[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]



                                  








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                      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:]
    
    
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    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:]
    
    
  
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    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:]
    
    
    
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    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:]
    
    
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    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:]
    
    
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    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:]
    
    
  
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    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:]
    
    
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    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:]
   
   
   
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    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.]
    [Submissions for the Record follow:]
    
    
    
    
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