
tax expenditure. As you consider tax reform and the charitable
deduction, thinking about the rationale can lead you to
different outcomes.
Now, the tax-based rationale offers some clarity, at least.
Under a tax-based rationale, you would prefer to keep the tax
benefit as a deduction and not a credit. This rationale also
tends to disfavor putting any caps on the deduction. And it
generally would not be consistent with a non-itemizer
deduction. However, the rationale generally is consistent with
imposing a floor under the deduction.
Also under this rationale, the ability under current law to
deduct the unrealized depreciation in contributions of property
should be repealed.
Finally, the rationale is at least agnostic and probably
favors making the deduction more targeted to fewer groups. In
other words, a base-broadening measure would be to narrow the
scope of the deduction.
A subsidy or tax expenditure rationale is much messier,
because virtually anything can be consistent with a subsidy.
But even with a tax expenditure approach, emphasis on the goal
matters. If the priority is to raise revenue without impacting
giving, then some choices clearly are better than others. Ten
billion dollars could be raised while causing a drop in giving
of about $10 billion, or you could raise $10 billion with
little to no effect on giving.
If the priority is to make the deduction more equitable,
and extend the incentive to more people, then caps or a non-
itemizer deduction or a credit are appealing. If the priority
is to focus on activities performed by organizations--say to
make the tax benefit less about promoting giving in the
abstract, and more about promoting, say, basic needs
organizations--then a credit or better targeting the incentive
might make sense.
Although there is no consensus on rationale, it's
noteworthy, in my view, that a floor is consistent with both
rationales, and would have important administrative benefits,
especially with respect to non-cash contributions.
Non-cash contributions, I believe, are somewhat neglected
in the current tax reform debate, and they shouldn't be. The
charitable deduction is not really one deduction. It's two.
There is one for cash, and one for property. And the property
deduction is significant. On average, it amounts to over $45
billion in contributions a year, which is more than 25 percent
of the charitable deduction.
I think that the deduction for property is worth a close
look, as I am concerned that the cost of the deductions, which
are considerable, may outweigh the benefits, which are
uncertain.
First, the costs are significant. Costs are not limited to
revenue, but include many factors. One cost is that the rules
are incredibly complex. There are at least 10 approaches to
property contributions, and a detailed anti-abuse reporting
regime to navigate. The complexity undermines the transparency
of the incentive and its effectiveness.
The rules are also largely inadministrable. Small-dollar
contributions will escape scrutiny. Medium-sized amounts are
probably not worth the effort. Large amounts depend on
valuation, which is a resource-intensive area for the IRS. The
rules also come at a cost of fairness. Most of the benefits go
to a very small percentage of taxpayers. And the anti-abuse
regime sometimes results in denying otherwise bona fide
deductions.
There are real reputational costs to the charitable sector
from abuses associated with charitable--with property
contributions. It's led to a lot of legislation. And the IRS
continues to list non-cash property as a top tax scheme. So the
costs are high.
Unfortunately, the benefits, though very real, are
difficult to assess. So in trying to assess the benefits of
property, valuation is a key problem, as the claimed value of
property contributions may be inflated. And it's also not the
same as the benefit to the donee. So, even if we know what the
value actually is, the actual benefit to the donee depends on a
number of factors, including the donee's need of the property
that's given, any cost to the donee from carrying the property,
any amounts that are paid by the donee in order to secure the
contribution, and the timing of when the donee realizes the
benefit.
In short, there are many uncertainties regarding donee
benefit, and these uncertainties, combined with high costs,
urge me to question whether a new approach is needed. Thank you
very much.
[The prepared statement of Mr. Colinvaux follows:]
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Chairman CAMP. Thank you very much, Mr. Colinvaux. I will
now yield to the gentleman from Indiana, Mr. Young, for the
purpose of an introduction.
Mr. YOUNG. Thank you, Mr. Chairman. Dr. Eugene R. Tempel is
the Founding Dean of the School of Philanthropy at Indiana
University, which is happily nestled in Indiana's ninth
congressional district. He is also President Emeritus of IU's
foundation. At the IU School of Philanthropy, Dr. Tempel is the
leading--leading the planning and organization of the world's
first school dedicated to the study and teaching of
philanthropy. He is a nationally-known expert on philanthropy
in the nonprofit sector, and former Executive Director of the
Center on Philanthropy at Indiana University.
Dr. Tempel is a fellow Hoosier. And on behalf of the
Committee, I would like to express my gratitude for your
presence here today, and I thank you very much.
I yield back.
Chairman CAMP. Thank you very much, Mr. Young.
And, Mr. Tempel, welcome. You are recognized for 5 minutes.
STATEMENT OF EUGENE R. TEMPEL, ED.D., FOUNDING DEAN, INDIANA
UNIVERSITY SCHOOL OF PHILANTHROPY, INDIANAPOLIS, IN
Mr. TEMPEL. Thank you, Mr. Chairman, Mr. Levin, Members of
the Committee. Thank you for the opportunity to testify here
today. I am the Founding Dean of the Indiana University School
of Philanthropy, formerly known as the Center on Philanthropy
at Indiana University, founded in 1987. The school's
researchers are among the most respected sources of objective
research on U.S. charitable giving and the factors that
influence it. Their research is the basis for my testimony
today.
Charitable giving has been a cornerstone of American
society since before our Nation was founded. The Massachusetts
Bay Colony led one of the first formal fundraising drives in
1641. Giving is an important way citizens exercise democracy.
Each year 65 percent of Americans give to charity, higher than
the percent of people who vote.
Giving is a tremendous force in our society. An estimated
$298 billion was given to charities in 2011, according to our
research. Seventy-three percent of that came from living
individuals. Because of charitable giving's enormous scope and
impact, I urge you to investigate carefully the various effects
tax policy could have on giving before deciding whether and how
to change policies in ways that may have significant positive
or negative consequences for the Nation's more than 1 million
charities and the people they serve.
Federal tax policies have a significant impact. Our
research shows that the cost of giving, the amount it actually
costs taxpayers to make a gift after taxes, affects how much
they contribute, and the timing of their contributions. Our
research and research by colleagues elsewhere has looked at how
various Federal tax policy changes impact charity.
Raising marginal tax rates reduces the amount of after-tax
income available for giving, but lowers the cost of giving by
increasing the value of the tax deduction. Raising taxes alone
without other policy changes that affect giving is usually a
net positive for giving.
Capping or eliminating the charitable deduction negatively
affects giving. It reduces households' incentives to give to
charity, or to give as much as they might have. If rates
increase, and the charitable deduction is capped or reduced,
this would produce a double whammy for giving, because it both
reduces after-tax income, and increases the cost of giving.
Reducing incentives for giving is especially likely to
affect giving by higher-income households, which account for a
disproportionate share of U.S. household giving. IRS data show
that the top 10 percent of income earners at $100,000 or more
gave almost two-thirds of all itemized contributions in 2009.
The top 1 percent gave 37 percent. Many charities rely on gifts
of $100,000, $500,000, or $1 million, the gifts most affected
by the combination of raising taxes and reducing or eliminating
the charitable deduction. That would have a detrimental impact
on the services charities provide.
Our study of gifts of $1 million or more shows that more
than a third of the total dollar amounts of these gifts were
given to foundations. Just under a third went to higher
education. The next highest totals went to health care and the
arts. In our 2012 survey, wealthy donors were almost evenly
divided on whether or not they would decrease their giving if
the charitable deduction were eliminated.
The School of Philanthropy analyzed the Obama
Administration's 2011 budget proposals to raise rates and
reduce the charitable deduction of--for higher-income
taxpayers. We estimated that if both proposals had been
enacted, total itemized household giving would have fallen by 1
percent in total, and giving by the higher-income households
specifically affected would have fallen by 2.4 percent. These
decreases may not seem huge in total, but they could have a
greater impact for individual charities, especially in the
context of other factors impacting charitable giving.
Our extensive research demonstrates that charitable giving
is closely tied to the economy. Charities are still striving to
recover from the great recession. Giving has dropped by more
than 15 percent in 2008 and 2009 combined, after adjusting for
inflation. Giving began to grow again in 2010 and 2011, but it
is relatively slow in growth, reflecting the country's slow
economy. If donations were to continue to grow at the post-
recession average pace of 1.8 percent, it could take over 5
years for charitable giving to return to 2007 levels.
Finally, the health of the economy--or the health of
philanthropy depends on the health of the economy. Finding ways
to address the Nation's economic challenges without curbing the
growth of charitable giving will ensure the continuity of
services upon which our fellow citizens depend.
Thank you very much for the opportunity to testify. I will
be happy to respond to any questions you may have.
[The prepared statement of Mr. Tempel follows:]
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Chairman CAMP. Thank you, Mr. Tempel. And, finally, we will
hear from Jan Masaoka, who is CEO of the California Association
of Nonprofits. Ms. Masaoka has led several charitable
organizations, and is a former Nonprofit Times Executive of the
Year.
Thank you for being with us. You are now recognized for 5
minutes.
STATEMENT OF JAN MASAOKA, CEO, CALIFORNIA ASSOCIATION OF
NONPROFITS, SACRAMENTO, CA
Ms. MASAOKA. Thank you very much. Mr. Camp and Mr. Levin
and Members of the Committee, thank you very much for inviting
the participation of the nonprofit community into this
important discussion. I am Jan Masaoka, and I am the CEO of the
California Association of Nonprofits, which is a Chamber of
Commerce-like organization for the nonprofit community.
In California, as you may know, as our California
representatives here today may know, there are 150,000
nonprofit organizations that employ three-quarters of a million
Californians, deploy 7 million volunteers, and have $130
million--billion, excuse me--$130 billion a year in purchasing
power.
So in order to discuss the impact of the charitable
deduction on nonprofits, it's worth spending just a minute or
two thinking about the impact of nonprofits on American life.
And just to illustrate, I recently visited my aunt in an
Alzheimer's care center that is run by our family church. I--my
hearing aid that I have in today was used as technology that
was developed in part in a nonprofit medical research lab. I
recently watched a documentary made by nonprofits on the
history of trains with my young nephew. And when my younger
daughter was in a serious car crash, she was taken in a
nonprofit ambulance to a nonprofit hospital where she received
the expert care that made it possible for her, after all, to
eventually walk again.
Not only that, but all of us are breathing cleaner air
today because of the work of nonprofit activists fighting
against toxics and pollution. Many of us who are women and
people of color went to universities and got jobs because of
nonprofit activists who have fought against discrimination.
Many of us are alive today because we weren't killed in a car
accident that was related to alcohol, thanks to the work of the
nonprofit Mothers Against Drunk Drivers. And this morning, I
looked up something on the nonprofit encyclopedia, Wikipedia,
without knowing, without fearing or worrying that my personal
data will be sold to companies that will then advertise to me.
So all of these things are made possible, in part, because
of the nonprofit corporate tax exemption and the charitable
deduction. But, paradoxically, the charitable tax deduction
disproportionately benefits people in the wealthier groups of
society, with 57 percent of people claiming the charitable
deduction actually claiming 79 percent of the dollars that were
claimed. And the benefits of the charitable tax deduction go
disproportionately to the disadvantaged in our society. So,
despite the importance of the charitable tax deduction to poor
and other people, disadvantaged people in our society, as the
other speakers here have mentioned, it's also the case that
only one in four foundation grants in the United States is
specifically targeted to help lower-income communities.
So, what--we at the California Association of Nonprofits
have two important messages. First, we support the charitable
deduction because we know the power of nonprofits using
charitable tax monies and government monies to strengthen
families and communities. Second, though, we also support
efforts to make our taxation system more fair, and to make the
benefits of the tax deduction through the nonprofit sector more
proportionately support all aspects of our society.
If you remember the parable of the little Dutch boy who
stuck his fingers into the dike to keep water from flooding
into the town, the nonprofit sector could be seen that way. And
if you were to be asking that little Dutch boy, ``Would you
like to take some of your fingers out of the dike,'' he would
quite appropriately say, ``No, it's important for me to keep
them in.''
But if we were to say, ``Well, if you take your fingers out
of the dike, we would have time to put in a wooden buttress
against the dike that would do a better job,'' then I think he
might do that. So, for us just to discuss one aspect of the
charitable tax deduction without discussing the aspects in
particular of a floor for the deduction and benefits for non-
itemizers, is like asking us to only consider one change
without looking at comprehensive tax reform.
So, we believe that charitable deduction should be kept as
it is, but--when it is kept in isolation. But in looking at all
these factors together, we support not just a charitable tax
donation that incentivizes giving, but one that more fairly
distributes both the benefits of that charitable tax deduction
and the benefits to all segments of our society. Thank you.
[The prepared statement of Ms. Masaoka follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman CAMP. Thank you very much. And thank you all for
your testimony. And now we will move into a question-and-answer
period.
Mr. Steuerle and Professor Colinvaux, you recently co-
authored a paper that discusses numerous aspects of the
charitable deduction, including data on who gives, theories
that support the deduction, and various proposals for reforms.
I wanted to explore some of those issues that you raise in your
report, and some of them reflected in your testimony with both
of you.
So, Mr. Steuerle, the report notes that in discussing
reform proposals, floors, caps, and credits can all have
similar revenue effects. But each has a different impact on
charitable giving. If I asked you for a package of three or
four provisions that would broaden the base without reducing
the total level of giving, or even possibly could increase
giving, what would that package look like?
Mr. STEUERLE. Mr. Chairman, I lay out a number of options
in my testimony at the end. The two primary ones that I would
use on what I would call the revenue-raising side are to put a
floor under charitable contributions that has very little
effect on giving. Basically, people would still probably give
some basic amount. The idea of incentives is to give incentives
at the margin for the next dollar of giving, the giving above
which you would have done if there were no tax break.
And so, that concentrates the deduction at the top. It does
raise revenues. But then I would take some of those revenues
and, as I say, spend it on other items that I think would
actually be much more effective in increasing giving. One that
I've offered many times is to allow giving until April 15th, or
the time people file their tax return. People would sit there,
they would fill out their TurboTax or their H&R Block tax
returns, and they would see immediately that they could save
money--and they see exactly how much they'd save. That's a very
good marketing tool. We don't put grocery store advertisements
out 4 months before people go to the grocery.
Another revenue-raising option--and Mr. Colinvaux got into
this in some detail--is I believe there are substantial areas
in which you could raise money by looking at areas of weak
compliance. In some cases, it's because the IRS just simply
doesn't have the resources to enforce. They simply can't check
up on most clothing donations.
There is also the simple fact there that even if it's not
abuse, if it's not non-compliance, in many cases somebody may
be taking a $1,000 deduction for $10 or $20 that goes to a
charity. An example would be I've bought designer clothes, paid
$5,000, 2 years later I say, ``Gee, that's worth $2,500.'' I
give it to a profit-making agency that takes a charitable--
works on behalf of a charity. That profit-making agency runs a
thrift store. It goes to the thrift store, those designer
clothes sell for $100 in the thrift store. The thrift store
people are paid off, the profit-making agency is paid off, and
the charity gets $10. Now, that's an exaggerated view, but that
is actually legal under the current law.
So, I think there are a lot of areas where you could
increase revenues by cutting back on areas of very weak
compliance. But again, then I would actually--I mentioned
putting a floor under itemized deductions. I would then use
that to extend a deduction to non-itemizers, which I believe,
by the way, would get at some of Jan's comments, because that
would actually increase the amount of giving by lower-income
taxpayers that I think would go to areas like food banks.
There are other options that I mention in my testimony. But
those are among the principal items I would think about.
Chairman CAMP. Thank you very much. Professor Colinvaux,
you are the tax lawyer here. And one of the things I've learned
from releasing two tax reform discussion drafts is that policy
ideas are one thing, but turning those ideas into rules that
are simple and easy to understand is something else.
So, what rules would we need to make Mr. Steuerle's
proposals operational? And are there any other administrative
issues we'd need to consider?
Mr. COLINVAUX. Well, the question of rules is a difficult
one in the absence of a specific proposal. But I think I would
echo what Mr. Steuerle said at least on a floor.
So, if you did impose a floor, my own belief is that it
would affect giving on the margin. So it might not have a total
bad effect on giving. And there are considerable administrative
benefits to a floor. So this is not--the rule of a floor may
not be difficult to enforce, and the administrative benefits
are considerable. And if you think about those benefits in the
context of non-cash contributions in particular, right now
taxpayers who give up to $500 in non-cash contributions don't
have to separately report that, as they do with higher-value
property contributions.
We really don't know whether the property being given
that's under $500 is anything close to the value that's claimed
by taxpayers, or whether the donee organizations are getting
the benefits from those contributions. A floor would have the
effect of virtually eliminating many of those contributions. So
you wouldn't need any specific rules to address that.
I also want to echo something Mr. Steuerle said about
trying to use proposals that focus on the benefit that actually
goes to the charity. And a good example here were car
donations, because with car donations, money was raised through
the contribution of a car. The car would then be sold by a
third party. The money raised from selling the car would often
be much less than the claimed fair market value. Some of the
sales proceeds--maybe the bulk--would go to the third-party
seller, and the charity, at the end of the day, would get
pennies. So you'd have a charitable deduction claimed in a high
amount with a fairly small actual net benefit going to the
charity. And Congress' response to that was to tie the
deduction to the actual sales proceeds from the car sale. So
that is a rule that was used to try to make sure that the
deduction is based on the benefit that goes to charity. That's
the type of rule you might have to institute.
Chairman CAMP. Thank you. I want to give everyone else on
the panel a chance to comment. I know that you represent tax-
exempt organizations that do incredibly important work. And the
charitable deduction helps you fulfill that mission, as you've
testified.
And the primary focus of this Committee for the next year
is to produce a tax reform plan that broadens the base and
lowers rates. So if you would each--if you care to; you don't
have to--if you'd like to comment on Mr. Steuerle's and Mr.
Colinvaux's statements, that there might be a mix of policy
options that could help us broaden the base in tax reform while
also preserving the level of giving, I will start with Mr.
Murphy. And you don't have to comment if you don't want to, but
I want to give everyone a chance before I go to Mr. Levin.
Mr. MURPHY. Well, thank you, Mr. Chairman. As it should be
obvious, I am not a tax economist. But the Council on
Foundations has a long track record of supporting better
enforcement of the existing laws. And it seems to me that a
number of the issues that Mr. Steuerle and Mr. Colinvaux raise
are concerns about enforcement. There is nobody on this panel
representing a charity who does not want to weed out the bad
apples and the bad actors. There will be strong support for any
effort to try to do that, I think, from the nonprofit sector.
Chairman CAMP. All right. Mr. Wills.
Mr. WILLS. Yes, I'd like to echo that sentiment, as well. I
think all of us are thinking that enforcement would be the
wisest way to go, as opposed to creating a whole lot of new
rules.
In addition to that, I think that we want to look at the
wisest way to structure whatever is going to happen. And we
just want to make sure that whatever it is that comes out
doesn't further limit charitable giving. So when the net is all
completed, we are not harming the charities and the people that
they serve. That's kind of the primary objective.
Chairman CAMP. Thank you. Mr. Gallagher.
Mr. GALLAGHER. Two quick points. One is this conversation
of the floor that's been circulating now for years. I think one
of the things we ought to keep in mind is that not everybody
lives in Washington, where a one-bedroom condo costs $350,000.
There are people who live in central Indiana and southwest
Pennsylvania and parts of the west that, you know, make $50,000
or $75,000 a year, own their own home, deduct their taxes, give
away $1,500 or $2,000 a year, and $500 is a disincentive for
them to make that gift. It's--we always--I think we have this
conversation in such abstract, we forget about where a lot of
people live.
The other is as we think about a fair--and I would say
simple--approach, let's try to keep it simple. Because I--you
know, economists, I think, would say that a gift to charity is
maybe the most elastic gift or spend anybody makes in a year.
You don't get a pair of shoes, you don't get a car, you
probably don't even meet the person that benefits from your
gift. And, therefore, it is incredibly discretionary.
So, I think you will probably hear from folks today--
Volunteers of America and others--who have benefited greatly by
gifts of property. Crack down on compliance issues, but the
gifts to Volunteers of America, Salvation Army, and others, in
terms of clothing and so forth, dropped dramatically after we
moved on that, after we moved on trying to crack down. So
whatever we do, I think we have to realize these gifts are very
elastic. You know, the perception of complexity or cost drives
human behavior and drives giving.
Chairman CAMP. All right. Mr. Tempel.
Mr. TEMPEL. I would say simply that, you know, a floor is
better than a cap, because it pushes charity toward the top,
and where the cost of giving will have an impact. I fully
support the notion of a credit for non-itemizers, as well.
You know, Congress did a wonderful thing in providing us
with a 5-year experiment in the early '80s. And that experiment
can be examined, and you can get real data from the impact that
had. Some economists at the time believed that some kind of a
small floor there would have pushed giving up, as well. So,
those things do provide an incentive.
We have one study out at the University of Michigan's panel
study of income dynamics, where we have our own panel study on
philanthropy. And in that study it's clear that when people
move in and out of itemizing, their giving changes
dramatically.
Chairman CAMP. Right. Just one quick question. You
mentioned in your testimony that when rates go up, charitable
giving declines. Historically, when rates have gone down, has
charitable giving increased? Is the opposite true?
Mr. TEMPEL. No.
Chairman CAMP. All right.
Mr. TEMPEL. Yes.
Chairman CAMP. Thank you. Ms. Masaoka.
Ms. MASAOKA. Thanks. One point that hasn't really been
mentioned is the impact of America's volunteers on America's
communities, most of whom are mobilized through nonprofit
organizations. And the charitable deduction does only a very
small amount to incentivize and to reward volunteerism.
One very small thing that Congress could do to further
incentivize and reward volunteerism would be to change the
mileage reimbursement rates for people who are using their cars
for volunteer work. Right now, if one person uses her car,
let's say, for her own business, she can deduct the mileage
that she uses her car for at $.77 a mile. If she--the same
person later in the day does volunteer work driving her car for
Meals on Wheels, she can only deduct $.41 for the mileage that
she spends there. Just making that very small change, which
would have a very minor impact, would send a really strong
message about the importance of volunteerism.
Mr. STEUERLE. Mr. Chairman, could I add just one quick
footnote?
Chairman CAMP. Yes.
Mr. STEUERLE. When we talk about floors, the Committee
should consider that we really have two floors we are talking
about. One is the one we suggest such a floor under charitable
contributions. But the standard deduction serves as a
multiplicative floor----
Chairman CAMP. Yes.
Mr. STEUERLE [continuing]. That excludes most taxpayers
from getting any incentive at all.
Chairman CAMP. Yes.
Mr. STEUERLE. And so, when you are thinking about what a
floor might be, whether you agree or disagree with our
proposals, think about how the two floors interact. And I think
in that way you can actually think about ways of actually
dealing with Mr. Gallagher's concern about moderate income
taxpayers and whether they have some incentive.
Chairman CAMP. Thank you. Mr. Levin is recognized.
Mr. LEVIN. Thank you. I think this will be the only panel
where we get into policy discussions, basically. At least the
presentation. We may get into them, but I think the testimony
will be less about policy. So let me just say a few words about
the policy.
Number one, the charitable deduction is not a loophole. And
I think when anyone talks about widening the base, or whatever
they say, and they say let's get at loopholes, it's often, I
think, misleading. Because the charitable deduction is a tax
policy. We have loopholes, lots of loopholes. These so-called
tax preferences are not loopholes.
Second, I think we should be careful to say that if there
is any limitation, it's a transfer to the government, if I
might say so, because all of these tax policies, these tax
preferences, if we change them at all you can say it's a
transfer to the government. For example, the limitations we
placed on the mortgage interest deduction. You can say that's a
transfer to the government.
But I think it isn't a loophole, this deduction. Also, any
limitation isn't a transfer to the government. That conjures up
it's just sending the money to Washington. So I think we need
to be careful about that, if I might say so.
Also, we need to look at income distribution. And we've
been, some of us, working on this for over a year-and-a-half.
In July of 2011, at our request, Joint Tax gave us income
distributions on all of the tax preferences. And they gave us
one on charitable contribution deductions. This was based on
the 2009 rates and income levels. And there has been some
change, but I think the distribution analysis was instructive.
This was from Joint Tax.
And this is a chart, Mr. Chairman, I would like to enter
into the record.
Chairman CAMP. Without objection.
[The submission of The Honorable Sander Levin follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. LEVIN. And it shows, as to this deduction, 19 percent
is from people with incomes below $100,000; 26 percent from
people with incomes between $100,000 and $200,000; and 55
percent from people with incomes over $200,000. And this
somewhat parallels what some of you have testified to.
I think, again, I said in my opening statement, we need to
look at this deduction, as well as others, with care. And I
think we need to be careful of the labels. Also, we need to
have a careful study of the Pease Provision, which is now back
in law. And I know one or more of you gave some anecdotal
evidence as to the impact, but we have several studies that
indicate that the Pease amendment did have--in the past when it
was in effect, the Pease Provision--a negligible impact. And
the suggestion is that it will continue to have that. So, I
think we need to look very carefully at that.
Mr. Chairman, the working groups include one on charitable
deductions----
Chairman CAMP. Yes.
Mr. LEVIN [continuing]. That you and I have set up
together. And I think this is a vivid example of the need for
this Committee together to dig into the facts, and really bring
out all of these issues, all of the suggestions, and see if we
can come to some conclusion as to the facts.
And so, let me just end by saying we'll also probably ask
economists to give us their views. I have great respect for
President Reagan's views on some issues, but I think we'll talk
to everybody. So if there are any economists listening, we'll
hear you also. Thank you.
Chairman CAMP. All right. Thank you, Mr. Levin. Mr. Johnson
is recognized for 5 minutes.
Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate you
holding this hearing. I remember a roundtable of charitable
groups back in Dallas, where just about everyone in the room
spoke of the importance of charitable tax deductions. To that
point, I am reminded of the quote I saw about an unnamed
congressman--and perhaps for good reason--who said during a
debate surrounding the creation of the Federal income tax
system in 1913 that, ``If a man wants to make a gift to
charity, he ought to be encouraged to do so and not be
discouraged. He ought to be encouraged to make such a gift,
rather than be penalized for doing so.''
So, with that, I have some questions for Mr. Steuerle,
please.
Given your role with respect to the 1986 Tax Reform Act, I
would like to get your insights regarding the debate back then
regarding the tax treatment of charitable giving. One, why did
Congress, back in '81, decide to allow non-itemizers the
ability to deduct their charitable contributions?
Mr. STEUERLE. I think accepting the broad tax-base argument
that Mr. Colinvaux laid out, there is a good argument for
extending a deduction to everyone to provide them an incentive.
The concern we had by the time we got into '86 was basically
this was causing very large enforcement problems for IRS, that
IRS did not basically deal with small contributions, and it
complicated the tax return. So we were trying to reach a
compromise between that argument about providing an incentive
for everyone, and having something that's administrable.
It's not dissimilar, if you want, to the argument for
having a standard deduction under all contributions, although,
as I've laid out in my testimony, I would prefer, with respect
to the charitable contribution, to put a floor under it and put
it outside the law.
But back to '86, it was trying to reach that compromise
between issues of enforcement and issues of trying to provide
an incentive to all taxpayers.
Mr. JOHNSON. Well, my understanding is the House version
still allowed for non-itemizers a deduction, but the Senate
bill didn't. How did it come to pass that the Senate ultimately
prevailed in that question? Do you know?
Mr. STEUERLE. I don't remember. Again, I think sometimes
when you go to--you know, to compromise committees, that they
often take out items where there is some dispute, or where
there is some big extra cost, or where there is, again, some
extra administrative burden. But I can't speak for the
participants----
Mr. JOHNSON. Sometimes the Senate has different brain
inserts----
Mr. STEUERLE [continuing]. In the conference committee.
Mr. JOHNSON [continuing]. Than we do over here. Why did the
Reagan Administration's Treasury One plan propose to allow for
a deduction for amounts over 2 percent of the taxpayer's
adjusted gross income? And what was the rationale behind that
proposal, do you know?
Mr. STEUERLE. Mr. Johnson, that rationale was very similar
to the one that I suggest in my testimony. We were trying to
put a floor under deductions, because we thought the first
dollars of giving were not greatly influenced by the incentive.
Mr. JOHNSON. Lastly, do you think non-itemizers should once
again have the ability to deduct their charitable
contributions?
Mr. STEUERLE. Again, Mr. Johnson, yes, but if subject to a
floor. That is, I have very strong concerns for IRS' ability to
administer much of this. So I don't want to provide any----
Mr. JOHNSON. A floor, or a max, or both?
Mr. STEUERLE. I would allow a non-itemizer deduction, but
subject to a floor. So that way we are only allowing a
deduction for everyone who gives in excess of some amount--say
1 percent of income. The average amount of giving is 2 percent.
So people who give in excess of some average, or some amount
below that average, like 1 percent of income, it seems to me
that's a compromise that deals with the issues of enforcement
for IRS and administrability, but also deals with the concerns
of the charitable sector that provide incentive for everyone.
I do think the signal--I just want to be clear; we are
getting very technical here--the signal of a charitable
deduction, I think, is a powerful one and a very good one for
our society. And I want to maintain it.
Mr. JOHNSON. Thank you for your comments. Thank you, Mr.
Chairman. I yield back.
Chairman CAMP. Thank you. Mr. Lewis is recognized.
Mr. LEWIS. Thank you, Mr. Chairman, for holding this
hearing today. And let me join the Chairman and welcome each of
you and thank you for being here today.
I have a question for each member of the panel. And if you
can, just be very brief. I want to thank each of the experts
for sharing your views and your thoughts. I would like to know
if there is an option under consideration that would be better
for increasing giving than others? Do you have an option better
than we have? Do you have a suggestion or recommendation that
would increase contribution, giving?
Mr. STEUERLE. I want to give my panelists equal
opportunity. I offered several options in my paper. Again,
extending the deduction to non-itemizers, done the right way, I
think could increase giving. I think one of the major ways of
increasing giving would be to allow giving until April 15th. So
I have a number of issues like that, where--that I suggest in
my testimony, though those are probably the two principal ones.
Mr. LEWIS. Mr. Murphy.
Mr. MURPHY. Mr. Lewis, I would defer to the folks who are
better at writing tax law than I am, and simply----
Mr. LEWIS. Are you the head of the Council on Foundation?
Mr. MURPHY. Yes.
Mr. LEWIS. So you know a great deal about the whole
foundation community?
Mr. MURPHY. Well, I work for a foundation, yes, right. I
mean, I think there are certainly a number of proposals that
have been suggested that would expand charitable giving. Our
concern is primarily not to send a signal to donors that
charitable giving is less important. We would be very concerned
about any limitations that Congress would impose.
Mr. LEWIS. Yes, Mr. Wills.
Mr. WILLS. Mr. Lewis, I believe that there are many options
that are available. Our key concern is that whatever option is
selected doesn't do anything to decrease charitable giving.
That's the key.
So, as far as a particular option that I would have a
preference for, I don't have a particular preference, but would
be very interested in helping the working group on tax-exempt
and charitable efforts from this Committee to help design
something that will not decrease the incentive for charitable
giving.
Mr. LEWIS. Well, have any of you considered or thought
about ways to get a greater degree of giving from the larger
American community?
Mr. GALLAGHER. Well, Mr. Lewis, I would say--answer the
first question and then that question. First of all, I don't
think we can overstate the simplicity and the compelling nature
of tying the charitable tax deduction to an individual's tax
rate is the envy of the world. The fact is that it's simple,
and it's compelling, and it works. And it's amazing to me that
just in the consultation we've had in the last 2 or 3 years
with the French government, that the French are--now have the
most generous tax incentive for charitable giving in Western
Europe because they were benchmarking us.
So, one, I would--having said that, I think extending tax
deductibility for charitable giving to all taxpayers is the
fairest and simplest way to improve the current environment.
Mr. COLINVAUX. I think I am going to echo that. But if the
goal is to have more giving, then look to those who currently
don't have an incentive. And those who don't currently have an
incentive are those who take the standard deduction--so that
would lead you to a non-itemizer--but with a floor. I think a
floor is very important for the non-itemizer deduction, because
we already know that non-itemizers do give already. And so we'd
want to encourage additional gifts that aren't already being
made.
Mr. LEWIS. Thank you.
Mr. TEMPEL. Mr. Lewis, I would say that, you know,
certainly not putting a cap on deductions would keep from
dampening it. But anything you do to shift the cost of giving
from the donor, you know, to the beneficiary, would be helpful.
So creating special incentives among people who give would be
helpful. I think the charitable tax credit for non-itemizers,
or some way for non-itemizers to get recognized, would be
helpful.
The problem is that, you know--I mean, I believe in
democratizing philanthropy, so that everyone can participate,
and everyone should participate. But the philanthropy is skewed
to the top. And so we need to find incentives that allow those
people who care most about this to--and provide the largest
sums of money--to do so easily.
I was--I visited in the last 3 weeks with two people----
Chairman CAMP. Time has expired.
Mr. TEMPEL. Okay.
Chairman CAMP. If you want to submit anything in writing
for the remainder of his questions, you are free to do that.
Mr. Brady, you are recognized for 5----
Ms. MASAOKA. I just have one comment, quickly, that----
Chairman CAMP. You can submit that comment.
Ms. MASAOKA. As two people have already commented earlier--
--
Chairman CAMP. You may submit that comment in writing.
Ms. MASAOKA. Oh, all right. I am sorry.
Chairman CAMP. We are going to stick to the 5-minute rule.
We have a very long day, we have a lot of witnesses that want
to testify----
Ms. MASAOKA. I am sorry.
Chairman CAMP [continuing]. And a lot of Members who want
to ask questions.
So, Mr. Brady, you are recognized for 5 minutes.
Mr. BRADY. Thank you, Mr. Chairman. I like charitable
giving, especially at home. Our part of Texas is Hurricane
Alley, and so what our churches and clubs and organizations
do--United Way, others--during that crisis is just so critical.
And what I like is that in local giving, you are looking at the
organization that's delivering that service. They're
accountable. And if they don't perform or do the job, you quit
giving to them.
My worry is that when I send my taxes to Washington, I've
noticed there is a middle man who takes a pretty big chunk out
of that dollar and sends it who knows where. So I want to grow
charitable giving. And I can't help but think that, with a Tax
Code so complex, it costs our Nation three times more a year to
comply with the Tax Code than what we spend to encourage
charitable giving in the Tax Code. I would much rather, in a
simpler code that lowers tax rates, I'd much rather send my
money to my church or charity than to my accountant--I hope my
accountant is not watching the hearing today, but that's what I
want to achieve.
So I think this is helpful, to ask, after 96 years of
principally the same charitable giving exemption, is there a
smarter, is there a better way to encourage, reward charitable
giving? And my question, though, is the reverse of that.
In the current Tax Code, which areas are probably the least
effective in encouraging charitable giving? For example,
someone raised the issue of the clothing deduction, and sort of
how that can be--my sense is it's going to curl one way or the
other. People, rather than renting the storage unit, want to do
something with clothes and items that they have. I will ask the
panel. What are the areas that we aren't quite as good at
rewarding giving, and is there a better way to do it?
And I will open it up. Do you want to start, Ms.----
Ms. MASAOKA. No.
[Laughter.]
Mr. BRADY. That was kind of easy, you just--don't give up
that easy here.
Mr. Tempel.
Mr. TEMPEL. Well, I would say that, you know, one of the
simplest things you can do to reward charitable giving is to
have the tax credit for non-itemizers, so that you create
incentive for those people to, you know, to give, and to give
at higher levels.
Mr. BRADY. But can you do that without risking, you know, a
greater gaming of the system?
Mr. TEMPEL. Well, there are----
Mr. BRADY. You think we could do it in a good way?
Mr. TEMPEL. As Mr. Steuerle said, there are issues--there
are enforcement issues that become involved when you make the
credit available for non-itemizers, in how you would--how
people would document that, et cetera.
Mr. BRADY. You think it can be done?
Mr. TEMPEL. I think it would be possible, sure. But I am
not a tax law expert, nor am I an economist. But those--and
when you study giving, incentives matter in terms of how much
people give. And not whether they give, but how much people
give. And so that would be one way to encourage more giving.
The more--you know, the more you can reward people for
making a contribution, that is to--supporting this sector of
our society, our supporting it outside the government, to
supporting it in ways that are meaningful to them, the more you
strengthen democracy and, I think, increase philanthropy. So,
you know, you have to look at--the cost of giving matters to
individuals. Research shows that over and over again. So that
anything you can do to lower their cost of giving is, in fact,
helpful.
Mr. BRADY. Can I ask you this? How much in that research is
the tax break critical to their giving? How much of a motivator
is that?
Mr. TEMPEL. Well, it doesn't motivate whether they will
give, but it motivates how much they will give, and when they
will make the gift.
Again, another wonderful experiment in 1986, 1987, you saw
people move their giving from 1987 to 1986. It's the only time
in the Giving USA data that giving went down from one year to
the next.
Mr. BRADY. And when you say ``moved it,'' they limited it?
Mr. TEMPEL. No, they moved their giving forward into 1986
to take advantage of the higher marginal tax rates. And then
the giving dropped in 1987, in the aggregate.
So, you know, it's very--their giving is very price-
sensitive. It's not whether they give, but how much they give.
Mr. GALLAGHER. Okay. Mr. Brady, if I could, there is a
direct correlation to people that volunteer, and whether they
give to charity and how much they give.
Mr. BRADY. Yes, but----
Mr. GALLAGHER. So we could--the promotion of volunteerism
is--has a direct connection to giving. And if you--whether you
agree with mandatory service in high schools or not, if you
watch that generation of kids coming, they are incredibly
philanthropic, more than the boomers in--on aggregate.
So, anything we can do to promote volunteerism--and I would
say one of the things that has happened in this debate is you
have galvanized the nonprofit sector. We ought to try to
galvanize the nonprofit sector on volunteerism and innovation
around solutions to some of our social problems.
Mr. BRADY. Thank you, Chairman. I appreciate it.
Chairman CAMP. Thank you very much. Mr. Blumenauer is
recognized.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I would direct a
question to Mr. Steuerle. I like the way that you package
together your concepts here to try and streamline something to
be revenue-neutral and get more impact out of the contributions
that are made. And it seems very common sense to me. I have
been deeply concerned of late watching--you were talking about
the counter-cyclical impact on foundation giving, the pay-out
requirements.
Can you elaborate on what is going to be necessary--I mean,
you have been through the wars on this in administrations. You
have watched the process. What do we have to do to be able to
somehow make progress on something like this, that seems
common-sense, broad base of support, revenue-neutral? What is
the key?
Mr. STEUERLE. Well, some of the impact, in terms of
foundations giving in a counter-cyclical way, or making--that
is, they give--they have a tendency--although I have to say in
the current recession they did not do it as much as might be
expected--they have a tendency to give less in a recession
because their assets go down, and then more when their assets
go up. Some of this is just the natural result of the economic
cycle as due to their own internal methods.
So, for instance, if they decide to give 5 percent of asset
value every year, they start to get caught in that trap. And
better planning could help a lot, dealing with that.
There is a particular policy issue, however, as well, in
that the current excise tax has this very strange effect by the
way it is calculated, that if you give more--for instance,
those foundations that said, ``We will give 7 and 8 percent of
our asset value this year'' get penalized later on. So they
have a strong incentive not to give more in times of recession
or asset declines. And that excise tax is something worthy of
fixing. The Council on Foundations has been fighting to fix it
for some time.
Now, the debate there often gets, then, narrowed down to,
well, gee, there is a revenue aspect involved. And so, if we
fix it by just, say, making it a flat 1 percent of assets and
an excise tax, that might lower slightly the revenues. I have
offered you other revenue options here.
Quite honestly, I think the whole excise tax on foundations
is silly. I mean, there is no excuse for it. And if you
actually talk about bang per buck, you get rid of $1 of excise
tax on foundations, that means at some point they are going to
give a dollar more to charity. That is actually more than we
get out of some of the charitable deduction. As far as I am
concerned, I would eliminate it. But admittedly, I would
simplify it, and that would solve part of your problem.
Mr. BLUMENAUER. But what I am interested in, from your
vantage point as somebody who is a scholar studying it, and
somebody who has been on the inside administratively dealing
with tax policy and administration, how--what is the dynamic
that enables us to move forward on some things that would
appear to be common sense, and have broad support? Is--what is
the key to making it happen?
Mr. STEUERLE. Well, I think one of the tricks--and this is
an issue that goes far beyond the subject of this hearing; it
goes to tax reform, or budget reform in general--the key is
often to be able to make trade-offs on a broader scale.
So, for instance, there are some things that people might
feel, ``I don't want to change that, because it is--if we
change it, it is progressive.'' But it is very inefficient. You
know, we can go into a part of the city and throw money off the
roof to a poor part of the city and say, ``Gee, we want to keep
that, because if we get rid of it, we are going to--it is going
to be regressive.'' But if you are allowed to combine other
elements, other packages to maintain that same goal, you can
get at it.
The same with this excise tax. When it is dealt with one
item at a time, people say, ``Gee, I would love to fix it, but
it is going to cost us revenue,'' so then we don't get any
movement on it.
I think most people--I think even most legislators on both
sides of the aisle--would say the current design of the excise
tax on foundations--and I don't want to over-emphasize that--
but it is badly designed, you know. Nobody really supports its
current design.
So the question is--how to get movement is how to be able
to offer trade-offs that allow Congress to get past whatever
the impasse is. If the impasse is revenues, then you decide
what is the total amount of revenues we want to raise, and then
let's consider the package as a whole. Let's not take them one
item at a time off of a list and decide it on the basis of its
revenue impact or its progressivity, or anything else.
Mr. BLUMENAUER. Thank you. I found your testimony very
useful. Thank you, sir.
Chairman CAMP. Thank you very much. Mr. Tiberi is
recognized.
Mr. TIBERI. Thank you, Mr. Chairman, and thank you all for
being here. Mr. Gallagher, great to see you.
Mr. GALLAGHER. Good to see you.
Mr. TIBERI. We miss you in Ohio.
Mr. GALLAGHER. Thank you.
Mr. TIBERI. I found a statement that you made in your
written testimony to be just fantastic: ``A limitation on the
deductibility of charitable donations isn't really an increase
in tax on the wealthy, so much as it is a transfer to the
government of money that would otherwise go to charities. The
real impact will be felt by the people we serve.''
I had a conversation with a man you may remember who has
since passed away in Ohio by the name of Richard Solove, who
gave over $20 million to Ohio State. And the cancer hospital,
the James Cancer Hospital, is now called the James Cancer
Hospital and Solove Research Institute. Before he gave that
money he said, ``Never let anybody tell you, Pat, that people
like me don't give money based upon what the Tax Code looks
like. That doesn't mean I still wouldn't give, but maybe not as
much.''
Mr. GALLAGHER. Right.
Mr. TIBERI. It was an unbelievable point that I will never
forget.
And so, on New Year's Day, all of us were here. I was in
the Capitol that afternoon, trying to figure out what was in
the so-called fiscal cliff deal that was negotiated between
Vice President Biden and Mr. McConnell that the Senate had just
passed. And obviously included in that were provisions in the
Tax Code that Members on this side of the aisle did not like,
including what the President insisted on, the return of the
Pease and PEP provisions that impact donations, including
donations to charity, with the tax provision.
And what was astounding to me is that day, as we were
looking at those provisions, the President did a press
conference. So the ink is not even dry on this proposal, and
the President said he was coming back for more, in terms of
limits on donations to charities. Now, as Chairman with the
great American, Mr. Lewis, of the Philanthropy Caucus, I have
grave concerns about what that means to charities.
Can you tell us--and it has only been a little over a
month, a month-and-a-half, what that has meant to charitable
giving, and what it would mean further if the President gets
his way?
Mr. GALLAGHER. Well, in short, there is no question that
the White House's proposal to cap the charitable deduction for
the highest income earners would reduce giving in the country.
There is no question about it. The debate is how much.
You know, the fact is that, at least the donors that we
work with, are--they look at complexity, they look at cost.
They are anticipating that the cost is going to go up for their
charitable giving. They are doing one of two things. And
somebody referenced it on the panel. They are accelerating
their giving--and accelerated their giving at the end of last
year--in anticipation of that gift costing more, or they are
extending their gifts out.
So, we work directly with a very large donor from Orange
County, California, who has made lots of gifts to cancer
hospitals, local nonprofits, United Way. In fact, he has seeded
the founding of United Way in Paris. And he is extending his
gifts out multiple years. So what he is doing is he is reducing
his annual giving in anticipation of the cost. So the giving is
going to go down.
I want to make another point. I want to use Columbus--and
it is great to see you again--in Ohio, in terms of what gets
crowded out here is--so there is $20 million donors. But when--
I think we are missing the opportunity to galvanize the
nonprofit community around social solutions, working with
government and businesses and local nonprofits. Service-
supportive housing in Columbus, in Ohio, and across the country
started because Federal Government and State government started
loosening the rules around Section 8 funding and other housing
funding. Local donors stepped up with local contributions.
Local government got flexible in terms of instead of sending
people to shelters, why don't we put them in housing and force
the services, public and nonprofit, to support them to get them
into housing. Twenty percent of the people in shelters in all
of your districts consume 80 percent of the capacity of those
shelters.
If, on the other hand, we can create innovative approaches
to service-supportive housing with flexibility around
government funding--and the way we seeded it in Columbus was
with an individual $500,000 gift that allowed us to buy a
building, go to the YMCA, manage it. The Mental Health
Association put money into it to provide support services.
There are 1,000 units of new service-supportive housing in the
city of Columbus and in Franklin County because of that. And
you know it.
And we should be talking about my view, how you get us
galvanized around that, versus what we are galvanized around
right now, which is trying to prevent the limitation on the
incentive, which will reduce giving.
Chairman CAMP. All right----
Mr. TIBERI. Thank you, great point.
Chairman CAMP [continuing]. Thank you very much.
Mr. TIBERI. I yield back.
Chairman CAMP. Mr. Davis is recognized.
Mr. DAVIS. Thank you very much. I was not daydreaming, but
I wasn't looking.
Chairman CAMP. We are following the Gibbons Rule in this
hearing. So it is Mr. Davis' turn.
Mr. DAVIS. Thank you very much. Let me thank you all for
being here. There are many people who express the theory that
the more control individuals have over the use of whatever they
give or is extracted from them, the more likely they are to
give more.
Let me just ask your opinion quickly, relative to that
theory, and we will just start with you, Mr. Steuerle.
Mr. STEUERLE. It depends on the individual. The one thing I
would say about the charitable deduction is that government, in
most areas of social policy, does drive policy, that government
decides what to do with its spending budget. So it decides
often, you know, that we will put money into Medicare, we will
put money into Medicaid, we will put money into, sometimes,
subsidizing food banks. What the charitable deduction does on
the side is it gives the taxpayer some independent choice over
where to allocate those social benefits, and it provides a tax
subsidy to do it. And I think that is a very useful part of
this broader social welfare budget, in the sense that we are
allowing individuals to signal--it is not just the giving they
do, it is the signal that they give.
And so, I think the incentive for them to give sends a
positive signal to which they respond very positively. And that
is a good thing.
Mr. DAVIS. Mr. Murphy.
Mr. MURPHY. Mr. Davis, I think it may not be so much a
matter of control as engagement. Donors have more than a tax
motivation to give. And the more we give them an opportunity to
see the impact of their gift, yes, the more active they become
in giving. I think there is no question about that. But I am
not sure it is as much about control as the ability to see
results, and that they have made a difference.
Mr. DAVIS. Mr. Wills.
Mr. WILLS. Yes. If control means that they have more of an
opportunity to create more wealth and have more disposable
income to make decisions upon, certainly the more control they
have over those things the greater their giving is going to be,
as long as the incentive to give is still in place.
Mr. DAVIS. Mr. Gallagher.
Mr. GALLAGHER. Our research is pretty compelling. People
give because they want to help other people. That is the number
one driver. And that there is an incentive to do it. It is
those two things.
Mr. COLINVAUX. If control of the gift means having the
ability, as itemizers do, to direct a portion of government
money to a charity of their choice, then, yes. Again, this
leads to the idea of a non-itemizer deduction.
Mr. DAVIS. Mr. Tempel.
Mr. TEMPEL. I think it is not so much control, unless you
mean control as having a choice about where you give, following
your own values, fulfilling your own values.
But I would echo what Mr. Gallagher and several others have
said, that it is, in fact, engagement. Organizations need to
engage people and build trust. Research shows over and over
again that when people trust organizations, they trust or trust
highly, they give almost double the amount that they give when
they don't trust.
Ms. MASAOKA. Well, what several people have already pointed
out is when tax rates go up, or when tax rates threaten to go
up, people give more and they give sooner. And so, what is
clearly--people are clearly making a choice about control by
doing that. They are saying, ``I would rather give to a place
that I care about and that I know, rather than to give that
money to the government.''
Mr. DAVIS. Mr. Steuerle, let me ask you, if I could.
According to the Joint Committee on Tax, individuals with
higher incomes give more, on average, to charity. Is the tax
benefit higher for wealthier individuals than the general
population who itemizes?
Mr. STEUERLE. If we are speaking about giving to particular
charities, higher-income people clearly have more of an
incentive to give than lower-income people, because the gift is
subsidized at their tax rate.
However, I do want to make another point in terms of
neutrality. Think about a high-income person and a low-income
person taking a vow of poverty. If you convert away from a
deduction to a credit, you actually would end up in the strange
situation where the high-income person would have to pay taxes,
even though they took a vow of poverty; the low-income person
wouldn't.
So, what I am trying to argue is that the non-neutrality is
partly caused--for progressive reasons we want higher rates on
higher-income taxpayers. But the result is they pay a much
higher tax rate on their earnings, on their wages. So if they
decide to work and give their wages to charity, we are sort of
neutralizing that effect by giving them a charitable deduction.
Or, if you want to, if we have a spouse that says, ``I want
to go work and give money to charity,'' one spouse is high
income, one is not, the deduction sort of treats them in a more
neutral fashion.
Mr. DAVIS. Thank you very much----
Chairman CAMP. Thank----
Mr. DAVIS [continuing]. And I yield back.
Chairman CAMP. Well, thank you very much. Mr. Reichert is
recognized.
Mr. REICHERT. Thank you, Mr. Chairman, and thank you for
holding this hearing today. And I also want to thank you for
the opportunity to serve as the Chair of the Charitable and
Exempt Organization tax reform working group. So we may meet
again somewhere along the road here in the next few months.
And, Mr. Chairman, as you have mentioned in your comments,
charitable organizations perform invaluable services for our
society, and I believe are part of what makes America great.
You have all spoken to that eloquently. But all parts of our
Tax Code need to be reviewed. And charitable giving and exempt
organizations deserve a close look, also. I think all of you
would agree with that.
I will give an example. On one side of things you have
AARP. In the last Congress, Dr. Boustany, former Congressman
Herder, and I took a close look at how AARP sells for-profit
insurance, and the implications for this nonprofit title and
organization that they run. We need to ask if organizations
like AARP have significant financial interests in a business
like selling insurance, and should they continue to enjoy their
tax-exempt status. I mean, that is the question that a lot of
us have.
And on the other side of things, I think, Mr. Colinvaux,
you have mentioned the vehicle and property donations and the
confusion around that. In pre-2005 people were allowed to
deduct the fair market value of anything less--a vehicle less
than $5,000. And then, if it was above $5,000 they had to have
an appraisal. I am sure you are very familiar with the law. But
post-2005, it was less than $500 for fair market value, and
then you had to have the sales price of a--appraisal over $500.
So what happened after 2005 is the donation of vehicles went
from 900,000 vehicles to 200,000 vehicles.
So, I am in agreement with you that there needs to be a lot
of work done. And as some have mentioned here, enforcement is
one of the, I think, major concerns here, and people taking
advantage of certain parts of a charitable giving Tax Code. I
am an old cop, so I am all about enforcement. So we will be
taking a look at this language very closely.
But I also want to mention that Mr. Lewis is my Co-Chair on
this charitable giving working group. And so, together, Mr.
Lewis and I will be taking a close look and hopefully finding
some solutions and looking at some reforms that increases
giving, but also allows some fairness in the Tax Code and some
enforcement, holding those people accountable that might be
thinking about taking advantage of certain parts of the Code.
I do have one quick question for Mr. Tempel, and it has
been touched on, but I want to sort of get at it from a
different--in a different way. You mentioned in your testimony,
and you pointed out, that the economy and consumer confidence
is more important to charitable giving than tax incentives.
So, if we enact tax reform that grows the economy, do you
believe that, even if we limit the subsidy for the charitable
deduction, giving to charities will rise? So the economy grows,
not just the tax brackets are changed and go from 6 to 2 to 10
and 25 percent, but the economy, as a result of tax reform,
grows?
Mr. TEMPEL. Well, the answer to that would be that there
will be a lag if you do something to limit charitable gift
deductions. But as the economy grows, you know, the--you know,
philanthropy would grow with it. And you would eventually
overcome the downturn that is caused by negative incentives.
I mean, there is just no--there are no two ways about it.
We have looked at research going back now to 1960, analyzed the
core--you know, the drivers of increases in giving year to
year. And the two single biggest predictors of increases in
giving are the--are a rise in household income and the rise of
the S&P.
Mr. REICHERT. And you see that happening, even if we limit
subsidies?
Mr. TEMPEL. Yes. You know, that correlation has existed
through various tax schemes. But you can see where shifts take
place inside the sector. I do not have it with me, but I can
get for you the research that shows what happened after 1986.
Because there was a redistribution of philanthropy from the
very top of the economy distributed out throughout the middle
class. And the top marginal tax rate folks decreased their
giving, but they recovered about 10 years later. So that is
what happens. You see a depression, but it will recover if you
can really grow the economy.
Mr. REICHERT. Thank you, Mr. Chairman.
Chairman CAMP. Thank you very much. Ms. Sanchez is
recognized.
Ms. SANCHEZ. Thank you, Mr. Chairman. I want to take a
moment to thank each of our panelists for appearing before the
Committee today. I know that your organizations do remarkable
work in our communities, often encountering many challenges,
and sometimes very limited funding. And I also wanted to thank
the Chairman and the Ranking Member for holding this hearing,
because it is an important step, as the Committee starts to
think about the long-overdue tax of comprehensive tax reform.
Our Tax Code needs to be fair to working families and
businesses, alike. And in an effort to simplify our Tax Code,
we hope that we can encourage American innovation and job
creation, and pass a strong economy on to our next generation.
One thing that I hear over and over again is that we can't
continue down this path of uncertainty, complexity, and, most
of all, inequity in our Tax Code. It is just not going to be
sustainable. So I am very much encouraged by the fact that
Chairman Camp and Ranking Member Levin are strongly committed
to working together to pass comprehensive tax reform, because
only through completing that task are we going to accomplish
the goals of bringing in the revenue that we need. And I think
the charitable tax deduction is a very important part of that
discussion.
I also know that Americans are--have a very long and proud
tradition of taking care of our own. And that is why I support
robust incentives for charitable giving. It is only through the
sacrifices of friends and neighbors that everything from food
banks to homeless shelters to museums and libraries are funded.
And the Tax Code should encourage those charitable donations
and try to treat all Americans equally in that giving.
But one thing that I have heard more than once in this
hearing already is that individuals who file itemized tax
returns are the only ones who can take advantage of the
charitable deduction. And those individuals only make up about
a third of all of those who file returns. The National
Philanthropic Trust recently found that 65 percent of
households give to charity.
So, with that big disparity between those who give to
charity and those who can actually claim the charitable
deduction, I think it is time to think about expanding access
to this credit to lower- and moderate-income workers--earners,
pardon me--who take the standard deduction.
Charities that are in my district serve every function
imaginable, and they receive a very high percentage of their
donations in the form of small gifts from everyday working
people. And as I would suspect, that is the point that I think
Mrs. Masaoka made earlier. Most of your charities, much like
those in my district, benefit from similar small-dollar
donations. Local charities in California receive donations from
both high- and low-income earners. But it wouldn't hurt the
charity business model if we--if lower wage earners could
deduct their contributions, as well.
And I understand that there is somewhat of a difference in
what the large-dollar donors tend to give money to and what
low-dollar earners--or low-income earners tend to give their
money to. Low-income people are more likely to donate to things
that are, like, directly benefitting local communities, things
like food banks, homeless shelters, and churches. So, if that
group can most benefit our community, why do we not incentivize
their giving more under the Tax Code?
Now, assuming that the charitable deduction incentivizes
giving, encouraging low- and moderate-income individuals to
donate would only increase charitable giving if taxpayers at
these income levels become eligible for the deduction. So I am
interested in getting your perspective on that.
I wonder if Ms. Masaoka could expand on that, on that
theory?
Ms. MASAOKA. I think you have made all the important points
very wonderfully, that, in fact, what we do know is that while
a great deal of the money to the charitable sector comes from
high-income households, that people at lower ends of that
spectrum are more likely to give to their local communities, to
people that are disadvantaged in some way. And they are also
more likely to give a higher percentage of their incomes. It
may not be the same in dollars, but they are giving--lower-
income people give a higher percentage of their income than do
higher-income people.
So, all of these things argue, I think, for not only, but
for the inclusion of benefits to non-itemizers as part of a
package in tax reform.
Ms. SANCHEZ. Is there anybody on that panel that would
disagree with what was just said? No? Okay.
Then, very quickly----
Mr. TEMPEL. Ms. Sanchez, I would----
Ms. SANCHEZ. Oh, I am sorry, Mr.----
Mr. TEMPEL. I would only say that, you know, our survey of
high-net-worth households does show that 80 percent of them
give to higher education, but 79 percent of them give to direct
needs causes, as well. So it is not true that the wealthy only
give to, you know, very esoteric causes, or the causes that
help enhance human potential, as opposed to reducing human
suffering.
Ms. SANCHEZ. I understand, and I didn't mean to imply that.
I was just making a--the case that lower-income earners tend to
more specifically give to those needs.
Chairman CAMP. All right. Thank----
Ms. SANCHEZ. Thank you, Mr. Chairman.
Chairman CAMP. Thank you. Dr. Boustany is recognized.
Mr. BOUSTANY. Thank you, Mr. Chairman, and thank you all
for being here today.
As Americans, we are all very, very proud of our
unsurpassed generosity. I certainly saw it in my time in
Congress when I took the oath of office in 2005. And since
then, my home State of Louisiana has been hit by five
hurricanes. Four directly affected my district. During all of
that, oftentimes, charitable and tax-exempt organizations were
the first to be involved in the first response, before the
government could get involved in helping so many families.
Given that we are seeing a lot of difficulty throughout our
country today, a lot of Americans are struggling, I have a
policy question and I would like to direct it to Mr. Tempel, to
start with.
Should we, as we craft policy in this area, should we give
preferential tax treatment to those U.S. tax--to donors who
give to U.S. organizations who preferentially--say 50 percent
or more of the time--provide services to American citizens and
residents versus some overseas charitable type of event?
I mean, I have no doubt about the importance of public
health globally, but is this something we should consider, as
we look at policy? Mr. Tempel, if you want to, start with that.
Mr. TEMPEL. Well, you know, and I would have to offer
personal opinion, because I don't think we have any research
that shows this. I mean, one thing one might consider is what
kind of an impact does that have on U.S. foreign policy, if we
were to encourage people to give locally, rather than
internationally. And international is growing, although it is a
very small sliver of the total U.S. philanthropic pie.
There is some--I think what happens is there are some very
visible new donors who are spending a lot of their resources
in, you know, in developing countries. And so we notice that.
But it is still a very small sliver. I did ask one of those
donors why he gave in Africa, and he said, ``I have been to
West Virginia, I have been everywhere in the United States.''
And he said, ``What you see in the United States, you can't
even imagine--it doesn't even get close to what you see where I
am putting my money.'' So I think that is--you know, I think
that is one of the ways one might consider it.
This is a complicated issue. And, of course, we are one of
the countries that allow people to make contributions here that
benefit other countries. Many countries don't do that. But I
think it is probably something you want to take into
consideration, in terms of the way in which the U.S. approaches
its foreign aid program and foreign relations program.
Mr. BOUSTANY. Thank you. Anybody else want to comment on
this?
Mr. STEUERLE. I would just say, in terms of the data,
international organizations are probably more dependent upon
charitable contribution than almost any other type of charity,
and that is because other charities, such as hospitals,
nonprofit hospitals, get a lot of their money through fees.
Higher education, the same way. So you would have a fairly--
much more deleterious impact upon international organizations,
if you went after them.
Let me also say--and I actually personally have dealt with
this with the State Department and some other aspects of my
life--and that is that the goodwill that the American people
create through their private donations abroad is often, in many
cases, greater than what the State Department can do. The State
Department, almost inevitably, has to deal through governments,
who often are corrupt. But you have to--they have to deal
government to government, whereas the private international
organizations can be much more effective in dealing one-on-one
with schools, hospitals, and needs abroad.
So they actually serve our country very much in promoting
goodwill abroad, and I think, as a result, actually reducing
such things as terrorism by creating that goodwill.
Mr. BOUSTANY. No, I fully understand that. And having
traveled abroad to a number of these troubled areas and taken
an interest in public health, you know, clearly you are correct
in your analysis and statements.
But I wanted to ask this question on behalf of a lot of
constituents I have in south Louisiana, who oftentimes wonder
why are charitable dollars going out of the country when we
have immense needs that were unmet on the Gulf Coast? And
certainly now we are seeing that on the East Coast, and so
forth. So, Mr. Wills.
Mr. WILLS. Yes, I just--I want to just add and echo the
point. I completely concur with this gentleman's comments about
how it would be harmful to international efforts. But also it
is very important that we maintain philanthropic liberty, so
that the donors have--they can give to what their intent is to
give to. If we start to tell them where they should and should
not give, especially if you start to try to divide between
whether or not an organization is doing work in the States or
internationally, that could become very complex, very difficult
to enforce, and also would harm giving significantly.
Mr. BOUSTANY. Right. I was going to put aside the
complexity of administering that for a minute, and just----
Mr. WILLS. Right.
Mr. BOUSTANY [continuing]. I wanted to address the policy
issue. So I appreciate it.
I see that my time has expired. Thank you, Mr. Chairman.
Chairman CAMP. Thank you. Mr. McDermott is recognized.
Mr. MCDERMOTT. Thank you, Mr. Chairman. I always try to
figure out what these hearings are about. I don't know whether
the purpose was to panic the charitable community into rushing
to Washington to talk about what their deductions are all
about. If that is the point, I guess we have done it.
But what is troublesome to me is that I don't think that is
what it is about, really. The gentleman from Ohio was asserting
that the President was the only person who was looking to limit
the cost of tax expenditures, including charitable deductions.
Now, it was the Chairman who proposed last year a lower--to
lower the top individual rate to 25 percent in the revenue-
neutral bases. So you have to have some revenue from someplace.
That would require them to raise revenue from someplace by
limiting certain tax expenditures.
Now, during the election, Governor Romney had exactly the
same proposal. The people rejected that at the polls. But he
was proposing limiting the itemized deductions to $25,000, a
proposal that most people think would have absolutely decimated
charitable giving in this country, if that had been proposed by
the President when he got into office.
Now, I am really confused because if you think about this,
the Majority wants to bring the individual rate down to 25
percent by finding revenues someplace. And I look around at
where the places are you would look for revenue. There is broad
agreement among the Members and the witnesses that we need to
expand incentives to give, right? So where do you look for
those revenues?
I guess you could go to the deduction for health
expenditures, or you could go to home mortgage interest. Or I
deduct State sales tax that I pay in the State of Washington
for my income tax. They could take that away from me. I don't
know where this revenue is going to come from to lower the rate
on a neutral basis.
Now, we could go after oil companies. That would be--but I
don't think that--the first hearing was not having oil
companies in here to talk about their deductions. Or the first
hearing in here was not about carried interest from hedge
funds. But what we do is we scare you folks into running in
here and signing up in droves to say, ``Hey, do you realize
what you are going to do to this country if you start limiting
the deductions?''
I heard from the president of Seattle University. And he
said to me, ``Jim, our charitable deductions will drop, we
figure, by at least 40 percent if you start fooling around with
the limits that are in the law today.'' And I can't
understand--and maybe the Chairman has already told you--but
are we talking about lowering their--the deduction for this? Or
are we talking about getting rid of it all together? Or what
are we doing here?
Chairman CAMP. Is this rhetorically, or would you like me
to comment?
[Laughter.]
Mr. MCDERMOTT. No, I would like--my question is to you, Mr.
Chairman.
Chairman CAMP. Well, on your time----
Mr. MCDERMOTT. Yes, sir.
Chairman CAMP [continuing]. I will say that there have been
a lot of public debates about these issues, whether it is the
Simpson-Bowles Commission, whether it is the President's
proposals, or whether it is candidates for the President's
proposals. And what we are trying to do is hear from the
charitable giving community in a professional and open and
businesslike way. And that is why we have developed the working
groups. And I know that Mr. Lewis and Mr. Reichert will do a
very fine job of exploring those issues.
You know, a lot of this--some of the testimony today is
about the complexity of this. And there might be ways to
simplify some of these rules. So we are really approaching this
with an open mind.
And actually, I gave a longer answer than I wanted to, so
why don't I give you some time to continue.
Mr. MCDERMOTT. Yes, I was just talking to Mr. Lewis. I
said, ``You got to be the Vice Chair of the charitable giving
working group. Congratulations.''
These folks are going to be 100 percent against doing what
is perceived as what might happen in tax reform in this
country. And I can't understand. Is it we are sort of softening
them up for the fact that they are going to get clipped?
Chairman CAMP. No.
Mr. MCDERMOTT. Or are we saying today, ``Gee, we heard from
you and we understand that this is a bad idea?''
Now, I can't judge yet quite what this hearing is about.
But I appreciate you all coming. And I am--Dr. Boustany asked a
question that worries me. When you start saying we are only
going to give to Americans, that is like buying American. A lot
of us give a lot of money to organizations that are based
outside this country that are doing things in global health all
over the world. And for anybody to start putting those kind of
prescriptions into law really don't make sense to me.
I yield back the balance of my time.
Chairman CAMP. All right. Mr. Gerlach is recognized.
Mr. GERLACH. Thank you, Mr. Chairman. Given the testimony
we have had from this panel, which we all appreciate, and given
the schedule we have today, I will yield back my time and thank
you very much.
Chairman CAMP. All right. Thank you. Mr. Becerra is
recognized.
Mr. BECERRA. Mr. Chairman, thank you very much for this
hearing. And to all of you, thank you for not just your
testimony, but your patience. There have been lots of
questions, and you have done a tremendous job of trying to
respond.
Mr. Steuerle, let me ask you a few questions first, because
I thought you did a great job in your--not just your oral, but
your written testimony, which was much more extensive, in
trying to sort of navigate this whole question. And you start
off--let me start off with what you said in your conclusion.
``The charitable deduction and the rules governing tax
exemption are in need of critical examination. The focus of any
such examination should be on whether existing rules are
maximizing the public benefit at the lowest cost to
taxpayers.''
I agree 100 percent with what you have just said, because I
think most of us can personally--whether by example or
observation--talk about some of the tremendous things that have
been done by so many of the nonprofits that are out there
today. In Los Angeles--and Ms. Masaoka could testify to this--
there are some tremendous things being done on the educational
side, on the homeless side--Los Angeles has perhaps the largest
homeless population in the country because of its weather, lots
of folks gravitate to it.
But I wanted to get to a couple of points--still in your
testimony. Now I am looking at page seven of your testimony,
where you talk about: ``The charitable deduction supports not
charity as it is commonly understood, but rather the entire
section 501(c)(3) sector, of which basic needs or traditional
charitable organizations are just one of many supported
types.''
So, in other words, when we think charitable deduction,
most Americans think, ``Ah, we are giving to charity.'' When we
think charity, we think serving the basic needs of those who
need it most. Yet, as you point out, so much of what is given
through this taxable--or deductible contribution, doesn't go to
those--to serve those who have the most basic of needs.
You also make a very important point in a footnote,
footnote 17, that I want to read for the record, because it is
so important, and it is based off of what I just--the quote I
just mentioned from page seven. Your footnote 17 says,
``Further, as a general matter, many basic needs of traditional
charitable organizations would be more adversely impacted by
cuts to direct government spending than by changes to the
charitable deduction.''
So, if the goal is to protect basic needs organizations
from harm, the charitable deduction is but one small piece of a
broader policy issue. So if you are truly trying to make sure
you protect the basic needs or help those who have basic needs,
we should really be looking at what the government is doing
with its direct allocation of dollars and investments to
services that go to those who we are trying to make sure don't
fall through the cracks, which is sometimes something I think
too many Members of Congress neglect in this effort to just
cut, cut, cut. And we leave those behind who need it the most,
most, most.
You go on to point out something on page six. You have a
chart of what the wealthiest taxpayers who take the charitable
deduction do and where they give. And the only thing I can
extract from what you and others have said is that those who
give the most don't direct their giving to those who need the
most. Let me repeat that: ``Those who give the most don't
direct their giving to those who need the most.''
And so, I agree with your conclusion that we must examine
the charitable deduction. Because when it is defended as giving
to charity, and most people conjure up this image of charity,
most people don't recognize that too much of what is being
given is not being given to what we would traditionally define
as charity. And I want this sector to do very well.
I wish you all would do more enforcement of your own kind,
because we have too many examples--and, unfortunately, too many
examples in the area of our veterans, where organizations pop
up by the minute saying they are going to protect our veterans,
and we find out that they did nothing of the sort, except
enrich themselves.
I believe it is time for us, given this whole discussion of
looking at how we invest, through taxpayer dollars, try to look
at how we could make this charitable deduction work best for
those of you who do some great things. United Way does some
great things in Los Angeles. And I hope that we continue to
support the nonprofit world, the charitable sector. But I do
believe we have to examine some of these things.
And I join in agreeing with some of my colleagues and some
of the comments that have been made on both sides of the aisle
on how this important sector does deserve a critical
examination. I have lots more questions, if I could get to
them, but I just wanted to point out that, Mr. Steuerle, I
thought your testimony hit it right on the mark.
Chairman CAMP. All right.
Mr. BECERRA. I yield back.
Chairman CAMP. Thank you. Mr. Smith is recognized.
Mr. SMITH. Thank you, Mr. Chairman. And thank you to our
witnesses for sharing your perspective here today. And I hope
you can appreciate the balance that we are trying to approach
this issue with.
Mr. Gallagher, you illustrated in your testimony that
perhaps a change, as suggested by various entities or parties,
would perhaps lead to the elimination of the United Ways in
Philadelphia, Washington, D.C., and Cleveland. Or--and I think
you emboldened the print that says--``or all of the work of 10
or 20 United Ways'' if changes would occur.
Now, for the record, that would be an option for you to
take, not necessarily a mandate for you to take that approach,
should changes occur.
Mr. GALLAGHER. Correct. That is illustrative.
Mr. SMITH. Right. Okay, thank you. Mr. Murphy, you used the
comment, or the words, that ``we should do nothing that would
threaten charitable giving.'' Is that accurate?
Mr. MURPHY. Yes.
Mr. SMITH. Let's discuss the estate tax, for example. And
now, some would argue that the existence of the estate tax
actually drives up charitable giving. Would that be your
assessment?
Mr. MURPHY. Based on the work that I have done with
individual donors, yes.
Mr. SMITH. And does the latest estate tax reform--do you
feel that would threaten your work?
Mr. MURPHY. I think donors are still uncertain about what
the final outcome will be. One of the difficulties with the
estate tax is donors are fairly comfortable planning their
income tax for the next 12 months; most of them not sure when
they want to plan to die. And so there is uncertainty out
there, yes.
Mr. SMITH. But perhaps a balance of estate tax reform, you
know, and other approaches, you know--we can achieve a balance,
I guess, if we have a thoughtful dialogue and debate on the
issue itself, rather than statements of ``Do nothing that might
threaten.''
Mr. MURPHY. Well, you know, Mr. Smith, I think,
fundamentally, our position is that we ought not tax people on
the money they give to charitable purposes. And that is a
fairly fundamental principle, that we are asking people in this
country to voluntarily donate their dollars. And we simply
shouldn't tax them on it.
Mr. SMITH. Okay, and I can understand that. I can
appreciate that. But I would hope that donors are motivated out
of charity more so than tax avoidance. Would you share that?
Mr. MURPHY. My experience has been--and I have worked with
thousands of donors--I have never had a donor make a gift
because there was a charitable deduction. What--as I said in my
testimony, what it has allowed them to do is to make a larger
gift, to dream larger about the impact they can have on the
community. But the motivation, as Mr. Gallagher pointed out, is
very clear. It is to help their neighbors, to make their
community a better place.
Mr. SMITH. I fully understand. And as Mr. Becerra just
shared, though, there are some examples out there and--I think
you even acknowledged--there are some bad actors. And we need
to approach the issue with the objective of some reforms to
make sure that dollars end up where they need to be, rather
than someone perhaps gaming the system, not necessarily with
the rate here, but through some changes that I would hope you
wouldn't consider, you know, a threat to the beneficiaries of
your organization.
Mr. MURPHY. Well, I don't know what specific changes you
are proposing. But again, the Council on Foundations has a long
history of supporting stronger enforcement by the IRS. Most of
the abuses that are cited aren't legal in the first place; they
are illegal. And there has been an enforcement problem.
Mr. SMITH. So you would not perceive those to be a threat
to----
Mr. MURPHY. We would not perceive--I don't think anybody
here would perceive better enforcement of the law, the weeding
out of bad actors, to be a threat. Quite to the contrary, as
someone--I think Mr. Tempel--noted, we exist in the world of
trust. And to the extent there are bad actors, we have to
overcome the mistrust that creates.
Mr. SMITH. Very well, very well. Thank you, Mr. Chairman. I
yield back.
Chairman CAMP. Well, thank you very much. Mr. Rangel is
recognized.
Mr. RANGEL. Thank you, Mr. Chairman. And thank you so much
for having these hearings. They are very informative. And I am
going to ask the panel to help me to frame the questions,
because I want to find out what each one of you think,
generally, is the amount of monies that is given to not-for-
profit organizations--how much of that actually goes to assist
people that have problems that concern poverty or their well-
being or--there must be a word in the foundation business that
you use to demonstrate that we are not talking about the
perpetuation of the arts or tennis or all of those good things
that are important to the country, but those things that are
directly related to issues such as education and health care
and poverty.
What percentage, generally speaking--and it is a
guesstimate I am looking for--would you say goes to that, so
that when we talk about tax-exempt organizations, we don't
automatically believe that we are talking about helping the
poor? Mr. Steuerle.
Mr. STEUERLE. Mr. Rangel, I don't have the numbers with me.
In----
Mr. RANGEL. You don't need any numbers for what I want.
Mr. STEUERLE. In various reports we do examine the percent
of giving that goes to various types of organizations.
Mr. RANGEL. I gathered that, that is why I----
Mr. STEUERLE. And you are quite correct. Only a minority of
contributions goes to those organizations that directly serve
the poor. So----
Mr. RANGEL. What is that? A minority?
Mr. STEUERLE. Only a small minority of contributions go----
Mr. RANGEL. Oh, okay.
Mr. STEUERLE [continuing]. That directly serve the poor.
Mr. RANGEL. Let me withdraw the question and say now, would
each of you describe in percentage form what a minority would
be, so I can get a better handle on that? Mr. Murphy.
Mr. MURPHY. Mr. Rangel, I think it is a slippery slope to
try to----
Mr. RANGEL. I know it is a terrible slope to get onto,
but----
Mr. MURPHY. There is--I mean we have a huge definitional
problem here.
Mr. RANGEL. Talking about the poor is never very
comfortable. I know that.
Mr. MURPHY. I mean, we fund----
Mr. RANGEL. But I just don't want the poor to--you don't
want to deal with the question.
Mr. MURPHY. Well, Mr. Rangel, you mentioned specifically
tennis. Our community foundation funds a tennis program in our
community that provides tennis lessons----
Mr. RANGEL. Here we go. I am not talking about tennis. I
know how important that is for the poor. But that is exactly
what I want to separate from food and homelessness and job
training. I want to separate the two.
Suppose I say only 10 percent of charitable dollars
actually go to improve the quality of life of human beings.
Suppose I just said that. And I am making it up, but there is
no challenge to that. Having said that, you are not bound by--
--
Mr. MURPHY. Well, I would challenge that.
Mr. RANGEL. I know, tennis. Excluding----
Mr. MURPHY. I would challenge that assertion, Mr. Rangel.
Mr. RANGEL [continuing]. Taking people to learn how to play
tennis and going to the opera and those things that are vital
to make a whole person. But I am talking about where poverty
doesn't give a person an option.
Now, having said that, what do you think we could do to
make the contributions to this type of work? What types of
incentives could we do for this, as opposed to other worthwhile
foundation and charitable work? Is there anything that you can
do so that if I decide that I want to get my deductions from a
tax provision, that I can target it to the 10 percent, rather
than the 90 percent?
Mr. TEMPEL. Mr. Rangel.
Mr. RANGEL. Yes.
Mr. TEMPEL. I would like to add a perspective to this. We
actually did some research on this last year.
Mr. RANGEL. Good.
Mr. TEMPEL. About 8 percent of the money goes to direct-
need organizations. And you know, you can turn into a
philosopher here, if you are not careful. But philanthropy is
really about reducing human suffering on one side, and
enhancing human potential on the other side. I am a----
Mr. RANGEL. What is the other side?
Mr. TEMPEL. Enhancing human potential. I am the--my father
and mother did not go to college. I am a first-generation--they
did not go to high school. And so, I am the beneficiary of a
scholarship, a need-based scholarship.
About 23 percent of money that goes through all other
organizations ends up benefitting need-based scholarships, job
opportunities, job training, and other kinds--food banks and
other kinds of----
Mr. RANGEL. Is that within your 8 percent?
Mr. TEMPEL. What is that?
Mr. RANGEL. Is that within the----
Mr. TEMPEL. Twenty-three percent of the money that goes to
all organizations goes back to these needs, yes.
Mr. RANGEL. And you have some data that you have
accumulated?
Mr. TEMPEL. Yes, mm-hmm. Yes, we have a big study.
Mr. RANGEL. Well, then I would broaden my question and ask,
since so many people associate poverty and helping a person
improve the quality of life, is there anything that you would
think that we could target what we are talking about when we
say charity?
Chairman CAMP. And, obviously, time has expired. But if you
could get us some of that data. And I think--I believe Mr.
Rangel is asking about more basic needs.
Mr. TEMPEL. Yes.
Chairman CAMP. Not necessarily college education. I think
you were thinking about basic needs.
Mr. RANGEL. Exactly.
Chairman CAMP. And I am not sure that is the correct term,
but----
Mr. RANGEL. But he mentioned they hadn't finished high
school. And I would think that in today's economy, that you
have to include that.
Now, how can you and I--before you leave, maybe you can
direct me in the right direction?
Mr. TEMPEL. We can send you things. Yes.
Mr. RANGEL. I would like to see you before we leave,
though.
Chairman CAMP. That would be helpful.
Mr. RANGEL. Thank you.
[Laughter.]
Thank you, Mr. Chairman.
Chairman CAMP. Mr. Young is recognized for 5 minutes.
Mr. YOUNG. Thank you, Mr. Chairman. Dr. Tempel, earlier in
your testimony you, I think very helpfully and pointedly,
indicated that there is a direct correlation, very tight
relationship, between the state of the economy and the
incidence and amount of charitable giving. You specifically
identified sort of two metrics to look at, which is household
income and the S&P rate, and at any given moment to determine
what sort of charitable giving one might expect in the economy.
So, it is important, from my perspective, that we implement
tax policy as we are embarking on comprehensive tax reform
here, that will grow household incomes, in particular.
I found it notable in your statement, Doctor, that higher-
income households provide a disproportionate share of giving.
And you said you did a study in 2012 that examined giving by
higher-income households. What else can you tell us about
giving by these households, based on your study, sir?
Mr. TEMPEL. Congressman Young, I--this is why the task you
have ahead of you is so complicated, because there are so many
different factors that work in different ways on charitable
giving.
But, you know, high-income households, those incomes with--
incomes of $200,000 or more, $1 million in net worth, excluding
their homes, do give a disproportionate share of philanthropy.
And as you look at that and study that, they give about 9
percent, actually, about 9 percent of their household income,
as compared to 2 percent, generally. About 95 percent of them
give. And, as I said earlier, interestingly, 80 percent of them
give to higher education. You would expect that. But 79 percent
of them give to basic needs organizations, you know, as
illustrated by Mr. Gallagher's point, that he has $1 million
and $10,000 donors. So, those are the donors that will be
impacted by any kind of price sensitivity. So I think that is
worth looking at.
The other thing is we asked them for the first time 3 years
ago--we do this study every 2 years--we asked them 3 years ago
if they would be--if they would increase, keep the same, or
decrease their giving if the tax deduction were eliminated. And
we used the phrase ``eliminated.'' And interesting, about half
of them said they would keep their giving the same. But about
half of them said they would decrease their giving. And that
percentage got worse as the economy got worse, and as we got
closer to these discussions. So we know that, even--you know,
that they are sensitive to those things.
Mr. YOUNG. Thank you. What impact did the recession have on
charitable giving? And how, generally, can you tell me, are
charities doing right now?
Mr. TEMPEL. Well, in the aggregate, charitable giving went
down by 15 percent over a 2-year period of 2009 and 2010. And
there has been some recovery, but the last 2 years have
recovered at an average rate of 1.8 percent.
And so, you know, going back to the earlier question I had,
if you think about the slow growth of philanthropy now, and you
did something--you know, the economy will help philanthropy
grow, there is no question about it. But if you do anything to
dampen philanthropy now, it will simply prolong the length of
time it needs--it takes to come out.
The other thing is that not all charities and not all
philanthropic organizations are hit the same by this downturn.
There was, in fact, in 2009, an increase in giving in basic
needs or human service organizations. But after that, after
2009, that kind of evaporated. So people turned attention back
away from that. So you can see these kinds of things inside the
economy.
Mr. YOUNG. Which leads me to my final question. You and
other panelists have indicated concern--understandably, I
think--about the financial consequences of changing tax policy
with respect to charitable giving. Doctor, are there other
perhaps intangible or unforseen consequences that you can
conceive of, and that this panel should consider, as we look to
reform the overall Tax Code?
Mr. TEMPEL. Yes. Just for the record, I did not come to
argue in any direction, but just to point out how complex this
issue is you are dealing with, from the data we have.
I would echo some other comments here that, you know, one
of the intangibles here is that this is the way people get
involved. They get engaged in their communities this way. They
give this way, they volunteer this way, you know, and those
things are all beneficial. But we have some emerging research
that shows that when people give and volunteer, they have
better health outcomes. And those could have huge public policy
implications, if we don't encourage this kind of activity.
Mr. GALLAGHER. And I would, if I could, add that--so we are
a very large nonprofit that focuses only on human services, and
mostly basic need. And we operate within an ecosystem of all
nonprofits.
I think the Committee, with all respect, should focus on
the health of the nonprofit sector. Compliance, bad apples have
to be managed, and regulation and enforcement have to be
managed. But we need a stronger nonprofit sector. And we need
to then balance what is the role of government versus the role
of nonprofit. We are dwarfed in dollars by what local, State,
and Federal Government put into human services, and that has to
be balanced, in terms of your deliberation, I think.
Chairman CAMP. All right. Thank you. Mr. Neal is
recognized.
Mr. NEAL. Thank you, Mr. Chairman. My question is going to
be directed to any of the panelists. And by way of the
question, you are going to understand my sympathies for the
argument you have made.
I represent a spectacular district, the Berkshires. So just
a few names that you might quickly associate with the
Berkshires: The Rockwell Museum, Barrington Stage, Shakespeare
and Company. I have some of the best colleges and universities
in the world. I sit on the board at Mount Holyoke. And the
eastern part of the district, Sturbridge Village in between the
Seuss Museum, Carnegie Libraries.
And I think the question could be summed up--along with
Tanglewood, where so many of you have visited at one time or
another--I think the question that I have could best be summed
up by what the multiplier effect is of charitable giving, what
it means to the creative economy, the people that it draws. And
I would be happy to be instructed by any one of you, assuming
that what you are about to say is entirely consistent with what
I think.
[Laughter.]
Mr. STEUERLE. I still have a piece of data I would add.
Although we talk about charitable contributions here in terms
of dollars, the volunteer labor is a much larger portion of the
economy than is the amount of dollar contributions. So we might
talk about charitable contributions being about 2 percent of
income. But I believe, in terms of labor supply, if we add
volunteer labor we come to a number about 7 percent. Is that
about right, Jean? I think it is.
So, we--and, of course, the impact is beyond just what the
volunteers are doing, but the people they are affecting. So it
permeates throughout society.
Mr. GALLAGHER. And two quick points. I mean there--over 10
percent of the American workforce works for nonprofits. It is
12 to 13 million people or more.
The other--maybe the most compelling economic statement I
have ever heard--piece of research I heard was by a man named
Art Rolnick, who at the time was the Chief Economist for the
Federal Reserve in Minneapolis, and he was speaking to a group
of business leaders in the Twin Cities when they were debating
on whether to build the Vikings a new football stadium, the
Twins a new baseball stadium. He said, ``If you take the $1
billion and put it into an endowment for making sure that every
child born in Minnesota gets a quality early childhood
education, the economic rate of return would outpace what you
are going to put into those two stadiums.'' His point was that
there is an economic engine that is human development that goes
neighborhood to neighborhood. And the Fed has modeled it.
Mr. NEAL. And the number of students since then who come to
Jacob's Pillow and give freely of their time and volunteer and
participate in stage is proof of its success.
And I always have some fun with my Republican friends by
pointing out that one thing that is inarguable is the best
hospitals perhaps in the world are right in Massachusetts. And
so, when anybody gets sick I have never heard them make the
argument, ``I don't want to be in Massachusetts.'' And those
hospitals derive an enormous amount from charitable giving.
And I think that is a very important consideration here, as
well: Universities, arts, and hospitals. And the reputation
that the State has, which is still a very low unemployment
rate, relatively speaking, it is a very high-income State, and
it is consistent with that creative economy argument that I
made a few moments ago. People from all over the world come to
Massachusetts to participate not only in what I have outlined,
but, just as importantly, the sheer beauty of the State. And it
has been a net winner for us. And I think protecting the
charitable contribution is a very important part of this tax
reform discussion because it induces behavior, it incents
behavior, and that is a theme that is neither Republican nor
Democratic.
So, if there is anybody else that would like to offer in
the last 2 or 3 seconds I have, Mr. Chairman, I----
Mr. MURPHY. Well, Mr. Neal, I think you point out the
incredible diversity of the nonprofit sector, which is one of
this country's great assets, and why I am so hesitant to start
parsing out what is a basic need and what is not. And I go back
to my testimony. My wife was cured of cancer with treatments
that were developed by medical researchers at universities, in
part, in your State. And contributions to that medical research
aren't considered, generally, by folks to be a basic need. But
they sure become a basic need when someone you love has cancer.
Mr. NEAL. My colleague, John Lewis, was treated in some of
the most difficult moments of his life, he was treated by the
only group that would treat him at the time in the aftermath of
Selma, and that was a group of Catholic nuns. He has never
forgotten. As he reminds me, the order of Edmonites that also
cared for him and the critical surgery that he took in his life
was in Boston. Thank you all very much.
Chairman CAMP. Thank you. Mr. Kelly is recognized.
Mr. KELLY. Mr. Chairman, I am going to yield back my time
to the Chair.
Chairman CAMP. All right. Mr. Larson is recognized.
Mr. LARSON. [No response.]
Chairman CAMP. You are yielding to Mr. Blumenauer? All
right, Mr. Blumenauer. All right.
Mr. Griffin is recognized. Oh. Go ahead, Mr. Griffin.
Mr. GRIFFIN. Thank you, Mr. Chairman. Thank you for having
such a thoughtful and serious discussion. I want to add my
voice to the others who have said that they want to encourage
giving, they believe in the nonprofits and the work that they
do. I would point out that Arkansas has historically been at
the top. We are not a wealthy State, but we give a lot. And we
are--I think we were ranked number one, per capita, in giving
at one point.
And so, nonprofits are a big part of the community where I
live in Little Rock. And I have learned a lot about nonprofits,
as I have been serving up here. And one of the things that I
want to drill down on is the role of the Federal Government
with nonprofits. It seems to me if we could encourage more
giving, then--someone was asking where do we get the revenue--
well, maybe the Federal Government could quit giving nonprofits
so much money, and we could replace that with private
donations, where people are making individual choices.
And I want to lay some of this out, and then get your
comment. I have learned, since being in Congress--I have toured
a lot of nonprofits. I have toured food banks and a rice depot,
and other things. And I--usually, the first question I ask is,
``Where do you get your revenue? How much of your revenue is
from contributions?'' And some of them say, ``We are proud that
we get no government money,'' and others say, ``We get 80
percent government money,'' which just shocked me, when I
learned that a lot of these nonprofits are Federal agencies, in
fact, and they get their money through--as a pass-through, you
know.
And when I started tracing the dollar that we, as
taxpayers, give, and how much is left when it gets back to
Arkansas and is distributed by a State agency after it has been
through seven steps to get there, a dollar gets back at, like,
a quarter or $.10 or whatever. And it seems to me, if we want
to find waste and better use of our dollars, we should
encourage someone who lives down the street from the rice depot
to just give them a check, instead of having taxpayers send all
the money to Washington, where it is then sent over to an
agency, they then divvy it up, send it back to the State, the
State gives it to the county, and then they distribute it to a
local community group that does good things, but it is a very
inefficient way of doing good things.
And one of the things that has bothered me is--and I have
talked with some charities about this--they will start out--
they will tell me, ``We started out with no government money.
Then it went to 5 percent, then it went to 10 percent. And then
one time we got a big grant, and it was 75 percent. So we quit
fundraising.'' They have become dependent nonprofits, and
they--the tools in their philanthropy toolbox rust, because
they don't have to court big donors, and they love that. And
they don't have to have annual dinners, and they love that.
They just get that big check from the Federal Government. I
know those are a minority, but this is the--what we have
created. And so I would like to get your comment on that.
And I just want to let you know that I want to encourage
private individuals to make decisions of where they want to put
their money. We have to remember that simplification is
critical. There are a lot of great ideas that get complicated.
So, if any--Mr. Gallagher.
Mr. GALLAGHER. Congressman, just a point of fact, United
Way is the second-largest funder of human services behind
government. So we are the largest private supporter of human
service programming. There are nonprofits that are overly
dependent on government funding; there is no question about it.
The private sector will never be able to replace government
funding, in total. It is just--we are dwarfed by it.
Having said that, where you see the partnership working is
what is great about local private money in that it is local and
it is flexible and it moves quickly. Where you see public
investment working is when there is flexibility built in. So we
will not be able to replace public money and Federal support
and State support. But if you look at--if you look in Detroit
right now, there has been a rehauling of the entire food
distribution system. Local government, State government, with
Federal money, created incentive and flexibility in the food
bank system, and local nonprofits redesigned it together.
Mr. GRIFFIN. Just real quickly, I want to say----
Chairman CAMP. Please, because we are out of time. Just
very quickly.
Mr. GRIFFIN. Thank you.
Chairman CAMP. Thank you. I want to thank this panel very
much for their testimony. I very much appreciate the amount of
time and the quality of the remarks. I thank you very much.
Mr. LEWIS. Thank you, Mr. Chairman.
Chairman CAMP. All right. I would like to welcome our
second panel. Thank you for being here, and welcome.
First, we will hear from Mr. Mark Huddleston, President of
the University of New Hampshire, and testifying on behalf of
the American Council on Education, the Association of American
Universities, and the Association of Public and Land-Grant
Universities.
Second, we will hear from Conrad Teitell, who is Chairman
of the Charitable Planning Group at Cummings & Lockwood, LLC,
and is testifying on behalf of the American Council on Gift
Annuities.
Third, we will hear from Jake Schrum, who is President of
Southwestern University in Georgetown, Texas, and is testifying
on behalf of the Council for Advancement and Support of
Education. Since joining Southwestern University, Mr. Schrum
has led the largest fundraising campaign in the university's
history.
Fourth, we will hear from Diana Aviv, who is President and
CEO of Independent Sector, a national network of American
nonprofit organizations. In that capacity, Ms. Aviv represents
tens of thousands of organizations across the country.
Fifth, we will hear from Vinsen Faris, who is Executive
Director of Meals-on-Wheels of Johnson and Ellis Counties, and
Chairman of the Board of Directors of the Meals On Wheels
Association of America. Mr. Faris has consulted for the Center
for Nonprofit Management, and has testified before Congress and
the Texas legislature on several occasions.
Sixth, we will hear from Mr. Bill Rieth, President and CEO
of the United Way of Elkhart County. Mr. Rieth has over 25
years of experience in education and philanthropy.
And, finally, we will hear from Jill Michal, President and
CEO of the United Way of Greater Philadelphia and Southern New
Jersey, who also serves as a Board Member of the Greater
Philadelphia Chamber of Commerce and the Philadelphia Council
for College and Career Success.
Again, thank you all for being with us today. The Committee
has received each of your written statements, and they will be
made part of the formal hearing record. Each of you will be
recognized for 5 minutes for your oral remarks.
And Mr. Huddleston, we will begin with you, and you are
recognized for 5 minutes. Thank you.
STATEMENT OF MARK W. HUDDLESTON, PRESIDENT, UNIVERSITY OF NEW
HAMPSHIRE, DURHAM, NH, ON BEHALF OF THE AMERICAN COUNCIL ON
EDUCATION, THE ASSOCIATION OF AMERICAN UNIVERSITIES, AND THE
ASSOCIATION OF PUBLIC AND LAND-GRANT UNIVERSITIES
Mr. HUDDLESTON. Good morning--I think it is still morning--
Chairman Camp, Ranking Member Levin, and Members of the
Committee. My name is Mark Huddleston, and I am the President
of the University of New Hampshire. In addition to representing
UNH, I am here on behalf of organizations representing 4,300 2-
and 4-year public and private colleges and universities. I
appreciate the opportunity to share with you a broad
perspective on the importance of the itemized deduction for
charitable giving based on my current post at UNH and from my
prior service as President of Ohio Wesleyan University.
As the Committee addresses long-term deficit reduction, a
hugely important task, we urge you to proceed with caution in
considering changes to the charitable deduction. At its core,
our case is simple. Since it was enacted in 1917, the
charitable deduction has encouraged and delivered vital private
support for higher education, support that otherwise would have
required even higher levels of direct public expenditure.
In fact, for every dollar a typical donor receives in tax
relief, the public gains approximately $3 of benefit. And,
according to the Council for Aid to Education, colleges and
universities received $30.3 billion in gifts in 2011.
Charitable gifts advance scholarship, propel ground-
breaking research, and promote technological innovations that
drive the Nation's economy. Most important, charitable gifts
make higher education more accessible and affordable for our
students. I imagine that almost everyone here has benefited
from donors who gave generously to our alma maters. I certainly
did. And, by the way, if there are any UNH alums in the
audience, I would like to talk to you after the hearing. That
was a joke.
But certainly we could not achieve all that we do at UNH
without private gifts. More than two-thirds of the donors who
have created endowments at UNH have done so to support
financial aid and scholarships. An additional 10 percent
supports grants for research and teaching initiatives. And
fortunately, some of our donors also direct their gifts toward
better facilities for instruction and research. And these gifts
are especially important, given the challenges associated with
State bonding and deferred maintenance.
Yet even as our private donors deliver enormous benefits,
colleges and universities continue to face dire financial
challenges. For our public institutions, which enroll 80
percent of all college students, the largest factor driving up
tuition is declining State support. Unfortunately, the
recession saw State support for higher education--for public
higher education--drop to a 20-year low. And our students and
their families are left to bear resulting tuition increases.
At UNH we are proud of several distinctions, including our
role as one of the Nation's few land, sea, and space grant
institutions. And we provide tremendous value and opportunity
to our students, roughly 30 percent of whom are either Pell-
eligible or first in their families to attend college.
However, another distinction sets us apart. New Hampshire
is last in the Nation in per capita support for higher
education. Today, the State of New Hampshire provides less than
6 percent of our operating budget, the result of a 2011 vote to
cut our appropriation by 49 percent--that is 49 percent in 1
year. That was the deepest cut, by the way, in the history of
higher education in America. The State's subsidy to each
student has fallen by $5,000 in real terms over the past
decade, and is now less than $600 per student per year.
So, how do we make up the shortfall? We already operate
efficiently and our cost per credit hour is 30 percent lower
than our competitors. And we absorbed nearly 80 percent of the
State budget cut through layoffs, a hiring freeze, and further
cost-cutting. Well, we have bridged that gap in no small part
because generous alumni and friends are stepping up to help.
Truly, we could not achieve what we do without them. And we
certainly do not want to erect barriers to successful
individuals to help new generations of students.
Private colleges and universities face somewhat different
circumstances. They have always relied upon charitable gifts,
and many owe their very existence to generous donors. At these
institutions, charitable donations that provide grants,
scholarships, and fellowships for students have been increasing
in recent years, and they are increasingly important. At Ohio
Wesleyan, for instance, in a total annual budget of slightly
more than $100 million this year, $39 million comes from
private sources, which is devoted to student financial aid.
During the height of the recession, private and public
institutions had a common experience, as well. Our endowment
values dropped across the board. Given the slow economy, many
still have not fully recovered. In the last fiscal year, for
instance, the average rate of endowment return was -.3 percent.
And over the past 5 years, it has been only 1.1 percent.
Of course, this all comes at a time when the recession and
the dynamics of the global economy reinforce the value of a
college education. Recent projections show that by 2018, our
country will need 22 million new workers with college degrees.
But on our current trajectory, we will not make that goal. In
fact, we will miss it by 3 million workers. And while Pell
Grants and Federal financial aid help many students, we realize
that limited Federal resources are also under intense pressure.
Mr. KELLY [presiding]. Okay.
Mr. HUDDLESTON. So what is the solution? A large part is to
support continued private support for higher education.
Thank you, Mr. Chairman, and I look forward to answering
your questions.
[The prepared statement of Mr. Huddleston follows:]
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Mr. KELLY. And thank you, Mr. Huddleston. I am sorry the
light system is not working right now, we are having a little
bit of trouble with the clock. So, since we don't have any
officials on the field watching the game clock, we will let you
know. I will let you know when there is about a minute left. I
will just tap very lightly, so you know that you still have
about a minute left.
Mr. Teitell, if you would, please.
STATEMENT OF CONRAD TEITELL, CHAIRMAN, CHARITABLE PLANNING
GROUP, STANFORD, CT, ON BEHALF OF THE AMERICAN COUNCIL ON GIFT
ANNUITIES
Mr. TEITELL. Mr. Chairman Camp, Mr. Ranking Member Levin,
Members of the Committee, I am Conrad Teitell with the Cummings
& Lockwood law firm, and here today as volunteer legal counsel
for the American Council on Gift Annuities, a publicly-
supported charity sponsored by over 1,000 charities of all
stripes, large and small, religious organizations, social
welfare organizations, the Salvation Army.
In your deliberations, Members of the Committee, I ask you
to be aware--beware of salami tactics. Matyas Rakosi, Chairman
of the Hungarian Communist Party in the 1950s coined the term
``salami tactics.'' He said, ``If your opponent has a salami
and you want it for your very own, you had better not grab it,
because he will defend it. Rather, take for yourself a slice,
and then another slice, and he will not notice. And if he does,
he will not object. And then another slice, and then another
slice. And slowly, but surely, that salami will pass from his
possession into yours.'' So it could be with the charitable tax
incentives, a floor here, a cap there.
Mr. Levin, you spoke about the Pease limitation. The Pease
limitation introduced by Congressman Pease of Ohio in the 1990s
was supposed to be temporary, 5 or 6 years. And the reason for
that limitation was that Congress did not want to raise the tax
rate by .09 of 1 percent, because that would have taken it into
the next category, just the way on television nothing costs
more than $19.95. Well, if it is a 39.6 percent bracket, you
can't make it over 40 percent, hence the Pease limitation.
Now is the time to increase tax incentives, not to decrease
them. And a few Members of the Committee have--and some of the
witnesses have--spoken about non-itemizers. There currently
are--there is a tax benefit right now for tax itemizers. And
that is the tax-free distribution from an IRA to a qualified
charity. The two-thirds of the taxpayers who take the standard
deduction who make gifts from their IRAs to charity aren't
taxed on the income that they take from their IRA. They don't
get a deduction. But not being taxed on something is the
equivalent of a charitable deduction.
So, the IRA charitable rollover, in the law since 2006, is
a wonderful provision. But it has been on-again, off-again, on-
again, off-again. And when it gets on again, frequently it is
retroactive. And frequently it is too late for most of the
taxpayers. And it is off again at the end of this year. So we
ask that the non-itemizer charitable deduction, in effect, for
the rollover from an IRA to a qualified charity be made
permanent.
There are many, many people who are middle class who would
like to roll over gifts from their IRAs to charities, but they
need the income. We ask that the IRA charitable rollover, which
now is for direct gifts, be expanded to include rollovers for
charitable remainder trust life income gifts.
Much has been said here today about President Reagan. He
started out life as an actor, as we know. And he is known for
``Let's win this''--when he was an actor--``Let's win this one
for the Gipper.'' Let's win this one for the giver. And doing
so will, in effect, really win it for the people served by
American charities.
[The prepared statement of Mr. Teitell follows:]
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Mr. KELLY. Thank you, Mr. Teitell.
Mr. Schrum.
STATEMENT OF JAKE B. SCHRUM, PRESIDENT, SOUTHWESTERN
UNIVERSITY, GEORGETOWN, TX, ON BEHALF
OF THE COUNCIL FOR ADVANCEMENT AND SUPPORT OF
EDUCATION
Mr. SCHRUM. Chairman Camp, Ranking Member Levin, Members of
the Committee, thank you for this opportunity to testify on
behalf of the Council for the Advancement and Support of
Education, CASE, and the National Association of Independent
Colleges and Universities, NAICU, on the importance of
preserving the value of the Federal income tax deduction for
charitable contributions.
Southwestern University, where I work, is a nationally-
recognized private liberal arts college located in Georgetown,
Texas. It is the oldest institution of higher learning in our
State, and has a current enrollment of 1,400 students. Private
support raised from individuals is an essential funding source
for both private and public colleges and universities.
According to the Council for Aid to Education, donors
contributed $30 billion to colleges and universities in 2011.
Charitable gifts help institutions fund scholarships for low-
income students, recruit top-notch faculty, and strengthen
academic programs.
Like most private liberal arts institutions, Southwestern
relies on private support to fund key institutional priorities.
Each year our endowment covers a significant percentage of our
operating budget. Endowment represents 25.95 percent of the
current year education and general budget net of financial aid.
Charitable giving helps us minimize tuition increases and
provides a high-quality learning environment for our students.
In the aftermath of the recent recession, colleges and
universities continue to face challenges. Endowment investment
returns continue to be volatile, with the most recent data, as
pointed out by President Huddleston, showing the average return
was -0.3 percent in 2011 and 2012. At the same time, colleges
and universities are also seeing more and more cuts to their
State and Federal spending.
In Texas, schools experienced an 18 percent decrease in
funding for the tuition equalization grant program for the last
biennium. This represented a loss of over $37 million in grant
funding for needy students seeking a higher education in the
State of Texas. At Southwestern, this decrease in funding
resulted in a loss of over $600,000 to our students, 1,400 of
them, over a 2-year period.
Many students and their families are struggling to afford
higher education tuition costs. Unless institutions can
convince donors to provide additional aid for deserving
students, educational opportunity will shrink, even as the need
for education grows. That is why we urge the Committee and
Congress to support policies like the Federal tax deduction for
charitable gifts, policies that incentivize giving to
educational institutions.
While charitable giving is a voluntary act driven by a
desire to do good, to have impact, and to give back, tax
incentives do play a role in encouraging donors to accelerate
giving. Major donors to our institutions often base the size
and timing of their gifts, at least in part, on tax
considerations. And major donors are exactly the taxpayers who
would be most affected by proposals that limit the value of the
charitable deduction. These are the donors who have the
resources to give to charitable organizations consistently. And
our tax policy should encourage them to continue to give
generously.
Proposals that cap the value of the charitable deduction
with a hard dollar cap or a percentage of income cap do the
opposite;
they reduce the incentive for donors to give additional dollars
to educational institutions and other charitable organizations.
High-income donors who give little or nothing to charity would
be unaffected by a cap on a charitable deduction. Instead, a
cap would target the most generous high-income donors,
individuals, and families who want to make large gifts to
educational institutions or other charitable organizations. Why
would Congress want to penalize individuals who want to give
more of their wealth away, particularly at a time of rapidly
increasing wealth disparities?
Unfortunately, some have mislabeled the charitable
deduction as a tax break for the wealthy. A cap on the
charitable deduction would not hurt high-income donors, many of
whom would likely decide to give less if a cap was enacted.
Students and others served by charitable organizations would
feel the brunt of this policy change.
Once again, we strongly urge the Committee to preserve the
value of the charitable deduction and support other incentives
that encourage individuals to give more to their alma mater and
other organizations. Now is not the time to fundamentally
change a tax incentive that has contributed to a cherished
tradition of charitable giving unmatched in the world.
Thanks again for this invitation. I would be glad to answer
questions.
[The prepared statement of Mr. Schrum follows:]
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Mr. KELLY. Thank you, Mr. Schrum.
Ms. Aviv, you are now recognized for 5 minutes.
STATEMENT OF DIANA AVIV, PRESIDENT AND CEO, INDEPENDENT SECTOR,
WASHINGTON, DC
Ms. AVIV. Mr. Chairman, Representative Levin, and
distinguished Members of the Committee, I serve as the
President and CEO of Independent Sector, which is a national
coalition of approximately 600 public charities, private
foundations, and corporate giving programs, and, with their
affiliates, total tens of thousands of charitable organizations
across the country. I thank you for the opportunity to share
with you some observations about the usefulness of tax
incentives for charitable giving.
Every day, public charities and private foundations work to
provide educational and economic opportunities to alleviate
poverty, assist victims of disaster, advance knowledge, enhance
the cultural and spiritual developments of individuals and
communities, and foster support for our collective commitment
to justice and individual liberty. These life-enhancing
initiatives, as well as the nonprofit sector's 13.5 million
jobs and $670 billion in annual wages, are made possible by the
generosity of Americans who contribute millions of hours and
billions of dollars of support to the charitable causes that
they care about.
Unfortunately, the economic downturn and sluggish recovery
have made it harder for charitable organizations to fulfill
their missions. Overall, sector revenue has been stagnant in
recent years, in part because annual charitable giving is
nearly $13 billion less than what it was in 2007. At the same
time, 85 percent of charitable nonprofits experienced an
increase in demand in their services--for their services in
2011.
As this Committee considers ways to reform the tax system
to strengthen the economy, we urge you to oppose tax policies
that would harm charitable organizations. And of particular
concern are proposals that would reduce charitable giving even
further by limiting the value of the charitable deduction.
Unlike tax incentives to purchase a home or save for
retirement, the charitable deduction encourages behavior for
which the taxpayer receives no personal tangible benefit. The
deduction does not subsidize consumption or underwrite the
accumulation of wealth. It simply and effectively encourages
taxpayers to give away a portion of their income to benefit
others. Limiting the deduction, therefore, would exact a
sacrifice not from high net worth individuals, but rather from
organizations whose express purpose, through their donation, is
to serve the public good.
At the core of the concern about the charitable deduction
lies a deep apprehension that there are not enough or not
sufficient resources available to charitable organizations to
meet their responsibilities. Thus, in addition to preserving
the deduction, I urge Congress to extend permanently a number
of important giving incentives in the tax package, including
the IRA charitable rollover, and enhanced deductions of
donations of food and conservation easements.
Additionally, I encourage the Committee, either through a
new working group structure or some other vehicle that includes
experts from the private and charitable sectors, to examine new
ways of capitalizing the sector. Specifically, I urge you to
look into better use of existing funding streams, identify new
potential streams of capital, explore obstacles to the flow of
cash and non-cash contributions to charitable organizations,
and review existing governmental structures and other financing
vehicles.
Through enactment of the Revenue Act of 1917, which first
made donations to charitable organizations tax-deductible,
Congress, in its wisdom, embraced the entire range of social
purposes and important causes that citizens, individually or
collectively, might choose to pursue through charitable
organizations. With a focus on the arts, social services,
scientific research, or spiritual matters, this great American
tradition has sparked innovation, saved lives, and enriched our
communities.
Through the wisdom of this decision, Congress established a
century-old policy that has stimulated charitable giving, and
made it clear that our government and our society value the
contributions made by every charitable organization.
Thank you for the opportunity to share these perspectives,
and I look forward to any questions that you may have.
[The prepared statement of Ms. Aviv follows:]
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Mr. KELLY. Thank you, Ms. Aviv.
Mr. Faris, you have 5 minutes, please.
STATEMENT OF VINSEN FARIS, CFRE, EXECUTIVE DIRECTOR, MEALS-ON-
WHEELS OF JOHNSON AND ELLIS COUNTIES, AND CHAIRMAN OF THE BOARD
OF DIRECTORS, MEALS ON WHEELS ASSOCIATION OF AMERICA,
WASHINGTON, DC
Mr. FARIS. Mr. Chairman, Ranking Member Levin, Members of
the Committee, Committee staff, thank you for the opportunity
to be with you today. Again, my name is Vinsen Faris. I am the
Executive Director of Meals-on-Wheels of Johnson and Ellis
Counties in North Central Texas. I also have the privilege of
serving as the Board Chair of the Meals on Wheels Association
of America, which represents local, community-based senior
nutrition programs that are united and working to end senior
hunger in America by the year 2020.
The incredible task ahead to reduce the deficit and reform
the Tax Code so that it is more effective and efficient is
very, very challenging. So let me begin by urging the Committee
to seek ways that will encourage more Americans to increase
their philanthropic giving to valuable and impactful causes.
Almost $300 billion is the amount of money that Americans
generously donate to charities annually. This is a number that
is important to our association, as well as to the Meals on
Wheels programs in your States and your districts. But, like
other charities, it is not enough to address the growing
societal issues like senior hunger. That is why the charitable
deduction is so important.
Meals on Wheels programs are perhaps one of the very best
examples of successful public-private partnerships, because of
their ability to leverage multiple funding sources to provide a
solid return on investment. Nationally, only about 30 percent
of total spending for Meals on Wheels programs comes from
Federal sources, with a significant number of programs
receiving no government funding at all. This means that these
programs must raise about 70 percent of their budgets from non-
Federal sources, most of which are charitable contributions.
Let me tell you about Emily, one of our over 2,800 clients
we serve in Johnson and Ellis Counties, who has a similar story
to the thousands of seniors in your States and districts who
gather at senior centers or who receive home-delivered meals. A
widow, Emily is 88, a retired nurse who worked for 40 years and
brings in about $700 a month in Social Security benefits. She
suffers from advanced osteoporosis, and is physically unable to
leave her home to go to a grocery story or cook her own meals.
Now she relies on a Meals on Wheels volunteer to bring her a
nourishing, hot meal every day. This, along with a caring
smile, is her only direct daily contact with another person.
Keeping seniors in their homes and out of hospitals and
nursing homes is critical to controlling healthcare costs.
Please consider the fact that the cost of feeding a senior for
1 year through Meals on Wheels is roughly equal to the cost of
just 1 day in the hospital, or 6 days in a nursing home. This
is what Meals on Wheels does.
Yet, despite these benefits, Meals on Wheels programs are
threatened. They are currently facing a quadruple whammy to a
growing senior population facing the threat of hunger, State
and local budget cuts, coupled with the threat of
sequestration, higher cost for food and transportation, and, of
course, challenging fundraising, due to a sluggish economy.
Ensuring the long-term viability and prosperity of
charitable organizations like Meals on Wheels that can
efficiently and effectively help meet many of the health and
nutritional needs facing our vulnerable senior citizens is
critical. More people joining together in philanthropic efforts
will also build a greater community spirit, and a spirit of
partnership with our Federal Government, which will enable
everyone to do more for more people in need.
Seniors like Emily all across America will be impacted,
should any negative changes in the charitable gift deduction go
into effect. For us at Meals on Wheels, this debate is not
about the intricate details of the Tax Code. Rather, it is
about the seniors we serve every day. It is about the direct
impact these decisions would have on the 8.3 million seniors
facing the threat of hunger. It is about the doors our
volunteers knock on, and the neighbors they nourish. It is
about the hope our programs deliver to those who otherwise have
little. Please help us to continue to reach out and help those
in need, and to involve others as well, by maintaining the
charitable tax deduction and finding new ways that will
encourage more Americans to increase their philanthropic
giving.
To the Committee, thank you for the work you do. I would
also like to thank the Chairman for his long-standing support
of Meals on Wheels programs, and for all of you in looking at
this important topic. Thank you.
[The prepared statement of Mr. Faris follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. KELLY. Thank you, Mr. Faris.
Mr. Rieth, you are recognized for 5 minutes.
STATEMENT OF WILLIAM N. RIETH II, PRESIDENT AND CEO, UNITED WAY
OF ELKHART COUNTY, ELKHART, IN
Mr. RIETH. Thank you so much, and howdy. Thank you for
taking time to listen to us today. Mr. Chairman, Ranking Member
Levin, Mr. Young, and Mr. Roskam, I really appreciate your time
today. I am the President and CEO of the United Way of Elkhart
County in Indiana, and I am testifying in support of the
charitable deduction.
Let me tell you a little bit about Elkhart County, Indiana.
Our community of just under 200,000 residents is home to
manufacturing and high-tech industries. We are also known as
the RV capital of the world. Now, Elkhart County became a focal
point during the height of the recession when our unemployment
rate skyrocketed to over 18 percent in 2009. That same year,
President Obama visited my community because, in his words, it
was the place where the Nation's problems are most acute.
Now, I am happy to report that we are recovering, and we
are making progress, but we are still not there. In my
community, our residents are generous. Folks give over $74
million a year to local charities, of which we receive
approximately $2 million. Now, while we don't know which of
these donors take advantage of the charitable deduction, I
believe a number do.
For example, when we go out to raise funds to invest in our
community, it doesn't matter whether I am on the factory floor,
whether I am in the front office, whether I am talking to a
blue collar worker or a white collar worker. Every single time
I am always asked, ``Is this tax-deductible,'' to which I can
reply, ``Yes.'' So, I believe this is a highly motivational
force in people's lives. And as people invest in this, we are
able to take that investment and bring back millions of
dollars, impacting over 12,000 people in my community.
For example, we are able to do something in the area of
income through our income initiatives. One of our programs
helps hundreds of families every year learn how to budget, get
out of credit debt, start their first-ever savings account,
where we see 50 families graduate every year having met their
savings objectives, most of them becoming first-ever
homeowners. And when they become first-ever homeowners, it
brings greater stability, puts strong roots in our community,
and it breaks the cycle of poverty.
Our health initiatives. These assist hundreds of
chronically ill people with no prescription insurance. That is
a big problem in Elkhart County, people that lack prescription
insurance. In 2012, we were able to give back to the community
$3.1 million worth of essential medicines, medicines such as
cancer meds, insulin, blood pressure, heart meds. These
medicines not only keep people healthy, but they enable them to
continue to work, be productive, and keep them out of the
hospital, saving all of us, as taxpayers.
Our educational initiatives impact thousands of students
and help them succeed in school. For example, our reading
camps, which target second graders who are a bit behind in
their literacy skills. We see a 90-plus percent improvement in
these second graders, enabling them to be ready to successfully
enter third grade.
And these are just a few examples of many that I could
share with you that are helping people to live better lives.
The community and faith-based programs in my area are funded by
individuals who take advantage of the charitable deduction.
Just
this weekend I was talking to a couple that said if they did
not
have the charitable deduction, it would dramatically decrease
the amount that they give in my community.
A strong charitable sector helps local communities weather
economic and employment disruptions, much as we faced during
the disruption. And I am very fearful--I have to be honest--
very fearful that if the charitable deduction is eliminated, we
are going to lose these programs, these programs that are
helping take people out of poverty, these programs that are
helping students succeed, these programs that are helping
people to do better in the health area. If that would happen,
that would be devastating for my community. Please, I encourage
this Committee and Congress, please do not hinder us in
advancing the common good. Please, please, on behalf of my
community, maintain the charitable deduction. Thank you very
much.
[The prepared statement of Mr. Rieth follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. KELLY. Thank you, Mr. Rieth.
Ms. Michal, 5 minutes, please.
STATEMENT OF JILL MICHAL, PRESIDENT AND CEO, UNITED WAY OF
GREATER PHILADELPHIA AND SOUTHERN NEW JERSEY, PHILADELPHIA, PA
Ms. MICHAL. Thank you very much, Mr. Chairman, and thank
you to the Members of the Committee for taking time to allow
for this thoughtful conversation on what is an incredibly
critical topic to all of us.
At a time when nonprofits are already being asked to do
more for more with less, a cap on the charitable deduction is a
crippling blow to the human services sector at the time when we
need it to perform at its best. This sector is one of the very
few sectors where the demand actually goes up when the economy
goes down. During the worst recession any of us have ever
known, 78 percent of nonprofits have seen an increase in the
demand for their services. But we are at a breaking point. The
elasticity of our country's safety net is gone. And if even a
few more strands break, people are going to fall through it
quickly, and they are going to land hard.
With reserves exhausted, employees laid off, programs cut,
and the pressure to deliver results at an all-time high, there
is no room right now for nonprofits to breathe. And capping the
charitable deduction is a choke-hold that isn't going to take
long to have a serious impact.
I mentor a young girl back home in Philadelphia. And her
16-year-old friends are picking out baby names. And her
neighbors are carrying guns to school. Her mom and her unborn
baby brother were killed by a drunk driver. She walks two miles
to get to the nearest grocery store with her dad, because there
isn't one in her neighborhood. And she was bullied in the
public school system for being smart, so her dad works two jobs
to put her in private school.
But she is going to be okay. And the reason I know that is
because she is brilliant, and she loves to learn, she has a
father who will do anything in the world for her, but most
importantly, because I know that they are not alone. She had
the support of an amazing social service program in our
community that helped her grow up as a young woman without a
mother, and kept her from making the bad choices that would
have been so incredibly easy for her to make, a school that was
able to offer her subsidized tuition to escape the teasing and
the torment, and organizations that support mentors like me,
who will never let anything happen to her on my watch.
But the organization that she believes saved her, they had
to cut their staffing, their salaries, and their programs over
the past 4 years by over 50 percent, nearly bankrupting the
organization. And it wouldn't have survived if it weren't for
the tenacity of the board and the few remaining staff. And we
are lucky that this amazing young woman made the cut, but I
hate to think about all the other girls who won't be that
lucky.
I know and I get that the numbers need to work. But I also
know that there are real people behind these numbers. And while
it is true that some people give solely out of the goodness of
their heart, there is a reason that 20 percent of all online
giving comes in on December 30th and 31st. There is a reason
that 80 percent of the Americans who itemize their deductions
have a contribution to charity on that list. And these
deductions aren't the ones for their own mortgage. They are to
pay for the first mortgage of somebody who might have been
homeless just a year ago. These aren't the services that they
are getting for their own children; this deduction is taking
care of somebody else's children.
Placing a cap on charitable deductions reduces the
incentive to do the one thing that Americans take a deduction
for from which they get no personal gain. And you can read
studies, and the studies will tell you pretty much anything you
want to hear. But when I talk to real people about this impact,
I am hearing anything but what I want to hear. What they are
telling me is that it is going to have an impact. Whether it is
people giving $500 or people giving $5,000, it is part of their
decision-making process.
Our United Way raises roughly $60 million a year, but we
don't raise it from 60 millionaires. We raise it from nearly
100,000 people giving whatever they can give in whatever way
they can give it. And I don't want them to have to think twice
about it. I don't think you want them to have to think twice
about it. And the family living in a homeless shelter whose
kids could be hungry tonight, they definitely don't want them
to think twice about it. Thank you for your consideration.
[The prepared statement of Ms. Michal follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. KELLY. Thank you, Ms. Michal, and thank you to the
entire panel.
I will now go to the Committee Members. Mr. Young.
Mr. YOUNG. I thank my esteemed colleague and interim
Chairman.
We just heard in the first panel from Dean Tempel of
Indiana University's School of Philanthropy, and he authored a
2011 report titled, ``Impact of the Obama Administration's
Proposed Tax Policy Changes on Itemized Charitable Giving.''
His conclusion, among other things, was that a cap on itemized
deductions in higher marginal tax rates would lead to a 1.3
percent decrease in itemized charitable giving.
Now, we find ourself--the President of the United States
has proposed a 28 percent cap on itemized deductions. And at
the first of this year, Washington just implemented, at the
President's insistence, higher marginal tax rates. So I would
kind of like to localize and humanize this very important issue
we are discussing here by asking Mr. Rieth of Elkhart County,
Indiana, exactly in those terms what the reduction that we can
expect in charitable contributions will mean? Who will get cut?
Who will that impact? And what will be the larger impact on
your community?
Mr. RIETH. Thank you, Mr. Young. Let me answer that with a
true example. In 2011 we had a donor who donated $3,000 through
the United Way. They are very philanthropic, but they also
wanted to take advantage of the charitable deduction. One
thousand dollars went to us and our programs, another $1,000
went to the Salvation Army, and another $1,000 went to a local
homeless shelter. If that cap was there, I don't think we would
have seen that $3,000 that benefited all of us.
So, I would imagine, as I think of our donor base, it would
definitely decrease from some of our larger donors the amount
that they are able to give and some of these programs that I
have highlighted that are funded through them. For example, I
don't know what I want to give up. Do I want to stop helping
kids? Do I want to stop helping people break free from poverty?
Do I want to stop helping people that need prescription
insurance? It would be a tough one to know. We would probably
have to cut all of them to some extent with that loss of
revenue.
Mr. YOUNG. Well, thank you for your feedback. I mean, these
are important decisions we have to make, as a country, and as
we comprehensively look at the Tax Code, I think it is
important to remember the impact on individual Americans,
especially our at-risk Americans. Of course, I am particularly
concerned about Hoosiers. And I think it bears reminding that
the tax policies put forward by the President of the United
States, and insisted upon, will result in those specific
impacts that you have identified.
Thank you. I yield back.
Mr. ROSKAM [presiding]. The Ranking Member, Mr. Levin.
Mr. LEVIN. I just want to say, Mr. Young, and to everybody,
I really think it would be beneficial if we tried to keep what
I think sounds like partisan politics out of this. Governor
Romney suggested something much lower than was suggested by the
President. And we need to look at the question of limitations
in a very analytical, objective way, okay? We really need to do
that. We have set up a working group to look at the facts.
There are differing opinions about the impact of various
limitations and various ways to do it. And we now have some
limitations. The reinstitution of the Pease Amendment, whatever
its origin was, it lasted a number of years. And the impact of
it, there are differing opinions. Many studies indicate the
impact of it was very, very minimal.
If you look--and I introduced a document that shows the
income distribution of the charitable deduction--it is true it
isn't just the very wealthy. It is not a loophole. A very
substantial portion of it comes from very wealthy people,
though it isn't only very wealthy people. And so we really need
to look at the impact, because a small number of very wealthy
people give large amounts, and we need to take that into
account, as well as looking at the huge numbers of people who
aren't wealthy who contribute.
We also have had some testimony about the deduction when
property is given. We have wrestled with the auto provision,
right? We have really wrestled with that. And we have tried to
make sense of it, and to avoid the abuses. Because there have
been some.
So my only suggestion is that this is an issue that needs
to be seriously considered. We need to, I think, avoid the
rhetoric wherever we can because there are some serious issues
here.
And I have already said one rhetorical slogan, that it is a
loophole, I think is completely wrong. This is one of the
policies that have been put into the Tax Code for reasons.
There are provisions that came in because of lobbyists with a
special interest that I think are loopholes. Maybe they didn't
come from lobbyists. I don't think that is true of this, and I
don't think it is true of the mortgage interest deduction. I
don't think it is true of State and local taxes. These large
provisions--it isn't true of education, it isn't true of how we
handle health care.
These are provisions that are embedded in the Code, and
have been there for good--for policy reasons. And we need to
look at them and be careful that we don't place ourselves into
a rhetorical position that will diminish our efforts to look at
these issues.
So I just say that, Mr. Young. I understand the temptation,
and I don't say you are the only one who hasn't resisted it. I
think we need to do that.
Mr. YOUNG. Would the gentleman yield me----
Mr. LEVIN. Sure.
Mr. YOUNG [continuing]. His remaining 15 seconds or so?
Mr. LEVIN. Oh, sure.
Mr. YOUNG. I would say, first, your comments are very well
received. My comments were designed to illustrate the very
difficult trade-offs. There is no party that has a monopoly on
empathy or sympathy here with respect to pursuing tax reform,
and perhaps the unintended implications of a particular course,
one way or another.
I would also say I--my comments were designed to illustrate
the importance of economic growth. That should be a very
important goal with respect to tax reform. Anything that
undermines economic growth will also impair the ability of
Elkhart County, Indiana, to provide for its neediest citizens.
So we should keep that in mind. Thank you so much for the
dialogue.
Mr. LEVIN. Thank you.
Mr. ROSKAM. The gentleman from Arkansas, Mr. Griffin.
Mr. GRIFFIN. Thank you, Mr. Chairman. I want to say that I
am a huge supporter of this, of the charitable deduction. I
have been involved with a lot of charities, was on the board of
Big Brothers Big Sisters, and I understand the budgeting that
you have to go through. And I understand how tight the money
is.
And so, having said that, I frankly want to encourage more
charitable giving. And I think that we--when we are trying to
better the law, we have to remember that part of that is
simplicity. There are a lot of great ideas out there that
complicate the Tax Code. And so, every time I come up with an
idea, even if it is a good one, I have to ask: Is this making
the Tax Code too complicated? But I--listening today I have
heard several ideas that really don't: Getting rid of PEP and
Pease, possibly. That would be--that would make it less
complicated, certainly.
The other thing I would say is if we--maybe we could put a
line--we could put an above-the-line option for people who
don't itemize, and maybe put a floor of 500, or whatever, for
enforcement reasons, or whatever. But there are some things we
can do, and I think we--there is a lot of agreement from a lot
of people I have heard, that we want to encourage more giving
to groups.
So, my question is, when you are looking at saving some
money, what sort of reforms do we need to be looking at? And a
couple I would just mention, and then I will open it up to
anyone who wants to comment, is are there certain groups that
are able to be 501(c)(3)'s now that maybe shouldn't be? Is that
something we should look at?
Also, the government waste in funding I talked of at the
earlier panel, about the dollar that starts in the State and
goes all the way up here and accounts for a lot of the boom in
this city, and then goes back to rural Arkansas as a dime. I
just open it up. Do you have some ideas on reforms in this area
that could save us money?
[No response.]
Mr. Huddleston, anyone. Yes.
Ms. AVIV. With respect--if I could talk also about how to
increase giving, I think Conrad Teitell mentioned the extenders
package, and in particular the non-itemizer. One of the
realities that we find is that donors are very tentative about
giving when they are not sure what the rules are going to be
this year, and if they think the rules are going to change from
this year to next year, and then change back again. In addition
to the problems with the economy, they will hold back.
And I think that we see on the side of the organizations
that gather money and then redistribute, or charities that
receive this money directly, the degree to which there is
uncertainty about some of these incentives is the degree to
which there is less funding. So, one of the ways in which we
can be very helpful, I think, is to make the tax extenders
package permanent and clear.
Second, I think that on the side of--in the previous panel
some issues were raised about some people being in our sector
who engage in bad practices, unethical conduct, and so on. And
the point was made--and I want to underscore it--that we
operate on trust. And if there is no trust in our sector,
people won't give us money, because they think that what they
are seeing is the tip of the iceberg. So the degree to which
State oversight officials and Federal officials can do the job
of enforcing the laws, and then we are happy to look to see if
there is a gap in a place that would save, so that there is no
fraud or abuse, I think that that would be an absolutely
essential part of the work.
And then, finally, I had mentioned in my oral testimony and
in my written testimony as well, I think it would be a great
opportunity, through the panels that have been created, for us
to come together in partnership to think of new ways to
capitalize the sector, and to see if--what kinds of obstacles
exist, regulations, or anything else that stops different kinds
of people from giving funds because of the current structure.
Those three, I think, would be very helpful.
Mr. GRIFFIN. Anyone else? Yes, sir, Mr. Schrum.
Mr. SCHRUM. I would just like to quickly add that I think
consistency is really important with our donors. I have been
raising money----
Mr. GRIFFIN. Certainty?
Mr. SCHRUM. Certainty, right.
Mr. GRIFFIN. From year to year?
Mr. SCHRUM. Yes. I have been raising money for 40 years.
And every time something changes, donors step back, especially
the wealthiest, you know, who really create the
transformational gifts----
Mr. GRIFFIN. Sure.
Mr. SCHRUM [continuing]. For all of our charities.
Mr. GRIFFIN. Sure. I will just mention--I see I am running
out of time--but one of the things that has interested me as I
have learned more and more is how quickly the light turns to
red. Thank you, Mr. Chairman.
[Laughter.]
Mr. ROSKAM. Well, thank you all. I want to thank this panel
for your time and your courtesy and your testimony and your
expertise. And we look forward to interacting with you in the
days and weeks and months to come. Thank you very much.
And with that I would like to welcome up our third panel.
Well, welcome to the third panel. First, we are going to
hear from Pamela King Sams, who is the Executive Vice President
for Development at Children's National Medical Center, here in
Washington, D.C. Ms. Sams is responsible for managing the $500
million Transforming Children's Health campaign.
Second, we will hear from Nicole Busby, Executive Director
of the National Association of Free and Charitable Clinics. She
has been a featured guest on a number of television programs
discussing free clinics. Welcome.
Then we will hear from Rand Wentworth, President of the
Land Trust Alliance here in Washington. Mr. Wentworth has
served on numerous boards and previously testified before this
Committee, as well as the Senate Finance Committee.
We will also hear from Kim Morgan, the CEO of United Way of
Western Connecticut. Ms. Morgan serves on several boards, and
has worked in this field of nonprofits for over 20 years.
We will hear from Terry Mazany from Chicagoland, my home
area. He is the President and CEO of The Chicago Community
Trust. He is also a Member of the Board of Directors of the
Federal Reserve Bank of Chicago and the Council on Foundations.
We will hear from Brent Christopher, who is the President
and CEO of Communities Foundation of Texas in Dallas. Mr.
Christopher considers himself a reformed lawyer--God bless
you--and has held several leadership roles in fundraising in
administrations at a university and academic pediatric medical
center setting.
And, finally, we welcome Leslie Osche, who is the Executive
Director of the United Way of Butler County in Pennsylvania,
and is a constituent of our colleague, Mr. Kelly. And when it
is her turn to testify, I will be pleased to yield to him for
an introduction.
Again, thank each of you for your time and your testimony
and your professional commitment on these issues. As you know,
all of your written testimony is submitted for the record, and
that is incredibly helpful. So our time today will be limited
to 5 minutes each.
And, Ms. Sams, we will start with you.
STATEMENT OF PAMELA KING SAMS, EXECUTIVE VICE PRESIDENT FOR
DEVELOPMENT, CHILDREN'S NATIONAL MEDICAL CENTER, WASHINGTON, DC
Ms. SAMS. Good afternoon. Mr. Chairman and Committee
Members, I am Pam King Sams, as you mentioned. I am the
Executive Vice President for Development at Children's National
Medical Center, here in Washington, D.C. We are a 303-bed not-
for-profit academic medical center, and we have been around for
140 years, taking care of sick children. We would love to
invite you down for a tour if you haven't been down. It is only
three miles up North Capitol, so please come on up.
I am testifying today on behalf of the American Hospital
Association and its more than 5,000 member hospitals, health
systems, and health care organizations. We appreciate this
opportunity to comment on the importance of the charitable
contribution to America's nonprofit hospitals.
Let me give you a brief sketch of the financial environment
in which hospitals now operate. A recent Moody's report
maintains a negative outlook for nonprofit health care for
2013. It cites Federal and State cuts to healthcare spending,
limited reimbursement increases from commercial insurers, and a
tepid economy as some of the reasons. Since 2010, Medicare
hospital payments have been reduced by $250 billion over the
past 10 years. As a result, hospital Medicare margins stand at
an average -7 percent. In 2011, Medicare overall paid
hospitals--Medicaid paid hospitals $6 billion less than the
cost of treating Medicaid patients.
At Children's National, we collect an average of about $.44
on the dollar that is charged to all of our payers. Mr.
Chairman, 100,000 children live in the District of Columbia;
90,000 of those children are enrolled in Medicaid. Children's
National provides primary care for almost 40,000 of those
children. Those primary care sites are called the Goldberg
Centers. And they are called the Goldberg Centers because
wonderful philanthropists Stephen and Diana Goldberg contribute
to make sure that they have them.
Even in this environment, hospitals do more to assist the
poor, sick, elderly, and infirm than any other entity in health
care. Since 2000, hospitals of all types have provided more
than $367 billion in uncompensated care to patients. Children's
National, for instance, alone gave nearly $51 million in
uncompensated care last year.
The benefits to our communities greatly exceed the revenue
that the Federal Government forgoes by granting tax-exempt
status to hospitals. We believe that the incentive of the
charitable deduction is a key to providing continued access to
hospital services in communities across the county. Children's
National counts on contributions from the community simply to
keep its doors open. Our operating budgets always assume
philanthropy as part of our day-to-day operating funds. In
fact, nearly $42 million in philanthropy directly funded our
operations last year.
Nationwide, hospitals allocated upwards of 50 percent of
the funds they raise to operations for care, education, and
research. Let me give you an example. We treat Hannah, who has
cancer. She receives therapeutic drugs that were discovered
with the help of philanthropy. Hannah had to have chemotherapy,
so our child life specialist sat with her with a doll and
played to teach her what that meant. That was funded through
philanthropy. During her long weeks of stay for her treatment,
she would wander down to the art room and visit with our art
therapist and paint to cheer her days. And when she was too
sick to come out of her room, our music therapist came into her
room and played songs for her that made her smile, all funded
through philanthropy. And then finally, when she could go home,
her parents could not afford her outpatient medications, so we
had a family fund, supported through philanthropy, that helped
buy her medications for that first 30 days, until our social
workers, also funded through philanthropy, could work out the
situation to get her home safely.
America's hospitals are always open, serving our
communities 24 hours a day, 365 days a year. But they are
facing new challenges to maintaining access to high-quality
care to everyone who needs it. We are seeing all forms of
revenue shrink: Medicaid, Medicare, NIH, tightening
reimbursements through insurance companies. Our only positive
stream of revenue we may see is through philanthropy. Taking
away the tax deductibility could cut that final avenue of
funding dramatically.
Hospitals need the support they find from generous members
of the communities they serve now, more than ever. At
Children's National, our margin was less than 1 percent in
2012. Less that 1 percent. Without philanthropy, we would have
lost $39 million, jeopardizing the care of kids like Hannah.
As you work to reform the Nation's tax laws, we urge you to
continue to encourage private giving to hospitals, please
exclude charitable giving from any limitations on deductions,
and maintain the existing Federal charity deduction. Thank you.
[The prepared statement of Ms. Sams follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. ROSKAM. Thanks, Ms. Sams.
Ms. Busby.
STATEMENT OF NICOLE LAMOUREUX BUSBY, EXECUTIVE DIRECTOR,
NATIONAL ASSOCIATION OF FREE AND CHARITABLE CLINICS,
ALEXANDRIA, VA
Ms. BUSBY. Mr. Chairman, Members of this Committee, my name
is Nicole Lamoureux Busby, and I am the Executive Director of
the National Association of Free and Charitable Clinics. On
behalf of our board, our members, and the 1,200 free and
charitable clinics across the United States, I thank you for
having me here today to give you our thoughts on how limiting
the charitable deduction will dramatically and negatively
impact our ability to provide quality health care to those who
need it the most.
The mission of the National Association of Free and
Charitable Clinics is to broaden medical access to the
underserved, as well as to promote volunteerism, and to support
the free and charitable clinics across the country. However, I
believe that it is our broader vision that activates our
donors, our volunteers, and the communities that we work with
every day, and that vision is to build a healthy America, one
patient at a time.
Many are surprised to hear that there are 1,200 free and
charitable clinics across the United States who have been
standing in the gap, providing healthcare to those who have
fallen through the cracks of a broken healthcare system. Our
clinics believe in giving a hand up, not a handout, and we are
organized at the grass roots level, not at the government
level. So what does that mean? That means that the charitable
deduction is incredibly important to us, because we receive
little to no State or Federal funding. We are not federally-
qualified health centers, so that means we do not receive HRSA
330 money. We are not rural health centers. And, as I said
before, we rely heavily on the donations of individuals,
foundations, and grants to keep us going.
Some interesting facts about our donors: We are split 50/50
between men and women. Our donors give $1 to $100. And we also
have done a survey of our donors, and 44 percent of our donors
have said that they will stop giving to our organization if the
charitable deduction is gone.
Some interesting impacts and stats about our clinics: 44
percent of our clinics have an operating budget of under
$100,000; 83 percent of our patients come from a working
household; and we have found, because of a recent Penn State
study, that free and charitable clinics patients utilize the
emergency rooms less, they don't overcrowd our emergency rooms
because of colds or bumps and bruises. And because of this, we
have proven to be a very good return on investment for our
donors.
In fact, for every dollar that is donated to a free or
charitable clinic, there are $5 in services that are given to
patients. Free and charitable clinics are volunteer-run. We
activate an army of volunteers to provide the health care that,
quite frankly, many do not get right now in this county.
One of the greatest misconceptions of the Affordable Care
Act is that every single person in this country is going to
have health care coverage after its implementation. And you and
I know that, according to the Congressional Budget Office,
there may be as many as 30 million people without access to
health care. That includes documented, undocumented, and those
people who are eligible for Medicaid but their States are not
going to be expanding that. Because of this, free and
charitable clinics will remain an important and critical part
of the safety net.
And that is why we are urging you to not limit the
charitable deduction. We are asking you to not put a damper on
the generosity of the American people. And we are inviting you
to join us in our vision and help us build a healthy America
one patient at a time. Thank you.
[The prepared statement of Ms. Busby follows:]
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Mr. ROSKAM. Thank you, Ms. Busby.
Mr. Wentworth.
STATEMENT OF RAND WENTWORTH,
PRESIDENT, LAND TRUST ALLIANCE, WASHINGTON, DC
Mr. WENTWORTH. My name is Rand Wentworth, and I am
President of the Land Trust Alliance. Thank you for inviting me
to testify today.
The Land Trust Alliance advances land conservation by
serving 1,700 local citizen-led charities that are conserving
land across America. They protect safe drinking water, farms,
wildlife habitat, and places for children to play. Like any
charity, a land trust needs charitable gifts to fund its
operations. But a great deal of our work depends on a different
kind of a donation: The gifts of land or of a conservation
easement, which is a voluntary agreement to retire development
rights. These donations provide big public benefits and protect
land for a fraction of the market value. These are once-in-a-
lifetime gifts that are usually valuable--unusually valuable,
compared to other charitable gifts.
The IRS says that the average value of a donated work of
art is about $7,000. The average value of a gift of land was
$170,000. And the average value of a conservation easement was
$460,000. So, we were alarmed to hear proposals last year to
limit tax deductions at $17,000 or $25,000 or $50,000 per year.
Given the size of gifts of land, a cap on deductions would
be catastrophic for land conservation in America. Because these
gifts are so large, you might assume that they come from high-
income people. But many are donations from family farmers,
ranchers, and forest land owners with modest incomes, who
inherited their land from their parents, which has now grown
very valuable. The Tax Code generally limits these deductions
for a donation of property to no more than 30 percent of the
donor's income, with a carryover of no more than 5 years. For a
working farmer or rancher, though, their income is not large
enough to use these deductions. The math simply doesn't work.
This is why Representatives Jim Gerlach and Mike Thompson
wrote the Conservation Easement Incentive Act. It allows
conservation easement donors to deduct more of their income
each year,
and to carry over deductions for more years. Last year that
bill,
H.R. 1964, had 311 cosponsors, a majority of the Republicans, a
majority of the Democrats in the House, including most of the
Members of this Committee. It makes permanent the provisions
that Congress first enacted in 2006, and extended in 2008,
2010, and again last month.
Here is a story to illustrate why this bill is so
important. Dennis Maroni is a rancher in Arizona. His cattle
graze on desert grassland and mountain pasture, which is
habitat for a dozen rare species, including the Mexican Falcon
and the Jaguar. It used to be in the middle of nowhere, but the
growth of Tucson and Sierra Vista changed that. In 2007, Dennis
donated a 960-acre conservation easement to the Arizona Land
and Water Trust, a generous gift of his development rights,
valued at $560,000.
Raising cattle and sheep provides only a moderate income.
And under the previous law, Dennis would only get a small
fraction of his donation. But, thanks to the Conservation
Easement Incentive Act, he could deduct the entire value of his
donation over time. That makes a big difference for land owners
like Dennis.
His ranch is now protected, and that is good for wildlife.
But the easement will also keep his land in productive
agriculture. And Dennis sells grass-fed beef to farmer's
markets, food co-ops, and restaurants. So this donation is a
win-win-win for wildlife, for agriculture, for the economy.
We are grateful that Congress has extended the Conservation
Easement Incentive Act for another year. But it takes more than
a year for families to decide on the largest charitable gift of
their lives. We don't want land owners to rush into
conservation easements because of a short-term renewal of a tax
extender. That is bad tax policy and bad conservation policy.
We need certainty in tax policy, which is why we encourage
Congress to make the Conservation Easement Incentive Act a
permanent part of the Tax Code. Thank you for this opportunity
to testify.
[The prepared statement of Mr. Wentworth follows:]
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Mr. ROSKAM. Thank you, Mr. Wentworth.
Ms. Morgan.
STATEMENT OF KIMBERLY MORGAN, CEO,
UNITED WAY OF WESTERN CONNECTICUT, DANBURY, CT
Ms. MORGAN. Thank you, Mr. Chairman and Members of the
Committee. My name is Kim Morgan. I am the Chief Executive
Officer of United Way of Western Connecticut, which provides
services to fifteen communities and two counties, including the
town of Newtown, Connecticut, which endured a grave tragedy on
December 14th, as we all know.
I have just a few thoughts I would like to share with the
Committee today. First, I would like to acknowledge the
tremendous outpouring of support that our community has
received, and continues to receive, from across the country and
around the world in response to this tragic event. The
remarkably generous response in all its forms is the foundation
upon which the Newtown community will begin its process of
healing.
Second, it is important that people understand the depth
and the duration of the recovery challenge that we face. It
will take many, many years, many millions of dollars, decades
of mental health services, and an unending reserve of human
compassion and support for this community to cope with the
injury that it has suffered.
Third, it is important for this Committee to recognize the
important role that the charitable tax deduction can play in
helping a community to respond to such severe circumstances.
While taking nothing away from the pure compassion that has
motivated the generous response, we must acknowledge that many
of the most substantial donations may have been less
substantial, except for the existence of the charitable tax
deduction. I know this to be true from conversations that I
have personally had with donors.
And, finally, I want to emphasize that, even prior to the
tragic events of December 14th, it was the existence of the
charitable tax deduction, in part, which enabled United Way to
be in a position to provide immediate resources, services, and
structure to the Newtown community. I am convinced that we
would not have been able to respond nearly as well, nor would
our social service system, had our regular donors not been able
to take advantage of that tax credit deduction.
United Way of Western Connecticut received help from United
Ways across the country and across the State after this
tragedy. They were able to do this because United Ways have
worked to engage communities for decades on working together
and raising the resources necessary to tackle tough community
challenges. People know that they can rely on the United Way to
help garner those resources and use them wisely and
responsibly, and to coordinate efforts and offers of volunteer
assistance to best assist the community.
United Ways in Connecticut also contribute to our United
Way's 2-1-1 system, which has helped in the response to the
Newtown tragedy, as well, taking calls and offers of assistance
and providing crisis intervention and trauma resources to the
many people looking for help in dealing with their grief and
explaining the inexplicable to their children.
This community generosity is something we rely on at United
Way. And, in turn, the charitable deduction certainly helps
sustain and grow that generosity. I thank the Committee for
this opportunity, and would urge the Members to consider these
points during your deliberations.
[The prepared statement of Ms. Morgan follows:]
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Mr. ROSKAM. Thank you, Ms. Morgan.
Mr. Mazany.
STATEMENT OF TERRY MAZANY, PRESIDENT AND CEO,
THE CHICAGO COMMUNITY TRUST, CHICAGO, IL
Mr. MAZANY. Thank you, Congressman Roskam. I also want to
recognize Congressmen Schock and Davis, one of the newest
Members of this Committee, from my home State of Illinois. I am
grateful for the invitation from Chairman Camp and Ranking
Member Levin inviting us to provide testimony on the deduction.
I am joined here today by my colleague, Brent Christopher,
of the Communities Foundation of Texas. Regrettably, Alicia
Philipp of the Community Foundation of Greater Atlanta is
unable to attend. But her testimony is in the record.
For the past 9 years, I have had the privilege of serving
the metropolitan region of Chicago, home to more than 8 million
people and 12 congressional districts, as President and CEO of
The Chicago Community Trust. In 2012, our assets totaled $1.8
billion, we made grants of $175 million, and received $179
million in contributions from nearly 2,000 donors. The Chicago
Community Trust is one of 11 community foundations started in
1915, a year after this powerful idea became an institution in
Cleveland. Today there are more than 700 community foundations
in the United States serving virtually every community--urban,
rural, and suburban--in our country.
It is important to note that even though The Chicago
Community Trust primarily serves congressional districts in and
around Chicago, our grantmaking via donor-advised and endowed
funds has benefited every congressional district in the State.
And when there is a national disaster, we backfill resources
for the American Red Cross in Illinois, so that they can direct
their resources to where they are most needed in other hard-hit
communities.
One of the key things that Brent and I want to help the
Committee to understand today is that there are many different
types of foundations, and that a community foundation is a
public foundation, in contrast to private foundations like the
MacArthur and Joyce Foundations, which are also based in
Chicago. This is a very important distinction when it comes to
tax law. A community foundation is a collection of charitable
funds, contrasted with an endowment set up by a single donor.
It operates as a 501(c)(3) tax-exempt public charity, and is
focused entirely on improving the quality of life in that
geographic area.
As a public charity, community foundations are bound by the
strict rules of behavior and must meet the same requirements as
other charities like the American Red Cross and the YMCA.
One of the most important differences between the trust and
a private foundation is that community foundations accept both
donations and make grants. This distinction is fundamental,
when considering how change in the charitable deduction might
affect the field of philanthropy. The idea of a community
foundation fuses the capacity of a private foundation with the
power of community philanthropy, connecting donors with
opportunities to help the places and causes that they care
deeply about, not only today but in perpetuity.
The charitable deduction is vitally important for us to
deliver on our mission, especially with the growth of donor-
advised funds. And collectively in 2012, The Chicago Community
Foundation paid out $123 million in donor-advised grants at a
payout rate several times that required of private foundations.
We serve as the heart of local philanthropy, working with
large donors such as pharmaceutical magnate John G. Searle, who
created the first Searle Fund in 1964, and has provided
resources for a $50 million 10-year commitment to establish
Chicago as a global center for biomedical research, to more
than $100 million invested to improve education in Chicago
schools.
But it is also the modest donor. During the great
recession, we pulled contributions from more than $400 to amass
$10 million above our regular grantmaking to support the food
pantries, homeless shelters, winter coats for children, and
other essential services for those neighbors most urgently in
need. During the fourth quarter, as rumors were rampant about
the charitable deduction being scaled back, we received a
record $140 million in contributions, a strong reason to
believe that this tax policy does matter.
If we had a level playing field, I would be on the opposite
side of this argument, advocating that we all must do our part.
Instead, what we see is the continuing reduction of government
spending, a trend most likely to continue for the foreseeable
future. Given the reality that we face, and the fact that the
charitable deduction encourages a key behavior to our
democracy, giving for the common good, I am here to advocate
for the full preservation of this deduction. If we expect
communities to respond to the needs of their residents, we must
preserve their charitable capacity.
Thank you again for this opportunity to share what
community foundations are able to do, and our perspective on
this vital and important public policy.
[The prepared statement of Mr. Mazany follows:]
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Mr. ROSKAM. Thanks, Mr. Mazany.
Mr. Christopher.
STATEMENT OF BRENT E. CHRISTOPHER, PRESIDENT
AND CEO, COMMUNITIES FOUNDATION OF TEXAS, DALLAS, TX
Mr. CHRISTOPHER. Mr. Chairman and Members of the Committee,
including Congressman Marchant, whose district is in north
Texas, thank you for this opportunity to testify today. My name
is Brent Christopher, and for the last almost 8 years I have
served as the President and Chief Executive Officer at
Communities Foundation of Texas in Dallas.
When you hear the words ``community chest,'' you probably
think of the game Monopoly. That square exists on the Monopoly
board because there once were community chests all over
America, which supported local agencies addressing health,
hunger, and other basic needs. My foundation began in 1953 as
the Dallas Community Chest Trust Fund, and we evolved over time
into Communities Foundation of Texas.
We work like sort of a philanthropic GPS, helping to steer
charitable dollars not only to human service agencies, but also
to education, the environment, the arts, medical research, the
whole range of public needs across the north Texas region,
around Dallas-Fort Worth, and beyond. We have over $800 million
in charitable assets. We have worked with thousands of donors.
And we have paid more than $1.2 billion in charitable grants
since we were founded in 1953.
But I like that our roots come from the old community
chest, because, really, that is what a community foundation is.
As my colleague, Terry Mazany, indicated, each of the over 700
community foundations in America is a 501(c)(3) public
foundation. Really, a collection of charitable donations from
many people. Community foundations operate through a mix of
donor-advised funds, scholarship funds, funds that are
designated to support one particular charity, and discretionary
endowments that are entrusted to us to meet local needs over
time. And by depending on donations, we are affected by the
charitable tax deduction in a direct way that most private
foundations are not.
One of the most commonly-used tools in a community
foundation tool kit is the donor-advised fund. It is a public
charity alternative to creating a private foundation that
allows charitable assets to be managed more cost-effectively in
a bigger pool, while also allowing donors to remain involved by
recommending grants from that fund that align with their
charitable interests.
Last year, donor-advised funds at Communities Foundation of
Texas held a total of $266 million, and they paid out 14
percent of that value in $37 million worth of grants. These
funds are important charitable vehicles that are being used
more frequently by donors. And the current IRA charitable
rollover provisions that allow people to make tax-free
charitable contributions from excess funds in their IRAs should
be strengthened by including donor-advised funds as eligible
recipients.
Community foundations are a great democratizer of
philanthropy. The different types of funds allow people to
bring structure and strategy to their charitable giving,
regardless of their backgrounds. Our first major gift was in
1955 from a woman named Pearl Anderson. She was the widow of an
African American physician, and had grown up in rural Louisiana
during the days of segregation. Mrs. Anderson was prohibited
from going to school until the age of 12, when an African
American school was finally built just a few miles from her
home. She would often walk by a plaque that credited the
Rosenwald Fund with establishing that school. Rosenwald
referred to Julius Rosenwald, the great Chicago philanthropist,
and the Chairman of Sears Roebuck, who was inspired by Booker
T. Washington to build schools in African American communities
all across the rural south.
Pearl Anderson vowed that one day she would pay back the
debt that she owed to the people who made it possible for her
to get an education. She brought that dream, along with the
remainder interest in property that turned out to be worth
$350,000 to the old Dallas Community Chest Trust Fund. All she
asked was that the money be used to help youth and the poor,
without regard to their race or religion. And today we are
still using the Pearl C. Anderson Fund to do just that, and to
honor her promise to give back.
While you all were working on the fiscal cliff bill back at
the end of December, Robert Shiller, the Yale professor and
economist, wrote an op ed piece on the charitable deduction.
And instead of a dry, academic rebuff to its significance, it
is important to note that he began his op ed saying, ``Whatever
else we do about the Tax Code, we need to save the charitable
deduction, which has done so much good in our country, and
springs directly from some of our deepest values.''
Most people give from their hearts. But I also know that,
since 1917, the charitable deduction has been a vital thread in
the fabric of charitable giving in this country. It may not be
the primary motivation, but it definitely affects the size and
the timing of charitable gifts. As Ranking Member Levin said
earlier today, it is not a loophole that needs to be closed. It
is a multiplier of generosity. It is unique in our Tax Code, an
encouragement to act selflessly by spending money on the public
good instead of ourselves. And we need the full force of that
encouragement in this country today, more than ever. Thank you
very much.
[The prepared statement of Mr. Christopher follows:]
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Mr. TIBERI [presiding]. Thank you, sir, for your testimony.
Mike Kelly had hoped to be here to introduce you.
Unfortunately, he got tied up in a meeting and still may be
back before you are finished. But, Ms. Osche, please----
Ms. OSCHE. Congressman, thank you.
Mr. TIBERI [continuing]. Testify today. Thank you.
STATEMENT OF LESLIE OSCHE, EXECUTIVE DIRECTOR, UNITED WAY OF
BUTLER COUNTY, BUTLER, PA
Ms. OSCHE. Thank you, Mr. Chairman and Members of the
Committee. On behalf of the thousands of donors and our many
charity partners of the United Way of Butler County and our
entire United Way network, I thank you for the opportunity to
appear today and share concerns of our citizens on the impact
on charitable deduction.
There has been much discussion, I think, this morning
around the Tax Code and the high-level impact of charitable
deduction. And I would like the opportunity to share with you
what the real impact is at the local level, and what we are
hearing from our donors at the local level.
Butler County is one of the fastest-growing counties in
Pennsylvania. In population, job growth, and median income, our
county residents made contributions of $69.4 million in 2011,
nearly 4 percent of their discretionary income. As a result of
growth, our United Way in Butler County's annual fundraising
campaign topped $1.7 million last year, which was an increase
of actually 33 percent. Nearly one-third of that increase, or
over $560,000, comes from leadership-level gifts of $500 or
more.
Over the last several years, as the proposed cap on
charitable deductions has come to the forefront, I have heard
from many donors whose gifts would be significantly impacted if
tax reform means a limit on charitable deductions. In fact, one
major donor stopped me as I was on my way into the polls during
the November election to say that he would be forced to make
tough choices, and that his generous contribution would either
decrease or perhaps be lost all together.
Losing his gift would mean that we would lose at least 25
days of after-school programming for nearly 100 children at our
local elementary school, where 75 percent of those children are
receiving free or reduced lunches, and where our partner
agencies and volunteers are providing tutoring, teaching
basketball and other exercise programs, providing healthy meals
to those students and families, giving the students the
opportunity to participate in Boy Scouts, Girl Scouts, 4H, and
other community programs. The school district is so pleased
with the results of the student academic performance, that they
would like to expand that to other elementary schools. But we
can't make that happen if we lose that donor's gift.
Just a few months ago I received a call from a financial
advisor--and a volunteer with us--who had indicated that he was
working with a gentleman who needed to make a sizeable
charitable gift, but wanted to be certain that it was going to
have a real impact on somebody's life. He made a contribution
to our child care scholarship fund that assists those who are
either on a waiting list for Federal child care assistance, or
whose income makes them ineligible for that assistance. His
gift assisted a young family with two children whose life was
interrupted when the father suffered an injury. It was
debilitating and he was facing multiple surgeries and could no
longer work.
The mother was working full-time to maintain the family's
daily bills and healthcare costs, but her employer required her
to work overtime, which made her ineligible for child care
assistance. And child care would consume at least half of their
monthly income. She was thinking about giving up, about staying
home, and relying on public benefits. Imagine the cost that you
and I would be paying for that, compared to the $5,000 gift
that kept her employed for another 6 months, and provided
quality early care and education for her children.
Another concerned donor and fellow Rotarian provides an
annual gift to our emergency relief fund that keeps the heat on
for at least 30 families in our community. If these folks are
shut off, those reconnect costs would be triple the amount that
it took--with that little bit of assistance--to keep the heat
on.
Butler County's growth is largely due to the generosity and
private support of citizens who give, advocate, and volunteer
their time to ensure that those key building blocks of
education, income, and health are solid, and that we can safely
build on that foundation. Those $1.7 million in charitable
contributions last year allowed us to invest in programs and
initiatives that build character, improve academic outcome, and
equip our young people for the careers of the future.
We invested in initiatives and improved financial stability
through employment services, free health care for
underemployed, child care tax assistance, and affordable
housing. The investments were widespread across 40 programs and
21 different nonprofit providers. They are the programs that
close the door on vulnerabilities that lead to dependence on
more costly Band-Aid solutions.
We also distributed $700,000 in designated contributions to
over 700 separate charities across the country.
And so, the critical message I am honored to carry from my
community and from our United Way network today is that these
efforts are driven and funded by the private sector, by the
citizens of this great country, who support their religious and
charitable institutions, and who literally come to the table
with us, even at 7:30 a.m. on Monday mornings, to advance the
common good and resolve problems in our community.
Any effort to limit those charitable deductions strikes at
the heart of the citizens and the community, who are moving
beyond government support and solving problems here, at the
ground level. These efforts should be supported. And the
incentive to give and to volunteer their time must be
preserved. We work together with community institutions to
solve problems and drive change. And they all rely on the
generosity of our citizens and their charitable contributions
that have long been exempt from taxation.
Limiting charitable deductions has a negative multiplier
effect on our community and on families, and that widespread
consequence could be devastating. This country was built on the
charitable spirit of its citizens. And this core value is
unmatched anywhere else in the world. Please preserve this
value by protecting that deduction. And I thank you.
[The prepared statement of Ms. Osche follows:]
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Mr. TIBERI. Thank you. Thank you all for your testimony. It
will be part of the record.
Mr. Gerlach from Pennsylvania, you are recognized, if you
would like to ask a question.
Mr. GERLACH. Thank you, Mr. Chairman. I don't have any
questions for the panel, but I did read through your testimony.
And let me just say thank you on behalf of those I represent,
and on behalf of those that represent you in Congress that may
not be here this afternoon with us, for all the great work you
do in the communities where you serve. You do a tremendous
amount of great work. And all across the board we want to say
thank you.
And a special thank you to Mr. Wentworth for the great work
the Land Trust Alliance has been providing to us. And thank you
to Congressman Mike Thompson here of the committee on the
conservation easement legislation for the fact we had well over
300 House Republicans and Democrats cosponsoring this
legislation this last session as a testament to the importance
of the good work that conservancies and land trusts do all
across the United States. And we will continue to work with you
on this issue during the 113th Congress. So thank you for that.
But, otherwise, all of you, thank you for the tremendous
work you do in the various communities that you are involved
in. We appreciate it very, very much.
Mr. TIBERI. Thank you, Mr. Gerlach. The gentleman from
Texas is recognized for 5 minutes.
Mr. MARCHANT. Thank you, Mr. Chairman. I would just like to
say--add my thanks to the previous statement, and tell you that
the Chairman felt--told our Committee before we met today that
it was very important the American people hear from all of you
today. And so, this is an important part of our discussion of
tax reform, but it was also very important that each of you got
to add your voice to this debate and make your case.
I would like to say thanks to Mr. Christopher from north
Texas. I grew up in the Dallas area, and the Communities
Foundation has done an incredible job in Texas--in Dallas,
especially--in helping donors manage their donations. And it
has had an incredible impact on north Texas. And I know that I,
for one, am very grateful for that, and grateful to all of you
for what you do every day. Thank you.
Mr. TIBERI. Thank you. And last, but not least, Mr. Kelly
has made it. We--you just barely missed your opportunity to
introduce Ms. Osche.
The gentleman is recognized for 5 minutes.
Mr. KELLY. I thank you, Chairman. And Leslie, I am sorry I
wasn't here for it. We were talking before the hearing, and I--
Leslie was in the back of the room. I said, ``How would you
like me to introduce you,'' and we had talked yesterday. She
says, ``Well, it is''--something about Gidget Goes to
Washington. So--I have to tell you, though, we go back a long
way, because we are both lifelong residents of Butler,
Pennsylvania.
I think the importance--and I would like to associate
myself with the remarks of the other Members--of you being here
today is really your day in court. It is your day to put out
the information, your life experience, truly, I think, the
anecdotal message that you can bring, Leslie, when you talk
about people back home. Because that is what we understand as
Members of the Committee. We have to look at the whole country,
but we really know what it is like back where we live, back
where we work, back where we go to church, back where we have
gone to school. And so it is critical to understand that
relationship.
I have always thought that, coming from the private sector
my whole life, I know incentives work. And I know when you take
incentives away, that it has a drastic effect. And I think as
we look at--we are trying to reform this Tax Code, and trying
to navigate it--and I don't know, quite frankly, how anybody
does--this is not a political thing for me, based on a
Republican idea or a Democrat idea. This is about what is best
for this country.
You and I talked a little bit yesterday. When you start
taking things away from people that they had before, incentives
for doing the right thing, then you start to see results that
maybe go the other way. And I heard in our first panel about 97
percent of United Way's funding, where it came from in
contributions and how critical that was. I think that has just
always been unique about this country. I don't know of anyplace
else in the world that people are more generous with their own
money and their own time. And especially time, because you
really can place no dollar value on that. You are giving up a
day of your life to do something for somebody else, and I think
it is phenomenal that we do that.
I don't--haven't experienced anyplace else in the world
like America. So as much as we sometimes wonder about the
direction of the country, I--when I look at America's heart, I
know it is still the way it has always been.
You and I talked yesterday. Some of the people that you
talked to, people that you and I know, and people that fund
United Way and participate in United Way, the effect that it is
going to have--and I know you all know what that is going to
do. So--but, Leslie, some of the folks we know----
Ms. OSCHE. Yes. And I did speak to that a little earlier,
just before you came in, about the donor who specifically
stopped me during the election time and discussed what the
impact would be on his gift, and, again, outlined directly what
that impact would have on programs in our community.
And so, when I go from Rotary meeting to church to all of
these various organizations and talk with community members,
many have called me in the last week, indicating the fear,
again, that the multiplier effect would have if those
charitable contributions are capped in any sort of way. And
that multiplier effect, again, because it is the same people
that I see at all of those same charity events who are giving
to multiple organizations, and those organizations are
inextricably tied to providing that safety net in our
community.
Mr. KELLY. I know--and you have all given testimony, to a
certain degree, of how that does affect it.
I am not going to use too much more time, Mr. Chairman, but
I did want to thank you all for coming here. I know it would be
great if we had a full panel. But I have to tell you this--when
it comes to personal time, this is the worst part of my life. I
control absolutely nothing in my life. It is all based on
appointments and times where I have to be. It is all sorted out
for me, so it is a little bit difficult at times. But it is
really important.
I think that there is a disconnect between when I go home
and people say, ``People in Washington don't know what we are
going through.'' The fact that the Chairman called this hearing
gives you an opportunity. We do want to hear from you. We do
want to know the effect that it has on you. We do want to know
the effect that it is going to have on our charitable giving
aspect of the Tax Code. So thank you so much for being here.
And I will just tell you there will be great consideration
given at all levels.
So thank you so much, Mr. Chairman.
Ms. OSCHE. Thank you.
Mr. KELLY. I yield back.
Mr. TIBERI. Thank you, Mr. Kelly. I couldn't have said it
better, myself. So I won't say anything. Thank you all for
being here, and spending time with us today.
The next panel shall be seated as the third panel prepares
to leave. And I will introduce our panelists as they settle
into their seats.
Welcome to the fourth panel. Thank you for sticking around.
It is a busy day for a lot of Members.
The first witness I would like to introduce is an old
friend from Ohio, a former Ohioan, William Daroff, Vice
President for Public Policy of The Jewish Federations of North
America. Mr. Daroff is the leading advocate for the American
Jewish issues on Capitol Hill. Thanks for being here.
Second, we will hear from Ruth Thomas, who is Vice
President of Finance and Administration of SAT-7 in Easton,
Maryland. Ms. Thomas has extensive experience in human
resources, accounting, and IT management. Thank you for coming
today.
Third, we will hear from John Ashmen, who is President of
the Association of Gospel Rescue Missions in Colorado. Mr.
Ashmen is the originator of an award-winning professional
training CD series on Christian camp and conference leadership
orientation and development. Thanks for coming such a long way.
Fourth, we will hear from John Berry, who is CEO and
Executive Director of the Society of St. Vincent de Paul
Georgia in Atlanta. Mr. Berry entered the nonprofit sector
after a 25-year business and Federal Government career. Thank
you for being here, sir.
Fifth, we will hear from Larry Minnix, who is President and
CEO of Leading Age, here in Washington, D.C. Mr. Minnix has
been an advocate for nonprofit aging services for over 35
years. Thank you, sir.
Sixth, we will hear from Scott Ferguson, who is President
and CEO of United Way of the Chattahoochee Valley, in Georgia.
Mr. Ferguson has led four other United Way organizations across
the United States during his 24 career years with the United
Way. Thank you for being here.
Last, but not least, we will hear from LaKisha Bryant, who
is President and CEO of the United Way of Southwest Georgia.
Ms. Bryant was previously Executive Director of Girls,
Incorporated. Thank you for coming today.
Thank you all. The Committee has received each of your
written statements that will be made part of the formal hearing
record. Each of you will be recognized for 5 minutes for your
oral remarks.
And we will begin with the gentleman from--originally--
Ohio. Mr. Daroff, you are recognized for 5 minutes.
STATEMENT OF WILLIAM C. DAROFF, VICE PRESIDENT FOR PUBLIC
POLICY AND DIRECTOR OF THE WASHINGTON OFFICE, THE JEWISH
FEDERATIONS OF NORTH AMERICA, WASHINGTON, DC
Mr. DAROFF. Thank you very much, Mr. Chairman. It is an
honor to be here. It is an honor to be here with you, chairing
this Committee, given our many decades of friendship, as well
as your friendship with the Jewish community in your home State
and across the country.
I would like to thank you and the Committee for inviting me
to testify. My name is William Daroff, and I am the Vice
President for Public Policy, and Director of the Washington
Office for The Jewish Federations of North America. We
represent 154 Jewish federations across North America, as well
as 300 independent network communities which are the
fundraising organizations, as well as the central planning
bodies for an extensive network of Jewish health, education,
and social service agencies. And we raise and allocate funds
for almost 1,000 affiliated agencies that provide needed
services to almost 1 million individuals across the country.
As the second-largest philanthropic network in North
America, we know firsthand that tax incentives do result in
increased charitable giving. We oppose proposals that would
either limit the value of the charitable contribution
deduction, or impose a dollar cap on the charitable deduction,
as they would cripple our ability to provide needed social
services to the most vulnerable among us.
Jewish federations conduct an annual fundraising campaign
that raises almost $950 million each year from over 400,000
donors. In addition, we raise $1.2 billion each year through a
variety of planned-giving vehicles. We are especially proud of
the important role that donor-advised funds play, as well as
supporting organizations, in making grants and building
endowment assets. Jewish federations have combined endowment
assets of approximately
$14 billion, and make annual grants from those funds that
exceed
$1.5 billion, with significant distributions for both Jewish
and non-Jewish charitable endeavors.
We ask both sides--we see both sides of the charitable
deduction equation: How donors react to tax provisions, as well
as how philanthropic dollars flow to assist the most
vulnerable. Perhaps the primary mission of JFNA is to assist
Jewish federations as they inspire members of the Jewish
community to fulfill our religious duty to be charitable--in
Hebrew, ``tzedakah''--and to fulfill our collective
responsibility to build community and improve the world,
``tikkun olam.''
Although it is true that the importance of these principles
transcend the Tax Code and incentives such as the charitable
contribution deduction, we also recognize that such provisions
lead to increased donations. These contributions truly are the
lifeblood of the Jewish federation system.
Although the donor base of our annual campaign is large,
over 400,000 donors, the overwhelming percentage of dollars
raised come from a relatively small percentage of donors who
are tax sophisticated and extremely sensitive to the vagaries
of the Tax Code. It is this tax sophistication that permits
donors to structure gifts so that the maximum amount of funds
flow to Jewish federations and, in turn, to beneficiary
agencies, and that this flow happens to charities today, rather
than later.
This perspective convinces us that proposals that limit the
deductibility of charitable contributions will lead to a
significant decrease in donations to the Jewish federation
system. As you know, the Center on Philanthropy at Indiana
University published in 2011 a study stating that charitable
giving would decline by over $3 billion if the deduction was
reduced, which is not an insignificant amount. For us, the
debate by tax economists is largely an academic exercise,
however. The true measure is the tens of thousands who benefit
from our services every day. At a time when government funding
at all levels is shrinking, charities are needed to fill the
gap that government cannot address.
Some examples of the work on the ground by Jewish
federations and partner agencies tell the story. In Chicago,
the Jewish Federation provides food, refuge, health care, and
emergency assistance to 300,000 individuals of all faiths. In
Los Angeles, the Federation supports Bet Tzedek, an
organization that provides free legal services to over 100,000
families. In Ann Arbor, the home of Chairman Camp, the Jewish
Federation and the Jewish Family Services of Washtenaw County's
world-class Partners in Care Concierge Program pairs volunteers
with seniors to help them better navigate the medical system
and decrease hospital readmissions that could trigger
significant Medicare cuts.
Over the past several decades, the Jewish Federation System
has fostered growth in charitable giving through donor-advised
funds and supporting organizations known as participatory
funds. They offer donors an ongoing partner with Jewish
federations. These participatory funds provide a reliable pool
of dollars to support the annual campaigns of Jewish
federations, which is a primary financial source for ongoing
operating budgets. Grants from these funds comprise up to 25
percent of the operating budgets of some federations.
As you consider changes to charitable deductions, we urge
that participatory funds be allowed to flourish with a minimum
of regulatory burdens. We applaud your deliberative process in
addressing these very important issues. However, we believe it
is crucial, particularly with the Federal deficit--in a
thoughtful manner.
However, we believe it is crucial to recognize in the
income tax law that the charitable deduction is the only place
where an individual must give away income and assets in order
to receive a deduction. This selfless act must be promoted by
the Tax Code, and it is fundamental to the social contract that
bonds individuals, charities, and governments.
Again, we applaud the Committee for taking this action, and
we remain committed, as the Jewish Federations of North
America, to ensuring that Federal tax policies continue to
incentivize the flow of funds from individuals to public
charities.
I thank the Committee for the opportunity to present this
testimony, and stand ready to answer your questions.
[The prepared statement of Mr. Daroff follows:]
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Mr. TIBERI. Thank you, Mr. Daroff.
Ms. Thomas, you are recognized for 5 minutes.
STATEMENT OF RUTH S. THOMAS, VICE PRESIDENT
OF FINANCE AND ADMINISTRATION, SAT-7, EASTON, MD
Ms. THOMAS. Thank you, Mr. Chairman and Committee Members.
I am honored to be here today and thank you for the
opportunity. My name is Ruth Thomas, and I am Vice President
with SAT-7.
SAT-7 is the largest Christian satellite network in the
Middle East and North Africa, with five full-time, 24/7
channels, and with studios across the Middle East. For over 15
years, SAT-7 satellite broadcasts have bypassed rulers,
religions, and regimes, bringing free Christian content
directly to millions of individuals in the safety of their
homes. We know that 9.25 million children are watching every
day across the Middle East. One in four children in Saudi
Arabia watch Christian programming.
SAT-7 North America is a 501(c)(3) nonprofit organization
in the United States. We raise funds and build awareness for
our production teams. We neither seek nor receive any local,
State, or government funding, but are fully funded by private
donations, foundations, and churches.
I thank you for considering this important topic. America
is the most generous country in the world. And I am glad to
hear the prior testimony from your Members speaking of enabling
donations and not discouraging them. You would be surprised
that the attitude around the world is that America is so
generous. So we need to stand by that.
Many organizations will falter if the charitable deduction
is limited or removed. By working with integrity and great
efficiency, nonprofits are doing more with less. And I will
give you one example. In the case of SAT-7, our viewing
audience in the Middle East is over 15 million people. We have
an annual budget of $15 million. That equates to $1 per viewer
per year. That is truly cost effective. Others are doing
remarkable work, as well, with very few dollars, by utilizing
volunteers and the gifts of generous Americans.
Nonprofits are the many points of light spoken of by
President Ronald Reagan, the Shining City on a Hill. Nonprofit
employees are serving because they choose to do so, often
giving up large salaries and generous retirement and benefits
packages.
So, as you consider limiting or capping the deduction, an
American institution of our Tax Code, you are considering
cutting off our life blood. The majority of nonprofits receive
the largest portion of their operating funds from people who
itemize on their taxes, so they can receive the deduction. High
net worth donors are just as motivated by the tax deduction as
the smaller donors. They are just able to give more,
substantially more.
Without reservation I can tell you that if the deduction is
reduced, capped, or limited in any way, our donors will give
much less, even though they like to give more. Donors even call
us in January, anxiously awaiting their tax-deductible
receipts. We know how much that tax deduction is a part of
their thinking. The urgency to give at the end of the year is
also important. And stock gifts are often received on the last
few days of December.
Nonprofits have struggled since 2008 because of the
recession. To hamstring the public's generosity at this point
would severely impact the good work of thousands of nonprofits.
In our case, we would be forced to lay off staff and cut
broadcasting. To change the law in such a way that limits the
ability of nonprofits to do the good they do with well-
established efficiency and effectiveness will mean that needs
will go unmet.
I thank you for the time today, and I appreciate the
opportunity to be here.
[The prepared statement of Ms. Thomas follows:]
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Mr. TIBERI. Thank you, Ms. Thomas.
Mr. Ashmen, you are recognized for 5 minutes.
STATEMENT OF JOHN ASHMEN, PRESIDENT, ASSOCIATION
OF GOSPEL RESCUE MISSIONS, COLORADO SPRINGS, CO
Mr. ASHMEN. Thank you, Mr. Chairman. And I want to thank
the Committee for making charitable giving a priority, and
bringing all these folks in to testify. I told my colleague
here I feel a little bit like we are all band members, cover
bands playing the same tune. But I think we all have a very
different rendition, and I think it is good to hear all these
perspectives.
So, a week ago today I was at the National Prayer Breakfast
and heard President Obama's remarks when he spoke about Jesus
and the two very important commandments. The second commandment
we all know and have heard many times: Love your neighbor as
yourself. And for many years, many Americans have lived out
that commandment by giving money in large and small amounts to
trusted institutions that they believe are doing life-saving
work. I represent 300 of those associations. It is called the
Association of Gospel Rescue Missions. And we are North
America's oldest and largest network of independent, faith-
based crisis shelters and rehabilitation centers that do what
we call radical hospitality for the poorest of our citizens.
This testimony I am giving was submitted earlier in
writing. And in it there is a list of 37 of those 300 missions
that provide services that are represented in 24 of the
districts represented by Members of this Committee.
I want to focus my testimony on four realities that we
stand by in the Association of Gospel Rescue Missions. I hope
they will be instructive points as you make some important
decisions, going forward.
The first reality is kind of a backdrop for the other
three, and it is simply this. Rescue missions are busier than
they have
ever been at any time in our 100-year history. The stream of
peo-
ple is endless. I have been to a lot of these missions, and I
see it. Whether it is a chronically homeless man dealing with
addictions or mental illness, or a young woman with her child
who is shocked, embarrassed, devastated to be homeless for the
very first time, what I am telling you is every available space
and every contribution that comes in provides critical care
services.
One of your colleagues just this past week went to the
rescue mission that is right here in Washington, D.C. Standing
in the middle of this room with 180 beds, the question was
asked, ``How many nights throughout the course of the year are
all these beds filled?'' And the director, without hesitation,
said, ``Every single night.''
One of our directors told a volunteer--to sum up this point
I will use his saying: ``If serving the poor and powerless
brings you joy, hang out at our mission and you can be joyous
for the rest of your life.''
The second reality is that missions are not fee-for-service
entities. That is very important. That means they are extremely
dependent on the generosity of private donors. Let me say that
another way. Private donations do not supplement the income
that rescue missions receive; they are the primary source of
their income.
For example, Crossroad Center Rescue Mission in Congressman
Smith's Nebraska district says that 99 percent of its annual
funding comes from individuals. And that is echoed throughout
our association. Rescue missions for years have counted on the
current charitable deduction as an effective incentive. And,
frankly, they dread what might happen if that incentive is
reduced.
To sum up my second point, rescue missions are extremely
dependent on donations and the charitable deduction, probably
more so than most charities.
The third reality is that because rescue missions rely so
heavily on private giving, they are especially vulnerable if
there is even a small drop in contributions. Every drop impacts
services. It costs two dollars and a nickel at Rescue Missions
of Mid-Michigan, in Chairman Camp's district, to feed someone a
hot meal. So, for every $2.05 that doesn't come in, that is one
less meal to serve. Imagine yourself in a long line, waiting to
get that first meal of the day. You get up to it, and the food
runs out because the money has run out.
In Congressman Becerra's Los Angeles district, our director
there, Andy Bales, said what they are currently experiencing is
a 21 percent drop in donations, but a 35 percent increase in
people seeking services, which goes back to my first point.
Those kind of numbers ultimately affect people in need.
In my opinion, as everyone here so eloquently has said
before me, this is a time in our history when government should
be offering the fortunate among us more incentives to give
generously, not suggesting and experimenting with
disincentives. To sum up that point, any drop in donations has
a human cost.
Thank you very much for your time.
[The prepared statement of Mr. Ashmen follows:]
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Mr. TIBERI. Thank you, Mr. Ashmen.
Mr. Berry, you are recognized for 5 minutes.
STATEMENT OF JOHN A. BERRY, CEO AND EXECUTIVE DIRECTOR, SOCIETY
OF ST. VINCENT DE PAUL GEORGIA, ATLANTA, GA
Mr. BERRY. Thank you, Mr. Chairman, and thank you for the
opportunity to testify here today.
Since 2009 I have chaired our national vehicle donation
program, which supports the work of more than 4,500 St. Vincent
de Paul offices nationwide. I also chair our national charity
coalition working to stem the sharp decline in vehicle
donations.
Let me start by saying that we strongly support retention
of the overall charitable deduction. To change the tax
treatment of individual donations would undermine our capacity
to serve the community. But my testimony to you today focuses
specifically on the deduction for vehicle donation.
Over 5,000 charities rely on vehicle donations to
underwrite their services to the needy. And most of them are
testifying today. Often the nonprofit sector delivers these
services instead of the government. In these times of budgetary
challenge, we fill gaps to ensure that those in need are
helped. Many charities like ours receive little or no
government funding, and rely on the donations of non-cash
assets, especially vehicles.
However, since a 2004 change in the tax treatment of
vehicle donations, there has been a sharp decline in them, with
a staggering impact on charitable services. At that time,
Congress changed the valuation method as part of a package of
reforms to address abuses in the process under the rules that
then existed. Those changes strengthened tax reporting and
enforcement and were excellent. The valuation provision was
well-intended, but misjudged the psyche of the donor. The
changes were meant to eliminate abuse, but have had the effect
of also chasing away donors, actually undermining private
philanthropy.
Most of you and your colleagues already agree that this is
a problem. I say that because last session legislation to
address the problem attracted 333 House cosponsors, including
26 Members of the current House Ways and Means Committee,
including the Chairman and Mr. Kelly.
Sitting in this hearing room today it may seem like a small
matter. But for charities like ours, the impact is enormous. To
share my own experience, in 2004, just in Atlanta, we received
533 donated vehicles, the sale of which yielded over $237,000
in revenue. In 2005, the first year the new rule took effect,
donations dropped to 382 vehicles, yielding only $143,000. By
2012, we had seen a 72 percent decline in revenue. Small
numbers, maybe. But those numbers literally are the difference
between having--families having food on their table or a roof
over their heads. For us, for $100, we can feed a family of
four for a week, or provide light and heat for a month.
A food recovery and distribution program we operate in
Georgia partners with local retail food chains to collect food
that is beyond store shelf date, but is still perfectly good to
eat. That program today redistributes over 10 tons of food per
month through our 38 food pantries. The vehicle donation
revenue we have lost each year since 2005 would have more than
fully funded that program every year with money left over for
other programs. You can hear similar testimonials from
thousands of other charities across the county.
The national impact is also staggering. According to the
IRS, in 2004 charities received over 970,000 donated vehicles,
with a total value of over $2.6 billion. In 2005, that dropped
to 325,000 vehicles, with a value of $610 million, an overall
decline of 77 percent in only 1 year.
We do not seek repeal of the 2004 reforms. They have worked
well to curb tax abuses. Charities have no desire to restore
the black eye that vehicle donation had earned prior to the
changes. Our goal is to restore the timing of the valuation to
the beginning of the donation process, so prospective donors
can make an informed decision about the gift.
As Mr. Reichert alluded to earlier today, valuation of
donated vehicles over the $500 threshold is based on the gross
sale price. So donors don't know the value of a donation until
after the charity sells the car. This requires they hand over
the car without any idea of the consequences. Even the most
altruistic donor is reluctant to play roulette with the tax
ramifications of the donation, particularly with a vehicle of
significant value.
Last session Representatives Reichert and Larson introduced
legislation, H.R. 860, to solve the problem. It wouldn't touch
the tracking enforcement reforms, but it would address the
valuation timing issue. We are encouraged that so many Members
of Congress recognized the problem last session in cosponsoring
H.R. 860. For me, someone whose focus is more on the streets of
Atlanta than the halls of Congress, it sends a powerful
bipartisan message. Thank you very much.
[The prepared statement of Mr. Berry follows:]
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Mr. TIBERI. Thank you, Mr. Berry.
Mr. Minnix, you are recognized for 5 minutes.
STATEMENT OF LARRY MINNIX,
PRESIDENT AND CEO, LEADING AGE, WASHINGTON, DC
Mr. MINNIX. Thank you very much, sir. We appreciate the
opportunity. Leading Age represents 6,000 not-for-profit aging
and other kinds of providers throughout the country. In the
19th century we were your widows and orphans homes. We were the
homes for old women and widows of veterans of the Civil War and
the old soldier's home. Today we are things like Ecumen and
Jewish Home Life Care and the Bivens Foundation in Amarillo and
National Church Residences in Columbus. We are part of a
philanthropic sector that we believe is now so embedded in our
culture that we may be in danger of taking it for granted.
Otherwise, we wouldn't be talking about threats to the
charitable deduction.
Charity is in our gene pool. Benjamin Franklin started the
tradition by establishing the Leather Apron Society to help
sick and wounded soldiers, a major concern that is arisen in
spades today. De Tocqueville commented on America's unique
penchant for enlarging the hearts of communities, which I think
is a wonderful way to think about the American charitable
spirit.
Peter Drucker commented that America has three distinct
sectors that make it great and different: Government, whose job
is to protect and defend; business' job to generate an economy;
and the not-for-profit sector, to change lives.
Dr. Lester Salamon at Johns Hopkins, who is probably
arguably the most knowledgeable expert today on the importance
and the resilience of the sector, says that we have four
duties: One, guardian of values; two, meet difficult unmet
needs that are not profitable; three, advocate for those who do
not have advocates; and four, create social capital.
The not-for-profit sector is surprisingly large in size. It
is the third-largest employer in America, behind manufacturing
and retail--13.5 million jobs. So, threats to the charitable
sector mean threats to jobs, simply because that is where most
of the money goes.
So, as government reins in its spending, as we know that it
must do to get our financial house in order, philanthropy will
be asked to fill gaps that ordinary people and families cannot
cover themselves. And it is the poor, yes, but it is also the
middle-class poor. In our sector we see a number of people that
need various types of long-term care services that have a
little too much to qualify for Medicaid, but cannot sustain
themselves on their own resources.
Here is an example. Golden Years Home in Indiana had to
demolish their old nursing homes. We have a lot of old nursing
homes in America. And they had to have a capital campaign to do
that. They have a new state-of-the-art facility. Seventy-five
percent of their residents are Medicaid, Medicaid does not pay
the full cost of care, so there are two gaps that they fill
there. TELACU in Los Angeles, low-income senior housing, but
they also have an academic program where they tutor
disadvantaged students. They have a 100 percent graduation rate
for participating high school and college seniors in a county
where the graduation rate is 40 percent.
In aging services, a low-income elderly housing with
services is an emerging new model where, if they are allowed to
provide non-medical services, can help seniors age in place and
keep them out of hospitals and nursing homes. A downstream
effect on healthcare costs is beginning to emerge. Bethany
Center in San Francisco reports they don't remember the last
time one of their residents had to go to a nursing home. So
these outcomes are possible only with philanthropic
contributions.
Our retirement communities serving largely middle-income
people, keep people off of Medicaid. And we are seeing results
where they are staying out of hospitals and nursing homes
unnecessarily.
The power of the not-for-profit sector can be amazing. Dr.
Claire Gaudiani at Yale offers a very provocative perspective
in her book, ``The Greater Good: How Philanthropy Drives the
American Economy and Can Save Capitalism.'' I recommend it to
you. It is well done. She asserts in there, ``America is not
generous because it is successful; it is successful because it
is generous.'' In my own folksy way of putting it, I would say
philanthropy is the seed corn of American progress.
And I urge us not to forget that, and to stop messing
around with threatening the tax deductibility of charitable
contributions, and encourage people to give, not discourage
them. Thank you very, very much for this opportunity
[The prepared statement of Mr. Minnix follows:]
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Mr. TIBERI. Thank you, Mr. Minnix. I can't help but tell
you that I was with the National Church Residency folks a month
ago in Columbus, Ohio, in a project that they built with a low-
income housing tax credit to house, in transitional housing,
homeless veterans.
Mr. MINNIX. The homeless veterans, yes.
Mr. TIBERI. Working with the nonprofit community to provide
services, and then working with the for-profit community to
place them in permanent jobs and get them into permanent
housing. It is a great organization.
Mr. MINNIX. Thank you. We are trying to work with them with
HHS and HUD to show that there is a national model here.
Mr. TIBERI. It is a great----
Mr. MINNIX. So--yes.
Mr. TIBERI. It is a great concept.
Mr. MINNIX. So thank you for that comment.
Mr. TIBERI. No, you are welcome. Thank you for what you
have done.
Mr. Ferguson, you are recognized for 5 minutes.
STATEMENT OF SCOTT D. FERGUSON, PRESIDENT AND CEO, UNITED WAY
OF THE CHATTAHOOCHEE VALLEY, COLUMBUS, GA
Mr. FERGUSON. Thank you very much, Mr. Chairman and the
Committee. I am Scott Ferguson, President and CEO of the United
Way of the Chattahoochee Valley in Columbus, Georgia--the other
Columbus. It is a real honor to be here with a distinguished
panel and many colleagues. And I am honored to be the leader of
a United Way that has over 20,000 individual contributors every
year, many of which use that incentive as a deduction.
The United Way is committed to providing essential funding
to local nonprofit organizations that will assist over 100,000
families this year. United Way volunteers invest money in local
programs that demonstrate need, results, and good stewardship.
Our United Way has also been entrusted to oversee and incubate
and implement the City of Columbus' 10-year plan to end
homelessness. Working with many partners in our community, and
specifically with our Columbus housing authority, they recently
got HUD designation to work on permanent supportive housing.
In that--we also have an Army base there, and we have a lot
of homeless veterans, as well. And we do have an anonymous
donor that is considering a seven-figure donation to jump-start
this program for housing. And I am sure that this charitable
deduction is going through their mind. They are generous, but
there is also that tax implication.
The United Way is also focused on teaching youth giving
back. We are in our second year of having a youth United Way.
We have juniors and seniors from all area high schools that
learn leadership skills, they learn how to raise money and how
to give it back to the community. We also tomorrow launch our
fourth annual Live United Youth Camp, which is with 20 seventh
graders, and that is funded by Aflac Insurance, which is headed
in Columbus, Georgia. And they are learning about our focus
areas, which are basic needs, income, health, and education,
through volunteering, lectures, and tours. We have to get the
young folks to learn about giving back of their time and their
own money.
We are also an active partner in the area for the volunteer
income tax assistant program, which last year brought in $3
million of tax refunds and credits to people that needed the
money. We currently fund 50 programs through 26 nonprofit
agencies. It is what we are all talking about. It is local
people. It is things as basic as food, clothing, and shelter,
or keeping kids in school, tracking their grades, making sure
that they are successful in life.
In a recent study, the Columbus, Georgia, area actually
ranked as the 23rd highest charitable giving area out of 366
metropolitan areas. And we are only a population of about
300,000 people, seven counties in Georgia, one in Alabama. And
our folks support charity. And I am really afraid that--
everybody gives for the right reasons, but it still affects,
when you talk about charitable deductions.
Our United Way is on track to raise the most money ever,
and we will announce the results next week: $7.7 million. And
we are proud of that. And we are the second-largest funder of
social services behind government. And I think that is the
whole United Way system, not just in Columbus, Georgia. And I
am absolutely convinced that we must preserve the charitable
deduction as it is in the Federal Tax Code.
I would like to believe that people do give for the right
reasons, and I know they do, but we had an Executive Committee
meeting on Tuesday and we were talking about my appearance
here. And many of those people give to a lot of different
things in the United Way, and most of them are high-net-worth
individuals. And they are concerned about this, and how it
affects them. I am sure they will continue to give, but it
still affects our ability to raise money.
So, we oppose any limitations. I don't have the answer for
you; I am glad that you are in that leadership role. And we
will--right? We have to help you. I don't know how to do that,
but we are here to say that it is important, and it helps all
of us raise more money and make up the difference for what
government may have to cut in health and human services or
education. It is an important fabric of our community, and I
thank you for the time.
[The prepared statement of Mr. Ferguson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. TIBERI. Thank you, Mr. Ferguson, for what you do.
Ms. Bryant, you are recognized for 5 minutes.
STATEMENT OF LAKISHA BRYANT, PRESIDENT AND CEO, UNITED WAY OF
SOUTHWEST GEORGIA, ALBANY, GA
Ms. BRYANT. Thank you, Mr. Chairman and other Members of
the Committee, for allowing me to speak with you today. Again,
I am LaKisha Bryant, and I am the President and CEO for United
Way of Southwest Georgia.
In recent years, the United Way of Southwest Georgia has
undergone dramatic shifts on how we work to serve our
community. The historic community chest that was started in
1954 with a broad charitable mission has transformed into a
community agent that focuses measurable impact in the areas of
education, income, basic needs, and health. We focus our
efforts on building partnerships and collaborations, engaging
our citizens on the common good and focuses on what matters the
most to donors: Fiscal stewardship and a return on their
investment.
And as an agency that represents 27 partner agencies in our
13-county geographic territory, we feel that it is imperative
that the charitable deduction be preserved as it is currently
written in the Federal Tax Code and not be limited in any way.
Southwest Georgia is comprised of pecan groves, pine trees,
farms, and plantations, yet nestled in the hub of many major
manufacturers like Proctor and Gamble and Miller Coors. And
although the Marine Corps Logistics Base and the educational
and health sector make us the foundation of southwest Georgia's
economy and the hub for their commerce, we are still in one of
the poorest congressional districts in the State of Georgia,
and we are at the bottom tier of economically disadvantaged
districts in the country. According to recent Census figures,
our geographic territory has an alarming poverty rate by
counties ranging from 22.6 percent to 36.4 percent.
With these extremely high poverty rates, our citizens rely
on the services provided by our partner agencies to help them
live independent lives and provide things for their children.
Without the generosity of countless philanthropic gifts that we
are given annually, many of these services would be obsolete in
our rural communities. And many of those gifts are given at
certain levels based on the current Code. Without these
deductions, many of these funds would be lessened, if not
eliminated all together. And for a geographic community such as
mine, that elimination of funds could simply be detrimental to
agencies, and they would be faced with decisions such as
closing their doors or serving smaller populations, and
families would be forced to make difficult decisions about
food, clothing, and shelter.
The single-most important action that I feel the Committee
can take is to ensure that the preservation of the charitable
giving incentives that exist today remain in the Code. We
strongly oppose a cap on charitable deductions as a means of
financing other programs. A cap would reduce charitable giving
and undermine our ability to ensure that individuals and
families have access to food, housing, safe after-school
programs for children in need, and services for seniors and
disabled during these challenging economic times.
I would like to share a story with you. There was once a
little girl about to embark on a journey in her life. School
was out for the summer and both of her parents had to work. She
had to find something to occupy her time and mind during the
day. So her parents asked around about a program that they
could take her to, and they discovered a particular United Way-
funded program that had activities that matched her
personality.
So, with a lunch box in hand and her book bag on her back,
she embarked upon a new adventure and--that took her away from
her extremely modest cinderblock home on the south side of
town. As she entered the building, her nervousness soon
vanished. She saw familiar faces, and she was greeted by hugs
and strong supporting arms of teachers and staff that built and
cultivated the characteristics within her. She learned many
valuable lessons, new skills in education, learned about
careers, and how to plan for her future. And before she knew
it, the summer was over.
But each year she went back to that United Way-funded
program. She did this for 5 or 6 consecutive years before
moving on to high school, and then furthering her education in
college. But she never forgot the lessons that she learned and
the molding that she was given by that funded program.
But life has a way of getting more out of you. With the
leadership skills that she learned in that program, and the
many professional roles that she held in a number of years
afterward, she returned to become the Executive Director of
that organization. And now she continues to give back to her
community in an even bigger fashion.
I am that little girl in that story. I know firsthand that
funding support that we provide our programs works. I know the
values are irreplaceable. I know the message that we take to
our consumers takes them to higher heights and deeper depths in
this world. And none of that would be possible without
charitable contributions.
A United Way program played a major role in my development
as a woman and as a leader. And there are countless faces of
other girls, boys, men, and women that have benefited from
programs and services of the United Way of Southwest Georgia
and the United Ways in other communities.
I implore you to please keep the current Code as it is, or
expand it to foster more giving. Encourage more giving so that
others can have the same opportunities that I had. Thank you.
[The prepared statement of Ms. Bryant follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. TIBERI. Thank you for your story and your testimony
today.
Mr. Daroff, President Obama, back in 2009, first proposed
limiting the charitable deductibility of contributions, or the
contributions--limiting the deductibility of charitable
contributions to fund, in part, Obamacare, and has proposed it
in each of his budgets since then. And you have, since that
time, been a national leader on trying to stop those proposed
changes.
Why are you and your organization so concerned about the
changes that he has proposed?
Mr. DAROFF. Thank you for the question, Mr. Chairman. In my
7\1/2\ years at the Jewish Federations of North America, there
has been no other public policy issue in the domestic sphere
that has brought as much attention by both our volunteer
leadership and our professionals than these proposals to reduce
the tax-deductibility of charitable contributions, and that is
because we are all donors, we are all fundraisers.
We recognize the importance that the charitable deduction
has for us to have the ability, as a Jewish community and as a
Jewish federation system, to be at the forefront of the fight
to feed the hungry, clothe the naked, and heal the sick.
We recognize that while folks give contributions for many
reasons to try to make the world a better place, on the margins
changing the Tax Code can have a tremendous impact on the
ability of those folks to dig deeper into their pockets and to
give substantial contributions to help us do the good work that
we do every day. So this is an issue that really tugs at us,
talks directly at who we are, as an organization and as a
Jewish people, and that is why we have been so focused upon it.
Mr. TIBERI. Back in Ohio the Cleveland Foundation and the
Columbus Foundation have expressed the need and the importance
to me of planned giving. I know planned giving is something
that is and has been important to your organization. Can you
help expand on that issue, as to why it is important to you
all?
Mr. DAROFF. Yes, sir. Mr. Chairman, planned giving is a
process where donors, their advisors, and our endowment
professionals collaborate to structure gifts to our system in
vehicles such as gift annuities, charitable trusts, donor-
advised funds, and supporting organizations.
By definition, the charitable deduction plays a significant
role in this process, as the parties try to maximize the flow
of dollars to federations, as well as to assure that those
funds flow to help real people with real issues sooner, rather
than later, to help fund those social service programs.
The vast majority of our planned giving dollars come from
donors who have great tax sophistication. And so it is that,
again, that group of sophisticated donors who are very
sensitive to the vagaries of the Tax Code who itemize their
deductions where the--reducing the deductibility of charitable
contributions can just have a tremendous impact on their
giving. And so it is incredibly important to us, as we look to
the future, among this group of people.
We said--as I said in my testimony, the vast majority of
the funds that come in to our federations come from the top 10
percent of donors. And it is that group who, again, are very
sensitive to the Tax Code. It is that group, again, who are
very involved in planned giving, both within the federation
system and with the organizations you have mentioned, and with
our Jewish federations in Ohio that are incredibly important to
maintaining the operating budgets of those organizations that
really help to support agencies across the country.
Mr. TIBERI. Thank you. Thanks for being here today.
Mr. DAROFF. Thank you, Mr. Chairman.
Mr. TIBERI. Mr. Berry, thank you for testifying on an
important issue that 300-plus Members of Congress also think--
--
Mr. BERRY. Three hundred and thirty-three.
Mr. TIBERI [continuing]. Is very, very important. And
thanks for testifying on behalf of, as you said, thousands of
organizations, including many in my hometown, including Ronald
McDonald House and Goodwill of Columbus, who have really had a
huge drop-off in their donations.
Aside from the House bill you mentioned, I know Mr.
Reichert is really itching to get this moving and be helpful.
Can you just explain to us in plain English real quickly what
you think would be helpful?
Mr. BERRY. The provisions of H.R. 860 were a relatively
simple fix. And what it did was move the valuation number from
$500 to $2,500, which was half of where it was in 2004, at
$5,000. It is a good number, because it brings in most of the
vehicles that are coming in donated that are operable vehicles
that have questionable value. There aren't too many that are
over $2,500. The ones under $500 are pretty simple. They don't
have any wheels and they sit on blocks. So that middle ground
is really where it is important.
Today, with the advancements in technology and information,
the ability to value a vehicle is so much easier than it was in
2004. So you can go to four or five Internet websites and
easily come up with a list of approximate values of the
vehicle. You go into any Carmax in the country and walk out 20
minutes later with a valuation. So it becomes a very easy and
also a very auditable and enforceable process.
Earlier today there was testimony about how can the IRS
enforce some of the provisions around non-cash assets to ensure
they are not being over-valued. And I think, as a nonprofit
executive who has to file an IRS 990 form every year, it is not
a very difficult process. The IRS already requires you to
report on your fundraising dollars, your fundraising
percentages, and your overhead expenses. Those reporting
requirements could be expanded to include what percentage are
you paying for your car donation vendor, what percentage are
you paying for your thrift store operator, and then put some
guidelines on it. So----
Mr. TIBERI. Great.
Mr. BERRY. I think that is the----
Mr. TIBERI. Thanks for coming up today.
Mr. BERRY. Thank you.
Mr. TIBERI. Mr. Davis is recognized for 5 minutes.
Mr. DAVIS. Thank you very much, Mr. Chairman. And I was
just in the back, meeting with the Executive Director of the
Community Trust of Chicago. And, Ms. Bryant, I was kind of
struck as I got a chance to look at your testimony and hear
about it. Your personal story kind of intrigues me. And I
wonder if you could explain to us the impact of your direct
involvement and contact with one of the type agencies that we
are talking about, and what it may have been, had you not been
able to have those experiences.
Ms. BRYANT. For me, my parents married young. However, they
understood the need for hard work to be able to provide for
their family. So both of them had to work. So I had to have
somewhere to go during the day. However, they could not afford
child care over a certain amount. So they were told about this
particular United Way program, which was Girl's Club, now
Girls, Incorporated. And I was able to go there for a very
nominal fee. But it gave me an opportunity to expand my
academic skills, as well as learn about a world outside of
where I lived. And at that particular time I did live on the
south side of my community, which was considered one of your
lower-income areas.
And throughout time, my family--through the hard work--was
able to utilize these programs to get to a more independent
level of living, and work their way up to what is now--would be
probably considered the upper-middle-class level. However, the
impact of that program made sure it reinforced what my parents
were giving me, but it made me see that I had to go to school,
get a viable education, but also be able to give back to my
community, because that is what the program taught us.
And, like I said, God has a way and life has a way of
getting more out of you, and I ended up being the Executive
Director of that program, and for 7 years was able to impact
other children that still come from that lower-income bracket.
Sixty-seven to seventy-two percent of my children at that time
lived in the poorest areas of Albany. And Girls, Incorporated
is still a United Way-funded program.
So now, as a United Way CEO, I am working hard to leverage
the dollars that we get in our community to help programs such
as Girls, Incorporated, but countless other nonprofit agencies
that we know--without that funding, without the charitable
donations that we are giving, that we can then give to these
agencies to make community impacts, we would be lost.
A lot of the kids would not survive. A lot of families
would not have food, clothing, and shelter. And a lot of
children would not turn out and have the life that I have been
blessed to have.
Mr. DAVIS. And you can say without hesitation or
reservation that there is a good chance that you might not be
doing what you are doing today, had not you had the experiences
of that program.
Ms. BRYANT. That is definitely true. My parents had a very
strong impact on me. But the partnership that they got from
these programs to keep me occupied, to expose me to things that
they couldn't afford to expose me to at that time, really
helped to build the person that I am today.
Mr. DAVIS. Well, I certainly thank you for your testimony
and for the answers. And I think it reinforces for anyone who
has any doubt of the impact, that the program, through the
utilization of resources that came from the United Way and
other places, played a significant role. I thank you and I
yield back, Mr. Chairman.
Ms. BRYANT. Thank you.
Mr. TIBERI. Thank you very much, Mr. Davis. The far
superior Co-Chairman of the Philanthropic Caucus, Mr. Lewis, is
recognized for 5 minutes.
Mr. LEWIS. Thank you very much, Mr. Chairman. It is very
kind of you to--I don't know where you get the word
``superior'' from, but I am just----
Mr. TIBERI. Well, you are----
Mr. LEWIS. I am from Alabama, and I live in Georgia, and I
am just trying to help out and make a little contribution. What
have you been drinking today?
Mr. TIBERI. Well, it is my attempt to sooth my Big 10
feelings for an SEC guy.
[Laughter.]
Mr. LEWIS. Well, thank you so much.
Mr. TIBERI. You are welcome.
Mr. LEWIS. I appreciate it. I want to thank each member of
the panel for being here. I listen to and watch most of your
testimony from the monitor. And Mr. Berry, it is good to see
you again. And----
Mr. BERRY. Good to see you, too, Mr. Lewis.
Mr. LEWIS. Why, thank you. Ms. Bryant, let me ask you a
question. Now, you mention in your testimony that the
charitable deduction should not be eliminated, but reduced to
fund spending. Do you think it should be reduced or eliminated
to fund a tax cut for the wealthy?
Ms. BRYANT. I think the current Code that we have
cultivates a level of giving that allows citizens to feel good
about giving to organizations that are going to make an impact
in their community. I think the Code, as it stands now, should
probably just simply be expanded to foster more giving, so that
we can do more work in our communities.
I don't want to get too much into the discussion in regards
to whether or not that tax cut goes to somebody else to help
somebody that is wealthy. But I know for me, in my community,
we need those charitable deductions to help the people that
need it the most. And it is not just the donor that has the
deep pockets that I am concerned about. I am also concerned
about those donors that have maybe the slimmer pockets that are
giving that $100, that $500, that $1,000 gift that this Tax
Code change could affect, as well.
So, like some of my colleagues have actually mentioned
earlier, I think cultivating a larger system of giving and
enhancing the Code to encourage more giving is what would help
us all.
Mr. LEWIS. I have lived in Georgia for almost 50 years. I
think I know the State pretty well. You live in southwest
Georgia, in Albany.
Ms. BRYANT. Yes, sir.
Mr. LEWIS. And I know Mr. Berry knows a great deal about
the State. There is an unbelievable amount of unmet needs in
our State, like in many other regions of our country. And you
still see these unmet needs, and there is still a role for
foundations and nonprofit organizations to play in helping to
meet some of these unmet needs.
Does any other member of the panel want to respond to what
I tried to suggest?
Mr. DAROFF. Yes, I----
Mr. LEWIS. I am not trying to lead the witness, now.
Mr. DAROFF. I would say, Mr. Chairman, it is a pleasure
being here. We spent Passover seder together last year. You
know, based on your constituents, based on your life story, it
is an incredible role that nonprofit charities play in the
lives of millions of Americans. We heard from Ms. Bryant about
the incredible role that United Way played in her life.
So the answer is, definitively, yes, that there is an unmet
need that the charitable sector fills every day of every month
of every year. And we respectfully just ask, as this body seeks
to figure out the Federal deficit issues, the fiscal cliff
issues, the sequestration issues, that you look elsewhere for
those solutions. The charitable sector is being hit hard by the
economic downturn. It is being hit hard by a reduction in
governmental assistance that flows to our agencies. And we are
here to help. We are here to help fill that gap. And we suggest
that we want to continue to fill that gap.
And so, there are unmet needs, and we are here to help real
people with real problems every day.
Mr. LEWIS. Well, thank you. It is very good to see you
again.
Mr. DAROFF. Thank you, sir.
Mr. LEWIS. Thank you for being here.
Mr. BERRY. I would also, Mr. Lewis, just to address the
unmet need, we are the number one or two referral source for
United Way of Greater Atlanta, and we have been for the last 10
years. Last year we helped, in the north Georgia area, over
202,000 people. But the sad side story to that is that we
turned away over 300,000 people, because we didn't have the
money or the human resources to handle it.
So, the unmet need is there, and I agree, to try to do
anything to minimize the ability of the nonprofit sector to
deal with that need would be tragic.
Mr. MINNIX. I would like to add to that, Mr. Lewis. And, by
the way, I am from Atlanta. And there is no greater advocate
for senior housing and things like that than you, and we are
grateful for that.
But I would say that while seniors are getting along better
financially, the growing need for lower-income--especially
women, we still have a generation of women that are going to be
poor--there is a growing need of younger people with
disabilities who are living longer, who will be living with
those disabilities a long time. You add to that veterans that
are coming back from this war that are going to have to be
tended to. And the needs for charity in this country will
continue to grow.
And you are going to expect the not-for-profit sector to
meet those needs because they are difficult, because they don't
pay for themselves, and so don't hamstring us with that. Sorry.
Mr. TIBERI. The gentleman's time has expired. We have two
more panels. Thank you, Mr. Co-Chairman.
Thank you all for testifying. Thanks for your contribution
today. The next panel will be seated.
Thank you all. We have a vote coming up, so we are going to
try to get all of your testimony in. I am going to go ahead and
just begin as you get settled in.
I would like to welcome our fifth panel officially. First,
we will hear from Mike King, President and CEO of the
Volunteers of America in Alexandria, Virginia. Mr. King has
more than 35 years of experience as a leader in the nonprofit
sector.
I am going to yield to Mr. Davis, who has a constituent who
he would like to introduce personally. Mr. Davis.
Mr. DAVIS. Thank you very much, Mr. Chairman. And I am
indeed, as a strong supporter of the arts, I am pleased to
welcome Jimalita Tillman, the Executive Director of the Harold
Washington Cultural Center in Chicago. The mission of the
Harold Washington Cultural Center is to preserve and protect
African American culture, using the performing and media arts.
Harold Washington engages youth and community members in the
arts, using their time constructively, rather than on the
streets.
Ms. Tillman graduated from DePaul University with a degree
in theater management and international marketing. She received
training in theater operation from North Shore County Day
School, the Black Ensemble Theater, Pontifical Catholic
University of Rio de Janeiro, and the ETA Theater. She is a
member of the National Association of Theater Owners, the
International Association of Theater for Children, Young
People, the Black Storytellers Alliance, the National
Association of Youth Theaters, Sigma Gamma Rho, Incorporated
Sorority, and the African American Arts Alliance. She is also
the executive producer of the ``Off-Broadway in Bronzeville''
series at the Harold Washington Cultural Center, one of the
many programs that enrich the lives of Chicagoans.
We are pleased that she is here. I welcome her. And I also
must make a disclaimer, that her mother served with me in the
Chicago City Council, and is one of the heroes of Chicago. And
her mother also worked with the Honorable John Lewis when she
was 16 years old on the staff of Dr. Martin Luther King.
Welcome, Ms. Tillman.
Ms. TILLMAN. Thank you for having me. It is an honor and a
pleasure to be here. I caught that flight when the opportunity
came, and Mr. Camp's team sent me that letter. I said, ``A
hundred fifty copies? How am I going to get 150 copies
together?'' So I got it together----
Mr. TIBERI. Thank you----
Ms. TILLMAN [continuing]. We overnighted it, same-day'd it,
and we are very, very proud----
Mr. TIBERI. Thank you----
Ms. TILLMAN [continuing]. To represent our great
congressional district, the seventh congressional district----
Mr. TIBERI. Thank you.
Ms. TILLMAN [continuing]. In Chicago.
Mr. TIBERI. Thank you. We need to continue on with our
introductions before we vote. Thank you so much.
Mr. Delaney is our third witness today. Tim Delaney is
President and CEO of the National Council of Nonprofits, here
in Washington, D.C., and was previously Solicitor General of
Arizona. Thank you for being here.
Fourth, we will hear from Bill Kitson, who is President and
CEO of the United Way of Greater Cleveland. Mr. Kitson has over
24 years of experience in the United Way network. Thank you for
being here.
Fifth, we will hear from Naomi Adler, who is President and
CEO of the United Way of Westchester and Putnam in New York.
Ms. Adler is an attorney with a great deal of experience in
both the legal and nonprofit sectors. Thanks for coming.
Sixth, we will hear from Cynthia Gordineer, who is
President and CEO of the United Way of Forsyth County, North
Carolina, and she was previously a Regional Executive with the
American Red Cross, and was named Executive of the Year in
2011. Thanks for coming out.
Finally, we will welcome Karen Rathke, President and CPO of
Heartland United Way of Nebraska, a constituent of our
colleague, Mr. Smith, who wanted to introduce you today, but is
probably late coming from another meeting. Hopefully, he will
get here to say hello. And we welcome you, and I know he was
excited that you were here, as well.
So, thank you all. We will begin with Mr. King's testimony.
You have 5 minutes.
STATEMENT OF MIKE KING, PRESIDENT AND CEO, VOLUNTEERS OF
AMERICA, ALEXANDRIA, VA
Mr. KING. Okay. Thank you, Mr. Chairman, and all your
fellow Members. I am Mike King, CEO of Volunteers of America,
located here in Alexandria. But I am like many of you, I hop on
a plane about every other week to come up here, and I kept my
home in Dallas, Texas, when I took this job 3 years ago,
because I have three gorgeous granddaughters that I want to
watch grow up. So I understand what you give to this, and I
appreciate what you give to this.
Earlier today Representative Rangel was asking a question
about how much of the money gets to those agencies that serve
the truly needy and are doing the hard-core work with the
poverty folks. Well, you can look right at Volunteers of
America and answer that question. That is exactly what we do.
We are in 400 communities. We have 16,000 employees. We serve
2.5 million people a year. And we transform the lives of
America's most vulnerable citizens.
We are talking about seniors in the twilight of life that
are looking for affordable housing. We are the largest provider
of affordable housing for low-income seniors in America of any
nonprofit. We do that night and day, and we love doing it. And
we love them. We are a faith-based nonprofit, and that is our
love, that is our work.
In addition to that, we serve homeless veterans. We offer
them the same kinds of services, serving them in the kind of
project you described earlier. We have done many of those with
transitional housing, permanent housing, shelter, homelessness,
treatment for addiction and PTSD. We are partners with the
Veterans Administration, just as we are partners with HUD in
the housing that we do for seniors.
In addition to that, we serve addiction across the board
for women with children who can't bring their children with
them to an insurance-paid rehab center, but they can with us,
and we will take care of their children while they get into
recovery and restore their lives. We will also even take care
of children whose parents are incarcerated, and take care of
the care giver. We are dealing with the most vulnerable
Americans that there are.
No one is real excited to have us move into their
neighborhood, to bring a program there, to be quite candid with
you. I have been thrown out of more neighborhood meetings
trying to find new site locations for drug rehab centers and
affordable housing than I can remember. But what we do is
absolutely at the core of the fabric of America.
Let me share with you what we have been through the last
few years, because I think it is directly relevant to this
conversation that we are having today--and thank you for having
the conversation today.
You know, it hasn't been a picnic for the last 4 or 5
years. Whenever we go into recession in our nonprofit world
what that does to us is our needs go up. As you know, our needs
go up. As you described earlier, Representative Lewis, our
needs go up. We have less resources to meet those needs because
of the recession. At the same time, in just the last couple of
years, we have had to do adjustments in rates. And we
understand what you deal with there. We understand the gravity
of that challenge and of that problem.
Just last year we had an 11 percent cut in Medicare rates,
which cut us across the board for the skilled nursing care that
we provide to the low-income seniors I just described. So, on
the one hand, you have increased demand for services. On the
other hand, you have reduction in charitable giving because of
the recession. You are also getting hit with reduction in
rates, because there is just too much need and not enough
resources.
And so, what is the last thing you need to do at that point
in time? The last thing you need to do at that point in time is
say, ``You know what? We are going to disincentivize private
giving. We are going to discourage people from sharing part of
their bounty with those who need it most.''
We are absolutely here--if you are wondering why this woke
the nonprofit world up--and I heard that question floated out
today--well, this is why it woke us up. We have been doing
everything we can in the last 5 years to hold on. And I am a
nonprofit lifer. Okay? This is all I have ever done. So I have
seen all the trends come and go. Let me tell you what
nonprofits have been doing for the last 10 years. They have
restructured more times than any auto company you will ever
find, okay? They have cut and cut and cut and restructured and
restructured and restructured. And I see heads nodding. We have
all been there. You have everybody now doing two and three
jobs. There is no place else left to cut.
So, literally, why you have everybody's attention is we are
scared to death that we are going to have to start shutting
down programs. And you see it is not because that is us, it is
because of the people that we are engaged with that we don't
want to see on the street. That is why it has our attention.
That is our customer. That is who we work for. We are just
stewards. All of us here are stewards of that. That is why we
came to you. That is why you have been flooded on Capitol Hill.
Thank you. Thank you for asking us our opinion.
You know, I once heard the highest form of recognition you
can give someone is to ask their opinion. You have done that,
and we thank you for that. We trust you will do the right
thing. Please incentivize giving and, frankly, caring for our
fellow man. Thank you.
[The prepared statement of Mr. King follows:]
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Mr. TIBERI. Thank you, Mr. King.
Ms. Tillman, you are recognized for 5 minutes.
STATEMENT OF JIMALITA TILLMAN, EXECUTIVE DIRECTOR, HAROLD
WASHINGTON CULTURAL CENTER, CHICAGO, IL
Ms. TILLMAN. Thank you very much, and thank you for that
very beautiful introduction, Congressman Davis. He has already
summed up my credentials, my background, and much about our
facility that is inside of the great congressional district of
seven in Chicago.
This position that we are taking at the Harold Washington
Cultural Center is not an indictment on the current
Administration, but an honest voice of advocacy for theater,
music, and the arts. We utilize media and performing arts to
deter at-risk behavior in youth. That borderlines on the
quality of life as well as human resources and human services.
At the Harold Washington Cultural Center, we have a 1,000-
seat theater, a state-of-the-art computer resource lab, a
studio, a full-service recording studio, a video-editing lab,
and we service over 25,000 youth without Federal support,
State, or local. It is the individual little old lady down the
street, it is the neighbor, it is the local philanthropist,
such as Mr. John Rogers, that will come from time to time, or
that person who purchases that handle on the seats in the
theater. We rely on the individual donor and the community to
support what we do at the Harold Washington Cultural Center.
We have reviewed the 10-page NEC report on charitable
discussions and the fiscal cliff. Though we are not economic
experts, we believe that all possible measures have not
necessarily been taken to resolve the debt matter without
cutting the charitable deduction percentage.
We believe that the fact that Chicago has recently received
much media attention on the rash of crime and murders
perpetuated highly in our black community is a direct result of
funding that has been cut in the arts and in constructive
creative programs throughout our community. We provide young
people with an opportunity to get off the streets and on the
stage. And we tell our young people, ``Put down the guns and
get on the stage.''
We have an alternative charter high school within our
school that deals with the class of students ages 16 to 22 that
are getting back into the school system. And we don't just do
job training there. We actually do on-the-job training there,
because they learn light tech and design, they learn set
design, they learn acting, directing, and they are actually
able to apply it right there at the theater.
Our ``Broadway in Bronzeville'' program has been
acknowledged just recently--this is our inaugural year for
``Broadway in Bronzeville.'' We kicked it off with ``Imitation
of Life,'' ``Ain't Misbehavin','' ``Purlie,'' and ``Tap Dance
Kid.'' These are classic American Broadway Tony Award-winning
shows that we are introducing our community to, and we are
proud to bring that tie together.
Every day more than 100,000 nonprofit art and cultural arts
organizations act as economic drivers, creating an industry
that supports jobs, generates government revenues, and acts as
a cornerstone of our respective cities' tourism industry. This
study that is in my written document that I have submitted,
goes into the key roles that are played by nonprofits in the
art and cultural arts industry with their audiences, and how we
strengthen our Nation's economy. This cut within the nonprofit
sector that affects the arts directly has an immediate effect
to the economy, not just in Chicago, not just in Illinois, but
throughout this country.
As a Junior Senator from Illinois, President Obama attended
many events at the Harold Washington Cultural Center. He gave
us glowing remarks on our exceptional work within the
community. And that work is currently in jeopardy, due to the
unavailability of Federal and State funding.
During our--during the 2000 economic downturn--2008--we
were hit, our facility was hit with a foreclosure suit by our
bank at the rate of a $1.5 million mortgage. Our building is
valued at $15 million. It became difficult to pay the note
without funding, and we stood in jeopardy of losing this
community gem. However, due to community support and faithful
individual donors buying those handles, putting their names on
the wall, we are able to continue to operate our programs while
we are battling the foreclosure.
We do need help. We do need support. I am looking at all
the CEOs, I have been shaking hands and collecting cards,
because these are the ones that have the funds to give to us.
When it rains on mainstream and well-endowed arts
organizations, black arts organizations like us, we drown. So
it is very--I implore--all those that are on this panel and
those that have come before me, I agree. We need to not cut the
tax--the charitable deduction of what they are able to get.
But we need to look into the 60653, the low-income areas,
to see who is actually doing the work, not just in theory, who
is in action. We have boots on the ground. We are pulling
ourselves up by our bootstraps. We need your help. We need the
help of those on this panel, those that have spoken before us.
And Congress, we need you to not cut it, because we are
just getting our engines revved up with ``Broadway in
Bronzeville''--I have 10 seconds--and we need everyone to
support what we are doing, because with us just starting, if
the cuts happen we won't even get in the game of getting money.
Thank you.
[The prepared statement of Ms. Tillman follows:]
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Mr. TIBERI. Thanks for your passion. I wouldn't be here
today if it wasn't for art and music. So thanks for what you
are doing.
Mr. Delaney, you are recognized for 5 minutes.
STATEMENT OF TIM DELANEY, PRESIDENT AND CEO, NATIONAL COUNCIL
OF NONPROFITS, WASHINGTON, DC
Mr. DELANEY. Thank you, Mr. Chairman and Members of the
Committee. I also want to thank the staff who are stuffed
across the back row there, and those who are watching from your
offices. Thank you for your patience listening today, and thank
you for all the hours of preparation and the thousands of hours
ahead, as we come together to try to solve this community
problem.
I talk about ``we'' coming together, because government and
nonprofits, we serve the same constituents and we serve the
same communities. We are teammates joined as one. We need to be
operating together as one. And so, out of respect, what I want
to do is to just share three different points, very quickly, so
that you can move on with the panel.
My first point, as your teammate, is we cannot have a
meaningful discussion about charitable deduction without first
looking at community needs and understanding how fragile the
nonprofit community is right now. We have been asked to do so
much more with so much less for so much longer, we are being
stretched out of shape.
I encourage you to look at page three of my written
testimony, where I lay out--and the research shows--in 2008, 73
percent of nonprofits saw their workloads increase. In 2009, 71
percent more saw it increase. In 2010, a 77 percent increase.
In 2011, an 85 percent increase. It is going up and up and up.
And you heard from the earlier panels today about how the
revenue is going down and down and down. And we have been doing
this for too long.
And we are, unfortunately, seeing a lot of government
policies that are aggravating this at the Federal, at the
State, and the local levels, that are making this
unsustainable. So, any discussion about the charitable giving
incentive must begin with looking at the fragility of the
health of the nonprofit community.
My second--and to that, I am hoping that the working group
will bring nonprofits to the table and work with us and look at
the health of the sector itself, and not just look at what a
tax benefit might do to the donor, but let's look at what the
needs are in the local communities. That is where the right
attention needs to be focused, is on the community, not on the
donor. Because it is the communities that are having great
needs right now.
The second thing I would do is invite you to stop listening
to me for a second, kick back and relax, and look at my written
testimony that I submitted. And you will find in the appendix
at the back the voices of 130 different nonprofits in your
States who were--I am here simply relaying their voices, and
lifting them so that you can see in your own districts, in your
own States, how people are suffering. These are not the words
of wealthy donors saying, ``We want our tax breaks.'' These are
not the words of elite institutions saying, ``We want to name
another wing.'' These are the voices of local people in your
local communities, your constituents who are in pain.
And so, please, if you want more information about what is
going on in your individual States, reach out to your State
association of nonprofits, because they are the champions who
can help connect you with real boots-on-the-ground information.
The third thing I want to do in closing is share a story.
And that story is about our Nation's Founding President. And we
were hearing earlier today a lot of people offering theories of
what might happen and what if. And perhaps we could redesign
and totally wholesale change the charitable giving deduction.
But I want to share with you what happened when other people
relied on theories.
President Washington had retired. He was in Mount Vernon.
And it was a dark and dreary day in December when he was out on
his plantation. And he was surveying. And a rainstorm hit. It
turned to sleet and then snow. He caught the chills. He then
went home and he worked all night, and then he got up in the
morning and he knew that he was sick. They called in the
doctors who, on a theory, said, ``We need to bleed him. We need
to bleed him to get rid of bad blood.'' And so they took more
than three liters, three liters of his blood. And he died.
Now, their theory was, ``If we bleed him of the bad blood,
then he will recuperate.'' But in point of fact, they hastened
his death by bleeding him. Please do not rely on theories.
Please understand that theories alone can be dangerous. We know
that the charitable giving incentive is real. It is reliable.
It is proven to be effective in getting resources into local
communities where there are great needs.
So, as you are looking at different proposals, remember:
First, do no harm. First, do no harm. Look at the great needs
in communities across America. Thank you, Mr. Chairman.
[The prepared statement of Mr. Delaney follows:]
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Mr. TIBERI. Thank you. Those buzzers you heard mean there
is a vote. And that is a 15-minute vote. And we have 20 minutes
of testimony left. So I would encourage you to go as quickly as
you can.
Mr. Kitson is recognized.
STATEMENT OF BILL KITSON, PRESIDENT AND CEO,
UNITED WAY OF GREATER CLEVELAND, CLEVELAND, OH
Mr. KITSON. Yes, thank you very much, Mr. Chairman and
Members of the Committee. And thank you for providing me with
the opportunity to testify today on behalf of the 450,000
Greater Cleveland residents who benefit from United Way of
Greater Cleveland's work.
In my almost 25 years with United Way, I have witnessed the
important role that the nonprofit sector plays in our community
and in our great Nation. Our work relies on the generosity of
donors and volunteers. And, without question, the charitable
deduction is an effective and important incentive to stimulate
support for the thousands of health and human services that we
work on.
For example, the charitable community is the single largest
supporter of United Way 2-1-1, which covers 90 percent of the
State of Ohio. Our Cleveland United Way 2-1-1 provides coverage
for 7 counties, or 1.9 million people. And we answered a
quarter-million calls last year for help, a 33 percent increase
in the last 5 years.
And, as you know, many Americans today find it difficult to
afford prescriptions. Our Med Refer program found $2.5 million
of prescription benefits for people in need in the last 5
years. Without question, a cut in the charitable tax deduction
will result in a loss of support from donors to the nonprofit
sector, and would devastate our ability to continue to provide
these services, and ultimately the responsibility could fall
back on government.
The New York Times reported last year nearly 60 percent of
Cleveland's poor, once concentrated in its urban core, now live
in its suburbs; 40 percent of United Way's 2-1-1 calls come
from those very same suburbs. And their number one call is for
food. Nationwide, 55 percent of the poor population in
metropolitan areas is now in its suburbs. The charitable
community is coming to the need of these new poor.
The Cleveland Food Bank has doubled its food distribution
in the last 5 years. The earned income tax incentive in
Cuyahoga County is providing free tax preparation for some
10,000 families, and it returned $13 million to our community
last year to help the working poor. And United Way partners
with many folks in our community, including the Siemer Family
Foundation and the Cleveland Foundation, to aid young people
who so unfairly suffer when family finances jeopardize housing
security.
Not preserving the charitable deduction creates a
disincentive for giving to charity. And millions of poor
Americans will pay the price. Without the generous support of
America, nonprofits will be forced to abandon their work. We
lose our ability to provide food. We lose our ability to
provide shelter, to graduate kids, to help families become
financially stable. This also limits our ability to help with
healthcare services to the most vulnerable in our population.
And while I am here today representing United Way, I would
also like to speak for just a moment on behalf of my alma
mater, Hartwick College in Upstate New York, where I serve on
its board of trustees. Independent colleges in New York State
graduate more students than their public peers. And those
future leaders have benefited from scholarships given by
generous donors. The charitable deduction really matters in our
country, and it matters for our future.
I stand upon the 125-year history of the United Way system,
with thousands and thousands of large and small nonprofit
partners, to advocate for the charitable deduction. While the
generosity of Americans is not solely based on tax incentives,
it is part of the equation for many. On behalf of the millions
of Americans who rely on the kindness and strength of the
philanthropic community, please preserve the charitable tax
deduction. Thank you.
[The prepared statement of Mr. Kitson follows:]
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Mr. TIBERI. Thank you.
Ms. Adler, you are recognized.
STATEMENT OF NAOMI L. ADLER, ESQ., PRESIDENT AND CEO, UNITED
WAY OF WESTCHESTER AND PUTNAM, WHITE PLAINS, NY
Ms. ADLER. Thank you, Mr. Chairman, Members of the
Committee. I am honored to testify here today, and I will try
to go as quickly as I can.
As you may know, there is a United Way in every one of your
districts. Each United Way works collectively with all the
community leaders about whom you have spoken and heard from
today. Health and human service providers need for you to
listen to all of our testimony, for we are providing quality
education for every child, sufficient income to sustain the
needs of every family, and what is needed to create a
foundation for a healthy life for all.
United Way is seen as a community collaborator, as well as
an advocate for everyone, from the smallest child to the most
senior adult. As President and CEO of United Way of Westchester
and Putnam, New York, located in the Lower Hudson Valley of New
York State, just a few miles north of New York City, I am
extremely familiar with the important role that non-
governmental organizations serve in our community, as well as
the issues that impact their abilities to fulfill their mission
work.
The preservation of the charitable deduction is a
critically important issue in my community, as well as within
the sector I represent. We work with thousands of not-for-
profit organizations within a population of approximately 1.1
million people. In this role, our United Way is a major
provider of training for nonprofit executives and staffs, and
we hold the largest gathering of not-for-profit leaders
throughout the region for this purpose.
To put this into context for you and your staff, in 2010
there were 5,709 registered nonprofits just in Westchester
County alone. This is representing $11.7 million in assets and
$7.3 billion in revenue. The economic impact of the Westchester
not-for-profit community was estimated to be $23.5 billion.
This means there are more than 100,000 people that are employed
by nonprofits in just this one county.
In addition to our role as a partner and advocate with a
diverse number of nonprofit organizations that provide health
and human services, our United Way also provides millions of
dollars of funding, expertise, and gifts in kind to all of them
every year. In addition, we facilitate the coordination and
placements of over 18,000 volunteers to help the not-for-
profits keep personnel costs down, as well as to enhance the
level of efficient service given in the community.
Finally, as we heard, we operate United Way's 2-1-1 help
line, and our United Way does it for 33 percent of New York
State, connecting the public to the help that they need. This
includes referrals to more than 25,000 services that are
provided in our region. Just a few days ago, on February 11, 2-
1-1 Day, Governor Cuomo and other public officials recognized
that our States' United Ways work extremely hard to
consistently provide around-the-clock information and referral
and, in particular, during Superstorm Sandy, where we helped
more than 1.4 million people in just a few weeks.
In our community there are huge disparities, including
great wealth and significant poverty. Some of the best and
worst schools in the Nation are within miles of one another.
Therefore, it is our imperative to keep those residents who are
in a position to give focused on supporting the work.
As the entity that responds to thousands of donation
receipt requests every year around this time, as it is tax
season, our United Way experiences firsthand how the charitable
tax deduction is such an incentive to giving in our area. These
are not donors that give large chunks of money beyond the tax
cap that exists in New York State. Instead, they are part of a
group that donate in the range of $250 to $1,000 a year through
payroll deduction within their workplaces, as well as attending
fundraising events and online giving.
For example, in our community there are 18,000 children who
are hungry within 21,000 households. This year, the demand from
residents who have never requested food from a food pantry rose
30 percent, just in our community. The local food bank and
community food pantries receive food to feed our families
through various sources, mainly through corporate donations and
food drives. However, the personnel and the other resources
that are needed to properly inventory, house, transport, and
distribute food to those
in need is mainly funded through charitable donations. I cannot
fathom how our food safety net would survive if one of the
major incentives to give to those who feed our hungry is taken
away.
In conclusion, given our challenged economy, the recent
natural disasters, and all that is impacting our not-for-profit
sector, now is not the time to get rid of the charitable tax
deduction. Thank you.
[The prepared statement of Ms. Adler follows:]
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Mr. TIBERI. Thank you.
Ms. Gordineer, you are recognized.
STATEMENT OF CYNTHIA GORDINEER, PRESIDENT AND CEO, UNITED WAY
OF FORSYTH COUNTY, WINSTON-SALEM, NC
Ms. GORDINEER. Thank you, Mr. Chairman and Members of the
Committee. Thank you for the opportunity to talk about the
importance of the charitable deduction, and to share the
critical work that United Way is doing in Winston-Salem, North
Carolina.
Traditionally, nonprofits have delivered intervention
services. That is, they help those who are facing a difficult
time or are in a crisis situation. We address many of those
issues in our community because we know that it is important to
have a safety net to turn to. However, our focus has
increasingly transitioned to prevention strategies. By
addressing the root causes of our community's most pressing
needs, we can prepare people for a better life, and the need
for intervention assistance later will be ameliorated.
We believe people will be successful if they have an
education, financial stability, and good health. And much of
our investments are focused on these goals. Our highest
priority is to increase the high school graduation rate in our
county. Our economic viability depends on having an educated
and prepared workforce.
In 2008, when we launched our initial program at Parkland
High School in Winston-Salem, the graduation rate in our
community was 70 percent; 30 of every 100 students did not
graduate. After starting ninth grade, 4 years later they were
not graduating. The program included tutoring, mentoring,
family engagement counselors, graduation coaches, and more. We
have since expanded to two additional high schools. Since 2008
I am pleased to report that our graduation rate has increased
from 70 to 81 percent. And our community goal is 90 percent by
2018.
Our women's leadership council supports this goal through
their focus on three middle schools which feed the high schools
we work with. They fund projects such as the 2-week summer
Success Academy, designed to help rising sixth graders make the
transition to middle school. One of the middle schools is a
feeder to the high school that is most challenged in our
community. And this middle school, Philo-Hill, the number of
students who are--who test at grade level in math and reading
has more than doubled since 2008, when our partnership began.
More than 1,000 women contributed $650,000 in 2012 to this
work because they believe it is important. But we know that a
factor in their decision and their contribution is the
charitable deduction.
Our second priority is financial stability. And to address
this we opened our first Prosperity Center in 2008. The Center
offers a holistic array of services to help individuals
increase their income levels through job training, career
counseling, job search assistance, while providing classes to
help participants improve their financial literacy, build
credit and assets for future success, and other free financial
services, including tax preparation. It was so successful we
opened our second Prosperity Center in 2011, and we are
preparing to introduce our first mobile Prosperity Center. The
goal is to help families build stronger, more stable lives and
achieve their dreams.
We did not realize these accomplishments alone, but through
convening our community to form collective partnerships,
including both the public and private sector. Just as we can't
accomplish our community change on our own, we also know it
would be impossible to do without the necessary resources.
My community is extraordinarily generous. It ranks in the
top 1 percent of per capita giving in the country. We know that
many of our most generous donors are influenced by the
charitable deduction, and that was evidenced by the number that
rushed to pay their 2013 pledge by December 31, 2012 in the
face of uncertainty around the charitable deduction. We know
that some donors who contribute large gifts would not continue
or would reduce their gifts in the future. This would diminish
our ability to continue the level of strategic investments
needed to create stronger lives through education, financial
stability, and better health.
I would also ask the Committee Members to consider the
additional economic repercussions that would be caused by a
decrease in our services. In the short term, the cost of basic
and emergency needs would increasingly have to be assumed by
the government, because we would lack the funds to do so. In
the long term, our work to address root causes of poverty will
create additional contributing members of our community, since
we are preparing people to obtain higher levels of education,
be financially stable, and lead healthier lives.
A decision to eliminate or limit the charitable deduction
would provide immediate budget relief, but the cost would
surely outpace the savings in the long term. Thank you for your
attention.
[The prepared statement of Ms. Gordineer follows:]
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Mr. TIBERI. Thank you so much. And I apologize. We have to
go vote. If you could stay, your Congressman would like to give
you a flattering introduction before your testimony. There are
some questions from some of the Members if you have the ability
to stay.
We are going to reconvene in about 15 minutes or so. So, if
you can, hang on for a little bit while we recess for about 15
minutes, more or less. Thank you.
[Recess.]
Mr. REICHERT [presiding]. Can I ask the witnesses to return
to their seats, please?
The Committee will reconvene. And we have one witness left
to testify, I understand, in this panel. So we welcome Karen
Rathke.
And Karen, you are going to be introduced by my colleague,
Mr. Smith.
Mr. Smith, you are recognized.
Mr. SMITH. Thank you, Mr. Chairman. Thank you. I am pleased
to welcome Karen Rathke from Grand Island in Nebraska's third
district. Karen is President and CPO of the Heartland United
Way, which serves Hall, Hamilton, Howard, and Merrick Counties,
and raised $1.6 million in its most recent annual campaign.
Karen has served in her current position for 13 years and
doubled Heartland United Way's annual fundraising in that time.
Karen also serves on the Nebraska Governor's Commission on
Housing and Homeless, in 2012 was recognized as Woman of
Distinction by the Grand Island YWCA, and as Woman of the Year
by the Grand Island Independent newspaper.
It is a pleasure and privilege to have a constituent before
this Committee. Karen, welcome.
Mr. REICHERT. Welcome. Thank you, Mr. Smith. And you are
recognized for 5 minutes.
STATEMENT OF KAREN RATHKE, PRESIDENT AND CPO, HEARTLAND UNITED
WAY, GRAND ISLAND, NE
Ms. RATHKE. Thank you. Thank you, Mr. Chairman, Committee,
and certainly Congressman Smith, for that introduction. And I
am honored to represent not only the Heartland United Way, but
also the United Way network, and to testify in support of
preserving the charitable deduction in the Federal Tax Code,
and in opposition of any limitations on the charitable
deduction for any taxpayers.
At a time when government is constricting and contracting,
it is critical that the nonprofit sector be as healthy and as
resourced as possible. Any action that has negative impacts on
the nonprofit sector only puts further demand on an already
stressed system.
In our community, charitable donations fund free medical
and dental health care, emergency and transitional shelter,
rent utility assistance, free education courses, mentoring in
after-school programs, food, clothing, and disaster assistance.
Our 16 partner agencies, which are provided in my written
testimony, deeply rely on our United Way funding from thousands
of small and private donations to provide help and hope for
over 52,000 people.
As discussed in some of the earlier meetings, a floor, as a
possibility, would greatly impact donations, especially in
small United Ways and nonprofits, as one gift, combined with
the gifts of others, add up to our $1.6 million annual
campaign. The Good Life,
which we were called before Nebraska joined the Big 10, our--in
Nebraska our State benefits from $735.4 million in charitable
contributions to our State. Most of these funds are locally
raised, locally invested, and locally beneficial.
I doubt you will remember statistics at the end of the day,
so I want to share some stories that will put a face to the
impact of charitable giving.
Hunger is an issue in our community, with 67 percent of
kids qualifying for free and reduced school lunches in Grand
Island public school. There is nothing more painful than to
look in the eyes of a hungry child and know that the next meal
is not a guarantee, and to watch as students stuff leftovers in
their pockets.
So, in October we mobilized over 400 volunteers to package
100,000 meals purchased totally by private donations. These
fortified macaroni and cheese dinners are now in the hands of
multiple food programs. But, most importantly, for teachers
that now are able to discreetly slip a bag into a child's
backpack, it is comforting to know that the child will now have
a hot meal at night.
Private donations were collected to purchase new books,
which our recruited volunteers took out to summer academic
catchup programs. The readers created excitement for reading.
And then every student was able to pick out a book of their
choice. One fourth grade boy carefully deliberated over which
book to pick, and was so proud to finally be able to write his
name in that book, and insisted on using a pen, instead of a
pencil, because that was the first book that he had ever owned.
To respond to that on a larger scale, we are ramping up
efforts to get more books in the hands of more children. On
Monday, I received a check for $35,000 from a generous donor.
The donor's gift will provide over 1,000 children with a brand
new book to be delivered to their home every month, thereby
increasing their chances to be successful in school.
Interestingly, I was preparing for this testimony and I asked
him, if the charitable deduction was eliminated or capped,
would his donation change, and his response was it would.
Please don't take these books out of the hands of children.
Our community has one of the few free medical and dental
health clinics that is totally funded by private donations. The
clinic sees hundreds of patients each year, and--facing many
multiple challenges, oftentimes chronic disease. We had one mom
that was rationing out her blood pressure medicine to afford
shoes for her kids, not realizing that, without that medicine,
she might not be there to be the mom in the future.
We had one little girl who came in, her face so swollen
with infection and tooth decay, and in, obviously, a lot of
pain, but not complaining of pain, because she had been in that
situation for so long that she didn't even know what life
without pain felt like. She was treated, and the reports came
back in from school that this little girl was now a healthy,
vibrant student that was participating in class.
Private donations help limit every day how poverty defines
people's lives. You see this in a single dad who is relieved
that his daughter has an after-school place to go where healthy
choices are taught to avoid risky behaviors, a grateful mom
watching her young child excitedly walk down the hall to his
preschool classroom, knowing this was an opportunity that she
otherwise would not be able to afford. A fifth grade boy has
someone, his mentor in the bleachers, cheering him on, for the
first time ever.
These are just a few examples of what charitable
contributions are doing in Grand Island, Nebraska. It is a risk
of not being able to do these things, in addition to innovative
programs we are rolling out, that brings me here today, as one
example of hundreds of United Ways across the country providing
vital services, as I have shared.
Please protect the charitable tax deduction to give
children a chance, and families a future. And I wouldn't be a
good fundraiser if I didn't leave without encouraging you to
find more ways to extend and to increase tax incentives.
My dad always said that you can't go wrong when you always
do the right thing. The right thing today is to preserve the
charitable tax deduction and support our efforts to inspire
hope and create opportunities for a better tomorrow in
communities across the country. Thank you.
[The prepared statement of Ms. Rathke follows:]
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Mr. REICHERT. Mr. Davis is recognized for 5 minutes.
Mr. DAVIS. Thank you. Thank you very much, Mr. Chairman.
And I want to thank all of the witnesses, not only for their
patience, but for their testimony.
Ms. Tillman, let me begin with you. I know that the Harold
Washington Cultural Center is located in what would be
described as a low-income community, in terms of the economics
of the environment. And yet you indicate that you have been
able to generate resources that have kept you alive, open,
functioning, and going without substantial public government
support. How have you been able to do that?
Ms. TILLMAN. Thank you for the question. We initially
received funding when we first opened in 2004 to build the
building, to construct the building, but not funding to operate
the programs. Many of the generous donors, such as the Joyce
Foundation or the MacArthur Foundation, or some of the
foundations that were represented earlier, they only give to
you after you have 3 or 4 years of experience in operating.
And so, by the time the third or fourth year came in, the
economy was making a downturn. So we had to appeal to our local
community residents. We have a--there is a radio station that
is on iHeartRadio, as well as locally, in Chicago, WVON. And we
would turn to WVON and the listeners and say, ``Hey, this is
what is going on. The light bill needs to be paid. We are
having a light bill theater show. We are having a movie
night.'' We literally knocked on doors. It was a major
canvassing campaign to preserve the arts, because we utilize
arts as a form of grief counseling for young people, as well as
theater therapy.
We believe that theater can rock someone to their soul, not
just for the person that is performing on the stage, but the
person that is in the audience, having that theatrical
experience. And when a young man has an opportunity to put down
a gun and pick up a hammer and build a set, something that he
is able to create with his own two hands, he has a whole other
respect for what is going on around him.
The young lady, Hadiya, that recently fell to gun violence,
was a young person that participated in programs at our
facility. And our facility is open, on average, from 7:00 a.m.
to almost 11:00, midnight, and we have had some parents say,
``Hey, can you all roll out the sleeping bags on the stage
today, because there is gunfire going on in Englewood.'' And
because of things like that, we load in with our churches, we
load in with our local community groups. We load in to the
individual donor, be it a nameplate on a handle, a name on the
wall, whatever it is, it is almost all for sale.
So, it might be a Playbill, but that is the way we have
been able to do it, one handle at a time. And we need more
help. We are on BroadwayandBronzeville.com. We need to raise
$1.5 million on a capital campaign. And if they cut this
funding, if they cut this, we are just totally cut out of the
game when we are just now getting started.
Mr. DAVIS. Thank you very much.
Ms. TILLMAN. Thank you.
Mr. DAVIS. Ms. Rathke, let me ask you. I have had some
experience with free clinics. Health clinics are expensive to
run. How do you manage to raise the money and coordinate the
activities that you have been able to accomplish?
Ms. RATHKE. You know, we are very fortunate to have a
fabulous director of our third city community clinic, and we
have an amazing group of volunteer doctors and volunteer
dentists that come in and provide all the services. They have,
like, a dental hygienist, but--and one nurse that they pay for.
And we often joke that she is one of the best drug dealers in
town, because she can leverage drugs like no other from
pharmaceutical companies.
And the really unfortunate thing for families is that they
will--I know, right? They will come in and they qualify for
some of these pharmaceutical programs that they are unaware of.
And just by us making that linkage, these families can continue
on.
Mr. DAVIS. Well, thank you very much. I can see why you
have been Woman of the Year, and I suspect you will continue to
be Woman of the Year. I appreciate your testimony, and I yield
back.
Ms. RATHKE. Thank you.
Mr. REICHERT. Thank you, Mr. Davis. Mr. Smith is recognized
for 5 minutes.
Mr. SMITH. Thank you, Mr. Chairman. Ms. Rathke, welcome
again. Can you share a bit about the percentage of your donors
who itemize their taxes on--their income taxes? And what
percentage of the funds you raise come from those donors?
Ms. RATHKE. You know, we don't necessarily track how many
of our donors itemize. You know, we send out their tax
deduction letters to them. But beyond that, we aren't able to
track that in our system.
But we have over 500 leadership donors, and we have about
$500,000 of our $1.6 million that are raised by our leadership
givers. And so, you are aware of our community, a manufacturing
community. And so, the really great part of what we do with the
people we do the work with is that if somebody has benefited
from our services, and they are able, in a manufacturing
company, to now do a workplace campaign and give back, they do.
And whether they own a home or they qualify for some of those
deductions--you know, some of those are really good-paying
jobs, it is just really hard for us to scale that and figure
that out.
Mr. SMITH. Sure. But you would suspect, then, that perhaps
your leadership donors would benefit from itemizing their
deductions.
Ms. RATHKE. Absolutely.
Mr. SMITH. Sure. Mr. Kitson, we heard this morning that the
Cleveland United Way may face elimination, should there be a
cap on the--at the 28 percent rate. I mean, hypothetically.
Would that be likely or unlikely to happen?
Mr. KITSON. I think total elimination would be unlikely. We
still have a charitable community. But at the end of the day,
the mix of the donors that are necessary to bring in the $41
million that drive our work in the community, it involves lots
of different donors at lots of different levels. Eighty
thousand donors contribute to the United Way in Greater
Cleveland. Two thousand of them are leadership donors. A number
of them are significant donors. And so, all of those go into
play.
And when you start to move those numbers around and get
them thinking differently about where those charitable
deductions might go, it becomes very dangerous for a United Way
like ours.
Mr. SMITH. Sure, sure. I certainly understand that, and I
know that charitable organizations do an incredible amount for
our entire country and even beyond. And so I am very grateful,
and certainly I want to reflect on that a bit. So, thank you
for your testimony.
And, Mr. Chairman, I yield back.
Mr. REICHERT. Thank you, Mr. Smith. Mr. Lewis, you are
recognized.
Mr. LEWIS. Thank you very much, Mr. Chairman. I want to
thank each one of you for being here today, participating.
Mr. Delaney, your testimony described the grim economic
reality that charitable organizations face. It appears that
there is a lot of unmet need. How does this charitable
contribution deduction help to fill this unmet need, to fill
this gap?
Mr. DELANEY. Thank you, Mr. Lewis. Right now, as laid out
in our written testimony, we are at a tipping point. And the
nonprofit sector is just doing so much more for so many more
with so much less, you take away just a little bit of that, as
people talk about tinkering around some with the charitable
giving, it then makes everything slide downhill.
Let me just give you two examples of some of the pain that
is being felt, and that is some research that The Urban
Institute did in 2010, landmark research looking at government
contracts with nonprofits, that found that there were five
major trends showing that nonprofits are actually subsidizing
government activities, because governments are not paying the
full cost. Governments are paying late. Governments are
changing the contract terms midstream. Governments are putting
so many demands up front for application processes and for
reporting processes that it is obscene. And these are at the
Federal level, at the State level, and at the local level.
And as a consequence, what do nonprofits do when we don't
have the resources to get the work done on behalf of government
and the communities? According to the research--and this is on
page 8--or footnote 15 of my written testimony--the first thing
that nonprofit boards do is that they freeze or reduce
employees' salaries. Fifty percent of them do that. Thirty-
eight percent reduce the number of employees. And then 23
percent reduce their health, retirement, or stop benefits. And
the very last thing they do is they reduce services to the
community, because job one is mission. And so that is what they
do.
Another example is from your own district, Congressman, and
that is on page three in the handout. And again, just one
example. We have attached over 100 different comments from your
constituents from across the country. But in Georgia, for
example, the Atlanta Community Food Bank points out that in the
last 4 years they have seen food distribution increase by 85
percent, 85 percent in the 29 counties that they serve, and
that over 28 percent of Georgia kids, more than one in every
four, live in food-insecure households. People are suffering,
and they need to get to these.
And again, I am just lifting the words there at Atlanta
Community Food Bank, where they go on to say--and I quote--``It
seems quite ironic that at a time when government is cutting
human service programs, they are also considering disincentives
for the private sector to take up that important work.''
And so, that is really why I think the 44 of us are here
today to testify, is that we are being asked to do so much more
by our teammates in government, who are taking things away from
us. And now, on top of that, we are standing here feeling like
Rome is burning. Rome is burning, and we are standing with our
tiny
fire hose, and Congress is threatening--Congress and the White
House--threatening to perhaps take our fire hose away. And we
are saying no, not at this time. Let's come together and solve
these community problems together.
Mr. LEWIS. Mr. Delaney, I appreciate your responding. I
know the Atlanta Food Bank very well, and they have many unmet
needs.
Mr. King, when you get a proposal or a--maybe a request,
you cannot respond in a positive manner. What do you do? What
do you say to the applicant?
Mr. KING. Well, that is a great question. We have to form
waiting lists in those circumstances, you know, when all our
beds are filled. You know, when we have no more room at the
inn, literally, because most of what we do is--24/7, is
residential. And so we have to put them on waiting lists, or
look for another place where we might be able to refer them.
But to be candid with you, there is a big difference putting
somebody on a list and putting somebody in a bed, you know. And
that is the alternative we are left with, Representative Lewis.
It is a very difficult circumstance.
And I want to second what was said just now by Tim. He is
exactly right on what happens when you have gone through a
series of budget reductions, as far as the cuts, because we
have done that. And you start cutting and holding off on staff
increases, and salary increases.
And let me tell you what. The quality of care that happens
in those residences is directly attributable to the quality of
employee you have that hasn't gotten a raise in 3 years, and
now you are paying them hourly wage for the graveyard shift.
And the quality of that wage impacts the quality of care that
you give. That is the fear we go to bed with, okay? That is the
one you go to bed with.
Mr. LEWIS. Thank you. Thank you.
Mr. REICHERT. The gentleman's time has expired. I want to
thank the panel for your time today and your patience. I know
you were interrupted by votes and it has been a long day for
Members and also for you.
And also a special thank you for what you do each and every
day in our communities across this great Nation. I know it is
not easy at times. But I was in the law enforcement arena in my
previous career, and I know some of the struggles that you go
through, I have worked with some of the groups that you have
worked with on the streets. And if you can touch just one life,
you know that that makes a difference, change one life, one day
at a time. So we all on this Committee very much appreciate
what you do each and every day. So, thank you for being here
today, and thank you for what you continue to do for our
people.
And we will call the last panel up for their testimony,
please.
Well, welcome. You are the last panel of the day, and we
are excited about that, but we are also excited to see you.
[Laughter.]
You will be the most exciting panel, too, I am sure. But I
would like to welcome you here today.
First on the panel is Earle Mack, Chairman Emeritus of the
New York State Council on the Arts. Mr. Mack is a retired
Ambassador to the Republic of Finland.
Second, we will hear from Andrew Watt, who is President and
CEO of the Association of Fundraising Professionals in
Arlington, Virginia. Mr. Watt is an honorary fellow of the
Institute of Fundraising.
Third, we will hear from John Palatiello, who is President
of the Business Coalition for Fair Competition in Reston,
Virginia. Mr. Palatiello is also the owner of his own public
affairs and marketing firm.
Fourth, we will hear from Anthony Ross, who is President of
the United Way of Pennsylvania. And Mr. Ross began his career
as a staffer with the Pennsylvania State House of
Representatives. I want to sympathize with you, on behalf of my
staff.
Fifth, we will hear from Lisa Ireland, who is Executive
Director of the United Way of Orleans County in New York. Ms.
Ireland has a long history of community service in her
community.
And, sixth, we will hear from Tory Irgang, who is Executive
Director of the United Way of Southern Chautauqua County, and
constituent of our colleague, Mr. Reed.
Mr. Reed, you are recognized.
Mr. REED. Well, thank you very much, Mr. Chairman. And it
is my great pleasure to welcome one of my constituents, Tory
Irgang, who is going to be testifying last, but that means she
is the best of all the witnesses today. So I welcome her here
today, and a fellow western New Yorker, Ms. Ireland, from an
adjoining county to our district. I look forward to your
testimony, and I really do appreciate you being here and
offering the important testimony you will provide today.
So, with that, I yield back. Thank you, Mr. Chairman.
Mr. REICHERT. And, finally, I will add that William
Hanbury, who is President and CEO of United Way of the National
Capital Area, was scheduled to appear today, but was
unfortunately--and had to unfortunately withdraw due to
illness. His testimony will be entered into the record.
So, thank you all again for being here today. The Committee
has received each of your written statements, and they will be
made part of the formal hearing record. Each of you will be
recognized for 5 minutes for your oral remarks.
Mr. Mack, we will begin with you. You are recognized for 5
minutes.
STATEMENT OF EARLE I. MACK, CHAIRMAN EMERITUS,
NEW YORK STATE COUNCIL ON THE ARTS, MANHATTAN, NY
Mr. MACK. Good afternoon, everybody. It is a pleasure to be
here and to speak today before this distinguished Committee.
All day long we have been talking about donor behavior. Well, I
am a donor. And I am here today as a private citizen and a
philanthropist, someone who has been fortunate enough in his
lifetime to give millions to charities.
So, I can tell you definitively that if the charitable
deduction is reduced or capped, I and people like me may not be
giving nearly as much to charities. It is not that we donate to
diverse charities because of the deduction; we need where we
need to give, because it is the right thing to do. It is
inherent in human nature that we usually need a gentle tap to
make it at least somewhat in our own self-interest to do the
right thing.
The tax deduction is a strong motivating factor, not only
for the largest donors, but for the small contributors, as
well. In other words, if the incentive of the deduction is
gone, people won't stop giving, but they are likely to give
much less. There is likely to be a noticeable attitude
adjustment when people feel that government is not encouraging
the giving. It could cast a pall over giving. People might find
themselves feeling somewhat more selfish. Maybe I will give
more money to my family. Maybe I will give more money to my
relatives. Maybe I will save the money. And this certainly will
reduce the velocity of spending, and increase the ripple effect
that curbed spending would have on our economy.
Consequently, these nonprofits that perform the vital
services to our community and maintain our culture, our
heritage, our education systems, our hospitals, our scientific
research, and our religious institutions, they are going to be
the ones that are going to get the short end. Please don't take
away these incentives that make our country great. Doing so
will have a disastrous effect on the nonprofits and religious
institutions that are all so vital to our society, and the
outreach to helping the poor, the homeless, the mentally ill,
and the troubled kids. And let's not forget about the
absolutely essential role of the nonprofits in research,
health, education, and the arts.
For instance, since its inception in 1993, the Prostate
Cancer Foundation has raised more than $520 million to fund
groundbreaking research that has prevented as many as 40
percent fewer deaths in U.S. men. And what about breast cancer?
Venture philanthropy is a high risk, and it amounts to
approximately 3 percent of the U.S. dollars invested in medical
research today. However, this kind of philanthropy leads to
hundreds and hundreds of millions of dollars of research to
closer relationships with patient communities and enhancing the
understanding of specific diseases.
Having chaired several of these kinds of nonprofit
institutions, I can tell you that your number one
responsibility is to raise money for programs to serve the
community or to run capital campaigns to build new wings. When
I approach my peers to donate millions of dollars in these
important causes, they say, ``Is this 501(c)(3)? Is this a tax
deduction?''
A personal experience of mine that I feel illustrates this
point in our unique approach to charitable giving in the United
States, but also demonstrates the potential danger of fixing
something that has worked for nearly a century, in the late
'70s I heard from my friend, Sir Joseph Lockwood. He was then
Chairman of the British conglomerate entertainment company
called EMI. And he was telling me about his difficulties in
raising money to rehabilitate the facilities of the Royal Opera
and Ballet, both of which have been providing access to
artistic excellence and educational resources for 75 years
throughout the communities and schools. Sir Joseph was Chairman
of the reconstruction fund of the opera and ballet, and it had
fallen into such disrepair that they couldn't dance on the
stage. And the few dressing rooms backstage were uninhabitable.
It took him and his colleagues many----
Mr. REICHERT. I am sorry, Mr. Mack, but could you wrap up
your testimony, please?
Mr. MACK. Thank you. Well, the construction workers who
were putting the new buildings up, the carpet layers, the
computer workers, won't have that privilege if we cut capital
spending.
Mr. REICHERT. And thank you for your----
Mr. MACK. It is not that I object to fair share. But
please, hands off capital giving. We don't want to end up like
England, where we have to go to the government to repair
nonprofit institutions. So thank you very much, and Happy
Valentine's Day.
[The prepared statement of Mr. Mack follows:]
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Mr. REICHERT. Happy Valentine's Day to you, sir. Thank you,
Mr. Mack.
Mr. Watt, you are recognized for 5 minutes, please.
STATEMENT OF ANDREW WATT, PRESIDENT AND CEO, ASSOCIATION OF
FUNDRAISING PROFESSIONALS, ARLINGTON, VA
Mr. WATT. Mr. Chairman, Members of the Committee, thank you
for the privilege of allowing me to testify. And as you will
probably recognize, I am not a U.S. citizen, and I do come from
the UK. So I recognize the picture that Mr. Mack is trying to
draw.
I have the privilege of leading the largest community of
fundraisers in the world. Our members, between them, raise
approximately $100 billion a year. That is nearly a third of
the philanthropic dollars raised in this country.
You have heard a lot of data and statistics today, so I am
going to cut that out of my comments. It is in our written
remarks. The numbers are important, because they underscore the
value of the deduction and what it means to us. But I think
that there are things that are more important than that. The
deduction is more than a revenue source. So, let me explain.
As a non-U.S. citizen, it is a particular privilege to work
in this field. For me, the defining characteristic of the
United States is the strength of its community, the way in
which communities across America come together to address the
common need. Communities act swiftly, decisively. They are
based on an understanding of the environment in a way that
those of us who work at a national level often struggle to do.
I think it is a uniquely American way of looking at
problems. Americans don't instantly think of looking at the
government. We think of working with each other first, with
community groups and businesses, to solve a problem. And that
is an American mindset which is recognized and supported by
government incentives, such as the deduction.
I have worked for fundraisers for over 20 years in the UK,
Europe, and now America. And during that time I have seen many
different communities incentivize giving in many different
ways. But the charitable tax deduction is unique in being
established for nearly 100 years. And it has withstood the test
of time. Its symbolic nature almost outweighs its monetary
value. It represents a gesture of confidence between the
people, by way of their elected representatives, and the
effectiveness of nonprofit and community action. It binds
together the interests and concerns of all of us in the
betterment of our society.
But the deduction doesn't define who we are and what we do.
Tax deductions are not what we are about. The defining
characteristic of what we are about is impact, impacting
communities. I look and sound like a banker. But like every
single one of us in this room on both sides of it, I chose a
career in service. I know what that means, you know what that
means. And that is what we are talking about today.
That mindset and structure is envied in other countries.
Charities in other countries are desperately upset at the
potential changes here, because they look to America for an
example. They look to this country as a model. And a step
backwards here is a step backwards for them. That is why the
deduction is so important. It is a powerful symbol of the
American tradition and system of philanthropy, and it is a
symbol of the continuing commitment to the impact and the
change that nonprofits create. It is government, working
together with individual donors, for-profit organizations,
businesses, and foundations.
To change that symbol, to limit the deduction in any way,
is to alter that commitment, especially a commitment that we
know works. You have heard it repeated several times today. For
every dollar of tax revenue foregone, you are seeing a value of
$3 in the community. I think that is a phenomenal rate of
return, and one that any of us would be happy to see in our
businesses.
When my wife and I sit down at the beginning of the year to
calculate what we can afford to give to charity, we don't see
this as a tax break or a tax deduction. We calculate what, with
tuition fees and everything else that we have to pay, we can
afford to invest in communities. And then we see the uplift
that this brings. It is a 35 percent uplift on what we can
afford to give. It is not a tax break. It benefits many, rather
than the individual, and that is a really powerful message to
send.
Tim Delaney and many others have given passionate--made
passionate remarks about the crisis that we face at the moment.
But through it all, nonprofits continue to deliver service,
deliver service at great expense to themselves, efficiently,
effectively, and well.
We have to have many conversations in this country. We need
to talk about what we can do to encourage more public-private
partnerships to tackle issues head on. We need to discuss
incentivizing more social investment to address our core
problems. We have to come together in dialogue about how we can
mobilize resources more effectively--not just financial
resources, but human, social, and other types of capital.
But I truly believe that to put the charitable deduction in
this conversation is a red herring. It is effective, it is
proven to work. In the general context of things it is not
expensive. But, most importantly, it is that symbol of the
tradition of philanthropy in the United States. It is part of
the culture of this country. And I firmly believe that you
cannot simply limit or replace the deduction without losing
something very vital. So thank you for your time.
[The prepared statement of Mr. Watt follows:]
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Mr. REICHERT. Thank you, Mr. Watt.
Mr. Palatiello is recognized for 5 minutes.
STATEMENT OF JOHN M. PALATIELLO, PRESIDENT,
BUSINESS COALITION FOR FAIR COMPETITION, RESTON, VA
Mr. PALATIELLO. Thank you, Mr. Chairman, Members of the
Committee. I am John Palatiello, President of the Business
Coalition for Fair Competition, BCFC.
Don't feel bad; it took me 4 years to learn how to
pronounce it.
There are thousands of legitimate charitable organizations
that do exemplary work in American society, and you have heard
a lot--from a lot of them, and heard a lot about them today.
The tax treatment of these charities and those who donate to
them is not an issue for BCFC. What is an issue is when
nonprofit organizations operate in direct and unfair
competition with private, for-profit, tax-paying businesses,
including small businesses, by engaging in commercial
activities, but not paying taxes.
Billions of dollars a year in economic activity occurs that
is untaxed. This results in lost revenue to the Federal
Government, as well as State and local government, and it
creates an unlevel playing field for the private sector, and
particularly small businesses.
Entities organized under various provisions of section 501
of the Internal Revenue Code are provided a special tax-exempt
treatment which were clearly intended to perform activities and
provide services that are otherwise considered governmental in
nature. It was not intended that they use this privilege to
engage in activities that are commercially available. The
exemption for charitable and other purposes is based on the
assumption that such organizations are providing general
welfare services, and part of--and be part of our social safety
net, and that government would otherwise have to provide those
services with appropriated funds.
So, in its wisdom, the Congress traded off the requirement
to spend tax money directly with a tax benefit to offset what
these organizations legitimately provide. It was never the
intention of Congress that these organizations should be
engaged in providing commercially-available products and
services.
The nonprofit organizations provided special treatment
under section 501 are required to pay an unrelated business
income tax, or UBIT, on their commercial or nonexempt
activities. The problem is that this policy has not been
adequately codified by Congress, nor effectively and
efficiently implemented by the IRS. In our testimony we provide
a number of resources that we would encourage the Committee to
explore.
Under the Chairmanship of Congressman Jake Pickle of Texas
in the 1980s, this Committee conducted an exhaustive
investigation of this issue and the lack of enforcement of
UBIT. The Small Business Administration, the Government
Accountability Office, and the Philadelphia Inquirer all have
done exhaustive studies, and we have those cited in our
testimony, and commend them to your attention.
What am I talking about with regard to commercial
activities performed by nonprofit organizations? Well, it is
the YMCAs competing with private health clubs. YMCAs perform
extraordinary services, services for at-risk youth. Those are
legitimate. Those should have the benefit of special treatment
for their contributions to society. But when a local small
business gym or health club has to compete with a tax-
subsidized or a specially treated YMCA, that is unfair
competition.
Credit unions, compared to community banks. Same situation.
Rural electric and telephone cooperatives competing with
invest-your-own utilities and small business energy firms. We
have seen situations where nonprofits have been created to
compete with private bicycle rental companies, laundry
services, and a variety of other activities. We see
universities venturing outside of the classroom and into owning
and operating and running hotels, mapping services, and testing
laboratories. It occurs in dozens of other industries and
professions.
It is only when we move beyond hidden subsidies and
ineffectual regulations of UBIT that both consumers and
producers and all taxpayers will be able to enjoy the benefit
of a level playing field and even-handed competition. We would
urge the Committee to look at implementing a commerciality
clause, and thus implement the Yellow Pages test. If there is
something that you can find from private business in the Yellow
Pages, then you probably shouldn't have government doing it,
and you probably shouldn't be providing special tax treatment
for a nonprofit to do it. It is a very simple, commonsense
test.
So, we commend the very charitable and social welfare
activities that most charities provide, but we would urge your
attention to commercial activities, where the system is being
abused and resulting in unfair competition with private
enterprise, and particularly small business.
Thank you very much, Mr. Chairman, for the opportunity.
[The prepared statement of Mr. Palatiello follows:]
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Mr. REICHERT. Thank you.
And, Mr. Ross, you are recognized for 5 minutes.
STATEMENT OF ANTHONY L. ROSS, PRESIDENT,
UNITED WAY OF PENNSYLVANIA, HARRISBURG, PA
Mr. ROSS. Mr. Chairman, Members of the Committee, thank you
for the opportunity to testify today about the importance of
the charitable deduction. I am Tony Ross. I am President of the
United Way of Pennsylvania. Our organization is the State
association representing 54 local United Ways that serve every
community in the Commonwealth of Pennsylvania.
In my view, it is most appropriate that we gather today on
Valentine's Day to have a dialogue about the importance of
charitable giving. In my view, one of the most meaningful ways
that Pennsylvanians and all Americans demonstrate their caring
and concern for their communities, friends, and neighbors, is
through donating to charities of their choice. United Way of
Pennsylvania and our members are unified in our support in
preserving the charitable tax deduction, which is vital to our
ability to serve our commonwealth's most vulnerable citizens.
And if you know anything about United Way, we are all local
and independent organizations. So, to get 1,200 organizations--
and 54 in Pennsylvania--to agree on anything is quite
remarkable and quite a challenge.
Throughout the day you have heard about several proposals
that might limit or eliminate the charitable deduction, so we
won't go too much into that. But the simple reality is without
the support of our donors the important work by United Way and
our partners in the charitable community which positively
impact all of our community simply would not occur.
Earlier today you heard from a couple of my colleagues from
Pennsylvania, Jill Michal from Philadelphia and Leslie Osche
from Butler County. But let me share a few other examples from
Pennsylvania of some outstanding work done by United Way and
our community partners: The United Way of Berks County in
Reading, Pennsylvania, has started a Ready, Set, and Read
initiative which brings together schools, businesses,
organizations, and individuals to improve early grade reading
success; Erie Together, an initiative of the United Way of Erie
County, which develops comprehensive, community-wide responses
to alleviate the impact of poverty on their community; United
for Women, which assists newly-strugglng women who are one step
away from crisis in Allegheny County, which is in the
Pittsburgh region of Pennsylvania.
Simply put, policies to cap or limit the charitable
deduction would make these efforts impossible and be
devastating to the human service organizations and the people
that they serve.
Just consider the impact on charitable giving during the
recent economic downturn. From 2005 to 2010, charitable giving
in Pennsylvania has declined from $181 billion to $169 billion,
a 6.2 percent decrease. Do Pennsylvanians use the charitable
deduction? Absolutely. In 2010, the year which the latest data
is available, 1.9 million Pennsylvanians, some 31 percent of
those who filed tax returns, filed itemized returns with over
$5.8 billion in charitable deductions. And I think this is
really important, this next point. The average contributions
from those that itemized using the deduction was $3,048. And it
is important to note that the non-itemizer contribution, the
average contribution, in Pennsylvania was $2,181. So you
certainly can see a financial impact there.
Simply put, the proposals to cap or eliminate the
charitable deduction present a triple threat to charities:
Reduced Federal and State funding, increased demand for
services, and fewer donations. Our organization undertook a
survey to ask different organizations about the impacts of some
of these budget cuts. And to underscore what Mr. Delaney said,
the last thing that we saw in our survey, as well, the last
thing that people do is eliminate services to community. They
do all kinds of other things, eliminate staff, reduce hours.
But the last thing they do is cut services. And so, certainly
we have seen that impact in Pennsylvania, as well.
Additionally, I think it is very important to note that
nonprofits really assist the government, in terms of reducing
the need for government services. Rest assured that the reduced
capacity of charities to meet community needs will result in
increased demand for public assistance from the public sector.
I was very struck earlier today by the comments of the
gentleman from Meals on Wheels who talked about the fact that
feeding someone for 1 year was equal to the cost of 1 day for
someone being in a nursing home. And I think that underscores
another reality for all of us on this panel, or our colleagues
who have spoken earlier today, that prevention is actually the
most cost-effective way, in terms of policy. You know, we are
talking about this in some respect because we have a fiscal
policy issue. But the most fiscally responsible and
conservative action the government can take and nonprofits can
take is to be preventative. So I think that example relays
that.
Simply put, people--the money may go away, but the people
and need do not. So, while many of our government partners
often applaud us for helping to serve people in need, we simply
ask, ``Don't handcuff us, and enact policies to help us
positively impact the community that we both serve.'' Thank
you.
[The prepared statement of Mr. Ross follows:]
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Mr. REICHERT. And thank you, Mr. Ross.
Ms. Ireland, you are recognized for 5 minutes.
STATEMENT OF LISA IRELAND, EXECUTIVE DIRECTOR, UNITED WAY OF
ORLEANS COUNTY, MEDINA, NY
Ms. IRELAND. Thank you, Mr. Chairman. Good afternoon to Mr.
Chairman and the Members of the Committee. Thank you for
providing me the opportunity to testify at today's hearing on
behalf of both the United Way of Orleans County, as well as the
United Way network here in the United States.
New York State, as you are well aware, has suffered 2 years
of devastating storms, concerns over a very challenging
economy, as well as both State and Federal cuts to the
ultimately important human service programs. All of these have
put a tremendous amount of pressure on the charitable sector to
address community needs. Any effort to limit the charitable
deduction sends the wrong signal to the donors at the time that
their gifts, especially our large donors, are needed the most.
As an Executive Director of a smaller United Way that is
situated in a mostly rural area, we rely heavily on a few major
donors to continue to support our mission and the programs that
we sponsor in our local area. We currently sponsor over 20
programs from a very wide variety of service areas, including
support for children, the elderly, those in poverty, and those
with disabilities.
As an example, we fund the only youth mentoring program in
our local community. Entitled Just Friends, it has successfully
created over 100 relationships between children and adults. The
children in this program have what we call and can be seen as
difficult home lives. In many cases, they are from either a
single-parent home, or they are being raised by a grandparent,
an aunt, an uncle, and, in some cases, a next-door neighbor.
Many of them also come from households with transient members,
where on a daily or weekly basis these children have different
family members, different people living in their homes with
them.
As the name of the program implies, our Just Friends youth
mentoring program matches at-risk youth with an adult figure
who really wants to just be their friend. This allows for a
constant positive role model in their lives, who will take the
time to build a special, one-on-one relationship with them. In
many instances, the mentor and the child spend their time
together doing simple things. We don't ask our mentors to go
out and spend hundreds of dollars on them every time they see
them. They are asked to give life back to this child. They take
the time, on a daily basis when they see these kids, doing such
activities as fishing--because in our area we are the number
one fishing area, so that is really important--baking cookies--
which you and I may see as a regular daily thing, but to some
of these children, no one has ever taken the time to bake
cookies with them--to teach them how to plant a garden and to
watch it come to fruition, where they have flowers or fruit or
vegetables that they have grown themselves.
Imagine a child the first time they walked into a county
fair, learning about the animals they have only ever seen in
books, and having the opportunity to walk around with someone
holding their hand, caring about them. And maybe they could
just spend some time having some ice cream.
We live in a region in our area that has two State
facilities, two State prisons. And we had a child in this
program who came from the inner city of New York City. Her
mentor, the first time they went out, they went to a local
place out by Lake Ontario called Brown's Berry Patch. And what
they did is they walked around, they picked apples, and they
just spent the day together. The only time this child had ever
seen an apple was in the local supermarket on the street in
Manhattan. They didn't know what an apple tree even looked
like. These are special one-on-one opportunities given to these
children.
The activities that these children are going through with
these mentors are simple, things that, in our daily lives, we
take for granted. You may have a child, a grandchild. I have
little children. Every single day when I tuck my children into
bed, I don't take that for granted, because these children
don't have that.
In building these relationships, our mentors are able to
build the child's self esteem, and are able to offer
encouragement to aspire them to achieve a better tomorrow for
themselves.
As an outcome to these relationships, we have seen an
increase in school attendance, higher graduation rates, and
more involvement in school activities. One of our greatest
moments is when our mentor was able to watch her mentee walk
across the stage at graduation, because that child had no one
in their lives that had ever graduated college.
Our local United Way is very concerned that any limitation
on charitable giving will have a detrimental effect on our
ability to raise funds and support these programs.
In closing, I have had the privilege of working in the
nonprofit sector in Orleans County for the past 12 years. I
have worked with a variety of programs and an array of people
whose lives have been directly impacted by the work of United
Way. I have seen firsthand the success of these programs and
the individual successes of the people whose lives have been
changed by these programs. I cannot begin to put into words how
important it is that we do whatever we can do to enable our
major donors to give. I encourage you to preserve the
charitable deduction as it exists in the Tax Code.
Again, thank you for the honor and the privilege of being
here with you today, and thank you for everything that you do.
[The prepared statement of Ms. Ireland follows:]
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Mr. REICHERT. And thank you.
Ms. Irgang, you are recognized for 5 minutes.
STATEMENT OF TORY IRGANG, EXECUTIVE DIRECTOR, UNITED WAY OF
SOUTHERN CHAUTAUQUA COUNTY, JAMESTOWN, NY
Ms. IRGANG. Thank you very much for your patience and for
your stamina. I think I am the last thing holding you here
today.
Our United Way is located in the southwestern corner of New
York State, and we have a service area of approximately 72,000
residents. Ours is a traditional community, where the United
Way has an impeccable reputation as the charity of choice. And
I inherited that when I came there, not bragging about myself.
In 2012 we invested just over $1 million into community-
based programs that impact 31,000 lives. And here are just a
few examples of how those dollars are translating to outcomes.
Students participating in school-based mentoring at
Jamestown High School are remaining in the same match with an
adult for an average of 30 months, versus the national average
of only 9 months. In 2011, 80 percent of these students pursued
post-secondary education or job training upon high school
graduation. During the last school year, all of the teenage
mothers enrolled in a combination education and parenting
program graduated on time, and their children had received all
recommended immunizations.
The number of older adults receiving home-delivered meals
in 2012 in our community increased by more than 10 percent.
This $4-per-day remedy kept more people in their homes and
saved us thousands in Medicaid expenses associated with
facility-based care.
Families filing their taxes through our volunteer income
tax assistance program received $330,000 in a combination of
earned income and child care tax credits last year. Nearly 50
percent of those who filed with us expressed an intent to use
their refunds to purchase a home or car or establish a savings
account.
These programs are administered by community-based
organizations that remain nimble. What I mean by that is they
can respond to emerging needs quickly, and adjust their service
as demand shifts. Our United Way is at the heart of this,
annually utilizing a team of 40 individual volunteers to
compile and monitor program outcomes and make recommendations
that lead to efficiency and improvement.
What is behind this system of investment, review, and
improvement in our community? It is charitable giving. The
United Way of Southern Chautauqua County's 2012 campaign raised
just over $1.3 million. Approximately 17 percent, or $221,000,
came directly from individual donations of $1,000 or more. Yes,
these gifts came from the hearts of good people who care about
the community. But it would be foolish to believe that these
donors were not also motivated by the tax incentive that they
received.
The Chronicle of Philanthropy reports $21.9 million in
charitable giving annually in Chautauqua County, which is quite
impressive. With a median household income of only $41,000, I
believe we need all the incentives available to encourage this
high level of charitable contribution to continue. For lower-
wage earners, the itemized deduction is a modest incentive.
For the highest wage earners, those with the greatest
capacity to give, the ability to itemize is a huge incentive.
And without this incentive, the United Way of Southern
Chautauqua County stands to lose a significant portion of its
campaign revenue. This would devastate the 44 programs that
receive funding currently. And these are exactly the types of
programs community members and donors want to support, those
that keep their administration simple and low-cost, those that
adapt to a changing landscape, those with whom they have a
personal connection.
Just to give a face to the type of programming that changes
lives and benefits from United Way support, I will conclude by
telling you about Len and Armando. Len serves as a mentor to
Armando, and has for over 4 years. They meet for lunch at
school once a week. Over the time they have been in a mentoring
match, Armando has been moved to three different schools. Each
time, Len has been there to help him cope with the transition.
He keeps Armando focused on his schoolwork, even when other
things seem more important. Most of all, Len listens to Armando
in a way that a friend or a parent just can't do.
On the other hand, Len has found the relationship
beneficial. Armando has helped him become more accepting and
patient with others, including his own children. Len's visits
with Armando are the bright spot in his week, and he can see
the time he has invested is already paying dividends.
There are thousands of stories like this one from southern
Chautauqua County. What they all share in common is that they
wouldn't be possible without the generosity of caring
individuals. Protecting the charitable deduction is a critical
piece to ensuring that this generosity continues in communities
like mine. Thank you.
[The prepared statement of Ms. Irgang follows:]
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Mr. REICHERT. Thank you for your testimony. Mr. Davis, you
are recognized for 5 minutes.
Mr. DAVIS. Thank you. Thank you very much, Mr. Chairman.
And, again, I certainly appreciate the witnesses who have been
here for a sustained period of time.
I would appreciate it if each one of you who are affiliated
with a United Way organization would answer this question for
me. I have always wanted to know more about who the people were
who donate to the United Way. Some people think that you have
to be wealthy. Some people think that wealthy people are the
individuals who do it. So, if you could, give us a description
of who you think your donors are, whether they are a mixed
group, low-income, high-level donors, and what motivates them.
I think we heard from Mr. Mack considerable information
relative to what motivates him and other people like him.
So, if perhaps we would just begin with you.
Ms. IRGANG. I think they nominated me. In southern
Chautauqua County, we are a very small rural community. The
vast majority of our campaign comes from regular, everyday
people who are donating $26 or $52 a year. So a dollar a
paycheck or a dollar a week. We have about 150 donors who make
up that leadership circle, that highest level of giving. But
certainly if we were looking at the volume that comes in, it is
really from people just like you and I, everyday people who are
working and contributing at a sacrificial rate for themselves.
I heard Brian Gallagher say earlier today in our meeting
that the average gift across all of United Way worldwide is
$300. So we really are looking at donors who are giving--many
donors are giving smaller amounts of money. And what we are
looking at is that a portion of our campaign--in my case, 17
percent--comes from those large donors.
Ms. IRELAND. Thank you very much for the question. We in
Orleans County are an extremely rural county, as well. And I
would answer you in saying that we have what you might want to
call a mixed bag of donors. I am fortunate enough to have in
our one area a large manufacturing company who is currently
based out of Chicago. But with their foundation, every dollar
that the employees donate, they double that to $500, and then
they, you know, match above and beyond that. The employees
themselves this year raised $26,000. The company matched by
$26,000, which is generosity beyond belief for us.
On the other hand, I have the $75 donors that send that in.
But one of my favorite, favorite donors is a lady that, since I
started 1\1/2\ years ago, comes in every single month and gives
me $5. It is all she can afford, and she said, ``It is what I
can give to make a better tomorrow after I am not here.'' So I
have both ends. But they give because they care, and they give
because they know that, although today might be a good day for
someone, somebody might need that money tomorrow.
Mr. ROSS. From a statewide perspective, I would just echo
what my colleague Jill Michal said a little bit earlier. She
talked about their United Way raised $60 million, but they
don't raise it from 60 millionaires. What I like to say in
Pennsylvania, we raise $175 million across every United Way in
the State, which is great. But when you look at our State
budget, it is $28.7 billion.
But what I like to tell donors in Pennsylvania is that
every donor, whether you gave the $52 or whether you gave the
$10,000 or the $1 million, every donor is a $175 million donor
in Pennsylvania. Because without all of those aggregate
donations, we don't get to that $175 million.
So I think another way of looking at it, as well, is to
look at how United Way campaigns are organized. I often have
divisions. So you have schools, you have labor, you have
businesses. Actually, one of the things I think is most
impressive is the fact that the agencies that we often support
often do fundraising campaigns to support the United Way. So
the agencies that actually get the funds actually raise money
from their employees to contribute to the campaign. So it
really is a comprehensive community effort.
And this one last point regarding the type of donors, we do
have 26,000 donors that give over $10,000 a year. And that
equals about $500 million, nationally.
Mr. DAVIS. Thank you very much. And thank you, Mr.
Chairman. I yield back.
Mr. REICHERT. Thank you. The gentleman's time has expired.
Mr. Reed, you are recognized for 5 minutes.
Mr. REED. Thank you, Mr. Chairman. And I would like to
thank the entire panel, and especially Tory, for your
testimony, and for all the hard work that you do in our
district in Chautauqua County and our neighboring county of
Orleans, Ms. Ireland.
One question I have for you is if you are not in business--
say the charitable deduction, whatever happens to it,
jeopardizes your very existence if it goes away--who would do
the work that you do now, in your mind?
Ms. IRGANG. I think you would have a lot of calls to your
office, probably. But in truth, there are 19 agencies located
in the greater Jamestown area that receive support from the
United Way. And their collective revenues are around $20
million. So it is a big chunk of our community. United Way is a
small piece of that, obviously, but we are kind of the lynch
pin. We are the leverage point. We are what they need to bring
in other dollars, the foundation that they can count on.
And so, I don't want to say we are irreplaceable, but I
think that we play an extremely critical role. And I am not
sure there is a replacement for it.
Mr. REED. Well, I appreciate that, because some of the
discussions I have had with Members on this issue, some have
kind of played devil's advocate and had the argument of, well,
if we got rid of the charitable deduction, that would produce
more revenue to the government, and then the government could
step in and provide the services.
And one of the things I am concerned with in regard to
that,
for every dollar that is given to you--for example, a United
Way--how much of that dollar is utilized on the front line,
versus if the dollar was a taxpayer dollar that went to the
government--say to Washington--and then back to provide the
service, how much of that dollar would make it to the service
of the people that you are intending to serve?
Anyone on the panel, if--Mr. Mack is eagerly jumping
forward. Thank you, I appreciate it.
Mr. MACK. Thank you. I go along with President Obama and
his concept. Instead of top-down, bottom-up, the people that
are on the bottom, that are on the bottom of the start-ups,
they could be wealthy people, they could be poor people. They
have great ideas. And if they feed from the bottom up, instead
of feeding from the top down, where the government tells you
where to give, it would wipe out the whole creativity, it would
wipe out all the dedication of these people that work because
they are dedicated. They make sometimes little money or no
money, but they believe in what they do.
Mr. REED. Good point. Mr. Watt.
Mr. WATT. Mr. Mack touched on something earlier, which is
coming from the UK, where you are used to having government
pick up the tab for education, health care, a wide range of
things. It means that the philanthropic incentive in the UK is
focused very differently: Overseas aid, cuddly animals, and
children. It goes to different causes. The problem with that is
that at times like this, when things are very tight, budgets
are being balanced, we are about to move to the sequester--we
will see the same thing here--the first thing that gets cut is
government commitment to co-funded projects with nonprofit
organizations.
So, the kind of approach where government becomes
responsible, you take away something like the tax deduction,
which puts the responsibility on the community to deliver
service, and transfer it back to government, it is a very, very
slippery slope to go down.
I have lived here long enough to recognize where I think
the merit of the balance lies, and I have to say that I don't
think that government should assume the responsibility of
nonprofit activity.
Mr. REED. I appreciate that. Did you want to offer
something, Ms. Ireland? Please----
Ms. IRELAND. Just one example of what would happen. We have
what's called Camp Rainbow, and it is run by the ARC, and it is
a camp up in Lyndonville, New York. It was started years ago
for children with disabilities because these parents started it
saying, you know, ``There is no camp for my child who has
disabilities.'' It has since been open to children without
disabilities to teach children to learn together, and to be
inclusive, not exclusive. And we fund heavily into that
program.
And their Executive Director, when she does presentations
with me, lets everyone know that if funding from United Way
were to be cut to that program, that that program would have to
stop, because they do not receive any funds. They lost a
Federal grant for transportation, and transportation alone, to
get the children back and forth to camp for the summer, is
$17,000.
So, that is an example of your question if it were to go
away, what would happen. And these children, this is the only
camp that they have. It is specially designed for wheelchair
access and children with leg braces. And it is the greatest
time they have. So there is an answer to what would happen.
Mr. REED. Well, I appreciate that. I see my time is
expiring. And Lyndonville is up on Oak Orchard Creek, and I
think I have caught a few salmon and brown trout there.
Ms. IRELAND. I am sure.
Mr. REED. I appreciate the reference to the fishing. Thank
you all.
And with that, Chairman, I yield back.
Mr. REICHERT. Thank you, Mr. Reed. Mr. Lewis, you are
recognized for 5 minutes.
Mr. LEWIS. Thank you very much, Mr. Chairman. And I will be
very brief. I want to thank each of you for being here, and
thank you for being so patient.
This is a question for all of the United Way organizations
that are on the panel. I want to know more about the people you
do not have the resources to serve, to help. Do you have to
turn people away from your program? How does the charitable
deduction help your organization to provide these services?
Mr. ROSS. Oh, I am going first this time? Thank you for the
question, Mr. Lewis. I think there are a couple of ways to
answer that question.
First of all, I want to make the point that serving people
in need does not occur in a vacuum. It really takes an
infrastructure to make that happen. It is not just the
philanthropic sector or the government sector. Because when
someone needs a need, they don't care where the particular help
might come from. So it may be a government program, it may be a
nonprofit program. We all work in concert. So that is one
answer to the question. Certainly, when there is a cut in
services that--from our government partners, then often United
Way has come to--to try to fill that gap.
There is always more need than dollars, no matter how much
money you raise. And I think part of that is because, you know,
human beings evolve. The challenges that we had in the '70s and
the '60s are not the ones that we have today. So certainly
there is always an unmet need. I think most United Ways undergo
a process called community needs assessment, in which they try
to prioritize what are the most critical needs in the
community. And--because the resources are limited, you have to
be sort of strategic about this. But my colleagues at the local
level I think can talk a little bit more in depth about that
process.
Ms. IRELAND. Thank you, Mr. Lewis, for that question and
the opportunity to speak about it. There is always going to be
more need than we can take care of. And again, we are a small
rural community with limited resources. The number one thing
that I have encouraged our agencies and our community to do is
to collaborate together. And we have, in our community, a large
need for literacy. And that is something that we are working on
right now.
For example, we have so many programs that we work on in
getting literacy into the family and to the children. But if
the parents can't read, then what is that helping? So we--for
example, we had all these kindergarten forms that came home,
and the parents were just signing them and sending them back.
They didn't know what they said. So we are working as a
collaborative unit to kind of say, ``I can do this; what can
you do?''
And in a case where there is a need that we can't meet, we
go back to the local community that supports us so well, and we
just say, ``Here is the need. What can we do together?'' And
our community is so small and so rural, but so amazing and so
giving that there is never a circumstance that they won't rally
around. A sick child without medical insurance? They will, you
know, set up a chicken barbecue, do whatever they can.
So, any incentives such as, you know, the charitable tax
giving, all of those, you know, Tax Codes--which is so far
removed from my expertise--but anything that we can do to, you
know, keep our donors, encourage our donors, so that we can go
to that donor that gives us $1,500 a year and say, ``This is
the story. Can you give us $2,000 next year?'' So we work with
our community to meet the needs as best we can.
Mr. LEWIS. Thank you.
Ms. IRGANG. And I think just to bring up something that--I
think what they have said is wonderful. In conclusion, United
Way is in a position to help hold the programming and the
agencies in our community somewhat accountable for the funding
that they receive.
We also, as was mentioned earlier, we often do community
needs assessing. So we are able to direct agencies and programs
that maybe are not as necessary as they once were to evolve and
follow the needs, so that we can try to meet the needs that are
most pressing and most important, not necessarily legacy
programs and keep them going forever. So I think that is an
important role for United Way in almost every community that it
is in.
Ms. IRELAND. I agree.
Mr. LEWIS. Thank you. Thank you, Mr. Chairman. I yield
back.
Mr. REICHERT. Thank you. Well, thank you for your time
today and thank you for your testimony. And even though this
has been a long process for everyone today, almost 7 hours and
41 witnesses, 6 different panels today, it really has been, I
think, a very worthwhile exercise. And again, thank you for
hanging in there and staying until the very end. And we have a
number of witnesses--or Members here with us still, people
moving in and out throughout the day.
But the process here is going to be one, as we move
forward, is going to be very open, as was today's hearing. And
I am proud to say--and I don't know if some of you were in the
audience earlier in the day when I said that I have been chosen
as the Chair of the Charitable Organization Working Group. And
Mr. Lewis is the Co-Chair. And he and I together, I think, are
very excited about working with all of you in finding a way
that we can keep working to help those people that need help,
and also make the system fair.
And I know I am going to ruin your name again, but I think
Mr. Palatiello----
Mr. PALATIELLO. John.
[Laughter.]
Mr. REICHERT. That works, too. I will call you JP, how is
that? John, I think you pointed out a very interesting thought
in making sure that there are organizations out there that
aren't in it to create revenue for themselves and compete with
private businesses, but they really are truly there to help
folks who really need help. And that is one of the things that
we will be looking at, too, as we have our working groups.
But I also want to say to the question that Mr. Davis asked
on who donates and who contributes, I know that United Way and
Special Olympics are very innovative in their fundraising
events. I have participated in those events as the sheriff back
in Seattle and King County. People get a great deal of fun out
of watching a full-grown sheriff with 1,100 people working for
him riding a tricycle in a tricycle race. They will come to see
that and pay a lot of money. They will also pay to see a
Saturday jump in Lake Union in the Polar Bear Plunge.
So those are fun events, but--and they bring the community
together in a way that I know you recognize. You see, it is not
only about the money, it is about the unity of the community
and working together to provide for those people that really
need our help.
We are going to move forward again with this open process,
and I look forward to your continued input. And thank you all
for what you do for those people in need each and every day. We
really appreciate your efforts.
So, with that, the Committee stands adjourned.
[Whereupon, at 4:51 p.m., the Committee was adjourned.]
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