[Senate Hearing 117-811]
[From the U.S. Government Publishing Office]
S. Hrg. 117-811
EXAMINING CHARITABLE GIVING AND
TRENDS IN THE NONPROFIT SECTOR
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
MARCH 17, 2022
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
54-579 PDF WASHINGTON : 2024
COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
DEBBIE STABENOW, Michigan MIKE CRAPO, Idaho
MARIA CANTWELL, Washington CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland RICHARD BURR, North Carolina
SHERROD BROWN, Ohio ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania TIM SCOTT, South Carolina
MARK R. WARNER, Virginia BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts BEN SASSE, Nebraska
JOHN BARRASSO, Wyoming
Joshua Sheinkman, Staff Director
Gregg Richard, Republican Staff Director
(II)
C O N T E N T S
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OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 1
Lankford, Hon. James, a U.S. Senator from Oklahoma............... 3
WITNESSES
Cardinali, Daniel, president and CEO, Independent Sector,
Washington, DC................................................. 5
Morgan, Susannah, CEO, Oregon Food Bank, Portland, OR............ 6
Osili, Una, Ph.D., Efroymson chair in philanthropy and economics,
and associate dean for research and international programs,
Lilly Family School of Philanthropy, Indiana University,
Indianapolis, IN............................................... 8
Steuerle, C. Eugene, Ph.D., co-founder, Urban-Brookings Tax
Policy Center; Center on Nonprofits and Philanthropy, Urban
Institute; and ACT for Alexandria, a community foundation,
Washington, DC................................................. 10
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Cardin, Hon. Benjamin L.:
Letter from Apra Maryland.................................... 35
Cardinali, Daniel:
Testimony.................................................... 5
Prepared statement........................................... 35
Responses to questions from committee members................ 41
Crapo, Hon. Mike:
Prepared statement........................................... 48
Lankford, Hon. James:
Opening statement............................................ 3
Submissions for the record................................... 48
Morgan, Susannah:
Testimony.................................................... 6
Prepared statement........................................... 60
Responses to questions from committee members................ 61
Osili, Una, Ph.D.:
Testimony.................................................... 8
Prepared statement........................................... 64
Responses to questions from committee members................ 68
Steuerle, C. Eugene, Ph.D.:
Testimony.................................................... 10
Prepared statement........................................... 78
Responses to questions from committee members................ 87
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement........................................... 93
Communications
American Alliance of Museums..................................... 95
American Heart Association....................................... 97
Anthony, Melanie................................................. 101
Association of Art Museum Directors.............................. 102
Association of Fundraising Professionals......................... 103
Beugen, Paula J.................................................. 107
BIPOC Executive Directors Coalition of Washington................ 108
Business Coalition for Fair Competition.......................... 108
California Association of Nonprofits............................. 115
Center for Fiscal Equity......................................... 116
Colorado Nonprofit Association................................... 120
Community Foundation Public Awareness Initiative................. 122
Council for Advancement and Support of Education................. 128
Council on Foundations........................................... 130
Food Donation Connection......................................... 133
Girl Scouts of the USA........................................... 134
Heymann, Jon..................................................... 135
Horvath, Aaron, Ph.D. and Jean Lin, Ph.D......................... 136
Idaho Nonprofit Center........................................... 138
Indiana Philanthropy Alliance.................................... 142
Initiative to Accelerate Charitable Giving....................... 144
Iowa Council of Foundations and United Ways of Iowa.............. 145
Jewish Federations of North America.............................. 145
League of American Orchestras.................................... 151
Michigan Nonprofit Association................................... 154
National Council of Nonprofits................................... 157
National Health Council.......................................... 163
National Taxpayers Union......................................... 165
NH Center for Nonprofits......................................... 168
Nonprofit Alliance............................................... 170
Philanthropy Colorado............................................ 171
Snape, William J., III........................................... 172
Theatre Communications Group..................................... 177
United Philanthropy Forum........................................ 179
United Way....................................................... 181
Vanguard Charitable.............................................. 193
YMCA of the USA.................................................. 195
EXAMINING CHARITABLE GIVING AND
TRENDS IN THE NONPROFIT SECTOR
----------
THURSDAY, MARCH 17, 2022
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:07
a.m., via Webex, in Room SD-215, Dirksen Senate Office
Building, Hon. Ron Wyden (chairman of the committee) presiding.
Present: Senators Cantwell, Carper, Cardin, Brown, Bennet,
Casey, Warner, Whitehouse, Cortez Masto, Grassley, Thune,
Cassidy, Lankford, Daines, and Young.
Also present: Democratic staff: Chris Arneson, Tax Policy
Advisor; Joshua Sheinkman, Staff Director; and Tiffany Smith,
Chief Tax Counsel. Republican staff: Jamie Cummins, Tax
Counsel; and Jeffrey Wrase, Deputy Staff Director and Chief
Economist.
OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
OREGON, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The Finance Committee will come to order. We
meet this morning to discuss ways to look at promoting
charitable giving in America. Our people are generous, and
that's why charity is one of the key incentives that's right at
the heart of the American tax code, and it is a top priority
for Democrats and Republicans on this committee.
My own view is that the charitable tax deduction is a
lifeline and not a loophole. There has never been more accuracy
in that than there was in early 2020 when the pandemic arrived
in the United States. Over the course of a few weeks in March,
the pandemic wiped out a quarter-million jobs in my home State
of Oregon. Our State has a workforce of just over 2 million
people. In a flash, Oregon's unemployment rate jumped by 10
percentage points.
As terrible as those figures are, other States had it even
worse. More than 22 million Americans lost their jobs or had
their hours reduced to zero. The unemployment rate hit 14.8
percent, the highest ever recorded. That economic devastation,
added to a hunger crisis, has been causing pain for American
families for far too long. According to the Children's Defense
Fund, prior to the pandemic more than 10 million American kids
grew up in households where they just did not have enough to
eat. Black and Latino families were twice as likely to be short
on food. And again, that was the situation before anybody had
heard of COVID-19.
The crisis exploded in 2020. Everybody remembers the images
of cars stacked up for miles outside of food pantries. My good
friend Susannah Morgan is here, a long-time leader of the
Oregon Food Bank. I was out there with her at those food
pantries where we were putting boxes of food into those cars
one after another for just, it seemed like forever.
There was an added challenge of feeding vulnerable kids,
many of whom were unable to get the free lunches they rely on
in school for nutrition. So, as you have probably picked up, I
think we are very fortunate to have my Portland neighbor
Susannah Morgan, the CEO of the Oregon Food Bank, with us. She
will describe how the crisis hit Oregon families like a
wrecking ball, as well as how her terrific organization was
able to respond to the 1,400 pantries across Oregon and in
southwest Washington.
The record shows that in 2020 in Oregon and across the
country, Americans stepped up again and again when their
neighbors needed help, when charitable giving reached new
highs. The Federal and State Governments stepped up. Now there
are some important lessons this committee ought to consider as
we go forward, because there are still millions and millions of
people across the country who need support.
Organizations like the Oregon Food Bank are still seeing
demand at higher levels than they did in 2019. Two quick
examples: first, the CARES Act, which the Congress passed in
March of 2020, included a tax deduction for charitable
donations of up to $300 for the vast majority of taxpayers who
do not itemize their tax returns. The 2017 tax law took some of
the punch out of the existing charitable deduction by greatly
reducing the number of taxpayers who itemize. So the new $300
deduction helped to correct a big flaw in the 2017 law, and it
helped promote giving in 2020. It was extended and expanded in
2021, but it expired on January 1st. I believe there is going
to be bipartisan interest in reviving it and expanding it to
promote even more giving.
Second, in addition to promoting donations, the Senate also
ought to be looking at ways to help our nonprofits operate.
Let's help them keep their doors open, and help keep their
workers on the job. The CARES Act created an Employee Retention
Tax Credit that saved a lot of jobs nationwide. It was extended
and expanded in 2021. The credit was designed with parity for
nonprofits in mind so that these nonprofits and their workers
could certify and benefit, just like other employers.
Last year, with Senator Brown, Senator Klobuchar, and
Senator Schatz, I also introduced a bill called the WORK Now
Act. That would also help nonprofits grow and hire. It would
create a new grant program to help nonprofits retain staff,
hire the unemployed, while also supporting efforts to scale up
the services that are offered.
Let me just close by saying organizations like the Oregon
Food Bank--and we are lucky to have them in virtually every
nook and cranny of our country--those organizations are the
backbone of America. In addition to promoting charitable
giving, it is a no-brainer that the Congress ought to find
smart ways to help our nonprofits do their essential work as
well. There is lots for the committee to discuss.
I want to thank our witnesses for joining the committee,
and I also want to express my appreciation to members of the
Finance Committee. This will be the close of what amounts to a
triple header for the committee this week. We began the week
with a very important hearing looking at security and trade
issues relating to the Indo-Pacific. Yesterday we dealt with
the enormously important question of finally getting relief to
Americans who are just getting crushed by these prescription
drug bills. And today we are going to look at how to promote
charitable giving.
So I want to thank my colleagues. That is a pretty big
load. There is a lot going on this week in the United States
Senate.
[The prepared statement of Chairman Wyden appears in the
appendix.]
The Chairman. Let me recognize Senator Lankford.
OPENING STATEMENT OF HON. JAMES LANKFORD,
A U.S. SENATOR FROM OKLAHOMA
Senator Lankford. Mr. Chairman, thank you. And thanks for
holding this hearing. It is an extremely important issue to be
able to discuss the health of our nonprofit sector and how we
can support and encourage their continued work. This is an
issue that is very near and dear to me. I served for more than
20 years with nonprofits. I am very passionate about the work
of nonprofits. And this is also a policy issue for our Nation
as well.
Let me first say ``thank you'' to those who serve in the
nonprofit sector, both who are here and who are all over the
country. You do remarkable work and are the real safety net in
times of need. I tell people all the time, we really have three
safety nets in America. While most folks look at government and
say, that is the safety net, we really have three different
safety nets. The first one is the family. The second one is the
community that is dominated by churches, nonprofits--both
secular and faith-based nonprofits that are out there--and then
the third is government.
If the family fails, and if the local community and the
nonprofits are not able to meet the need, then government is
the third option there. So the key aspect is to be able to make
sure all three of those safety nets stay healthy and stay able
to do their task. That is what happened during COVID-19, quite
frankly.
Our charities and our nonprofits rose to the occasion. They
served countless Americans facing uncertainty and difficulty
all across the country. But they were not immune, either, from
the effects of COVID-19, based on their workforce, their
operations, their organizational structure itself.
According to the Johns Hopkins Center for Civil Society
Studies' 2020 Nonprofit Employment Report, during the first 3
months of the pandemic, from March through May of 2020, the
nonprofit sector lost an estimated 1.6 million jobs, reducing
the nonprofit sector by over 13 percent. As of the end of last
year, the sector is still down nearly half a million jobs.
We know that encouraging more Americans to give will help
direct additional resources to nonprofits to ensure they can
continue to provide vital services to our communities. In 2020,
in the CARES Act, we included a provision to allow taxpayers to
take a deduction of up to $300 for charitable gifts they make.
Then in December of 2020, we extended that provision so that
taxpayers could deduct $300, or $600 for joint filers, for
gifts given in 2021.
As a result of that, in 2020 we had a record amount of
giving to nonprofits. Unfortunately, this provision expired at
the end of last year. This provision is a non-itemizer
charitable deduction and acts as both a lifeline to a nonprofit
sector that felt the effects of COVID-19, and it also answers
the call to service. It is an incentive for people to be able
to give.
Now again we are reminded of how crucial these
organizations are, both in local communities and
internationally, as we see the nonprofit community respond to
the devastating crisis in Ukraine currently. They are
supporting Ukrainian citizens with care, housing, and food, and
that is being done by a tremendous number of nonprofits.
Having the charitable deduction in place can incentivize
even more giving at critical times like these. This provision
is something I am very passionate about and have worked on for
several years with a great group of partners through the
introduction of the Universal Giving Pandemic Response and
Recovery Act last year.
I have folks who catch me all the time and say that
Americans are very generous. They will give without the tax
deduction, so the tax deduction is not necessary to encourage
Americans to give. I always smile at them and say, go to any
nonprofit in America, pick any one of them, and ask what their
highest month of giving is, and they will always smile at you
and say ``December.'' That is not because of the Christmas
spirit; it is because that is the end of the tax year, and they
know if they are going to get the deduction, they have to do it
right now, which is also why for many nonprofits in 2020 and
2021, they had a very large number of gifts the last week of
December of $300, the exact amount of that tax incentive.
I thank nonprofits for their work, and I want to make sure
that we continue to be able to encourage their work as the
safety net in our society. For all of you who are experts on
this panel today, thank you for giving your time and your
effort, both in your written testimony and the oral testimony
you will give. I thank you for your steadfast dedication to
your work.
Mr. Chairman, I also ask that Ranking Member Crapo's
prepared statement be included in the record
The Chairman. Absolutely, we will do that. And we are all
going to work, as we have done on a bipartisan basis, on these
issues.
[The prepared statement of Senator Crapo appears in the
appendix.]
The Chairman. You know, Senator Lankford--we are going to
the witnesses in a moment--touches on an important point.
People say, ``Why do we need anything in the tax code? We are a
good people. We are going to give. We are going to help.''
I share that view. We are going to help, and there is no
question about it. But as I indicated, I think the charitable
tax deduction is a lifeline. And based on everything I have
seen, it does affect the number of gifts someone can make, and
the size of the gift. So that is what this debate is all about,
and this committee has a strong history of being supportive of
charities, and we are going to continue that.
Let me introduce our witnesses, and then we will go right
to them. Our first witness is Dan Cardinali, the president and
CEO of the Independent Sector, a national organization and
nonprofit. Our second witness is Susannah Morgan, the
inimitable CEO of the Oregon Food Bank. Our third witness is
Una Osili, who holds the Efroymson chair in philanthropy and is
associate dean for research and international programs with the
Indiana University Lilly Family School of Philanthropy. Our
fourth witness is well-known to many on this committee, Gene
Steuerle, co-founder of the Urban-Brookings Tax Policy Center
of the Urban Institute's Center on Nonprofits and Philanthropy,
and co-founder of ACT for Alexandria.
Thank you all for coming. We will make your prepared
statements a part of the record.
Mr. Cardinali, lead us off.
STATEMENT OF DANIEL CARDINALI, PRESIDENT AND CEO, INDEPENDENT
SECTOR, WASHINGTON, DC
Mr. Cardinali. Thank you very much. Chairman Wyden, Senator
Lankford, and members of the committee, thank you for holding
this hearing, and for the opportunity to share our perspective
today. I serve as president and CEO of Independent Sector, a
national membership organization made up of nonprofits,
foundations, and corporate giving programs nationwide. Our
members and their networks reach into every State and district
and touch every life in America.
I have spent my entire professional life working and
volunteering in the charitable sector. It is clear to me that,
despite the tectonic shifts we are living through, our Nation's
charitable spirit is alive and well. It is also evident to me
that that spirit is not fully unleashed. The charitable sector
is the foundation on which our democracy is built and continues
to evolve. When its foundation is weak, so is our Nation. The
charitable sector is also the engine of our collective
flourishing, a place where people come together to solve
problems, a trusted partner for community and government
leaders, and our economy's third largest employer.
For generations, policymakers have recognized the
importance of this sector by providing a tax deduction for
donations made to charity. I understand that by incentivizing
Americans to support the charitable sector, the Nation can do
more collectively beyond government and individuals going
alone.
Today the charitable sector is made up of about 1.8 million
organizations, 12 million professional staff, and nearly 70
million volunteers. But despite that strength, it is not immune
to the ravages of domestic and global challenges. With the loss
of over 1.6 million jobs during the pandemic, the sector is
still struggling to recover. It lags well behind the for-profit
recovery and is still down almost half a million jobs. At the
same time, organizations have had to adapt to new operational
challenges while facing increased demand for services.
With that, let me discuss how Congress and the charitable
sector can work together to strengthen civil society and help
people thrive. In 2020, Congress created a temporary charitable
deduction for non-itemizers, but allowed it to expire at the
end of last year. Every day that this lifeline remains expired,
it is a blow to our charitable recovery and a missed
opportunity for those in need. I urge you in the strongest
possible terms to restore the non-itemizer charitable deduction
quickly, and to significantly increase or eliminate the cap.
We are grateful to the members and the leaders of this
committee who worked for the creation of that deduction and who
continue to work for its restoration and expansion. Restoring
and expanding the itemizer charitable deduction is essential to
generating giving at a scale that our Nation actually needs.
However, this is not just a conversation about dollars. The
non-itemizer deduction also sends a powerful message to combat
the decade-long decline in the number of Americans who give to
charity at all. A charitable sector that is funded by the
wealthy will look very differently and will serve America very
differently.
I hope you will keep in mind the unique nature of the
charitable deduction. By definition, a donor receives no direct
benefit for their gift. The charitable deduction simply
encourages taxpayers to give away a portion of their income to
benefit others.
In addition to restoring and expanding the non-itemizer
charitable deduction, I also urge you to take action on four
key priorities that are addressed in my written testimony.
First, I urge you to restore the Employee Retention Tax Credit,
which is critical in helping nonprofits keep people employed
and serving their communities. Second, I ask you to pass the
Legacy IRA Act, which would expand the opportunity for seniors
to make contributions to charity through their retirement
accounts. Third, I ask you to increase the charitable mileage
rate to be on par with the business rate, at least temporarily,
which can bolster our diminishing volunteer force. Lastly, I
ask you to consider a set of policy solutions that are needed
to strengthen the partnership between nonprofits and the
Federal Government as a whole. I would welcome the opportunity
to discuss these solutions, which we call the ``seat at the
table'' initiative, either today or in the future weeks ahead.
So, I want to thank you for your support and the
opportunity to testify today. The charitable sector will
continue to step up to respond to the needs of society and,
with your support, will build upon this work to ensure that all
people thrive.
Thank you.
[The prepared statement of Mr. Cardinali appears in the
appendix.]
The Chairman. Thank you very much, Mr. Cardinali.
Ms. Morgan, welcome.
STATEMENT OF SUSANNAH MORGAN, CEO,
OREGON FOOD BANK, PORTLAND, OR
Ms. Morgan. Good morning. Chairman Wyden, members of the
committee, thank you for the opportunity to share my on-the-
ground perspective regarding charitable giving in the nonprofit
sector. My name is Susannah Morgan, and I am the CEO of Oregon
Food Bank. Our network is among the largest in the country,
with a central warehouse that provides resources to 21 regional
food banks, which then support over 1,400 pantries, free-food
markets, and meal sites across Oregon and southwest Washington.
Our mission is to end hunger and its root causes. To build
communities that never know hunger, we need living-wage jobs,
affordable housing and child care, and protection from
discrimination. When we hit tough times, we need government
safety nets like SNAP to ensure everyone has access to food.
Food banks should be the last resort when other systems have
failed, and food alone will never solve hunger.
I have worked in anti-hunger efforts for 26 years across
several States, and the past 2 years have been the most
challenging of my career. More than 865,000 people sought
emergency food assistance through the Oregon Food Bank network
in 2019, nearly one in five of our neighbors. In 2020, this
number rose like a tsunami to a jaw-dropping height of 1.7
million people, and in 2021 remains painfully high at over a
million of our neighbors. Even with the outpouring of community
support, we could not have kept food flowing without
significant State and Federal action.
As we began to run out of food due to the enormous increase
in demand, Governor Kate Brown came through with $1 million a
week for food purchases until USDA commodities arrived through
the CARES Act. Congressional aid reached communities directly
through enhanced unemployment and SNAP benefits, relief
payments to families, and more. The Child Tax Credit alone
drove down child poverty by an incredible 41 percent and
reduced food insecurity by 26 percent. Combined, these actions
helped us to meet the crisis head-on and ensure that hunger did
not spiral out of control.
Charitable giving incentives are an important piece of this
equation as well. Let me share one extraordinary week I had,
tied to decisions made by this committee. On a Monday, early in
the pandemic, my colleague in The Dalles, OR called me over the
moon excited because she had just located the perfect building
for a regional food bank. The purchase price was $750,000. On
Wednesday, a local philanthropist expressed interest in making
a $1-million donation, thanks in part to tax law changes that
allowed 100-percent deduction of her adjusted gross income. On
Friday, she committed to fund the purchase of the building in
what is surely the shortest capital campaign ever.
The work of this committee clearly influences expressions
of love and generosity in our communities. And from where I
sit, it is incredibly important that you consider how future
tax policy changes may impact Federal revenue. Even at our
scale in Oregon, for every meal we provide, SNAP provides ten.
Charity organizations simply cannot replace Federal funding for
the programs and resources our families need to thrive.
So, I humbly ask you to act to strengthen Federal revenue
and advance policies that prevent hunger from happening. The
best thing Congress can do to reduce hunger is to invest in
proven solutions that support families directly. Reinstate the
Child Tax Credit. Modernize SNAP to reflect the true cost of
healthy food. Invest in housing and child care. Raise revenue
by requiring the wealthiest corporations, individuals, and
estates to pay what they owe.
And it is important that any new incentives are designed to
encourage charitable giving that helps our communities now.
Hunger is a crisis today. And charitable support is needed now,
not tucked away for some hypothetical future. Sustain the 100-
percent adjusted gross income deduction. Increase the amount
private foundations must grant annually. Ensure donor-advised
funds have minimal annual distributions and spend-down
timelines.
As we speak, our communities face uncertainty around the
impact of global events, the cost of living, and whether a new
variant might emerge. Hunger remains an epidemic. This is not
over. We need Congress to continue supporting our neighbors
through proven policies, and I believe that together we can
still emerge stronger.
It has been an honor to be with you today. Thank you for
your time and attention.
[The prepared statement of Ms. Morgan appears in the
appendix.]
The Chairman. Thank you very much, Ms. Morgan, and I was
smiling about a couple of things. One, on the ground I have
seen you in action, getting all those boxes of food out. I
think you gave us the theme that everybody can connect with,
and that is ``never know hungry.'' It says it all. Thank you
for all your work.
Now the third witness, Dr. Una Osili, chair in philanthropy
at the Indiana University. Thanks for coming.
STATEMENT OF UNA OSILI, Ph.D., EFROYMSON CHAIR IN PHILANTHROPY
AND ECONOMICS, AND ASSOCIATE DEAN FOR RESEARCH AND
INTERNATIONAL PROGRAMS, LILLY FAMILY SCHOOL OF PHILANTHROPY,
INDIANA UNIVERSITY, INDIANAPOLIS, IN
Dr. Osili. Chairman Wyden, distinguished members of the
committee, thank you for the opportunity to speak today about
how the pandemic is influencing charitable giving. Philanthropy
has long been a cornerstone of our Nation. Even before we were
a Nation, many early Native American giving traditions were
rooted in mutual responsibility and reciprocity. Philanthropy,
both formal and informal, has played a visible role in
responding to the pandemic.
During the COVID-19 era, philanthropy has been
unprecedented in size, scale, and scope. Religious
congregations, grassroots organizations, community foundations,
and nonprofits in areas such as housing and food insecurity
have demonstrated resilience and creativity in meeting urgent
needs.
It is important to emphasize that charitable giving grew
during the first year of the global pandemic, with 2020 being
the highest year of charitable giving on record at $471
billion. Total philanthropy increased by 3.8 percent in
inflation-adjusted terms. Sixty-nine percent of this total was
contributed by living individuals, foundations, and charitable
bequests; corporations account for the remaining 31 percent.
Research has long established that charitable giving is
linked with key economic, financial, and social factors. In
2020, giving was influenced by robust end-of-the-year financial
markets, increased need, and a heightened awareness of racial
inequity that was fueled by the racial justice movements.
Furthermore, with rising economic and health insecurity, the
philanthropic sector is facing greater demand for services, and
nonprofit organizations are adapting to new technology,
staffing shortages, and virtual modes of engagement. In 2020,
online giving increased by 21 percent.
Philanthropy also plays a vital and increasingly visible
role in the global economy. The outpouring of cross-border
generosity in response to the COVID-19 pandemic has been
tremendous, and private donors are addressing global needs
using new vehicles, including crowdfunding, cryptocurrency, and
collective giving. Despite this progress, addressing
humanitarian issues, including the war in Ukraine, will require
an acceleration of efforts to harness private-sector resources.
The 2022 Global Philanthropy Environment Index identifies
obstacles to expanding these cross-border philanthropic flows.
In particular, the Index found more than a third of the 91
economies that are included reported restrictive policies on
cross-border giving.
While it is true that total charitable giving has been
increasing during the global pandemic, the racial justice
movement, and the unfolding humanitarian crisis, we must also
be concerned about post-pandemic giving patterns by Americans
of all income backgrounds. Despite the economic upheaval
produced by COVID-19, recent data show that affluent households
remain committed to charitable organizations, with 88 percent
giving to charity in 2020, consistent with the 90-percent rate
measured in 2017. However, recent data from the Philanthropy
Panel Study, the most comprehensive study of American giving,
showed that the fraction of low- and middle-income American
households that contribute to charity decreased from two-thirds
to half, a decline of 17 percentage points between 2000 and
2018. For younger Americans, declines in giving rates have been
particularly significant.
Looking ahead, we have an opportunity to address issues of
equity and efficiency among donors and nonprofits, since giving
is becoming more concentrated among high-income households. A
growing body of work has examined the effects of extending the
charitable deduction to non-itemizers. This work indicates that
a non-itemizer charitable deduction could increase both the
size of charitable donations as well as induce an expansion of
the number of households that give.
There are many issues to consider when investigating the
impact of tax policy. Nonprofit leaders and policymakers will
need to consider the effect of tax policy on charitable giving
dollars, the number of households that donate, Treasury
revenue, and issues of donor equity and efficiency. Making
timely decisions about policies that support and enhance the
longstanding norms and traditions of American generosity can
help us strengthen the role of philanthropy now and in the
future.
Thank you for the opportunity to testify today, and I am
happy to answer any questions.
[The prepared statement of Dr. Osili appears in the
appendix.]
The Chairman. We will have some momentarily.
Dr. Steuerle?
STATEMENT OF C. EUGENE STEUERLE, Ph.D., CO-FOUNDER, URBAN-
BROOKINGS TAX POLICY CENTER; CENTER ON NONPROFITS AND
PHILANTHROPY, URBAN INSTITUTE; AND ACT FOR ALEXANDRIA, A
COMMUNITY FOUNDATION, WASHINGTON, DC
Dr. Steuerle. Mr. Chairman and members of the committee, it
is an honor again to testify before you. The views I express in
my testimony are my own and should not be attributed to the
Urban Brookings Tax Policy Center, its trustees, or its
funders.
While a temporary increase in the standard deduction
substantially benefited many taxpayers, it contributed to a
reduction in charitable tax subsidies by about 30 percent and
left only about one-tenth of households taking a charitable
deduction. I doubt that Congress or the public will long
support such a narrowly targeted lifeline, in your own words,
Senator Wyden. I view this as a great opportunity to reform
incentives that strengthen the communal efforts that have long
defined our Nation. And my job, as I have been requested, is to
talk about some of the tradeoffs for the amount of money that
Congress might be willing to put forward. You will be getting
many suggestions for reforms, including mine, but my primary
suggestion is to pick among them only after comparing options
under a cost-effective rubric, and put gains for the community,
for the charitable beneficiaries, as the major objective of the
effort.
The classic distribution in revenue tables that we get when
we do tax analysis does not actually measure directly what goes
to the charitable beneficiaries. And there are three parties,
as you said, Senator Lankford, to this transaction: the
householder taxpayer, the community, and the Treasury. That is,
whether you decide in favor of the $50 billion of current
annual subsidies that go to charities under current law or the
$70 billion that was available under current law, you need to
compare options on a cost-neutral basis. Then you have your
talented Joint Committee staff show the net amount of giving
going to the charitable beneficiaries under different
combinations. Finally, when shown any particular option, always
consider alternatives that would generate more gains for the
community and for charitable beneficiaries and fewer windfalls
for taxpayers.
The rest of my testimony focuses primarily on four issues.
First, relative to cost, gains for charitable beneficiaries
will be greatly limited by caps on deductions, and they will be
enhanced through floors that limit the amount of giving to the
excess of something like over 1 percent or more of AGI.
Secondly, almost all proposals for an expanded deduction
provide windfalls to a group we call ``switchers,'' those
itemizers who switch to the standard deduction and then take
the new charitable deduction. There is often no gain for
charitable beneficiaries at all from those switches.
Third, gains for charitable beneficiaries can be further
enhanced by exchanging improved compliance for a stronger
incentive.
And fourth, many of the most cost-effective reforms--such
as allowing deductions at the time of tax filing--take
advantage of insights from behavioral science. Senator
Lankford, you referred to this when you referred to people
thinking about giving at the end of December. They also think
about giving when they file their tax returns.
So why do caps and ceilings matter? Caps concentrate
incentives onto giving that would occur anyway, while floors
concentrate them among giving beyond what one would do in the
absence of a tax subsidy. As one example, compare a universal
deduction with and without a 1-percent floor. Using research
methods commonly applied, failure to provide a floor cost
Treasury $17 billion, while generating only $2 billion extra
for charitable recipients and $15 billion in windfalls for
taxpayers, simply because of not accepting that type of floor.
Any reform should also account for IRS's limited ability to
administer hundreds of millions of charitable transactions
under current outdated systems of reporting. Fortunately, this
is an opportune time for Congress to create a system of
electronic filing for charitable contributions. I have little
doubt that third-party intermediaries can create an efficient
system of reporting to IRS, and we could use the revenues that
would be picked up from improved compliance to provide a higher
and better incentive for charities and for the recipients of
their output of goods and services.
Finally, behavioral science suggests that high bang for
buck reforms that allow deductions at the time of tax filing
simplify life for donors of their lottery winnings and provide
matching grants to charities.
In sum, charitable deduction reform can strengthen our
Nation's longstanding tradition of giving and working together
to provide maximum gains for charitable beneficiaries in the
community, at whatever level of subsidy Congress decides.
Consider how caps significantly weaken and floors significantly
strengthen the incentive provided. At the same time, we need to
decrease rather than add to compliance burdens for IRS and
consider how making incentives more salient can add to
charitable giving.
Thank you for this opportunity to testify before you, and I
would be glad to work with you on these issues in the future.
[The prepared statement of Dr. Steuerle appears in the
appendix.]
The Chairman. Thank you. Let me see if I can do a couple of
points quickly.
Is it correct that we are now seeing a need for assistance
exceeding 2020 levels, and that each of you expect that to
continue? Is that correct? Is there any dissent at the table?
Does everybody agree with that? You are free to dissent. That
is why we have hearings.
Mr. Cardinali. I am not sure that I disagree. But one point
that I would add to that is, that if you dig into the numbers,
there have been a number of extraordinarily wealthy people
making enormous gifts that have perhaps distorted the number
slightly around the amount of giving. So it would be worth
digging into the numbers and seeing the impact of some very
large philanthropic gifts which seem atypical. And whether they
will be sustained or not is a question I think we are all
wondering about.
The Chairman. But on the basic proposition that the need
for assistance exceeding 2020 levels, you expect that to
continue with some possible ramifications for very large gifts?
Mr. Cardinali. Yes.
The Chairman. Okay. So the second question stems from the
first. Do you believe that the current donations and grants,
for the most part--and let's take Mr. Cardinali's point--do you
think current donations and grants are sufficient to meet the
needs?
I am pretty sure you all said ``no.'' Does anybody disagree
with that?
[No response.]
The Chairman. Okay, we will put that one down as a ``no.''
Don't be bashful, because I am absorbing your very important
points.
Dr. Steuerle. Senator, with Dr. Osili's numbers, you know,
charitable giving, even at 2020 levels, is not at past peak
levels as a share of our income. And as our economy has grown
sixfold over the last century, our ability to increase giving--
that share of giving--has not really occurred. So I think all
of us believe that we could do much more as a Nation on this
front.
The Chairman. Very good. So it is always important to look
at both the past, because it is a guide to prologue, and to
kind of weigh, as Dr. Steuerle did, the tradeoffs.
Which programs--let's just go right down the line here. We
have passed novel programs to respond to the pandemic. Which
programs were the most successful, based on your hard evidence?
We will start with you, Mr. Cardinali.
Mr. Cardinali. I think many of them were very effective,
but I would mention three that come to mind. The first would be
the Paycheck Protection Program, which protected 4.1 million
jobs, according to the Johnson Center on Philanthropy, keeping
front-line workers engaged during a pandemic. The second, of
course, would have been the CARES Act and incentivizing giving
that enabled people to reach into their pocket and
incentivizing everybody to do that. Whether or not they could
get out the door and volunteer, they could certainly write a
check and donate. And third would be what Ms. Morgan mentioned,
and what I would also agree with: the Employment Retention Tax
Credit that kept employees.
The Chairman. Very good.
Programs most effective, Ms. Morgan?
Ms. Morgan. The Child Tax Credit, Senator Wyden, which
drove down child poverty and child hunger to rates I have not
seen in 26 years. I have been in anti-hunger work for 26 years,
and we have not ended hunger yet, and we are not stopping until
we do. And so, yes, we need the charitable incentives, and we
need Federal responses. This is a ``both and.''
The Chairman. Okay.
Professor?
Dr. Osili. Yes, I would agree that the CARES Act overall,
the PPP program, and the direct stimulus payments to households
really strengthened the country's ability to withstand the
pandemic. In particular, the Penn Wharton budget models
estimate that the impact of these stimulus packages boosted GDP
5.5 percent.
When we think about what drives charitable giving,
incentives certainly affect not just the amount that people
give, but the vehicles they use and the timing of those gifts.
In addition, economic factors affect their ability to give in
the first place. So American households give when they have the
resources, the means to give. The charitable deduction and the
incentives provide that boost you could see around the timing,
the amount, and the vehicle.
The Chairman. Dr. Steuerle?
Dr. Steuerle. I would include Paycheck Protection. As a
founder of the community foundation in Alexandria, I would also
say even the support that went to the cities that actually came
back out through our community foundation and through all the
charities in Alexandria, right across the river, to support
many of the efforts to provide food, shelter, clothing, and
other items that have been made possible.
So it actually extends far beyond just given what is in the
tax code. I suppose my one exception, Senator Wyden, is I think
most of these provisions were good as temporary provisions, but
such items as the $300 deduction--I think most estimates
suggest that it does not provide much of an incentive in the
long run because it is not applied at the margin. People give
more than $300; it is a windfall in the form of a tax break. I
think it was a good symbol during the crisis, but as a long-
term project, just like Paycheck Protection, I think we have to
look further.
The Chairman. I have long watched your scholarship on this
and share much of your thinking. This was particularly
important because we wanted to give more people an opportunity
to be involved. That was the point.
The 2017 tax bill said, yes, you've got opportunities if
you are really up at the top of the economic system. The whole
point of the $300 effort was to get more people mobilized at
the grassroots and talking about why they were helping our
wonderful Oregon Food Bank. We will continue this discussion.
Also, Dr. Steuerle, I would like you to flesh out for the
Finance staff how you envision this set of electronic
improvements as it relates to charitable giving. Because we
know the IRS is in the Dark Ages with respect to technology.
The comprehensive budget that passed last week is going to give
them hundreds of millions of dollars more. So we are moving in
the right direction. But if you have some ideas that are doable
and cost-effective, I am all ears.
Thank you all, and let's go to Senator Lankford.
Senator Lankford. Thank you. As I mentioned before, and
several of you have mentioned, this is something that I think
is extremely important that we deal with--the non-itemizer
charitable deduction--to incentivize more donations on the
lower end and to be able to keep that going. The data, I think,
also supports this, and we have talked a little bit about this,
but I want to raise a couple of things in some stories here.
Compared to 2019, after the $300 deduction was enacted in
the CARES Act, gifts of less than $250 grew by 15 percent in
2020. So, contrary to most examples of growth in giving during
the times of crisis typically, the growth in these small gifts
outpaced the growth in the larger contributions by 1.5 times.
When compared to 2019, there was a 28-percent increase in
$300 donations on the final day of 2020. That is the exact
amount of actually what the donation amount was. So there is
obviously some connection there, and I wonder what that would
have been if the number would have been higher for that time
period as well.
According to the Fundraising Effectiveness Project
comparing 2019 to 2020, the overall number of donors grew by 7
percent in 2020. New donors increased by 18 percent, and
overall giving increased by over 10 percent. On top of that,
based on their analysis of over $46 billion in charitable
giving, the Blackbaud Institute estimates that charitable
giving in the U.S. grew by 9 percent in 2021.
So how do we keep this going? And how do we continue to be
able to fan the flame of this? I will tell you, it is
significant, and we have seen it be significant. Let me just
give you a few stories from my State of Oklahoma.
Amy from Family and Children's Services was writing in and
said, ``When the new tax laws were amended during the pandemic,
it actually gave me more incentive to dig deeper because I knew
that not only would the nonprofit organizations get the
proceeds they needed, but I also got something in return to
help my spending that was not available to me prior to this. It
was a win/win.''
Tom, who is the Chief Development Officer at Family and
Children's Services in Tulsa said, ``I often get asked as a
fundraiser for nonprofit, `How is annual giving going? And have
we seen a decline since we were not able to do in-person
events?' '' He said, ``In fact, we saw a 17-percent increase in
first-time donors, and amongst donors 40 years or younger. A
few of them said that the tax deduction made them more
generous, and they were able to do something even more than
what they thought they could before because of that
advantage.''
Melissa, who is the director of community engagement at
ReMerge in Oklahoma City, said, ``Last year we had 10 gifts of
$300. Three of those donors were new donors who stated that the
tax credit had impacted their decision and the size of their
gift.''
Angie, who is the chief development and marketing officer
at Sunbeam Family Services, great group, said, ``When universal
tax deduction was enacted, Sunbeam experienced an increase both
in total donations and the average donation amount.''
So we have seen not only just those stories, but a lot of
other evidence. I have worked to be able to expand this. And I
think we can further support our nonprofits. Several colleagues
and I have joined together to expand this. Under our bill,
taxpayers would be able to do a charitable deduction of a third
of the standard deduction--just over $4,000 for single filers
and $8,000 for joint filers.
This bill ensures that every American who gives--not just
those with high incomes and those who itemize on their tax
returns--but others are able to give and to be able to give at
larger amounts, and they are incentivized to do that.
I do want to thank my fellow sponsors--Senators Coons, Lee,
Shaheen, Tim Scott, Klobuchar, Collins, Cortez Masto--as well
as other members of this committee who have co-sponsored the
bill--Senators Stabenow, Hassan, and Brown--for their support.
We do have a lot of support from the community on this bill
as well. I have letters here with me today representing
thousands of organizations, in every State. We have one letter
that a coalition has signed with 1,500 nonprofits that have
signed on, and another with hundreds of local United Ways.
Mr. Chairman, I believe these letters and others have
already been submitted for the record, but I would ask that a
few other letters that have also come in today be included in
the record as well. The Oklahoma Center for Nonprofits, Faith
and Giving, the Jewish Federations of North America, the
National Philanthropic Trust, the National Council on
Nonprofits, the Philanthropy Roundtable, and Philanthropy
Southwest have all written in in addition to that.
The Chairman. Without objection, they will go into the
record now.
[The letters appear in the appendix beginning on p. 48.]
Senator Lankford. So now that I have completely spoiled all
of my time for questions making a statement, I would love to be
able to visit with all of you at great length on this, but the
chairman is an ogre on time, so I am going to have to be
attentive on this.
Mr. Cardinali, I do want to talk about how the deduction
influences the behavior of non-itemizers. What have you seen on
that?
Mr. Cardinali. Well, first of all, thank you for your
leadership. And I think Independent Sector stands squarely
behind pretty much everything you just said.
The one additional item that is important is, by expanding
the non-itemizer deduction, we actually incentivized people to
participate in their community. It expands the number of
donors. And we know once a donor starts, there is a high
probability that they will continue to give. So we will build
out a pipeline, and it links to volunteerism. It gets them out
into their community, so they are donating, they are
volunteering, and that builds civic trust.
So, 100 percent behind your points.
Senator Lankford. Thank you. I would only mention one other
thing. Mr. Cardinali earlier said that, by definition, when you
are giving like this, it cannot be beneficial to you. I would
say, when people give to nonprofits, it is very beneficial to
them and the community, and to them personally. The old ``it's
better to give than to receive'' definitely kicks in when you
are giving.
The Chairman. It lifts the spirits and makes you feel you
are helping the community. Well said.
Senator Grassley?
Senator Grassley. I thought you had a Democrat to go ahead
of me.
The Chairman. We have you up at this time. Go ahead.
Senator Grassley. I am very happy to go.
Ms. Morgan, I am going to start with you. This is a quote
from your testimony: ``Hunger is a crisis today, and charitable
support is needed now, not tucked away for some hypothetical
future,'' end of quote. I am sure that is a statement working
charities in Iowa and across our country would agree with.
Today there are over a trillion dollars sitting in private
foundations and assets held by donor-advised funds totaling
$160 billion, a 360-percent increase since 2006.
Senator King and I have introduced the Accelerating
Charitable Efforts Act, which is focused on ensuring that tax-
deductible contributions to a foundation, or a donor-advised
fund, reach their ultimate charitable destination within a
reasonable period of time.
Could you elaborate on why it is important for working
charities like yours not to have hundreds of billions of
dollars of charity money effectively sitting on the sidelines?
Ms. Morgan. Thank you for the opportunity, Senator
Grassley. The Oregon Food Bank has been greatly impacted by
supply chain disruptions during the pandemic. So, prior to the
pandemic, 865,000 people--that is one in five people in Oregon
and southwest Washington--asked for assistance, and we relied
heavily on donations from growers, food distributors, and food
manufacturers to meet the need. Supply chain disruptions have
meant that donations are down well over 50 percent, because
they cannot give us what they do not have in excess. So we are
purchasing food at a higher rate than we have ever purchased
before.
So, we have more people who need food assistance, and fewer
resources in order to meet that food assistance. So, when I
hear of wealthy folks tucking money away in hopes that it will
make the future better, my response is, make the future better
right now for my neighbors who are struggling to put food on
the table.
Senator Grassley. Thank you.
Mr. Cardinali, I have a good history of working with your
organization, probably a long time before you ever got involved
in it, but they have helped me a lot during the early part of
this century with a lot of investigations and reforms that I
have done. We passed some legislation, but I also recall from
the 2005-2007 era that you put out some good work that helped
us do probably even more than what we had intended to do by
legislation. So I appreciate the Independent Sector's attention
to the importance of robust self-regulation and oversight in
fostering a healthy nonprofit sector. As I indicated before--I
want to repeat--it was a pleasure working with your
organization during my tenure as chairman of this committee in
the 2000s to improve nonprofit governance and accountability.
Could you elaborate on what the Independent Sector has been
doing to foster good governance and self-regulation of the
nonprofit sector since the release of that report, ``Report on
Good Governance and Ethical Practices''?
Mr. Cardinali. Thank you for the partnership, and it has
been transformative in striking a balance. We think that is
very healthy for a sector that has two components, one being
self-regulation, where those principles that you referred to
are still an extremely downloaded and used resource across the
sector--setting a standard of good behavior, ethical
governance, use of appropriate fund raising--and a set of tools
that allow people and boards to make good decisions about
difficult challenges in a changing and dynamic world. But as
you may recall well, that was also designed with appropriate
government oversight. So it is actually a two-part tension:
self-regulation and government.
So we, of course, denounce bad actors that take advantage
of the sector, but that is a minority of folks that often make
the news. But we do need appropriate support from the IRS and
the exempt organizations office there to be able to lean into
when there are bad actors, so that we do not diminish public
trust in America.
We know that right now, every year we measure the trust
that the general population has for nonprofits, and it is quite
high--higher than government or business. So protecting that
trust through striking the tension of appropriate self-
regulation and appropriate government oversight is important.
I do want to be clear. I am not calling for additional
government oversight, just appropriate government oversight.
Senator Grassley. Thank you.
The Chairman. Thank you, Senator Grassley.
I believe next is Senator Carper.
Senator Carper. Senator Carper is here. Good morning, Mr.
Chairman. Good morning, colleagues and witnesses.
The Chairman. Senator Carper, turn the power up. Is it at
our end?
Senator Carper. I think it is at your end.
The Chairman. That is perfect.
Senator Carper. Can you hear me?
The Chairman. Yes.
Senator Carper. All right; thank you. First of all, thank
you for holding this very, very important hearing, and a timely
hearing. My wife and I are getting ready to submit all kind of
tax-related materials to our CPA, so we are reminded that we
should be looking into our charitable giving. So this is
actually something that is very, very real in our lives, and I
know others' too. But I want to thank each of our witnesses for
your willingness to testify before the committee today.
Nonprofit organizations and charities are an invaluable
part of the communities in Delaware, and I know that is true
across the country. They provide critical support for some of
the most vulnerable among us. Throughout the coronavirus
pandemic, nonprofits in Delaware and the other 49 States
throughout America have risen to the occasion to help their
neighbors keep a roof over their heads, put food on the table,
get vaccinated, and a whole lot more.
When we support our local nonprofits, we show our
commitment to building a strong community. Having said that,
research has found that as time goes by, fewer households are
giving to charity. I think that has been mentioned a time or
two already today. In fact, studies have shown that only about
half of Americans are donating to charities these days. That is
down from about two out of three a couple of decades ago. And
since then--as I understand it--donations from lower- and
middle-income households have declined. Charitable giving
overall remains pretty much stable, but the increases are
concentrated among higher-income households, which is where you
would hope we would find most of the giving that takes place.
A question--this will be for everybody on the panel--but
could you take a couple of minutes to share your thoughts with
us on why we are witnessing this decline in widespread
charitable giving, what steps we ought to consider taking in
order to reverse this trend, at the same time making sure that
those who are capable of giving continue to do so? Please, in
any order you would like to go.
Dr. Osili. I can start. At the IU Lilly Family School of
Philanthropy, we've been tracking the share of Americans who
give to charitable organizations for many years. At the
beginning of the 21st century, two-thirds of Americans gave,
and this was consistent over time, until the time of the Great
Recession of 2008. At that time we saw that number begin to
decline. It's important to note that when the economy
recovered, following the Great Recession, we did not see that
number go up again. In fact, it has continued to decline, and
in the most recent analysis in 2018, for the very first time,
less than half of Americans gave. It's also worth noting that
among younger Americans, that decline has been even more
pronounced. In fact, for the overall public--that figure
declined 17 percentage points--but for young Americans it's
more than a 20-percent decline at the time of the Great
Recession. So, with that concept----
Senator Carper. How do you explain that?
Dr. Osili. How do we explain that?
Senator Carper. Yes.
Dr. Osili. I'm sorry. There are several factors to look at.
We have investigated the world of economic factors, that
changes in income, employment, and wealth, account for about a
third of that decline. The other half or so of the change is
due to a number of other factors. First, we have already heard
about trust levels: declining levels of trust, social capital.
But also religious participation has been shown to be linked,
and not just to religious congregations, but also to giving
more broadly. So, looking ahead, as we continue to build this
strong tradition of American generosity, we need to make sure
that it's broad-based across income and age groups. It's
important to recognize that economic factors play a role, and
certainly looking at the role that the charitable deduction
plays, not just in providing an incentive and sending a strong
signal about the government's commitment to the private
provision of public goods, but also the other factors. We've
heard about what role trust plays, but also what the charitable
sector can do to continue to build the relationships and
engagements and the sense of commitment that Americans have.
Senator Carper. Dr. Osili, I am about to run out of time. I
want to be able to hear from at least one other witness. Thank
you for all that you shared with us.
Susannah Morgan, just a few thoughts for us from the Oregon
Food Bank. The Delaware Food Bank sends their best to you and
your team. Go ahead, Susannah.
Ms. Morgan. Thank you. I do not have academic data, but
what I will tell you is, the Oregon Food Bank had 40,000 new
donors in the last 2 years. So we have gone from a database of
30,000 to a database of 70,000 donors in the last 2 years.
So a combination of the environmental factors in which one
in four people in Oregon were experiencing hunger, so everyone
knew someone who was needing food assistance--this was not
``them,'' this was ``us.'' And hunger was impacting ``us.'' A
combination of an outpouring of love--because that is really
what community donations are, it is love in the form of a check
for our community--and what the Federal Government did to
support trust and to authorize and provide credibility to the
nonprofit community through the tax code.
Senator Carper. Well, that is great. I think my time has
expired. I wish I had time to ask others, but thank you all for
joining us today.
The Chairman. I thank my colleague.
Senator Cortez Masto?
Senator Cortez Masto. Thank you, Mr. Chair. And I want to
say ``thank you'' to the Ranking Member and Senator Lankford
for co-chairing this important committee with you. I also
cannot thank you enough for just calling the hearing today to
highlight what we see here: the good bipartisan work that
Congress can do when we work together to be able to deliver for
all Americans, including many of the nonprofits across the
country and here today.
As we know, the CARES Act established that charitable
deduction for non-itemizers in 2020, and the COVID relief
package passed in December of 2020 added an extension of the
$300 charitable deduction for 2021. So I am proud to have
worked with my colleagues on this committee, Senators Lankford
and Scott, to co-lead the bipartisan Universal Giving Pandemic
Response Recovery Act to expand and extend a tax deduction for
charitable giving. The bill would build on the bipartisan work
and ensure that Nevadans who donate to charities, religious
organizations, and other nonprofits are able to deduct their
contributions from their Federal taxes.
This legislation recognizes the generous donations many
Americans have given to these lifesaving organizations, and
incentivizes further charitable giving during the coronavirus
pandemic. I know firsthand that during the height of the
challenging time of COVID-19, nonprofits, community
organizations, and religious organizations have provided
immeasurable relief and support to struggling families in
Nevada. Places like Betty's Village, an inclusive residential
housing community for people of diverse abilities, was opened
by Opportunity Village at the height of the pandemic. And I
fought for the ability of nonprofits to qualify for the PPP
loans during the pandemic. And because of that, my office was
able to help them secure that loan and help provide housing in
the community for people of diverse abilities.
By passing the Universal Giving Pandemic Response Recovery
Act, we can ensure that nonprofits like Betty's Village can
sustain the critical services they provide beyond the pandemic.
So, thank you again to our bipartisan partners in the Finance
Committee--Senators Lankford, Scott, Brown, Hassan, and
Stabenow--for working on this important legislation.
Let me start with Ms. Morgan. I so appreciate what you do.
I am a big supporter of our Northern Nevada Food Bank in Reno,
and Three Square, and all of the food pantries across the
country, so thank you for your commitment there. I also know--I
just recently had a roundtable discussion in Reno, and it
included many of our community's leaders, including members of
the Northern Nevada Food Bank, to talk about the crisis parents
are dealing with right now with the lack of access to
affordable child care. And I am curious.
You highlighted in your testimony how important Federal
response was in addressing that tremendous need during the
pandemic. It has since stopped, and can you discuss how
critical support like the CTC was in meeting the overwhelming
need, and how much harder it will be for organizations like
yours to meet the community needs when you see an increase in
that need over the last couple of years?
Ms. Morgan. Thank you so much, Senator, and so much love to
our colleagues in Nevada doing food bank work. The numbers tell
the story, right? For us in Oregon in 2019, it was 860,000. In
2020, it was 1.7 million people asking for food assistance. And
in 2021, it was just over 1 million.
What is the difference between 2020 and 2021? The Federal
response, and in some cases, the reopening of economies as we
became more accustomed to the pandemic. But from my analysis on
the ground, it is primarily the Federal response. It was the
increased unemployment compensation. It was the direct payments
to families. It was the Child Tax Credit that made the
difference, so that folks did not have to show up at a food
pantry and ask for a box of food.
We want to live in a world where no one has to ask for
food, where everybody can get all the food they need for their
families, and we think that, in partnership with the Federal
Government, we can get there.
So yes, I am scared about this year ahead as the provisions
of the CARES Act and other Federal provisions sunset. What then
will happen? Are we going to see another tsunami of need? Are
we going to see mothers crying in line because they are worried
about feeding their babies? So thank you, Senator, and the
entire committee, for everything you can do to help us help our
communities.
Senator Cortez Masto. Thank you. I yield the remainder of
my time, although little it is. Thank you, Mr. Chairman.
The Chairman. I thank my colleague. Important points, as
always.
I think Senator Thune is either online or----
Senator Thune. Yes, Mr. Chairman, I am online.
The Chairman. Great. Terrific. Senator Thune?
Senator Thune. Thank you, Mr. Chairman, for holding today's
hearing on charitable giving, and thanks to our panelists for
your testimony on behalf of the nonprofit and charity sectors.
Charitable giving is critical for local communities in
South Dakota, and we need to continue to encourage this
bipartisan priority in a fair and effective manner. In 2020,
during the first year of the pandemic, charitable giving in the
United States by individuals, bequests, foundations, and
corporations, reached a record high of $471 billion. Overall
charitable giving in the country in 2020 increased by 5.1
percent over 2019, and when adjusted for inflation, the total
amount increased 3.8 percent.
So my question, Dr. Osili, is, can you tell us which
categories of charitable giving saw the biggest increases in
2020? And how do you think the pandemic has changed Americans'
charitable giving patterns?
Dr. Osili. Thank you for that very insightful question.
There were three factors that contributed to the growth in
charitable giving. Certainly, number one was the recovery of
the economy, especially the strong financial markets at the end
of 2020. We also had increased need, as we have heard from my
colleague from Oregon. And in addition to that, we had the
racial and social justice movements in 2020. So all those
factors combined, led to what we saw in terms of charitable
giving.
As we unpack the data, there were three areas that stood
out in terms of increases, in particular, what we call public
society benefit, which is the sector that includes the umbrella
of causes such as donor and side funds, the national funds, and
also United Way, United Jewish Appeals, and civil rights
organizations that are leaders in terms of charitable giving
growth. We also saw strong growth in education and in basic
needs charities, which include organizations like the Oregon
Food Bank. In terms of areas that did not perform as well in
2020, it is worth noting that arts and culture organizations
were severely impacted by the pandemic because many of them
were not able to hold in-person events--
income-generating and fundraising events that usually involve a
face-to-face gathering.
So overall, the charitable sector grew, but not all
organizations benefited, and certainly not all subsectors
experienced the growth that we saw.
Senator Thune. Thank you. So, since the increase in the
standard deduction, overall charitable giving amounts have gone
up. The number of individual itemized deductions claimed for
charitable giving has gone down. And to put that another way,
overall giving amounts have increased while the number of
itemized donations has decreased.
Dr. Steuerle, given the significant increase in the
standard deduction, which resulted in fewer individual
taxpayers itemizing deductions than in 2018, are the estimates
of non-itemizer giving before and after 2018 necessarily
comparable? And could you speak to any current data that
directly measures the magnitude of charitable giving by non-
itemizers?
Dr. Steuerle. So we know in the years after 2017, in point
of fact, giving did increase a bit. However, what also happened
during that period was, we were at the end of a long period of
economic growth.
We also had income actually increasing, surprisingly, in
2020 because of the Federal subsidies that flowed through. So,
as Dr. Osili mentioned, we are not quite sure what is going to
happen as we move forward into the future. In fact, there are a
number of projections that say giving will decline. When you
reduced the charitable incentive as much as happened in 2017,
you essentially took 6 cents out of every dollar that was given
to charity away from those charities. That is, the Federal
Government used to provide about 21 cents on the dollar for
charitable giving and dropped it to about 15 cents.
So we think that that probably led to some decline; maybe
it was not 6 cents, but it certainly was not zero, in terms of
the effect. There is something we do not measure well as
economists. We are actually not good at measuring long-term
effects of different provisions. And I think the symbolism and
the signals provided by giving a deduction only to about one-
tenth of taxpayers is pretty powerful, and it speaks to the
earlier questions you and some other Senators have had about
what we can expect for the future in terms of community
participation. I think it sends a very bad signal, and I think
I am sure all the people at this table agree that we need to
have a more universal set of incentives, partly just as a
signal. I cannot tell you what the full effect of that signal
would be, but I think it would be quite powerful.
Senator Thune. Thank you.
Mr. Chairman, my time has expired, but let me just say how
important it is that we encourage and incentivize charitable
giving in this country. I do not think there is anything that
we do as a matter of public policy that contributes more to
meeting the needs of Americans in so many different areas of
our economy, but certainly what happened during the pandemic is
a reminder of the effectiveness of charitable giving and the
need for us to encourage it. So, thank you.
The Chairman. Senator Thune, thank you. And you and I have
been fortunate enough to be able to lead a number of these
bipartisan efforts to promote charity, and I look forward to
continuing to work with you.
We are happy to have Senator Cardin.
Senator Cardin. Mr. Chairman----
The Chairman. Senator Cardin, just one quick point before
you proceed. I would just say to colleagues, we are getting
down to wrapping up, and if colleagues on either side of the
aisle would like to either come in person or be available to
make their presentation online, now is the time to do it.
Senator Cardin?
Senator Cardin. Well, Mr. Chairman, first, thank you for
holding this hearing. I appreciate it very much. I think it is
very important that we highlight what we can do in this
committee's jurisdiction in regards to the nonprofit
communities. So, thank you all very much. And I would ask
consent that the statement from Apra, Maryland Chapter, be made
part of the record.
The Chairman. Without objection, so ordered.
[The statement appears in the appendix on. p. 35.]
Senator Cardin. I understand there has been a good deal of
discussion about some of the tools that were made available
during the coronavirus that affected the nonprofit community.
As chair of the Small Business and Entrepreneurship Committee,
I appreciate the references to the Paycheck Protection Program
particularly. I just really want to make an observation first.
In the early stages of that negotiation, it was not certain
at all that the nonprofit community was going to be included,
because the Small Business Administration does not include the
nonprofit community in many of its programs. The 7(a) program
did not include this. This was a real expansion of the efforts
on behalf of nonprofits.
And it was clearly the right thing to do. The nonprofit
community--there are so many small entities that have all the
challenges of a small business. And during the pandemic, they
were really hurt badly from the point of view of their
financial resources, but as well their mission, in order to
carry it out. So I am pleased that it was able to keep active
and alive the nonprofit community, the tools that were made
available from the Small Business Administration in the
bipartisan effort here in the United States Senate.
And I want to compliment the chair on the Employee
Retention Tax Credit, which has also been mentioned. Senator
Wyden was the leader on that particular initiative, and we
thank him. And there was a moment where we were having
challenges as to whether smaller entities were going to be able
to participate, and Senator Wyden was our hero in keeping that
there.
I am distressed, Mr. Chairman, to learn that you are having
challenges in getting that process through the IRS. And one of
the things I think we could do as a committee is recognize that
smaller entities, including nonprofits, do not have the
financial wherewithal to be able to take on the bureaucracy as
larger companies can. We should really work, in the
administration of the IRS, for the sensitivity of smaller
entities, whether they are for-profit or nonprofit. And I know
from the nonprofit community in Maryland, so many of them
really need that particular help.
And then lastly, I just really want to underscore the
efforts that--when we talk about the non-itemizers, the smaller
contributors, those who are giving to their community, again it
is usually--many of those dollars go to the smaller of the
nonprofits.
So once again, I think we need to have a sensitivity to
smaller entities. I am very happy about all the nonprofit
community, believe me. But I do think we need to be able to
help the smaller nonprofits deal with a lot of the bureaucratic
issues we have, as well as the financial issues in the tax code
itself.
And I have asked the chairman--he has been cooperative
here--I hope we will have an opportunity to look at the
Internal Revenue Code from the eyes of smaller entities and
have policies that help deal with their realities in the tax
code itself.
Would any of you want to respond to that? Mr. Cardinali, I
know you have been engaged with the smaller entities. Your
comments?
Mr. Cardinali. So first of all, thank you, Senator, for
your comments. I agree. The ERTC has been game-changing. I
appreciate the committee's leadership there. The Paycheck
Protection Program saved 4.1 million jobs by the Johnson
Center's estimates, which kept people employed and able to take
care of our community during the pandemic.
And this last point you made regarding strategies for the
sector to actually fully be able to partner with government in
a way that will allow it to best serve government, both as a
resource as well as an implementer--we have been working on a
piece of legislation that Representative McCollum is about to
drop, we hope, called the Nonprofit Sector Strength and
Partnership Act of 2022, which would basically establish
permanently an office of nonprofits in the White House. It
would set up an interagency council coordinated by that office,
and then a Federal group of bipartisan nonprofit leaders, so
that we would not run the risk of having something like the
Paycheck Protection Program be left to just advocates on the
outside. There would be people in government who would have a
knowledge of how the sector needs to be supported.
Thank you for your leadership.
Senator Cardin. Thank you.
The Chairman. Senator Cardin, let me just follow up on the
thoughtful points you made. And I think there may be an
opportunity, given the extra money that is going to the IRS
that you and I and this committee strongly supported because,
to a great extent, one of the areas we agree on is that they
are kind of in the Dark Ages on some of these issues relating
to technology and having skilled individuals, and their being
able to recruit--and because we found that Amazon was paying
more than the IRS.
I would be very interested in working with you on trying to
make sure that some of that extra money that was just signed
into law last week was for small business-focused efforts as it
relates to these issues. I would be interested in your
reaction. We are waiting for Senator Brown, but Senator Cardin,
as is usually the case, is out in front with respect to being
innovative. He has ideas for making reforms in the entire
agency, with Senator Portman, that we are looking forward to.
But what about moving right now, given the fact that that
money was just increased here in the last couple of days, to
address some small business concerns you are talking about?
Senator Cardin. Well, I can tell you, having as my partner
the chairman of the Senate Finance Committee will give me a
much better opportunity to get some results with the IRS. So I
accept.
The Chairman. I thank my colleague. And with that bold
explanation Senator Cardin has made, we can now have Senator
Brown, a great friend of charity. Thank you, Senator Cardin.
Senator Brown?
Senator Brown. Thank you, Mr. Chairman.
Ms. Morgan, I would like to start with you. You told us in
your testimony that charity organizations simply cannot replace
Federal funding for the programs and resources our families
need to thrive. I would do a really quick shout-out to the work
that United Ways all over Ohio have done in terms of getting
people connected to the Child Tax Credit and Earned Income Tax
Credit.
I know Chairman Wyden is not giving up on the importance of
those and extending them. But put that aside for a second.
The very first thing you said Congress should do to reduce
hunger is reinstate the Child Tax Credit expansion. That makes
sense, given we saw a significant drop in hunger levels. We saw
a 40-
percent drop in poverty. We know it relieves anxiety for
families, particularly at the end of the month. And it gives
them, as someone said, the joy of a little bit of breathing
room in their personal finances, especially when rent is due at
the end of the month.
There are a number of us on this committee--let me just
back up for a second. So, Ms. Morgan, if you would, just tell
us about your experience with the Child Tax Credit and how the
lapse in advance payments strained nonprofits like yours?
Ms. Morgan. Thank you very much, Senator. As I have said
before, we saw a huge tsunami of need in 2020, and that dropped
in 2021. So what we were finding was our neighbors--and 70
percent of the people who work at Oregon Food Bank have
experienced hunger. So it was our neighbors who were facing
hunger who had the choice to not have to go to a food pantry or
a meal site, but could instead go to a grocery store and ensure
that they could put meals on the table for themselves and their
families.
And as you can imagine, as all of you can imagine, if you
are hungry, nothing else matters. So there is the Chinese
proverb that says, ``The man who has food has many problems.
The man who does not have food has one.'' Because it is a basic
need. We need to eat three times a day.
We know that when Congress, when the philanthropists invest
in basic needs, it creates opportunity and space for all the
other things: better parenting, better education, better work
habits. We have the opportunity to participate civically. So we
need our basic needs met in order so that we can be fully human
and fully American. And this is a great opportunity for
Congress to continue to participate in that work.
Senator Brown. Thank you very much, Ms. Morgan.
My next question is for Mr. Cardinali. I have heard all
around my State from nonprofits like the YMCA that the early
termination of the Employee Retention Tax Credit really hurt.
Many nonprofits relied on that credit when budgeting and
planning for workforce needs. That is why I am co-sponsoring
Senator Hassan's bill to reinstate it.
Give us a few examples, if you would, Mr. Cardinali, of how
the early termination of ERTC actually hurt nonprofits.
Mr. Cardinali. Thank you, Senator, and thank you for your
leadership in Ohio and nationally. I can give you a very
concrete example about not just the early termination but
actually something that was mentioned earlier regarding the IRS
and their slowness in being able to actually provide these
reimbursements.
So specifically, an example out of Maryland that was
received just this week--I think it was submitted by one of the
Senators--that in 2021 they have received their credit, but
they have not received either payment from 2020. So not only
are we looking at the importance of it, the ERTC, as a way of
nonprofits keeping themselves employed, which was a great
innovation--I want to thank the committee again for it; it was
a game changer--but now, having it being repealed in the last
quarter really threw off planning. Anybody who has run a
nonprofit knows that you have to plan very carefully on cash
flows, and you rely on both public and private sources. And
when you get a massive disruption, it not only throws off the
individual employees that you may not be able to pay, but your
operations, and it destabilizes your culture internally.
So I would just encourage this committee to double down on
reinstating the ERTC and ensuring that the IRS is able to have
the resources necessary to be able to get those reimbursements
out in a timely manner.
Senator Brown. Thank you, Mr. Cardinali.
I will just make a closing comment. I don't want to go over
the time. I know you know we are diligent on this committee,
and the chair is really leaning into this to make sure the IRS
has the resources and workforce it needs to carry out its
mission after years of underfunding. It was so impressive, even
with that shrunk staff, if you will. We passed the Child Tax
Credit; Senator Bennet especially, on this committee, and I
worked together with the chairman and passed it in March and
immediately talked to the Secretary of the Treasury, and those
checks were out the door July 15th, August 15th, September
15th, October 15th. And in my State, literally the families of
2.2 million children have benefited from that. And we know the
difference it made, in not just cutting the rate of poverty,
but the difference it made in how it just made people's lives
better and a little bit easier.
So it is really important that the overworked and
underresourced IRS gets the help that it needs. And I thank all
of you for that.
So thank you, Mr. Chairman, I yield back the time.
The Chairman. Thank you, Senator Brown. And Susannah Morgan
spoke for a lot of Oregonians when she said right out of the
gate how much she appreciates the Child Tax Credit. And you and
Senator Bennet on this committee, supported by Senator Casey as
well, have been the ring leaders on one of the things I am
proudest that this committee has done. Dollar-for-dollar, it is
making a huge difference for kids. And we know in our home
town, you know this, Ms. Morgan, when I go out and ask people,
``What did you spend the Child Tax Credit on?'', they say
things like ``shoes for kids.'' We hear shoes. In our part of
the world, it rains once in a while. Shoes are really
important. So, thank you, Senator Brown, and Senator Bennet,
and Senator Casey, for all the leadership on it.
Now we are going to go to, in order of appearance, Senator
Young then Senator Casey.
Senator Young. Thank you, Mr. Chairman, for holding this
hearing. And I want to welcome our witnesses, in particular Dr.
Osili, a fellow Hoosier. I am grateful for your presence here
today.
I would like to begin by asking a couple of questions about
community foundations. We take great pride in our community
foundations in the State of Indiana, and, Dr. Osili, as you
know, beginning in 1990, the Lilly Endowment began an
initiative known as GIFT, or Giving Indiana Funds for Tomorrow.
This is a way to help establish and strengthen community
foundations across the State of Indiana. When GIFT began, there
were fewer than 12 community foundations, and today there are
94 community foundations. We have 92 counties, so of course
that is more than one per county. Indiana is the only State in
the country with a community foundation in every single county.
And we have the country's highest concentration of community
foundations.
Dr. Osili, how does this structure--the only State in the
country with a community foundation in every single county--
enable our State to better serve local communities?
Dr. Osili. Thank you, Senator Young, for your leadership.
Indiana is unique. We have, as you noted, a community
foundation in every single county, probably the highest
concentration of any State in the country.
There are over 700 community foundations nationwide. We
have seen in this crisis that community foundations have played
a vital role not just in collaborating and coordinating, but
also avoiding duplication and connecting donors to need. One
takeaway from the work in Indiana is the idea that every single
American is a philanthropist. You do not have to have millions
of dollars. People of all different backgrounds can
participate.
And in this crisis, in our communities, community
foundations have been the conveners, the collaborators, and
also the catalysts for innovation, bringing new ideas to the
forefront and helping donors to better understand those local
communities. I think there are some important examples and
models that other States and other communities can learn from.
So, thank you for mentioning that.
Senator Young. Well, that was an excellent segue, Dr.
Osili, because it begs the question. Since we are in
Washington, DC, and I know my colleagues and their staff are
watching attentively, are there major barriers that you might
speak to regarding establishing more community foundations
around the country?
Dr. Osili. We have an endowed chair in community
philanthropy at the Indiana University Lilly Family School,
under Dr. Laurie Paarlberg. And one point she has noted is that
in every State there is the potential, of course, to expand the
work of community foundations, but every State is different,
and we have to look at what those barriers are at a State
level. What we have seen that has really worked in Indiana is
having foundations that are willing to help support through
matching grants programs. But in other States, we have had
incentives for contributions to community foundations. I think
Kansas is one of them where there is an incentive.
So as we look at how to support community foundations, I
think what we have learned so far is just the role that they
play. And I think my colleague, Dr. Gene Steuerle, can also
share his example here in Virginia. They can really help
support that sort of leadership and innovation that is often
lacking in a crisis.
Senator Young. Well, thank you, Doctor. And I will be
submitting for the record some questions to the other
witnesses. If you have thoughts on barriers that we can
eliminate to ensure there is greater uptake in community
foundations that you can learn from, what I will take some
liberties with and call the Indiana model, that would be
fantastic.
So, in my remaining bit of time here, Dr. Osili, I would
like to highlight a column you wrote recently for the
Indianapolis Business Journal. You stated that the pace of
technological innovation in the philanthropic sector is
increasing, and it is going to need to accelerate this year and
in future years. We have had some really notable examples where
the Central Indiana Community Foundation has partnered with an
Indianapolis-based tech company, Selflessly, and met with some
success in ensuring that companies have the tools to track and
manage their charitable giving.
In short, Dr. Osili--I will, again, submit some questions
to you to ask in greater detail about this topic, but why is it
so important for organizations in the charitable giving space
to embrace technological innovation?
[The questions appear in the appendix.]
Dr. Osili. An excellent question, Senator Young. Just to
put this in perspective, online giving grew by double digits
over the last year. And today, online giving accounts for 10
percent of charitable giving overall, the highest ever on
record. What this means is nonprofits have had to shift a lot
of their engagements, service delivery, and even just their
day-to-day operations online. And many nonprofits were not in a
position to do so; they did not have the resources or the
capability.
When we look at workplace giving--a very important channel,
since about $6 billion is given through workplace giving--
companies also face this challenge of shifting online because,
in the past, workplace giving was done in person. They've had
to quickly shift this giving opportunity online. So what we are
looking at is an acceleration in innovation, and a need for
greater reliance on technology for giving. And we are also
seeing many nonprofits pivot, in other words, take advantage of
these new technologies. But there is a lot more work that needs
to be done, and I think as we look ahead, we are also going to
need to think about some of the smaller organizations that have
not necessarily adapted at such a rapid rate. What do they
need? And religious congregations, we should also remember,
many of them have had to start receiving donations online and
may not have done so before.
So what this highlights is just a gap in the need itself
and where the organizations are in their move towards making it
easy to give online.
The Chairman. We are going to have to move on----
Senator Young. Thank you, Doctor.
The Chairman. I will tell Senator Young that his interest
here is very welcome, because we are seeing something of a tech
boomlet here as it relates to ways in which we can bring more
value out of these incredibly important charitable deductions.
So, good point.
Senator Casey, and then we will go with Senator Daines.
Senator Casey. Thank you, Mr. Chairman. I want to thank the
panel. I apologize that I was not here for your testimony
today. I had to chair the Aging Committee hearing and was not
able to move between hearings. But I really appreciate you
being here today.
Like so many Senators, I have been a supporter of the
nonprofit sector and policies that facilitate responsible
charitable giving. I also want to commend the nonprofit sector
for their work, especially through the past couple of years of
this pandemic, as they continued to serve during both an
economic crisis and a health crisis. Sixty-three thousands
nonprofits in Pennsylvania employ 15 percent of the
Commonwealth's workforce. So, in my home State, I can only
extend my gratitude and respect for their work and their
contributions.
I just have two questions, one for Mr. Cardinali and one
for Ms. Morgan. But I will start with you, Mr. Cardinali. You
reference in your testimony the changing profile of charitable
giving, mentioning that the share of individual contributions
would have declined if it were not for the donations of a few
wealthy individuals. In my home State of Pennsylvania,
households give 2.7 percent of their income to charities, but
charitable contributions and their associated subsidies are
disproportionately skewing to top earners.
We know that the ability to deduct charitable contributions
from your taxable income serves as a real incentive to give.
What are the forces behind this changing profile of giving?
Mr. Cardinali. Thank you, Senator, for your leadership and
support of the nonprofit sector. I have spent a lot of time in
Pennsylvania in my years with communities and schools, and you
and your colleagues have been remarkable.
There are a couple of things that I want to mention about
your question. I think if we think about the incentive--and I
mentioned this earlier in my testimony, that the charitable
deduction is giving your money away for somebody else, not
buying a home, or being subsidized in any other way. So from a
policy point of view, we believe that extending that incentive
to everybody paying taxes is just good for community and good
for America.
Secondly, when the tax structure incentivizes those who are
disproportionately economically better off, they will have a
set of interests that might not be representative of the entire
community. They might privilege organizations like
universities, which I hold in high regard, or arts
institutions, which are critically important to community. But
they might not be in touch with or connected to organizations
like food banks that could benefit immensely. And Ms. Morgan
and I had breakfast yesterday morning, and she was talking
about the number of donors that she had, and they are primarily
small donors who are not currently incentivized by the tax
code.
So I think if we just think at a basic level regarding a
tax code that could really pull this altruism into community,
how could we not benefit from it?
There is a second piece that I would like to mention about
this point, and that is that when folks are incentivized to
give, we know that they are then incentivized to volunteer. I
ran an organization, Communities in Schools, with 4,000 staff
and 40,000 to 60,000 volunteers. So without volunteers, we
could not have developed an evidence-based intervention that
mitigated the effects of poverty for K-12 students.
So donations are directly related to supporting volunteers,
which then is this public good that partners with government.
Senator Casey. Thanks very much.
Ms. Morgan, I am going to ask you my final question. You
had, in your testimony, talked about the way the Federal
Government can act to help organizations like the Oregon Food
Bank to achieve your mission. And one statement in your
testimony just leaped out at me, and I am quoting here: ``The
Child Tax Credit alone drove down child poverty by an
incredible 41 percent and reduced food insecurity by 26
percent.''
I think the first part of that, we have heard a lot of. A
lot of people know because of the good work of Senator Brown,
Senator Bennet. Working with the Finance chair, your home State
Senator, Senator Wyden, the Child Tax Credit, the enhanced
version of it, became a reality. We know it reduced poverty by
that much, but we did not hear nearly enough about the
reduction in food insecurity by 26 percent. So that is a
positive action the Federal Government took in the passage of
the Rescue Plan.
We also know that in addition to the positive impact it
had, it reminded us how much of someone's income can be spent
on food. We are told that 60 percent of low-income families who
receive the Child Tax Credit, the enhanced version, spent it on
food; 16 percent spent it on child care. We have one more
opportunity to take full advantage of the Rescue Plan in the
next couple of weeks, and that is to make people aware of
another, a separate tax credit, the Child and Dependent Care
Tax Credit, which will allow families to get up to $4,000 per
child, and up to $8,000 per household, to pay for child care.
Anything else other than those? I know there are others you
can mention, but I know we are out of time, so if you could
just mention one or two things in addition that the Federal
Government could invest in, and then I am done.
Ms. Morgan. Thank you, Senator. I am not going to cite
legislation for you because that is not my area of expertise,
but I do want to say that you have amazing food banks in
Pennsylvania--Pittsburgh, Philadelphia, Harrisburg--that are
wonderful partners. And I would like to just drive home the
fact that hunger is a symptom. Its cause is poverty. And
poverty itself has a cause, which is systemic inequities. It is
not an accident that our communities of color are more likely
to be hungry. It is not an accident that single moms are more
likely to be hungry. It is because we have designed systems to
prevent prosperity and allowed those to happen.
And so I would say that actions like the ones that you have
suggested, where we distribute wealth and tear down barriers to
prosperity, are exactly what we need our Federal Government to
do.
Senator Casey. Thanks very much.
Thanks, Mr. Chairman.
The Chairman. I thank my colleague for all his good work.
Dr. Steuerle. Can I just add one quick footnote?
The Chairman. Very briefly. We still have Senator Daines
and Senator Whitehouse, but go ahead, Doctor.
Dr. Steuerle. This is just very brief, Senator. For 10
years now I have sponsored at the Urban Institute an effort to
put out something called Kids Share, and we measure what goes
to kids in all these programs in the budget. So I would be glad
to provide that to you. I should add as a footnote to that,
that almost all programs for children are scheduled to decline
relative to GDP over time in the budget by the way that they
are structured.
The Chairman. Very good.
Senator Daines and then Senator Whitehouse.
Senator Daines. Mr. Chairman, thank you. I want to first
start off by thanking our nonprofits in Montana and across our
country for truly their tireless work they have done serving
our communities during the past 2 years, a couple of tough
years. Needless to say there were a lot challenges, and I am
grateful our nonprofits stepped up, and it is good to see.
Montanans and Americans also stepped up to the plate. These
nonprofits would not be having a better year without the fact
that we had people who were very generous, contributing a total
of $324 billion in 2020. That is a 2.2-percent increase from
2019, and the highest total dollar amount ever. When including
bequests, foundations, corporations, a total of $471 billion
was donated to charity in 2020 in the middle of a pandemic. And
the enactment of legislation like the Legacy IRA Act, which was
introduced by Senators Cramer, Stabenow, Rosen, Cornyn, and
myself, I believe would further boost charitable giving by
expanding the amount that our seniors can give to charity tax-
free from their IRAs. The philanthropy of Americans certainly
warms my heart and yours, but unfortunately Congress is not
doing enough to police some bad actors out there who are
abusing the charitable sections of the tax code.
One area that comes to mind are the fraudulent, syndicated
conservation easement transactions that we have seen accelerate
over the past several years. In fact, just 2 weeks ago a grand
jury returned an indictment against seven defendants for their
role in an abusive syndicated conservation easement scheme.
According to the indictment, the defendants and their co-
conspirators sold over $1.3 billion in false and fraudulent
charitable contributions. I should have said ``deductions'' and
not contributions there. These were essentially cookie-cutter
deals in which investors were promised a 4 to 1 return on that
money they invested within a matter of months. As explained in
marketing material that accompanied the deal, an investor who
contributed $100,000 to the scheme could receive $170,000 back
within months of purchasing their syndication unit by claiming
a $400,000 charitable deduction.
The government has known about this very specific tax
shelter for years, and yet it continues. According to the IRS,
syndicators claimed nearly $36 billion in unwarranted
deductions alone between 2010 and 2018, with $9.2 billion
claimed in 2018.
Senator Stabenow and I have legislation to put an end to
these shady deals, which also has the support of the chairman,
former chairman Grassley, and other members of the Finance
Committee and the Senate. I believe Congress needs to pass our
bill this year. The abuse needs to end. And just to be very
clear, I am very much pro-conservation easements. In fact,
Montana is one of the leading States. It is a great way to
incentivize the private sector, private landowners in the
realms of conservation. It is the abuse of these syndicates
that is the issue.
Dr. Steuerle, this is just one example of a few bad actors
unlawfully profiting under the guise of philanthropy. My
question for you is, what could be done to better protect the
integrity of charitable laws, which I fully support?
Dr. Steuerle. Senator, this is really a tough issue, but
tax administration is something, as everyone on this committee
knows, that does not get well funded. So one thing is just
simply to increase the money that goes into tax administration.
But another, which is really tough I think--and my
testimony is largely about making tradeoffs--is, if we are
willing to put in some tighter rules with respect to charitable
contributions, how they are recognized, what can get by, we can
use those resources to fund the types of incentives that
members of this committee want to provide, as you yourself have
talked about.
I think that is a way to corral the charitable community to
join with you in this effort. I think one of the dilemmas--and
I am being quite blunt about it--is it is very hard for the
community as a whole to speak out against, particularly, their
members. They might speak out against the greatest abuses, but
when it comes to some simplification, say we are only going to
allow easements when they meet certain tough criteria, you will
get feedback from those who are probably good actors who say,
``Well, I don't want to bear the additional administrative
costs.''
So the way to win this battle is to offer a higher
incentive, say put that money towards a better charitable
incentive, and that way we can get the members of the
charitable community to join with you in this effort.
Otherwise, I think it is often a losing battle to just pretend
that we can just hope that maybe a couple more dollars to IRS
are going to solve the problem. IRS should have more resources,
but that is not enough. You really have to get the charitable
community behind the type of effort you are talking about.
And I will mention some tradeoffs here in terms of
reporting as well. It is also an issue with 990 reporting,
which IRS delays getting out. The individual taxpayer is one of
your best sources for information on what is going on. The
better we get 990 reporting put out to the public as it is
required to be, and on a timely basis, the better the
individual taxpayer, the households out there, can join in your
effort to create a stronger community.
Senator Daines. I am out of time, but I will just end with
a comment on good actors and bad actors. Again, there are many,
many, many more good actors on conservation easements----
Dr. Steuerle. I fully agree.
Senator Daines. And they are fully behind this legislation,
because it is a few bad actors here who are tainting the good
efforts of our land trusts, and they are very supportive and
would love to see this passed here, and I hope we can. We have
a good bipartisan start here, and I hope we can get this signed
into law. Thank you.
The Chairman. The time of the gentleman has expired, and I
want him to know, as we have talked about this issue so often,
I am in very strong support of this, as you know. Chairman
Grassley and I led efforts to look into these kinds of abuses.
So there have been four of us on this committee, two Democrats,
two Republicans, and, Senator Daines, your point that you just
explored here a minute ago is spot-on in the sense that we know
how important these are in the West, where the Federal
Government owns so much of our land, and we are talking about a
small minority that unfortunately is really abusing a very
valuable tool for the vast majority of folks, particularly
Westerners, who use it in a thoughtful way.
So I just want you to know, we are in this battle until we
get it done. This a chance for the two of us to send a message
to all the scofflaws out there, the people who are not willing
to be in the majority and comply with the rules. And we are
going to stay at it until we have fixed it.
Senator Daines. I thank you, Mr. Chairman. Thanks for your
support. I think I sense a movement.
The Chairman. Not just a movement. You see a grassroots
mobilization. And as you know, we have a lot of businesses with
us--environmental folks, businesses, community leaders. So we
are on it. Thank you.
Senator Whitehouse, we have a vote on, and you may actually
be at the vote.
Senator Whitehouse. No, I am here.
The Chairman. There you are. We are going to have Senator
Whitehouse, and then we are going to finish up. After Senator
Whitehouse is done, I will give a lengthy closing address of
about 2 minutes.
Senator Whitehouse?
Senator Whitehouse. Thank you, Mr. Chairman, very much.
My question has to do with donor-advised funds, and it is
for Ms. Morgan. As you know, the connection between a
charitable donation and the tax deduction for it is to
encourage people for the benefit the public receives. With
donor-advised funds, you have the predicament that the donor
gets the deduction now, but the charitable benefit may not
happen for years. And depending on a variety of circumstances,
it may not happen actually ever.
There is an estimated $140 billion set aside for future
gifts in donor-advised funds with no requirements for the funds
to actually be distributed to charities. And one study taking a
look at donor-advised funds found that 35 percent of them did
not make a single distribution in 2020, which was kind of a
high-need year for charitable giving.
So I am working with a number of my colleagues on trying to
have a reform of donor-advised funds. I would like your
thoughts on the importance of that. One of the pieces of
pushback that we have gotten is that it creates a very
significant administrative burden for the donor-advised funds,
particularly ones that persist through time, where donations
come in on year 1, year 2, year 3, year 4, year 5, and then
donations are going out year 1, year 2, year 3, year 4, year 5,
and you get into a very complicated piece of logistical
tracking to try to identify when each dollar came in so you can
find out when it went out, and whether it met the distribution
requirements.
So if I could ask for your thoughts generally on whether
this is an area that you think needs attention, and
specifically if you have ideas on ways to grapple with the
tracking of timing of individual dollars, sort of an accounting
predicament, I would be grateful to hear from you about that.
And if anybody else cares to chime in, please--I do not want to
extend the hearing, but please do feel free to send in
responses if I have asked you a question for the record. Send
in a written response.
So with that, Ms. Morgan?
Ms. Morgan. Thank you very much, Senator. I am sure that my
colleagues at Independent Sector have a wealth of research on
some very specific policy recommendations on this. From where I
sit on the ground, we track our inventory like that. We get a
donation of a truckload of oranges, we have to know when they
show up and when they go out, and who they go to. So I am not
particularly sympathetic to complex tracking requirements,
because I live with them every day.
Our sense is that hunger is a crisis right now. Before the
pandemic, it was one in five Oregonians; it has gone up to as
close to one in four during the pandemic. The idea that money
is getting tucked away, that is not benefiting our neighbors,
our communities, ourselves, right now is anathema to me.
Philanthropy means the love of humankind. And the act of
philanthropy is the act of showing love. Should there be
charitable incentives to encourage them? Well, of course there
should, like giving ice cream to a kid for getting a good grade
on an exam. But the getting a good grade is a reward in itself,
and participating in the community is a reward in itself.
I believe that, in general, charities are with you,
Senator, on the idea of the need for reform for donor-advised
funds, and that it needs to be crafted carefully so that it
does not have unintended consequences.
Senator Whitehouse. Good. Well, thank you. I will use the
last 30 seconds of my time to support what the chairman said
about our common interest in making sure that conservation
easements are used properly and honestly. My father is no
longer with us, but he spent his retirement as chairman of the
Piedmont Environmental Council, which at one point had the most
dense array of conservation easements anywhere in the country,
and he did an outstanding job of preserving that historic
countryside. So I am a firm believer in the value of
conservation easements and happy to be a part of Team Wyden and
Team Daines on that.
Thank you very much.
The Chairman. Thank you, Senator Whitehouse, for all your
leadership on environmental issues. Terrific panel. Thank you
all so much.
I especially want to thank my good friend Susannah Morgan
for making the trek to Washington, DC, a trek of more than
3,000 miles. She may beat me home, because it looks like I am
going to be doing a red-eye tonight to make it to central
Oregon first thing in the morning, but I really want to thank
her for all her leadership.
This is a terrific panel. Senator Crapo is, of course, the
ranking minority member. He has been involved in a number of
matters that have involved a negotiation this morning, and he
really wanted to be here.
We are going to work on this in a bipartisan way. That is
the way we try to do everything that we possibly can. Now, it
is not always possible, and I always kind of use that because,
with respect to the Child Tax Credit, I went to the floor of
the United States Senate in December, and I asked unanimous
consent to extend the expiring Child Tax Credit for a year. And
unfortunately, there was objection from the other side of the
aisle.
So then I came back in January, and I asked unanimous
consent to again extend the Child Tax Credit for a year, and
again there was an objection from the other side. So sometimes
it is not possible. But I will tell you, there are a lot of
opportunities right now for bipartisanship.
You have given us an enormously important one as it relates
to charitable giving. We are also working in a bipartisan way
with respect to competing with China, mental health, retirement
savings. So I really appreciate your giving us a very good
update on what the challenges are.
And apart from the fact that we are still coming out of a
crisis, the pandemic, we want to give more certainty and
predictability to all of you so that you are in a position to
talk to workers, and donors, and others. That is where I think
we stand, not just for the next 15 minutes, but for the days
ahead.
You have given us a lot of good ideas. Let me also say
that, for the record, the questions are due on March 24th.
Members have to submit their questions for the record by March
24th. We thank all our guests again,
With that, the Finance Committee is adjourned.
[Whereupon at 12:02 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Submitted by Hon. Benjamin L. Cardin,
a U.S. Senator From Maryland
Apra Maryland
March 16, 2022
Apra Maryland is the professional development and networking resource
for
Maryland-area fundraising professionals who harness information and
data to drive philanthropy. With our 160 members, we urge your support
of the Universal Giving Pandemic Response and Recovery Act (S. 618/H.R.
1704).
In March 2020, as part of the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, Congress enacted a $300 charitable deduction for
Americans who do not itemize their Federal income taxes. In December
2020, Congress extended this universal charitable deduction
availability through 2021 and increased the cap to $600 for joint
filers with the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Unfortunately, this important lifeline for Maryland's charitable
nonprofits expired at the end of 2021.
The universal charitable deduction has been an essential aspect of
COVID-19 pandemic relief for Maryland's 30,880 charitable nonprofits.
The Association of Fundraising Professionals' Fundraising Effectiveness
Project reported that in the last quarter of 2020, ``. . . general
donors giving less than $250 have come out in a huge way during the
pandemic'' with a ``+15.3% [year to date] change.''
The bipartisan Universal Giving Pandemic Response and Recovery Act (S.
618/H.R. 1704) would extend the availability of the universal
charitable deduction through 2022, eliminate the current exclusion of
gifts to donor-advised funds, and increase the maximum deduction to an
amount not to exceed \1/3\ of the standard deduction.
Apra Maryland supports the extension and expansion of the universal
charitable deduction and urges the Maryland Congressional Delegation to
adopt legislation to that effect. We support S. 618/H.R. 1704,
preferably with amendment to make a permanent universal charitable
deduction, not to exceed \1/3\ of the standard deduction.
Thank you,
Theresa Clark
President
______
Prepared Statement of Daniel Cardinali,
President and CEO, Independent Sector
Chairman Wyden, Ranking Member Crapo, and members of the committee,
thank you for the opportunity to share a perspective from the nonprofit
and charitable sector at today's hearing. I serve as president and CEO
of Independent Sector, a national membership organization founded in
1980 made up of nonprofits, foundations, and corporate giving programs
nationwide. Working together, our approximately 500 member
organizations and their networks reach every State and district and
touch the life of every American in one or many ways. They range from
some of the largest charities in the world to all-volunteer
organizations, and from major philanthropic institutions to small
foundations, academic centers, community-based organizations, and more.
Independent Sector's core aim is to support these organizations and all
civil society, working toward a healthy and equitable nonprofit sector
to ensure all people living in the United States thrive.
It is an honor to represent Independent Sector's members and the
broader nonprofit sector along with my fellow witnesses today. Our
sector's strength--like our Nation--lies in its diversity. With that in
mind, I also strongly urge you to draw upon the vast wealth of
knowledge and community-based context in comments submitted for the
record by several of our member organizations and other leaders in the
nonprofit sector, including the Girl Scouts of the USA, Council on
Foundations, Association of Art Museum Directors, League of American
Orchestras, Jewish Federations of North America, YMCA of the USA,
United Way Worldwide, Opera America, Dance/USA, American Alliance of
Museums, National Council of Nonprofits, National Health Council,
Goodwill Industries International, Association of Fundraising
Professionals, and Faith and Giving.
importance of the nonprofit sector
Before considering the nonprofit sector's impact on the people it
reaches, I ask you to consider its importance to something even more
fundamental: representative democracy itself. In the course of their
daily commitment to promoting the common good, the organizations that
form our civil society nurture a marketplace of ideas analogous to the
way that for-profit organizations sustain a marketplace of goods.
Without either of these marketplaces, American democracy would be in
grave peril. The fragility of democracy is on clear display around the
globe, and nonprofit organizations play a critical role--within
America's borders and beyond them.
Advancing Human Flourishing and Solving Problems Together
Over our more than 250-year history as a Nation, civil society has
been the place where young people are educated to realize their
potential and contribute to society, cultural institutions enrich our
lives and unleash our creativity, and religious institutions provide
meaning and build community rooted in values. Without these essential
institutions and community members leading and volunteering in them,
our citizenry would be greatly diminished.
The nonprofit sector is the place where people have been coming
together to solve problems for as long as there has been a community to
serve. Whether they are providing housing, health care, nutrition,
workforce development, education, disaster relief, cultural
inspiration, spiritual guidance, environmental conservation, or any
number of other essential services, nonprofit organizations are run by
community-based boards of directors. This means they have a keen and
powerful sense of what holds a community together, what it needs, what
it most values, and what might be pulling it apart. They offer an
unmatched look at the fabric of community life in America.
The COVID-19 pandemic has challenged Americans like nothing else in
our lifetime. As with any monumental challenge, the nonprofit sector
has confronted this pandemic heroically and in innumerable ways. As
just one example, the Bethlehem Inn in Bend, OR provides safe and
inclusive shelter for men, women, and children across central Oregon
who are working their way out of homelessness. Each year, the Inn has
the capacity to compassionately serve 1,100 adults with shelter,
nutritious meals, clothing, hygiene essentials, and opportunities for
addiction counseling, life-skills training, and housing and employment
applications. Throughout the pandemic and economic crisis, charitable
support from the community helped keep the Bethlehem Inn's doors open.
Not only did they continue providing services while taking precautions
to successfully prevent a COVID-19 outbreak, but they also responded to
profound community need by opening a second location that will continue
providing opportunity for people who have fallen on hard times.
The world has watched the crisis in Ukraine unfold in real time,
but the nonprofit sector has not merely watched; it has sprung into
action. Aided by the generosity of donors from around the world,
nonprofits have provided emergency medical and humanitarian assistance
within Ukraine, supported essential journalism, and offered nutrition,
health, counseling, shelter, and more to an ever-growing number of
Ukrainian refugees in bordering countries. The speed and effectiveness
of the nonprofit sector's response could never be duplicated by
government programs or well-meaning businesses.
Trusted Doer and Partner
Nonprofit organizations are woven into and reflect the communities
they serve, and they work every day to improve lives and build a
brighter future. No sector is closer to the realities or the people on
the ground or has as deep an understanding of the problems communities
face. With this understanding and proximity comes the trust to drive
innovation and collaboration to get things done.
As a result, the nonprofit sector is an essential partner for
government leaders with big goals. From health care to housing,
education to environmental protection, government at every level relies
on nonprofits to generate innovative new solutions and provide critical
services throughout the country. This collaboration does not always
properly recognize the expertise, capabilities, and needs of nonprofit
organizations, and could be improved with additional structures and
policies.
Economic Driver and Job Creator
While the organizations and people that serve in the nonprofit
sector are driven primarily by their charitable missions, they drive an
essential part of the Nation's economy. Over 10 percent of the private
workforce in the United States is employed by a nonprofit organization,
and with more than 12 million paid workers, the nonprofit sector
employs more people than the finance and real estate sectors combined,
outpacing manufacturing at the national level and in 27 States.
Further, these organizations pay $670 billion annually in wages,
supporting families in communities across America.\1\ Despite its
``tax-exempt'' moniker, the sector pays a significant amount of taxes;
in 2010, 501(c)(3) organizations paid $35.2 billion in payroll
taxes.\2\
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\1\ Lester M. Salamon and Chelsea L. Newhouse, ``The 2020 Nonprofit
Employment Report,'' Nonprofit Economic Data Bulletin no. 48.
(Baltimore: Johns Hopkins Center for Civil Society Studies, June 2020).
\2\ National Center for Charitable Statistics (NCCS), the Urban
Institute, the Nonprofit Almanac 2012.
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health of the nonprofit sector
Last fall, Independent Sector published our second annual ``Health
of the U.S. Nonprofit Sector''\3\ report--an evolving resource that
collects the most current data on the health of the U.S. nonprofit
sector across multiple dimensions in a single, accessible format. While
there are many ways to assess the health of a system as large and
complex as the nonprofit sector, the report focuses on health
indicators in four categories: Financial Resources, Human Capital,
Governance and Trust, and Public Policy and Advocacy. These are the
lenses through which Independent Sector considers trends in the
nonprofit sector.
---------------------------------------------------------------------------
\3\ Grayson et al., ``Health of the U.S. Nonprofit Sector,''
Independent Sector, October 2021.
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Financial Resources
Much like for-profit counterparts, the pandemic deeply disrupted
the finances of many nonprofit organizations as fee-for-service and
other earned revenue evaporated and COVID-19 precautions increased the
cost of operations. Organizations that historically relied on in-person
fundraising events faced particularly acute challenges. Unlike for-
profit businesses however, nonprofits saw a huge surge in demand for
assistance as their communities confronted immense health and economic
challenges.
If nonprofit costs have increased as a result of the pandemic while
earned revenue has decreased, revenue from charitable donations has
been more difficult to assess, in part because it is distributed
unevenly across the nonprofit sector. According to Giving USA, total
charitable giving increased in 2020, although donations from
individuals would have dropped without the broad and robust giving of
one particular donor. According to the Fundraising Effectiveness
Project, charitable giving through the third quarter of 2021 largely
kept pace with 2020 levels, with a small decrease in the number of
donors and a small increase in the total amount in donations. Another
recent study from researchers at American University and George Mason
University found no significant increase in giving to organizations led
by or serving communities of color in 2020 or 2021, despite increased
attention on their missions.
While the trends in dollars donated over the past 2 years may be
somewhat varied, the longer-term trajectory of the number of Americans
donating is clear and alarming. Twenty million fewer American
households gave to charity from 2000-2016, a decline of 13 percent.\4\
---------------------------------------------------------------------------
\4\ Chelsea Jacqueline Clark, Xiao Han, and Una O. Osili, Changes
to the Giving Landscape (Indianapolis, IN: Indiana University Lilly
Family School of Philanthropy at IUPUI, 2019).
---------------------------------------------------------------------------
Human Capital and Workforce
The nonprofit sector is powered by people, including nearly 12
million employees as well as approximately 70 million volunteers who
step up to serve their communities in various ways. During the worst of
the recent economic crisis, nonprofit organizations lost over 1.6
million jobs and the sector was still missing approximately 459,000
jobs as of December 2021,\5\ the most recent estimate available. While
the economy as a whole has recovered more than 90 percent of lost jobs,
the nonprofit sector lags at merely 72 percent and is not likely to
break even until the end of 2022. These lost and missing jobs have
particular ramifications for women, who make up approximately \2/3\ of
the nonprofit sector's workforce.
---------------------------------------------------------------------------
\5\ COVID-19 December Jobs Update, Johns Hopkins University Center
for Civil Society Studies, January 2022.
Importantly, these job loss numbers are the work of nonprofit
researchers and reflect highly informed estimates based on 2017 data.
The Bureau of Labor Statistics publishes quarterly data about a wide
range of sectors and subsectors, but the nonprofit sector only receives
such data every 5 years unless charitable resources are diverted to
purchase the data from the Bureau. Although this issue is beyond the
Finance Committee's jurisdiction, the lack of regular government data
about the third-largest workforce in America is deeply unfair and
---------------------------------------------------------------------------
constrains the ability of policymakers to respond to changing needs.
While trends in America's non-stipend volunteer force (as opposed
to AmeriCorps participants, for example) are somewhat more difficult to
measure, it too plays a vital role in helping the nonprofit sector
serve those in need. One recent report found that 66 percent of
volunteers had decreased the amount of time they volunteer or stopped
entirely due to the pandemic.\6\
---------------------------------------------------------------------------
\6\ The Role of Volunteering in Philanthropy, Fidelity Charitable,
2020.
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Governance and Trust
Public trust is the currency upon which nonprofits conduct their work.
The extent to which the public believes nonprofits lead ethically and
transparently impacts whether individuals will invest in or utilize
services from nonprofits. While trust in a wide range of institutions
hovers near historic lows, it is encouraging to see that 84 percent of
recent survey respondents said they were confident in the ability of
nonprofits to strengthen American society. The greater role nonprofit
organizations play in people's lives, the more trusted they become.
While trust is a key currency for any individual nonprofit
organization, it is also important to the health of the nonprofit
sector as a whole. It is for this reason that Independent Sector
strongly supports appropriate oversight of the nonprofit sector and
condemns those would abuse our sector for private gain. In addition to
appropriate legal requirements and enforcement, Independent Sector is
committed to a robust practice of self-regulation within the nonprofit
sector. We were proud to work with this committee in the mid-2000s to
establish the Panel on the Nonprofit Sector, the work of which lives on
in The Principles for Good Governance and Ethical Practice--33
principles of sound practice for charitable organizations and
foundations related to legal compliance and public disclosure,
effective governance, financial oversight, and responsible fundraising.
Policy and Advocacy
Nonprofits are a critical conduit of information between
policymakers and the communities they serve, and Independent Sector
believes deeply that policy education and appropriate advocacy is
critical to a healthy nonprofit sector. The health of our sector's
advocacy efforts can be partially demonstrated by concrete--if
incomplete--victories in Federal policy in recent years, including
access to Paycheck Protection Program loans, payroll tax credits for
COVID-19-related sick leave and employee retention, and the creation of
a nonitemizer charitable deduction for the first time in decades.
However, our understanding of how many nonprofits do this work and the
barriers they experience is badly outdated. Independent Sector is
commissioning a comprehensive survey of nonprofits this year to answer
these questions, the first of its kind in 22 years.
urgent policy needs
To ensure that the nonprofit sector can continue to foster
individual and collective flourishing and provide essential services to
communities in need, Independent Sector respectfully asks for
consideration of the following legislative proposals under the
committee's jurisdiction:
Restore the Nonitemizer Deduction and Significantly Increase or
Eliminate the Cap
The tax code reflects our Nation's values, and has provided a tax
deduction for charitable contributions for over 100 years. In 2020, the
nonitemizer deduction--created in the CARES Act and subsequently
extended through 2021--provided a charitable deduction for taxpayers
who do not itemize up to $300 for single filers and eventually expanded
to $600 for joint filers. This new incentive was a powerful statement
that every American has a role to play in lifting up our communities.
While the charitable impulse comes from the heart, tax incentives
clearly make a difference. On December 31, 2020, donations of exactly
$300--then the cap for both individuals and households--increased by 28
percent.\7\ The charitable sector was deeply disappointed that
congressional inaction allowed the nonitemizer deduction to expire at
the end of last year.
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\7\ Fundraising Effectiveness Project, 2020 Fourth Quarter Report.
Rather than being just for the wealthy, charitable giving should be
an activity that brings a community together, strengthening social
bonds and a sense of belonging, even in our differences. For example,
the Idaho Nonprofit Center coordinates an annual initiative--Idaho
Gives--that generates nearly $4 million in donations to roughly 600
Idaho charities. The event has an average donation of $250 and the
Idaho Food bank notes that each charitable dollar provides enough food
---------------------------------------------------------------------------
for five meals to those in need.
I urge you--in the strongest possible terms--to restore the
nonitemizer charitable deduction quickly, and to significantly increase
or eliminate the cap in order to strengthen our social bonds and to
help generate the scale of giving America needs at this moment.
Independent Sector is grateful to the sponsors and cosponsors of the
Universal Charitable Giving Pandemic Response and Recovery Act (S. 618,
H.R. 1704), including members of this committee--Senators Lankford,
Cortez Masto, Tim Scott, Stabenow, and Hassan. We have been proud to
work for the enactment of this critical--if temporary--response to the
myriad challenges faced by our Nation.
On a more permanent basis, there are a number of different ways to
create a powerful incentive for every American to give to charity.
Independent Sector commissioned research--in partnership with Dr. Osili
and some of her colleagues at the Indiana University Lilly Family
School of Philanthropy--about what those options could mean in terms of
dollars given to charity as well as the number of donors.\8\ The number
of donors is sometimes overlooked, but it means a great deal in policy
design for at least three reasons:
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\8\ Charitable giving and tax incentives: Estimating changes in
charitable dollars and number of donors for five policy proposals,
Indiana University Lilly Family School of Philanthropy, 2019.
It is hugely important for the health of our civil society
that nonprofits are funded by the broadest possible segment of the
population.\9\ A charitable sector that is funded only by the wealthy
will look very different and will serve America very differently, with
ramifications for governance, trust, and the types of organizations and
activities that receive funding.
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\9\ Ashely, Shena. ``Why the Decline in Individual Donors Should
Matter to Institutional Philanthropy--and What to Do about It.''
Nonprofit Quarterly. December 3, 2019.
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Charitable giving is a lifelong habit, and today's small-
dollar donors may one day become major philanthropic partners. If the
charitable deduction is only available for a tiny subset of taxpayers,
we will fail to build the next generation of givers.
Increasing the number of donors could have a profound impact
on the nonprofit sector by bolstering the volunteer force. Households
that made a donation to any charity during the course of a year were at
least three times more likely to volunteer at a nonprofit in their
community.\10\
---------------------------------------------------------------------------
\10\ Bergdoll, Jonathan, Indiana University Lilly Family School of
Philanthropy. Unpublished analysis of 2019 data from the Panel Study of
Income Dynamics, public use dataset. Produced and distributed by the
Institute for Social Research, University of Michigan, Ann Arbor, MI
2021. Dietz, Nathan, University of Maryland Do Good Institute.
Unpublished analysis of U.S. Census Current Population Survey Volunteer
Supplement, September 2015.
It is also important to keep in mind the unique nature of the
charitable deduction. Unlike incentives to save for retirement or
purchase a home, for example, the charitable deduction encourages
behavior for which a taxpayer receives no direct tangible benefit. The
charitable deduction does not subsidize personal consumption or
underwrite the accumulation of personal wealth. It simply and
effectively encourages taxpayers to give away a portion of their income
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to benefit others.
Finally, restoring and expanding the nonitemizer deduction is
extremely popular. In December, Independent Sector released polling
showing that 88 percent of American voters want to see a permanent
nonitemizer deduction, while 74 percent support raising the cap to the
level envisioned in S. 618, with greater than 70 percent support across
every income level and all political identifications.\11\
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\11\ Selected Nonprofit Policy Issues: Public Polling, Independent
Sector, December 2021.
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Targeted Action to Further Boost Charitable Giving
In addition to a broad-based nonitemizer deduction, there are
further policy levers that this committee can use to unlock additional
charitable giving. Independent Sector was proud to work with Congress
and our members for over a decade in support of the IRA charitable
rollover provision, which was eventually made permanent in the PATH Act
as part of Public Law 114-113.
A recent bipartisan proposal, the Legacy IRA Act (S. 243), would
broaden access to this giving vehicle by enabling seniors to make tax-
free contributions from their individual retirement accounts (IRA) to
charities through life-income plans. With many Americans unable to
afford to give away their retirement income during their lifetimes,
this would give prospective donors one more critical way to invest in
the common good in a way that works for them. Independent Sector was
pleased to support a modified version of the Legacy IRA Act that was
included in the Securing a Strong Retirement Act (H.R. 2954), and we
urge the committee to include S. 243 in any retirement legislation that
you consider.
Additionally, I urge Congress to restore two other disaster relief
provisions that expired at the end of 2021: the ability for individuals
who itemize on their taxes to deduct up to 100 percent of their
adjusted gross income for charitable contributions, and the ability of
corporations to deduct up to 25 percent of taxable income. With
continued widespread economic disruption, some potential donors with
highly variable income could be hamstrung by the lower limits now in
effect and reduce their giving accordingly.
Restore the Employee Retention Tax Credit and Adapt it to Better Suit
Nonprofit
Organizations
Congress created an Employee Retention Tax Credit (ERTC) in the
CARES Act to respond to the pandemic, subsequently expanding and
extending it through 2021. In a long overdue recognition of nonprofit
employers, the ERTC functions as a credit against payroll tax
liability--unlike some prior disaster relief income tax credits that
offered our sector no benefit. Independent Sector is deeply grateful to
this committee for that recognition. As a result, the ERTC has been a
critical lifeline, allowing nonprofit organizations to continue serving
their community in the face of immense financial challenges throughout
the pandemic. Its early and retroactive termination in the middle of
the fourth quarter of 2021 was extremely disruptive to charitable
missions and operations throughout our sector, given that organizations
had planned for the expiration of the credit at the end of 2021. While
the lost jobs caused by its early termination reflect families that
lost a paycheck, they also point to an issue of even greater urgency--
unmet community needs.
That unmet need is particularly urgent as nonprofit organizations
struggle to recruit and retain staff. Alarmingly, 42 percent of
nonprofit organizations responding to a recent survey had job opening
rates of higher than 20 percent, as they grapple with challenges
including salary competition and inability to find child care.\12\ I
urge you to restore the Employee Retention Tax Credit, to adjust the
``gross receipts'' test to more accurately reflect the resources
available to sustain nonprofit operations, and to expand eligible
payroll expenses to include child care and tuition assistance.
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\12\ The Scope and Impact of Nonprofit Workforce Shortages,
National Council of Nonprofits, December 2021.
---------------------------------------------------------------------------
Bolster the Volunteer Force by Increasing the Charitable Mileage Rate
Independent Sector strongly supported the investment of an
additional $1 billion last year in national service through AmeriCorps,
but it is concerning that no similar attention has been paid to the
non-stipend volunteer force. In addition to data indicating that
volunteering has lagged in the past 2 years, recent press reports have
highlighted recent volunteer shortages at food banks, affordable
housing organizations, meal delivery operations, and other key
charitable service providers. Congress cannot compel Americans to
volunteer, but it can encourage this vital practice in one instance by
treating volunteer drivers more fairly. I urge you to increase the
Charitable Mileage Rate for nonprofit volunteer drivers from its
painfully low statutory rate of 14 cents per mile to the same rate for
businesses (58.5 cents per mile) for 2022, and to eliminate the tax on
mileage reimbursements up to the business rate.
Provide a Seat at the Table for the Nonprofit Sector
While the other solutions I have called for today fall squarely
within this committee's focus on tax issues, there is a further set of
policy solutions that are needed to strengthen the partnership between
the nonprofit sector and the Federal Government as a whole. These
solutions--which we refer to as the Seat at the Table Initiative--would
create mechanisms that leverage the mission, knowledge, and impact of
nonprofits to help government and the nonprofit sector work together
more effectively in pursuit of shared goals.
Specifically, we call for the creation of a White House Office on
Nonprofit Sector Partnership, as well as an Interagency Council, two
structures that will allow policymakers access to data, reporting, and
front-line, community-specific expertise from nonprofits so they can
better assist constituents. These bodies, along with a proposed Federal
Advisory Board made up of nonprofit leaders, would also ensure
nonprofits nationwide are equipped to produce better policies and
better results for the American people. Additionally, the initiative
contains other policy measures that would support the partnership
between government and the nonprofit sector, including: releasing
quarterly nonprofit economic data, reducing paperwork for nonprofits to
register and fundraise in multiple States, increasing access to
national service, as well as assessing grant and contracting processes.
conclusion
Once again, thank you for convening this hearing and for the honor
of representing Independent Sector's members before the committee.
These are trying and tumultuous times for legislators, the nonprofit
sector, and the Nation. May they serve as a reminder that our sector's
work is never over and always deeply urgent. Congress--much like its
partners in the nonprofit sector--has responded to national crises over
the past few years in unique ways. Now is not the time to walk away
from that work, but to build upon it. Expanding the charitable
deduction so that it is available to every American--along with other
targeted investments in the nonprofit sector--will broaden
participation in civil society and unleash the power of nonprofit
organizations to ensure that all people living in the United States
thrive.
______
Questions Submitted for the Record to Daniel Cardinali
Question Submitted by Hon. Ron Wyden
Question. During the hearing, we discussed challenges facing the
nonprofit sector, including the changes to the tax law in 2017, which
resulted in a decreased tax incentive to give to charity, and a
reduction in the number of taxpayers eligible to claim the charitable
deduction. In 2019, just 11 percent of taxpayers claimed itemized
deductions, with fewer actually claiming the charitable deduction. In
your testimony, you suggested that the number of donors declined and
that donations are distributed unevenly across the nonprofit sector.
Are there certain kinds of organizations that have been
particularly affected?
Answer. Thank you for your leadership in convening this hearing.
Without swift action, charities of every type will continue to be
negatively affected by the expiration of the nonitemizer deduction and
communities will be deprived of critical resources. It is hugely
important for the health of our civil society that nonprofits are
funded by the broadest possible segment of the population. A charitable
sector that is funded only by the wealthy will serve America very
differently, with ramifications for governance, trust, and the types of
organizations and activities that receive funding.
I believe that a charitable deduction available only to itemizers
will punish organizations whose donors tend to come from States with
lower itemization rates. This construct would also likely punish
organizations based in rural and low-income areas, as the donors in
their area may tend to have fewer deductions and be less likely to
itemize.
When considering which kinds of organizations are affected, I would
direct the committee to the most recent Study of Charitable Giving by
Affluent Households, published by the Lilly Family School of
Philanthropy at Indiana University in 2021.\1\ I defer to Dr. Osili's
analysis of this report, but would note that section 5 of the report
clearly illustrates affluent households giving to a wide range of
nonprofit causes and organization types with basic needs and religion
topping the list. According to data on page 36, eight different
categories received support from more than 25 percent of affluent
households. Generous donors are generous.
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\1\ Accessed at https://scholarworks.iupui.edu/bitstream/handle/
1805/26654/bank-america-sept21.pdf.
Furthermore, while I remain gravely concerned about the
implications of a shrinking donor pool for American civil society, any
analysis that focuses solely on giving by subsector or organization
type is necessarily incomplete. Organizations deemed to be higher
education institutions in any particular analysis are also likely
making profound contributions to their community's workforce
development or its health-care access. Nonprofits that may be recorded
as arts organizations may be simultaneously making contributions of
spiritual inspiration, youth development, and medical education to
their communities, to name a few. Independent Sector appreciates your
support for the full fabric of the charitable sector, and we look
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forward to working with you.
______
Questions Submitted by Hon. Mike Crapo
Question. Your written statement mentions Independent Sector's 2021
report, Health of the U.S. Nonprofit Sector, which contains helpful
data, analysis, and recommendations around the nonprofit sector.
Can you discuss the overall health of the nonprofit sector since
March 2020?
Answer. Thank you for your leadership in convening this hearing.
Our Health of the U.S. Nonprofit Sector report focuses on health
indicators in four categories: Financial Resources, Human Capital,
Governance and Trust, and Public Policy and Advocacy. As you note,
there is additional information about these four lenses in my written
testimony and the full report is available on Independent Sector's
website.\2\
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\2\ https://independentsector.org/nonprofithealth/.
In summary, losses of earned revenue and unpredictable fundraising
have combined with increased community demand and the cost of disrupted
operations to strain the nonprofit sector's financial resources since
March 2020. Our sector faces severe human capital challenges, having
lost 1.6 million jobs during the worst of the pandemic and recovering
much more slowly than the economy as a whole. Trust in the nonprofit
sector increased in 2020 as the public observed nonprofits serving on
the front lines of the global pandemic and economic crisis, but this
appears to have been a temporary increase. I look forward to sharing
2022 figures when they are released later this month. The health of our
sector's advocacy efforts can be partially demonstrated by a number of
concrete--if incomplete--victories in Federal policy in recent years,
although we seek a fuller assessment as part of comprehensive advocacy
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research that Independent Sector is commissioning this year.
Question. In your statement, you mentioned the Legacy IRA Act,
highlighting the ability for individuals to give using their retirement
accounts. Considering the Finance Committee is working on a
comprehensive retirement savings package, you have raised this point at
an opportune time. I know your member organizations benefit from every
type of giving, but my sense is that this type of giving may be
overlooked.
Can you explain how important giving through retirement accounts is
to your members?
Do you have relevant data that you could share with the Finance
Committee?
Answer. Giving through retirement accounts is very important for
Independent Sector's members and nonprofit organizations nationwide
since the number of retirees in the country is rapidly growing. It is
expected that 10,000 baby boomers will turn 65 every day through 2030,
and those over 65 now represent 15 percent of the total population.\3\
Coincidently, this is the average age of a donor in the United States
as of 2021.\4\
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\3\ How Women and Men Give Around Retirement. Pg. 3. The Women's
Philanthropy Institute. Indiana University Lilly Family School of
Philanthropy, https://scholarworks.iupui.edu/bitstream/handle/1805/
16758/wpi-retirement-july18.pdf.
\4\ 2022 Report on Qualified Charitable Distributions from IRAs.
Pg. 15. FreeWill, https://www.freewill.com/qcd-report-2022.
Since 2006 when charitable giving through Individual Retirement
Accounts (IRAs) or Qualified Charitable Distributions (QCDs) was
established and ultimately made permanent through the Protecting
Americans from Tax Hikes (PATH) Act, it has remained one of the crucial
fundraising avenues for nonprofit organizations. Among the many planned
gift options retirees have, the QCD at age 70\1/2\ incentivizes greater
charitable giving while it mitigates or eliminates the income tax on
the withdrawal. Americans donated an estimated $471.44 billion in 2020.
Out of that record number of donations, $41.19 billion were donations
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by bequest according to the Giving USA 2021 report.
Over the last few years, nonprofits have seen a surge in the number
of QCD gifts coming into their organizations. According to the 2022
Report on Qualified Charitable Distributions from IRAs, 71 percent of
organizations that received QCDs in 2021 said they fundraised more than
$10,000 through these gifts. Nearly one-third said that they received
more than $50,000 in total from QCDs.\5\
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\5\ 2022 Report on Qualified Charitable Distributions from IRAs.
Pg. 33. FreeWill, https://www.freewill.com/qcd-report-2022.
______
Questions Submitted by Hon. Maria Cantwell
Question. Nonprofits make up the fourth-biggest industry in
Washington State, with more than 30,000 organizations and 238,000
nonprofit employees. Like too many industries, nonprofits across my
State were decimated when the pandemic hit and had to cut staff. And 2
years later they are still struggling. In Washington nonprofit
employment is still down 6 percent below pre-pandemic levels, after
dropping 9 percent in early 2020. These are organizations that have
been on the frontline throughout the pandemic helping people find
access to housing, food, child care, and more, and they need our
support.
One of the most effective measures we took in the CARES Act was to
provide a payroll tax credit of up to $5,000 per employee for
businesses that were hard hit by the pandemic, to help keep people
employed. But unfortunately the Bipartisan Infrastructure Law repealed
the ERTC for the fourth quarter of 2021 as a pay-for, leaving
nonprofits without one of the key tools they had to retain staff. I am
a big believer in payroll tax credits as an incentive to sustain a
workforce. It's why I worked to create a similar program for our
aerospace workforce in the American Rescue Plan.
What has been the impact of the repeal of the Employee Retention
Tax Credit on nonprofit employment? Are you already seeing nonprofits
having to lay off staff or leave open positions?
If we could extend the ERTC through the end of this year, what
impact would that have to get nonprofits back to their pre-pandemic
levels?
Answer. I share your support for the Employee Retention Tax Credit
(ERTC) and your concern about nonprofit job losses. In a long-overdue
recognition of nonprofit employers, the ERTC functions as a credit
against payroll tax liability--unlike some prior disaster relief income
tax credits that offered our sector no benefit. Independent Sector is
deeply grateful for that recognition. As a result, the ERTC was a
critical lifeline, allowing nonprofit organizations to continue serving
their community in the face of immense financial challenges throughout
the pandemic. Its early and retroactive termination in the middle of
the fourth quarter of 2021 was extremely disruptive to charitable
missions and operations throughout our sector, given that organizations
had planned for the expiration of the credit at the end of 2021. It is
difficult to predict whether restoring ERTC would provide enough
support to help recover the more than 450,000 jobs that were still
missing from the nonprofit sector at most recent estimate. While the
lost jobs caused by early termination reflect families that lost a
paycheck, they also point to an issue of even greater urgency--unmet
community needs.
That unmet need is particularly urgent as nonprofit organizations
struggle to recruit and retain staff. Alarmingly, 42 percent of
nonprofit organizations responding to a recent survey had job opening
rates of higher than 20 percent, as they grapple with challenges
including salary competition and inability to find child care.\6\
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\6\ The Scope and Impact of Nonprofit Workforce Shortages, National
Council of Nonprofits, December 2021.
Question. There are over 1.3 million charitable nonprofits in the
United States, employing 12.3 million people. But of course their
impact goes far beyond their economic footprint--they are there again
and again to step in to help those in need when they have nowhere else
to turn. And nonprofits are also the recipients and implementors of so
much of what we fund here in the Federal Government, from homeless
services to environmental restoration. But despite the scale and
importance of the nonprofit industry, there is no unified approach from
the Federal Government to addressing the needs and support charitable
---------------------------------------------------------------------------
nonprofits.
What steps could the executive branch take to better coordinate
policy across agencies to support the needs of charitable nonprofits?
Would the creation of a Federal task force or dedicated White House
office be useful to better support nonprofits?
Answer. Despite its scale and unique understanding of community
needs, you are correct that the nonprofit sector is often on the
``outside looking in'' when Federal policies are decided, and there is
absolutely no unified approach. There is no equivalent to the Small
Business Administration for nonprofits, the Nation's third-largest
employment sector. Nonprofits do play a key role as implementers of
Federal policy, but--with the right systems in place--their deep
community trust and on-the-ground expertise could make them true
partners to the Federal Government. Independent Sector has worked with
our members and partners throughout the nonprofit sector to develop an
initiative comprised of structures and policies that would truly give
nonprofits a proverbial seat at the table. We expect similar bipartisan
legislation to be introduced in the House of Representatives very soon.
A White House Office on Nonprofit Sector Partnership would ensure
policies are designed with an understanding of the sector's capacity to
realize critical priorities in a way that maximizes the benefit to
communities. Coordinating policies across Federal agencies through an
interagency council would streamline information sharing for both
agency staff and nonprofit organizations, allowing nonprofits to spend
more time on their missions and helping Federal agencies work with our
sector more smoothly. This is particularly urgent for organizations
that participate in government contracting, with a recent survey
finding that government funding covers only about 70 cents on the
dollar for these organizations' direct program expenses.\7\ Finally, we
believe that a Federal advisory board on the nonprofit sector would
allow policymakers access to data, reporting, and frontline, community-
specific expertise from nonprofits so they can better assist
constituents and design more effective policies.
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\7\ A National Imperative, Alliance for Strong Families and
Communities (since changed name to Social Current), 2017.
Importantly, this initiative calls for other key policies as well.
Streamlining multi-State fundraising registration, providing regular
employment and workforce data about the nonprofit sector, and
broadening access to national service programs would all help give the
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nonprofit sector a seat at the table.
Question. As you're aware, charitable organizations depend on
volunteers to help deliver vital programs and services in local
communities. However, the number of volunteers in the nonprofit sector
have not returned to pre-pandemic levels.
Prior to the pandemic, the annual volunteerism rate in Washington
State was over 35 percent, contributing 202 million hours of service
valued at nearly $5 billion. In November 2020, the University of
Washington reported that volunteerism rates among Washington State
nonprofits had decreased by 30-50 percent, harming their ability to
operate at full capacity just when their services were needed most.
Nonprofits have been essential to helping or local communities
during the pandemic, even as they faced health risks, labor shortages,
and operational challenges themselves. I think that it is important
that we are able to support charitable nonprofits and address this
volunteerism shortage.
There have been some suggestions on how to boost volunteerism like
increasing the charity mileage rate to bring it in line with the
business mileage rate. What steps do you think Congress should take to
incentivize more people to volunteer?
Answer. Thank you for highlighting the roughly 70 million
volunteers who step up to serve the nonprofit sector and their
communities in various ways. The challenges you cite in your State are
echoed in national survey data and press reports, as my testimony
mentions. Independent Sector strongly supported the investment of an
additional $1 billion last year in national service through AmeriCorps,
but it is concerning that no similar attention has been paid to the
non-stipend volunteer force.
Increasing the charitable mileage rate to the business rate, as you
suggest, would be a critical first step and would send a strong message
about the importance of volunteering at a time when many Americans are
stretching to make ends meet. We support recently introduced
legislation, the Volunteer Driver Tax Appreciation Act (H.R. 7432),
which would increase the mileage rate for volunteers who are
transporting passengers or property on behalf of a charity.
Additionally, Congress should allocate at least $250 million in
Federal funding to: (1) support the creation and launch of a nationally
scaled digital platform to connect, mobilize, and support volunteer
networks across the Nation, particularly those in long-underserved
communities; and (2) to build the internal capacity of nonprofit
organizations to effectively develop and engage volunteers. In the
longer term, Congress can design additional solutions to boost
volunteerism if it directs the Bureau of Labor Statistics and
AmeriCorps to improve data collection and analysis of volunteerism.
______
Question Submitted by Hon. Debbie Stabenow
Question. Charitable giving has remained relatively stable compared
to GDP over the last several decades, but studies have suggested that
the proportion of individual donors has been declining. The nonprofit
sector has provided enormous support to communities across the country,
while many families, who may normally donate to their local nonprofits,
are facing their own struggles and economic hardships during this
unprecedented crisis.
Charitable IRA rollovers provide an important option for seniors to
donate. In your testimony, you advocated for the Legacy IRA Act (S.
243), introduced by Senator Cramer and me, which would expand
charitable IRA rollovers.
What would the expansion of charitable rollovers, specifically
enactment of the Legacy IRA Act, mean for both seniors who want to
donate and the nonprofits that receive those donations?
Answer. We are grateful for your leadership on this issue. If
enacted, the Legacy IRA Act (S. 243) would broaden access to this
giving vehicle by enabling seniors to make tax-free contributions from
their individual retirement accounts (IRA) to charities through life-
income plans. With many Americans unable to afford to give away their
retirement income during their lifetimes, this would give prospective
donors one more critical way to invest in the common good in a way that
works for them. After the donor passes away, the remaining amount is
used by the charity for their mission. Independent Sector was pleased
to support a modified version of the Legacy IRA Act that was included
in the Securing a Strong Retirement Act (H.R. 2954), and we urge the
Senate Finance Committee to include S. 243 in any retirement
legislation.
The Legacy IRA Act would mean donors could have a greater impact
and nonprofits would have more funds to continue their crucial work.
Nonprofits are estimated to see overall giving increase by $1 billion
if this bill becomes law, according to the 2022 Report on Qualified
Charitable Distributions from IRAs.\8\
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\8\ 2022 Report on Qualified Charitable Distributions from IRAs.
Pg. 30. FreeWill, https://www.freewill.com/qcd-report-2022.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. The deduction for charitable donations is meant to
encourage contributions that benefit the public. With donor-advised
funds, the donor gets the deduction now, but the charitable benefit may
not happen for years.
Are there any reforms to donor-advised funds that should be
considered?
Answer. Donor-advised funds are important charitable giving
vehicles worthy of serious conversations within the sector and with
policymakers about whether there is opportunity to improve their
operation and oversight. Upon the introduction of the Accelerating
Charitable Efforts Act (S. 1981), Independent Sector brought the
legislation and other associated policies to our public policy
committee, and hosted a series of webinars to educate, present multiple
perspectives, and hear reactions directly from the charitable sector.
We will use the information we heard from experts, researchers, our
network, and colleague organizations to evaluate any proposals using
three key perspectives. We believe that any legislation in this area
should (1) protect public trust in philanthropy and the broader
nonprofit sector; (2) improve equitable practices in philanthropy; and
(3) preserve the amount of charitable resources flowing into the
sector.
President Biden's Fiscal Year 2023 budget request includes a
proposal limiting the ability of a private foundation distribution to a
donor-advised fund to be considered a qualifying distribution for the
purposes of its annual five percent payout requirement. Independent
Sector believes that public trust is a critical asset for our sector,
and it is important that nonprofits uphold the spirit of the laws that
govern them--including the 5-percent payout rule for private
foundations--to help preserve that trust. We appreciate the President's
budget request recognizing that policy change is needed to address this
issue. We look forward to working with policymakers, alongside other
philanthropic and charitable organizations, to determine if this
specific proposal is the best solution for philanthropy, grantees, and
communities.
Question. We have heard that reforms which require tracking when
donations come in and when they are distributed from donor-advised
funds can be an administrative burden.
Do you have ideas for ameliorating any administrative burden that
may exist?
Answer. We appreciate your focus on reducing administrative burden
for nonprofit organizations in this context and others. Although I am
not an expert in this area, it is my understanding that charitable
nonprofits that sponsor a donor-advised fund do generally have policies
on inactive funds, which necessitate some tracking of donations. Any
new reporting or tracking requirements that impose a cumbersome
administrative burden would take away from the resources of the
organization needed to support their charitable mission. Independent
Sector would be glad to work with you and other organizations in our
sector to reduce the administrative burden of any policy changes.
______
Questions Submitted by Hon. Chuck Grassley
Question. In December 22, 2020, I released the results of an
investigation conducted by my staff into the relationship between World
Vision, a 501(c)(3) non-profit organization, and the Islamic Relief
Agency, which had been sanctioned by the U.S. Government. My
investigation concluded in part, ``A more robust and fundamentally
sound system of screening and vetting is needed to restore the public's
trust that contributions to World Vision are not funding illicit
organizations.'' The full results of that investigation are available
on my webpage here: https://www.
grassley.senate.gov/news/news-releases/grassley-releases-results-
investigation-world-vision-s-interactions-isra.
Do you believe that charities have implemented adequate safeguards
to ensure that grants from the U.S. Government and donations from
Americans are not even inadvertently funneled to the benefit of
individuals or groups that have been sanctioned by the U.S. Government?
Are there additional steps charities can take to ensure they are in
compliance with applicable rules and regulations, or is there any
action Congress should take to promote that compliance?
Answer. Following leadership from you and Senator Baucus,
Independent Sector convened a panel to examine good governance and
ethical practices for the nonprofit sector, which resulted in the
publication of the 2007 report Principles for Good Governance and
Ethical Practice, A Guide for Charities and Foundations. This report
was updated in 2016 with additional recommendations. Good governance
through self-regulation is critical to the health of American civil
society, but it is not sufficient on its own. Although the nonprofit
sector can accomplish a great deal through shared standards and self-
regulation, nonprofits also need State and Federal regulators to have
enough resources to enforce laws that guard against fraud and abuse,
because scandal often negatively impacts public trust in the entire
sector.
Independent Sector supports strong enforcement against those that
violate the laws governing our sector, and would be pleased to work
with you and the Senate Finance Committee to examine appropriate
safeguards and compliance policies.
Question. In an article published in 2020 in the Maryland Law
Review, Professor Johnny Rex Buckles concludes in part, ``Federal tax
law permits foreign actors to influence U.S. politics and policies
through their interactions with American charities.''\9\ He goes on to
note in his conclusion, ``Even the existing restrictions on lobbying,
and the prohibition against political campaign intervention, safeguard
against only the most obvious exploitation of charities by politically
motivated foreign actions.''\10\
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\9\ Johnny Rex Buckles, ``Curbing (or Not) Foreign Influence on
U.S. Politics and Policies Through the Federal Taxation of Charities,''
Maryland Law Review, Vol. 79:590 (2020).
\10\ Id.
In a theoretical case study, the article presents an example where
a Russian oil baron donates to a U.S. charity that educates the
American public on the dangers of fossil fuels with the intent of
promoting increased regulation of U.S. fossil fuel interests that would
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serve to confer a comparative advantage on their Russian competitor.
This example may in fact not be very theoretical. In an opinion
piece published in The Hill in March of 2022, Institute for Policy
Innovation resident scholar Merrill Matthews wrote, ``U.S. policymakers
are finally realizing that Russia may have been covertly funding U.S.
environmental organizations to shape public opinion and policies--
especially energy and anti-fossil fuel policies--to Russia's liking and
benefit. Such Russian skullduggery has long been an open secret in
Europe.''\11\
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\11\ Matthews, Merrill, ``Russia used `soft power' to influence EU
policies and anti-fossil fuel efforts,'' The Hill, March 22, 2022,
available at https://thehill.com/opinion/energy-environment/599113-
russia-used-soft-power-to-influence-eu-policies-and-anti-fossil.
Do you have concerns that foreign actions are able to exploit U.S.
tax-exempt organizations to promote their own priorities and extend
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influence over U.S. policy?
Are there reliable measures of how much foreign money is poured
into U.S. non-profit entities and the source of that funding?
Do you have an estimate of funding for U.S. non-profits that
originated from sources aligned with Russia, or Russian policy
priorities?
Answer. Foreign influence in U.S. politics and policy presents
unique concerns and challenges and the nonprofit sector must be mindful
and vigilant to prevent illegal activity. The Foreign Agents
Registration Act (FARA) and Department of Justice enforcement are vital
to protecting against illicit activity. With that said, we do believe
that FARA is badly outdated and that portions of it are overly broad
and vague. At a recent hearing before the U.S. House of Representatives
Committee on the Judiciary, Nick Robinson of the International Center
for Not-for-Profit Law testified that, ``FARA's notoriously sweeping
provisions have increasingly interfered with the operations of
nonprofits, businesses, media, religious institutions, universities,
and others with limited or no connection to foreign governments in a
manner that Congress never intended. . . .''\12\
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\12\ Enhancing the Foreign Agents Registration Act of 1938, House
Committee on the Judiciary, April 5, 2022.
We do not have specific detail about Russian spending or Russian
policy priorities in the United States. As noted above, Independent
Sector has published detailed recommendations for Good Governance and
Ethical Practice for nonprofits to follow, including recommendations
for transparency in their activities, to ensure nonprofits are acting
in accordance with the law and ethical guidelines. Independent Sector
is willing to work with you and the Congress to review these practices
and continue to ensure nonprofits act ethically and are not used
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inappropriately.
______
Prepared Statement of Hon. Mike Crapo,
a U.S. Senator From Idaho
Senators from all over the United States sit on this committee, and
one thing we all have in common is an appreciation for the important
work the nonprofit sector performs in each of our States. If the past 2
years have taught us anything, it is that the nonprofit sector is vital
to our communities across the country.
In Idaho, charitable organizations stepped up to serve Idahoans
when they needed it the most during the darkest days of the pandemic.
The nonprofit sector adapted to the COVID-19 situation incredibly well,
often fulfilling their missions with fewer resources and volunteers or
even canceled events, all while ensuring the communities they serve
were being helped.
But it is not just COVID-related responses that are worth
mentioning. Whether it is responding to a natural disaster, food
insecurity, or providing mental health services, nonprofits across the
country have done a wonderful job. They deserve our thanks, our praise,
and our commitment to continued support. According to a 2021 report by
the Giving USA Foundation, charitable giving in the U.S. exceeded $470
billion in 2020--a 5-percent increase over 2019.
The vast majority of giving comes from individuals, but
contributions and impacts from corporations, foundations, and even
estates cannot be overlooked. While data on charitable giving are
encouraging, more can be done to encourage giving moving forward.
Charitable giving and accompanying tax incentives are inextricably
linked. Fortunately, the Senate has a track record of bipartisan
cooperation on this issue.
On the Finance Committee, Senators Lankford, Scott, and Cortez
Masto have been leaders in crafting bipartisan legislation to help
increase charitable giving. I look forward to hearing about how we can
continue to work together on bipartisan tax policies to responsibly
encourage giving. As the Senate committee charged with considering
changes to the tax code, we also have an obligation to look ahead and
pay attention to shifts in the charitable giving landscape.
For example, the increasing prominence of crowdfunding and the rise
of digital assets present challenges and opportunities for the
nonprofit sector. I am also interested in hearing about educational
efforts to encourage more giving. It is essential that we think through
these issues and ensure we are being proactive about new developments
and trends on the horizon.
To our four witnesses, thank you for being here. Each of you has a
unique background and perspective. I appreciate your willingness to
share your expertise with us this morning, and I look forward to a
productive exchange.
______
Submitted by Hon. James Lankford,
a U.S. Senator From Oklahoma
Oklahoma Center for Nonprofits
Chesapeake Community Plaza
720 West Wilshire Blvd., Suite 115
Oklahoma City, OK 73116
1 (800) 338-1798
www.okcnp.org
[email protected]
March 16, 2022
The Honorable James Lankford
United States Senate
Washington, DC 20510
RE: Senate Finance Committee Hearing ``Examining Charitable Giving and
Trends in the Nonprofit Sector''
Dear Senator Lankford,
On behalf of the Oklahoma Center for Nonprofits and the 11,207
charitable nonprofits in our state, I write in advance of the upcoming
hearing, ``Examining Charitable Giving and Trends in the Nonprofit
Sector,'' to express strong support for your legislation, the Universal
Giving Pandemic Response and Recovery Act, S. 618, to improve this
important charitable giving incentive. I also would like express our
appreciation for your past support for pandemic relief, as well as
update you on the ongoing challenges that nonprofits are facing, and
explain the need for additional targeted relief within the jurisdiction
of the Senate Finance Committee.
In the face of the ongoing public health and economic crises, too many
Oklahoma nonprofits are still struggling to meet increased demands for
services, confronting a combination of decreased revenue, expenses that
are higher than pre-pandemic, and nonprofit workforce and volunteer
staffing shortages. See the results of the National COVID-19 Community
Impact Survey \1\ administered by the Federal Reserve System. The
relief provided by Congress made the difference for many organizations
by replacing revenues lost due to declines in individual and corporate
giving, fees for service, and canceled fundraising events. The largest
of these by far was forgivable loans under the Paycheck Protection
Program. Nearly 3,500 Oklahoma nonprofits received about $430 million
in forgiven PPP loans in 2020 and 2021, according to Small Business
data.\2\ Those funds saved more than 70,000 nonprofit jobs, the SBA
reports, which enabled these organizations to serve our communities.
However, the PPP program and most other pandemic relief programs have
expired, yet the need for, and burdens on, charitable organizations
remain great.
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\1\ https://fedcommunities.org/data/main-street-covid19-survey-
2021/.
\2\ https://www.pandemicoversight.gov/data-interactive-tools/
interactive-dashboards/paycheck-protection-program.
With the above context, I now address three areas of challenges that
nonprofits are facing and propose tax policy solutions for your
consideration: the lack of resources, the lack of staff, and the lack
of volunteers--all of which are essential to advancing nonprofit
missions.
Charitable Giving Has Not Kept Up
Charitable giving nationwide has not kept up with need and rising
expenses. The 2021 Giving USA report \3\ found that individual giving
decreased by nearly 0.8 percent in 2020 compared with 2019, when one
major donor's contributions are removed from the data. A separate
analysis, the Nonprofit Trends and Impacts 2021 \4\ from the Urban
Institute, found that small nonprofits were under particular stress.
``Forty-two percent of organizations with budgets under $500,000
experienced decreased donations in 2020, compared with 29 percent of
organizations with budgets of $500,000 or more.'' Nonprofits that said
donations were essential to their revenue stream were also more likely
to experience decreased donations in 2020.
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\3\ https://store.givingusa.org/pages/annual-subscription.
\4\ https://www.urban.org/research/publication/nonprofit-trends-
and-impacts-2021/view/full
_report.
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Tax Policy Solutions
In the aftermath of virtually every natural disaster since Hurricane
Katrina, Congress has recognized the value of nonprofit relief and
recovery efforts by enacting charitable giving incentives that
encourage some individuals and corporations to help cover some of the
costs of these community-based services. The COVID-19 pandemic and
resulting economic crisis have certainly qualified as natural disasters
and Congress--a bipartisan body--swiftly enacted giving incentives for
those who itemize and corporations. Recognizing the catastrophic impact
of health and economic crises, Congress went further by enacting, and
then expanding and extending, the universal charitable or nonitemizer
deduction to ensure that all taxpayers, including those who claim the
standard deduction received a tax benefit for giving back to their
communities by supporting the work of charitable nonprofits.
As a sponsor of the Universal Giving Pandemic Response and Recovery
Act, S. 618, you better than most recognize the benefits of the
nonitemizer charitable giving incentive. The Oklahoma Nonprofit Center
fully endorses this important legislation because it will further
promote giving by all American taxpayers--regardless of their income--
to give to the work of charitable nonprofits, thereby ensuring that our
country retains a strong and independent civil society. It will also
provide needed resources for charitable and faith-based organizations
to continue providing vital services to families, workers, and
communities, especially those critically impacted by the ongoing
pandemic. We stand with in your commitment to S. 618 and encourage your
colleagues to join you in supporting this bill to strengthen our
communities.
During the Finance Committee hearing on Thursday, we also ask that you
speak up in support of extending the two additional disaster-relief
giving incentives that expired on December 31, 2021--the provision
permitting individuals who itemize to deduct charitable donations up to
100% of their adjusted gross income and the measure allowing
corporations to deduct charitable donations up to 25% of taxable
income.
Nonprofit Workforce Shortages Crisis
One of the greatest challenges that nonprofits of every type of mission
are experiencing is the inability to hire and retain qualified workers.
The Federal Reserve survey, referenced above, found that 40% of
responding organizations reported that staffing levels are down. As of
December 2021, the nonprofit sector was still more than 450,000
employees short of pre-pandemic levels, according to the report COVID-
19 Jobs Update, December 2021 \5\ from the Center for Civil Society
Studies at Johns Hopkins University. The report found, ``as of the end
of 2021, nonprofits have recovered approximately 72.1% of the jobs
estimated to have been lost as of May 2020.''
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\5\ https://ccss.jhu.edu/december-2021-jobs/.
This past fall, the National Council of Nonprofits conducted a survey
of the difficulties nonprofits across the country were confronting in
retaining staff and filling vacancies. Three out of five (60%) survey
respondents reported vacancies of between 10% and 30%, according to the
NCN report, The Scope and Impact of Nonprofit Workforce Shortages,\6\
published in December. Another 16% reported vacancies greater than 30%.
Nationwide, nonprofits explained the causes of the vacancies as salary
competition, typically with employers outside the nonprofit sector
(79%) and the inability of potential employees to find child care
(23%).
---------------------------------------------------------------------------
\6\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
---------------------------------------------------------------------------
Tax Policy Solutions
The Oklahoma Center for Nonprofits and dozens of Oklahoma nonprofits
joined more than 1,500 organizations from all 50 states in signing onto
the recent letter to Congress and the Administration seeking Pandemic
and Workforce Shortage Relief for Charitable Nonprofits.\7\ Among other
things, that letter calls on Congress to address critical staffing
shortages at nonprofits by retroactively restoring the Employee
Retention Tax Credit, as proposed in the bipartisan ERTC Reinstatement
Act (S. 3625), and extend this refundable payroll tax credit through
2022. To address the impact of the unique impact of nonprofit workforce
shortages on individuals and communities, we ask that you modify
nonprofit eligibility under the ERTC beyond the current ``gross
receipts'' test to ensure more nonprofits qualify. We also request that
Congress revise the definition of eligible payroll expenses under the
ERTC to include child care and education subsidies to reflect the
increased costs charitable organizations experienced as they struggle
to maintain or expand services. We believe this improvement is
justified because, unlike for-profit employers, tax-exempt nonprofits
are not currently able to receive income-tax relief for providing those
employee benefits. Our proposal provides a level of tax fairness and
parity that does not currently exist.
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\7\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-workforce-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20
Advocacy%20Updates%20%20February%2022%202022&utm_medium=email.
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Volunteers Have Not Returned
A unique aspect of charitable organizations is that they can expand
their impact by leveraging the commitment of armies of volunteers who
are dedicated to the work of nonprofits in their communities. Pre-
pandemic estimates by AmeriCorps \8\ indicate that the volunteerism
rate in Oklahoma was 32.0%, contributing 94.5 million hours of service.
Nationally and in Oklahoma, nonprofits reported throughout the pandemic
that volunteerism dropped precipitously. Now, however, as many
businesses return to public operations, many nonprofits still have not
seen their volunteers return to pre-pandemic levels. Volunteering is
still depressed--parents have additional family demands, older
Oklahomans and others from vulnerable populations have safety concerns
with returning to in-person volunteering, and in general people are
stressed and have reduced time and energy to volunteer.
---------------------------------------------------------------------------
\8\ https://americorps.gov/sites/default/files/document/
Volunteering_in_America_States_508.
pdf.
---------------------------------------------------------------------------
Tax Policy Solutions
As discussed in the recent nonprofit letter on policy priorities,\9\
Congress can incentivize volunteerism by eliminating unfair tax
policies. Specifically, we seek an increase in the Volunteer Mileage
Rate for nonprofit volunteer drivers to the government rate (58.5
cents/mile) for 2022 and the elimination of the tax on mileage
reimbursements up to the business rate. The rapid increase in gas
prices mean that many nonprofits will need to reimburse their
volunteers for driving on the charity's behalf. Yet, those drivers will
be forced to pay income tax on any reimbursement rate greater than the
volunteer mileage statutory rate of 14 cents per mile. This existing
tax policy, enforced at both the federal and state levels, imposes a
disincentive on all but the most well-off volunteers. It is unfair,
harmful to the missions of charitable organizations, and must be
changed.
---------------------------------------------------------------------------
\9\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-workforce-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20
Advocacy%20Updates%20%20February%2022%202022&utm_medium=email.
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American Rescue Plan Act Resources
Before closing, I want to raise an important issue that, while not
within the Finance Committee's jurisdiction, is of critical concern to
the charitable nonprofits in our state. The American Rescue Plan Act
allocated $3.2 billion to governments in Oklahoma through the
Coronavirus State and Local Fiscal Recovery Fund. The federal
government is showing tremendous trust that governments closest to the
people and their problems are best positioned to decide the best ways
to spend their allocated resources to meet local needs. While available
for many purposes, the statute and Treasury Department regulations make
abundantly clear that governments at all levels may use these funds in
partnership with charitable nonprofits to address many challenges in
our communities. The Oklahoma Center for Nonprofits is actively engaged
in working with state and local officials to ensure the money is
properly invested. We ask that you and your Senate colleagues allow
these ARPA funds to go to the state and local governments as scheduled
so that we may achieve greater impact.
Conclusion
As you consider the issues raised during the Finance Committee hearing,
we ask that you reflect in the important, sustaining work that Oklahoma
nonprofits performed throughout the pandemic and recognize that our
challenges are far from over. Most for-profit businesses and government
offices have or soon will reopen to something amounting to normal
business. Most charitable organizations--particularly those addressing
the immediate needs of our residents--never closed their doors. Yet, at
this stage in the pandemic when demand for nonprofit services remains
high, Oklahoma's nonprofits remain short of resources to meet normal as
well as pandemic-related expenses. But we don't just lack adequate
resources; our nonprofits lack the staff and volunteers to meet the
very high needs, which is resulting in waiting lists, denial of
services, and outright closures of local nonprofits. In light of these
compelling challenges, we ask that you champion tax-policy solutions,
at the hearing and in the Senate, that will restore and enhance the
charitable giving incentives and the Employee Retention Tax Credit, and
remove tax disincentives for volunteers to support the missions of
nonprofits in their communities.
Respectfully,
Marnie Taylor
President and CEO
______
National Council of Nonprofits
1001 G Street, NW, Suite 700 East
Washington, DC 20001
202-962-0322
councilofnonprofits.org
March 16, 2022
The Honorable James Lankford
United States Senate
Washington, DC 20510
RE: Support for the Universal Giving Pandemic Response and Recovery
Act, S. 618
Dear Senator Lankford:
In testimony submitted today to the Senate Finance Committee in advance
of the hearing, ``Charitable Giving and Trends in the Nonprofit Sector,
''the National Council of Nonprofits enthusiastically endorsed the
Universal Giving Pandemic Response and Recovery Act (S. 618) that you
have sponsored and championed for the past two-and-one-half years. Sec
the full statement. We are honored to join the more than 1,500
organizations that signed the Nonprofit Community Letter on the
Pandemic and Workforce Shortage Relief for Charitable Nonprofits,
updated March 14th, that also endorsed your legislation.
In preparing for Thursday's Finance Committee hearing, several state
associations of nonprofits sent letters to their Senators on the
Committee. Below are the statements endorsing S. 618 submitted as of
early this afternoon We anticipate that more are coming.
Colorado Nonprofit Association
``Colorado Nonprofit Association unequivocally supports renewal of the
universal charitable deduction at least through 2022 and expansion
through Universal Giving Pandemic Response and Recovery Act (S. 618).
Passing this act will promote further giving by all American taxpayers
of all incomes and generate needed resources for charitable and faith-
based organizations to continue serving communities impacted by the
pandemic.''
Delaware Alliance for Nonprofit Advancement
``Indeed, we fully endorse the Universal Giving Pandemic Response and
Recovery Act, S. 618, because it will further promote giving by all
American taxpayers--regardless of their income--and generate needed
resources for charitable and faith-based organizations to continue
providing vital services to families, workers, and communities,
especially those critically impacted by the ongoing pandemic.''
Idaho Nonprofit Center
``We want to be clear that the Idaho Nonprofit Center strongly supports
renewal of the universal charitable (non-itemizer) deduction at least
through 2022. Indeed, we fully endorse the Universal Giving Pandemic
Response and Recovery Act, S. 618, because it will further promote
giving by all American taxpayers--regardless of their income--and
generate needed resources for charitable and faith-based organizations
to continue providing vital services to families, workers, and
communities, especially those critically impacted by the ongoing
pandemic.''
Maryland Nonprofits
``We want to be clear that Maryland Nonprofits strongly supports
extension of the universal charitable (non-itemizer) deduction at least
through 2022. Indeed, we fully endorse the Universal Giving Pandemic
Response and Recovery Act, S. 618, because it will further promote
giving by all American taxpayers--regardless of their income--and
generate needed resources for charitable and faith-based organizations
to continue providing vital services to families, workers, and
communities, especially those critically impacted by the ongoing
pandemic.''
Michigan Nonprofit Association
``As a cosponsor of the Universal Giving Pandemic Response and Recovery
Act, S. 618, you know well the benefits of the nonitemizer charitable
giving incentive. Like you, the Michigan Nonprofit Association fully
endorses this important piece of legislation because it will further
promote giving by all American taxpayers--regardless of their income--
to give to the work of charitable nonprofits, thereby ensuring that our
country retains a strong and independent civil society. It will also
provide needed resources for charitable and faith-based organizations
to continue providing vital services to families, workers, and
communities, especially those critically impacted by the ongoing
pandemic. We ask that you make a strong statement in support of S. 618
during Thursday's hearing and encourage your colleagues to join you in
supporting this bill to strengthen our communities.''
Montana Nonprofit Association
``Montana Nonprofit Association strongly supports renewal of the
universal charitable (non-itemizer) deduction at least through 2022. We
fully endorse the Universal Giving Pandemic Response and Recovery Act,
S. 618, because it will further promote giving by all American
taxpayers--regardless of their income--and generate needed resources
for charitable and faith-based organizations to continue providing
vital services to families, workers, and communities, especially those
critically impacted by the ongoing pandemic.''
North Carolina Center for Nonprofits
The North Carolina Center for Nonprofits strongly supports renewal of
the universal charitable (non-itemizer) deduction at least through
2022. Indeed, the Center fully endorses the Universal Giving Pandemic
Response and Recovery Act (S. 618) because it will further promote
giving by all American taxpayers--regardless of their income--and
generate needed resources for charitable and faith-based organizations
to continue providing vital services to families, workers, and
communities, especially those who continue to be affected by the
ongoing pandemic.''
New Hampshire Center for Nonprofits
''We are grateful for your co-sponsorship of the Universal Giving
Pandemic Response and Recovery Act, S. 618. The NH Center for
Nonprofits fully endorses this important piece of legislation because
it will further promote giving by all taxpayers, regardless of their
income, to donate to charitable nonprofits. We ask that you consider
speaking in support of S. 618 during Thursday's hearing and encourage
your colleagues to join you in supporting this bill.''
New Jersey: Center for Nonprofits
The Center for Non-Profits strongly supports renewal of the universal
charitable (non-itemizer) deduction at least through 2022. We fully
endorse the bipartisan Universal Giving Pandemic Response and Recovery
Act, S. 618, because it will further promote giving by all American
taxpayers--regardless of their income--and generate needed resources
for charitable and faith-based organizations to continue providing
vital services to families, workers, and communities, especially those
critically affected by the ongoing pandemic.
Oklahoma Center for Nonprofits
``As a sponsor of the Universal Giving Pandemic Response and Recovery
Act, S. 618, you better than most recognize the benefits of the
nonitemizer charitable giving incentive. The Oklahoma Nonprofit Center
fully endorses this important legislation because it will further
promote giving by all American taxpayers--regardless of their income--
to give to the work of charitable nonprofits, thereby ensuring that our
country retains a strong and independent civil society. It will also
provide needed resources for charitable and faith-based organizations
to continue providing vital services to families, workers, and
communities, especially those critically impacted by the ongoing
pandemic. We stand with in your commitment to S. 618 and encourage your
colleagues to join you in supporting this bill to strengthen our
communities.''
Oregon: Nonprofit Association of Oregon
``We want to be clear that the Nonprofit Association of Oregon strongly
supports renewal of the universal charitable (non-itemizer) deduction
at least through 2022. Indeed, we fully endorse the Universal Giving
Pandemic Response and Recovery Act, S. 618, because it will further
promote giving by all American taxpayers--regardless of their income--
and generate needed resources for charitable and faith-based
organizations to continue providing vital services to families,
workers, and communities, especially those critically impacted by the
ongoing pandemic.''
Pennsylvania Association of Nonprofit Organizations
``The Pennsylvania Association of Nonprofit Organizations strongly
supports renewal of the universal charitable (non-itemizer) deduction
at least through 2022. Indeed, we fully endorse the Universal Giving
Pandemic Response and Recovery Act, S. 618, because it will further
promote giving by all American taxpayers--regardless of their income--
and generate needed resources for charitable and faith-based
organizations to continue providing vital services to families,
workers, and communities, especially those critically impacted by the
ongoing pandemic. This measure is critical as individual giving makes
up 78% total charitable giving in the United States.''
South Carolina: Together SC
``As a cosponsor of the Universal Giving Pandemic Response and Recovery
Act, S. 618, you know well the benefits of the nonitemizer charitable
giving incentive. Like you, Together SC fully endorses this important
piece of legislation because it will further promote giving by all
American taxpayers--regardless of their income--to give to the work of
charitable nonprofits, thereby ensuring that our country retains a
strong and independent civil society. It will also provide needed
resources for charitable and faith-based organizations to continue
providing vital services to families, workers, and communities,
especially those critically impacted by the ongoing pandemic. We ask
that you make a strong statement in support of S. 618 during Thursday's
hearing and encourage your colleagues to join you in supporting this
bill to strengthen our communities.''
Virginia: Center for Nonprofit Excellence (CNE) and NetworkPeninsula
``Indeed, we fully endorse the Universal Giving Pandemic Response and
Recovery Act, S. 618, because it will further promote giving by all
American taxpayers--regardless of their income--and generate needed
resources for charitable and faith-based organizations to continue
providing vital services to families, workers, and communities,
especially those critically impacted by the ongoing pandemic.''
Washington Nonprofits
Letter to Senator Cantwell urging Congress to ``Renew of the universal
charitable (non-itemizer) deduction for 2022 and significantly increase
the cap on the deduction, as proposed in the bipartisan Universal
Giving Pandemic Response and Recovery Act.''
Senator Lankford, we thank you for our leadership and determination in
advancing the work of charitable organizations by promoting greater
charitable giving tax incentives. We will continue to work closely with
our colleagues at the Oklahoma Center for Nonprofits to promote this
important legislation.
Regards,
Tim Delaney
President and CEO
______
National Philanthropic Trust
The Honorable James Lankford
United States Senator
316 Hart Senate Office Building
Washington, DC 20510
Dear Senator Lankford,
On behalf of National Philanthropic Trust (NPT), thank you for the
leadership you have shown, along with Senator Chris Coons, advocating
for S. 618, the Universal Giving Pandemic Response and Recovery Act.
The legislation expands and extends the current deduction for
charitable giving at a critical time for nonprofits. As you know,
charities are on the front lines battling the effects of the COVID-19
pandemic, and S. 618 would increase charitable donations and make sure
nonprofits have the resources they need to aid local communities
recover from the pandemic.
NPT is a public charity and the largest national, independent provider
of donor-
advised funds (DAFs). Since our founding in 1996, our donors have made
more than 492,000 grants totaling $17.5 billion to charities across the
United States, including Oklahoma. NPT's donors have responded to the
turbulent past two years by substantially increasing their dollars to
the nonprofit sector. In the 2021 fiscal year, NPT's donors more than
doubled their giving by dollar value, committing $6.4 billion to
nonprofit organizations.
In Oklahoma, over the last five years, NPT made charitable grants to
298 charities in the state across 47 cities--totaling more than $23
million (please see the attached map highlighting NPT's grants in the
state). Our charitable grants in Oklahoma ranged from Edmond to Owasso
to Tulsa to Oklahoma City to Broken Arrow. In fact, NPT's grants in
Oklahoma increased 70 percent during the pandemic--underscoring the
responsiveness of our donors to the needs of Oklahomans and local
communities. Nonprofit organizations that received NPT grants include
City Rescue Mission in Oklahoma City, Folds of Honor Foundation in
Owasso, and the Oklahoma School of Science and Mathematics Foundation,
to name a few.
As a DAF sponsor, we are particularly supportive that S. 618 would
allow gifts to DAFs in the universal charitable deduction provision. We
not only believe this is good tax policy, but it will also help enhance
charitable giving and grantmaking to local nonprofits.
Thank you, Senator Lankford, for your commitment to the charitable
sector and for your leadership advancing S. 618. We stand ready to work
with you and the Senate Finance Committee to advance this important
piece of legislation.
Sincerely,
Eileen R. Heisman
President and CEO
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Philanthropy Roundtable
1120 20th Street, NW, Suite 550 South
Washington, DC 20036
[email protected]
202-822-8333
The Philanthropy Roundtable supports S. 618, the Universal Giving
Pandemic Response and Recovery Act. We applaud the bipartisan
leadership of Senators Lankford and Coons, along with the cosponsors,
for introducing this measure.
In a time of pandemic recovery, international crisis and economic
struggles at home and abroad, Americans are stepping forward to help
those in need. This bill is crucial to ensuring our nation's generous
spirit continues to grow and thrive by allowing a deduction for
charitable contributions for taxpayers who do not otherwise itemize
their tax deductions.
The bill in its entirety is a positive for those who care about our
vibrant charitable landscape, the donors that support it and all of us
who benefit from the important work of charities today. We have seen
the vital impact of prior universal charitable deduction measures.
Included in the 2020 Coronavirus Aid, Relief, and Economic Security
(CARES) Act, a version of this temporary tax benefit applied to tax-
year 2020. Then the Taxpayer Certainty and Disaster Tax Relief Act of
2020 generally extended it through the end of 2021. Thanks to these
measures, charitable giving reached a record high of $471.44 billion in
2020, according to Giving USA's 2021 report. Other data show
significant increases in smaller gifts. The Fundraising Effectiveness
Project found that gifts under $250 grew by 15.3% in 2020 compared to
2019 and noted a 28% increase in $300 gifts on December 31st, the exact
amount allowed for a deduction under the prior measure.
As earlier temporary universal charitable deduction measures expire, S.
618 offers even more encouragement for charitable giving. By allowing
donor-advised fund (DAF) gifts to be eligible for a deduction, the bill
appropriately acknowledges the key role that DAFs play in this
landscape.
According to data from the National Philanthropic Trust for the 2020
fiscal year, DAF donors stepped up in a year of pandemic, social and
economic crises. Grants out of DAFs rose to $34.67 billion from $27.29
billion, an astounding 27% in 2020 compared to the prior fiscal year.
Contributions into DAFs rose as well, by 20.6%.
These numbers illustrate America's rainy-day fund in action as donors
increased the amounts distributed out of DAFs to charities at a higher
rate than they increased their giving into DAFs--all of which is
irrevocably dedicated to charitable giving.
While DAF donors meaningfully increased their already high payout rates
during 2020 to nearly 24%, we are already facing new economic
challenges. Our communities have needs now and will face new,
unpredictable problems in the future. Allowing donors to continue
growing charitable assets while also paying out at strong rates is one
of the most powerful features of DAFs as a giving vehicle.
With the growing popularity of DAFs as a tool for giving, the
associated tax benefits should not be limited to those that itemize
their tax deductions. All generous Americans should be allowed to
deduct their charitable giving through DAFs.
Now, more than ever, S. 618 is vital to foster the generosity of
Americans and to support our charitable sector as it works to address
the significant challenges before us. We applaud Sen. Lankford, Sen.
Coons, and the bipartisan group of senators who support this important
legislation for their leadership and thank them for their support of
the charitable sector.
______
Philanthropy Southwest
1910 Pacific Avenue, Suite 13500
Dallas, TX 75201
214-740-1787
FAX: 214-740-1790
www.philanthropysouthwest.org
Dear Chairman Wyden, Ranking Member Crapo, Senator Lankford, and
Members of the Committee, Philanthropy Southwest welcomes the
opportunity to provide input to the Committee on Examining Charitable
Giving Trends for the Nonprofit Sector. Founded in 1949, Philanthropy
Southwest, the first association of grantmakers in the nation, believes
in a thriving Southwestern U.S. through the power of philanthropy. We
are a vibrant network comprised of hundreds of grantmaking
organizations and thousands of foundation trustees and staff in the
U.S. Southwestern region.
Philanthropy Southwest understands the importance of protecting and
enhancing the charitable deduction to ensure that charities across our
nation continue to receive the funds necessary to serve their
communities and fulfill their philanthropic missions. Inspired by the
words of former President John F. Kennedy, ``Philanthropy, charity,
giving voluntary and freely . . . is truly a jewel of an American
tradition.''
Altruism is good for all, and the charitable deduction is not only good
tax policy, but it also encourages all Americans, regardless of income,
to give. According to recent Giving USA data, U.S. nonprofits and
foundations have stepped up like never before in response to the COVID-
19 pandemic giving to charitable organizations supporting their
neighbors in need. This increased level of giving is attributed to a
robust charitable deduction for itemizing and nonitemizing taxpayers.
For example, the Fundraising Effectiveness Project report found that
there has been an outsized increase in small gifts of $250 or less, and
there was a reported 28% increase of $300 gifts on December 31, 2020,
the maximum amount a donor can take using a universal charitable
deduction. This increase shows the impact of the universal charitable
deduction on smaller gifts.
With the current charitable deduction being only available for
itemizing taxpayers, it forecloses the opportunity for more charitable
giving. The 2020 COVID relief legislation provided a temporary benefit
for nonitemizers to deduct their charitable contributions through 2021,
thus reducing the economic costs to the donor. The renewal of this
temporary universal charitable deduction could result in nearly 9 and
10 taxpayers being able to deduct their charitable giving even if they
do not itemize, democratizing the incentive for charitable giving.
Philanthropy Southwest supports the reenactment of a universal
charitable deduction for non- itemizing taxpayers. The Universal Giving
Pandemic Response and Recovery Act (S. 618, H.R. 1704), which renews
the universal charitable deduction and increases the cap to one-third
of the standard deduction, would provide donors and charities alike
with the certainty they need to continue giving freely to the vital
organizations in their communities and across the globe.
On April 5th-7th, the philanthropic sector will convene virtually in
support of philanthropy for Foundations on the Hill, an annual
convening for the sector. This premier gathering presents an
opportunity to speak to Congress about critically important legislation
for the charitable sector and inform congressional leaders about the
unique and important role that charitable giving plays in America. Our
U.S. Southwest delegation of foundation leaders will be informing
congressional offices about the importance of reenacting the universal
charitable deduction and looks forward to partnering with government
around efforts to preserve and protect charitable giving for all.
______
Faith & Giving
March 17, 2022
The Honorable James Lankford
U.S. Senate
316 Hart Senate Office Building
Washington, DC 20510
Dear Senator Lankford:
The undersigned faith-based organizations write to thank you for your
long-term leadership to add a universal charitable deduction (UCD) for
non-itemizers to the tax code and for your work to enact the Universal
Giving Pandemic Response and Recovery Act (S. 618). We are deeply
grateful to you and the bill's other lead sponsors--Senators Coons,
Lee, Shaheen, Tim Scott, Klobuchar, Collins, and Cortez Masto--as well
as to the other cosponsors who sit on the Finance Committee, Senators
Stabenow, Hassan, and Brown.
Thank you as well for your vital roles in enacting a temporary UCD in
the March 2020 CARES Act--and later extending it through 2021 and
doubling it for joint filers. Your diligent leadership ensured this
vital lifeline for the work of faith-based and other charities was
available to millions of generous Americans of all faiths.
The charitable deduction works. As one vivid example, the charitable
deduction's benefits and incentives may be the only reasonable
explanation why approximately 10 percent of annual giving occurs during
just the last three days (0.8 percent) of each year.\1\
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\1\ Digital Giving Index, Network for Good, https://
beta.networkforgood.com/wp-content/uploads/digitalgivingindex_2015-
1.png (covering 2015 giving).
Similarly, after Congress enacted the $300 UCD in 2020, the Fundraising
Effectiveness Project (FEP) reported that year-to-year annual donations
of less than $250 increased from the previous year's levels by 15.3
percent.\2\ Flipping the normal pattern for giving during a crisis,
this was nearly 1.5 times greater than the increase (10.4 percent) that
year in large donations ($1,000 or more). As FEP Chair Jon Biedermann
stated, ``One factor that may have helped the increase in smaller gifts
was the universal charitable deduction.''\3\
---------------------------------------------------------------------------
\2\ ``Fundraising Effectiveness Project: Giving Increases
Significantly in 2020, Even as Donor Retention Rates Shrink,''
Association of Fundraising Professionals (AFP), March 15, 2021, https:/
/afpglobal.org/fundraising-effectiveness-project-giving-increases-
significantly-2020-even-donor-retention-rates.
\3\ Id.
Further, as compared with 2019, there was a 28 percent increase in $300
donations on the final day of 2020.\4\ This is the exact amount of the
universal charitable deduction for 2020.
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\4\ Id.
For these and many other reasons, we believe Chairman Wyden is spot on
when he explains, ``The charitable deduction is a lifeline, not a
loophole.''\5\
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\5\ ``The charitable deduction is a lifeline, not a loophole,''
Blog Post, U.S. Senator Ron Wyden, April 18, 2016, https://
www.wyden.senate.gov/news/blog/post/ron-the-charitable-deduction-is-a-
lifeline-not-a-loophole.
Congregations and other faith-based organizations around the country
got the word out in 2020 and 2021 about the temporary UCD. They wanted
to ensure non-iteming givers received the UCD's benefit. But ministry
leaders also know the deduction helps increase giving by generous
individuals. Giving by individuals is the financial lifeblood of many
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faith-based charities.
Today, religious giving is subject to multiple negative pressures
Congress can help counter by restoring an expanded and extended UCD.
One such pressure is the percentage of American households giving to
charity, which has declined precipitously over the past two decades.\6\
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\6\ ``Latest Data Shows New Low in Share of Americans Who Donated
to Charity,'' Lilly Family School of Philanthropy, Indiana University,
July 27, 2021, https://philanthropy.iupui.edu/news-events/news-item/
latest-data-shows-new-low-in-share-of-americans-who-donated-to-
charity.html?
id=363.
Further, Giving USA data for 2018 through 2020 (the most recent
published data) show annual religious giving has failed to keep pace
with inflation. While inflation increased by 5.5 percent in 2018
through 2020,\7\ religious giving increased by less than 3 percent.\8\
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\7\ See ``Inflation, consumer prices for the United States,''
Federal Reserve Economic Data (FRED), St. Louis Fed, https://
fred.stlouisfed.org/series/FPCPITOTLZGUSA.
\8\ See ``Giving USA 2018,'' Press Release, Giving USA Foundation,
June 12, 2018 (reporting religious giving of $127.4 billion in 2017),
https://givingusa.org/giving-usa-2018-americans-gave-410-02-billion-to-
charity-in-2017-crossing-the-400-billion-mark-for-the-first-time/;
``Giving USA: Giving Grew in a Tumultuous Year but Not for All,''
Chronicle of Philanthropy, June 15, 2021, https://www.philanthropy.com/
article/giving-grew-in-a-tumultuous-year-but-not-for-all-whats-ahead-
in-2021 (reporting religious giving of $131.1 billion in 2020, a
decrease of 0.2 percent in inflation-adjusted dollars over 2019).
Adding to the financial impact of these negative trends, congregations
and organizations of every faith across America have remained on the
front lines caring for the needs of individuals and communities hurt by
the pandemic. Through virtual and (where and when possible) in-person
connections, congregations and other faith-based charities are serving
the escalating physical, emotional/relational, and spiritual needs of
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the most vulnerable members of our communities.
Unfortunately, the charities caring for our nation's most vulnerable
often are the most vulnerable themselves to economic downturns and
crises. Many fail to fully recover or even survive.
Restoring an expanded and extended UCD as soon as possible in 2022 will
help these smaller congregations and faith-based ministries weather the
pandemic's impact while also combating negative long-term trends for
religious giving. Moreover, granting lower- and middle-income taxpayers
the same sort of generous tax incentive granted to higher-income
taxpayers will help increase and democratize giving to all of America's
diverse ministries and other charities.
Thank you again for your and your Senate colleagues' dedicated
leadership to enact an expanded and extended universal charitable
deduction for non-itemizers. Please do not hesitate to contact me
([email protected]) with questions or to help connect with
other signers.
Respectfully yours,
Brian W. Walsh, Executive Director
National Faith-Based Signers
Accord Network
Agudath Israel of America
The American Association of Christian Schools
American Leprosy Missions
Association of Christian Schools International (ACSI)
Bread for the World
Catholic Charities USA
CCCU--Council for Christian Colleges and Universities
Center for Public Justice
Children's AIDS Fund International
Christian Alliance for Orphans
Christian Connections for International Health
Citygate Network
Compassion First
Cross International
Dignity Freedom Network
Disabled Children's Fund
ECFA (Evangelical Council for Financial Accountability)
Ethics and Religious Liberty Commission
Faith & Giving
Jewish Federations of North America
Kumveka
Langham Partnership USA
Lifewater International
Living Water International
Lutheran Services in America
Mennonite Central Committee
National Christian Foundation
Operation One
PastorServe
Plant With Purpose
Sojourners
Union of Orthodox Jewish Congregations of America
Volunteers of America
World Hope International
World Relief
World Vision US
Regional, State, and Local Faith-Based Signers
Baltimore Jewish Council (Maryland)
Church Hill Activities and Tutoring (CHAT) (Richmond, Virginia)
CitiHope International (Delhi, New York)
Great Falls Rescue Mission (Montana)
Jewish Family and Children's Services, San Francisco Bay Area
(California)
The Jewish Federation in the Heart of New Jersey (South River)
Jewish Federation of Greater Toledo (Ohio)
Jewish Federation of Southern New Jersey (Cherry Hill)
Jewish Federations of New Jersey (Scotch Plains)
MAP International (Brunswick, Georgia)
Morningstar Mission Ministries (Joliet, Illinois)
Mount Olive Baptist Church (Washington, DC)
Shirley's House of Hope (Marshfield, Wisconsin)
Third Lens Ministries (Atlanta, Georgia)
Youngstown Area Jewish Federation (Ohio)
______
The Jewish Federations of North America
The Max M. Fisher Headquarters
25 Broadway, Suite 1700
New York, NY 10004
p 212-284-6548
f 212-271-6741
https://www.jewishfederations.org/
March 15, 2022
The Honorable James Lankford
U.S. Senate
Washington, DC 20510
Dear Senator Lankford:
The Jewish Federations of North America (JFNA) would like to express
its gratitude to you and Senator Chris Coons for championing the
bipartisan Universal Giving Pandemic Response and Recovery Act (S.
618). As the nonprofit sector works to recover from the crippling
effects of the COVID pandemic, it is critically important to ensure
that Americans who donate to charities and religious organizations
receive an above-the-line tax deduction at a level higher than the $300
deduction first enacted in 2020 as part of the CARES Act.
JFNA represents 146 Jewish Federations and over 300 Network communities
nationally, including the Jewish Federation of Tulsa and the Jewish
Federation of Greater Oklahoma City. Jewish Federations collectively
raise and distribute more than $3 billion annually, and in Oklahoma we
support the social welfare, social services, and educational needs of
those throughout the state and beyond. In Tulsa, the Jewish Federation
is the umbrella organization for The Sherwin Miller Museum of Jewish
Art and the Charles Schusterman Jewish Community Center. In Oklahoma
City, we collaborate with the Edmond Public Schools, the Oklahoma
Center for Community and Justice, and United Way of Central Oklahoma.
A significant amount of charitable giving and grantmaking at our Jewish
Federations are advanced through donor-advised funds, which is why we
strongly support the provision in S. 618 that enhances the non-itemizer
provision by including gifts to donor-advised funds. We believe this
would allow for more charitable grantmaking and assist communities and
nonprofits during times of crisis.
Thank you for your leadership on this issue and your steadfast support
of the nonprofit sector. We encourage the Senate Finance Committee to
support S. 618 and work to pass it soon. Charities in Oklahoma and
throughout the country are depending on it.
Sincerely,
Edward J. Beckwith David Rosen
Co-Chair Co-Chair
Tax Policy Committee Tax Policy Committee
______
Prepared Statement of Susannah Morgan,
CEO, Oregon Food Bank
Chairman Wyden, Ranking Member Crapo, members of the committee,
thank you for the opportunity to share my on-the-ground perspective
regarding charitable giving in the nonprofit sector.
My name is Susannah Morgan, and I am the chief executive officer of
Oregon Food Bank. Our network is among the largest in the country, with
a central warehouse that provides resources to 21 regional food banks--
which then support over 1,400 pantries, free food markets and meal
sites across Oregon and Southwest Washington.
Our mission is to end hunger and its root causes. To build
communities that never know hunger, we need living-wage jobs,
affordable housing and childcare, and protection from discrimination.
When we hit tough times, we need strong government safety nets, like
SNAP, to ensure everyone has access to food. Food banks should be the
last resort when other systems have failed--and food alone will never
solve hunger.
I have worked in anti-hunger efforts for 26 years across several
States, and the past 2 years have been the most challenging in my
career. More than 865,000 people sought emergency food assistance
through the Oregon Food Bank Network in 2019--nearly 1 in 5 of our
neighbors. In 2020, this number rose like a tsunami to a jaw-dropping
height of 1.7 million people, and remained painfully high at over a
million in 2021.
Even with the outpouring of community support, we couldn't have
kept food flowing without significant State and Federal action. As we
began to run out of food due to the enormous increase in demand,
Governor Kate Brown came through with $1 million a week for food
purchases until USDA commodities arrived through the CARES Act.
Congressional aid reached communities directly through enhanced
unemployment and SNAP benefits, relief payments to families, and more.
The Child Tax Credit alone drove down child poverty by an incredible 41
percent \1\ and reduced food insecurity by 26 percent.\2\ Combined,
these actions helped us to meet the crisis head-on and ensure that
hunger did not spiral out of control.
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\1\ https://www.povertycenter.columbia.edu/news-internal/monthly-
poverty-january-2022.
\2\ https://jamanetwork.com/journals/jamanetworkopen/fullarticle/
2788110.
Charitable giving incentives were an important piece of this
equation as well. Let me share one extraordinary week I had, tied to
decisions made by this committee: on a Monday early in the pandemic, my
colleague in The Dalles, OR called me over the moon because she had
just located the perfect building for a new regional food bank.
Purchase price was $750,000. On Wednesday, a local philanthropist
expressed interest in making a $1 million donation, thanks in part to
tax law changes that allowed 100 percent deduction of her Adjusted
Gross Income. On Friday, she committed to fund the purchase of the
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building, in what is surely the shortest capital campaign ever.
The work of this committee clearly influences expressions of love
and generosity in our communities. Yet, from where I sit, it is
incredibly important that you consider how future tax policy changes
may impact Federal revenue. Even at our scale in Oregon, for every meal
we provide, SNAP provides 10. Charity organizations simply cannot
replace Federal funding for the programs and resources our families
need to thrive.
So I humbly ask that you act to strengthen Federal revenue and
advance policies that prevent hunger from happening. The best thing
Congress can do to reduce hunger is invest in proven solutions that
support families directly. Reinstate the Child Tax Credit. Modernize
SNAP to reflect the true cost of healthy food. Invest in housing and
child care. Raise revenue by requiring the wealthiest corporations,
individuals and estates to pay what they owe.
It is important that any new incentives are designed to encourage
charitable giving that helps our communities now. Hunger is a crisis
today and charitable support is needed now--not tucked away for some
hypothetical future. Sustain the 100 percent Adjusted Gross Income
deduction. Increase the amount private foundations must grant annually.
Ensure donor-advised funds held by large commercial wealth firms have
minimum annual distributions of 7 to 10 percent and spend-down
timelines, while making exceptions for community foundations.
As we speak, our communities face uncertainty around the impact of
global events, the cost of living, and whether a new variant might
emerge. Hunger remains an epidemic. This isn't over. We need Congress
to continue supporting our neighbors through proven policies. I believe
that, together, we can still emerge stronger than ever.
It has been an honor to be with you today. Thank you for your time
and attention.
______
Questions Submitted for the Record to Susannah Morgan
Question Submitted by Hon. Ron Wyden
Question. Over the past 2 years, Congress has implemented a number
of novel policies to make sure charities have the resources they need
to continue serving our communities in the midst of the pandemic. These
include the non-itemizer charitable deduction, and expanding the
Employee Retention Tax Credit and Paid Leave Credit for tax-exempt
organizations. Other non-tax programs have also impacted nonprofits,
like PPP and various grant programs. In your testimony, you emphasized
the importance of these policies as well as direct support to
households through the enhanced child tax credit.
Could you provide more detail about how the Oregon Food Bank and
the communities it serves benefitted from these tax policies? What
lessons can we learn from your experience?
Answer. The rate of hunger surged during the pandemic--and it could
have been even worse.
More than 865,000 people sought emergency food assistance through
the Oregon Food Bank Network in 2019--nearly one in five of our
neighbors. In 2020, this number rose like a tsunami to a jaw-dropping
height of 1.7 million people, and remained painfully high at over a
million in 2021.
Government help was critical to keep emergency food flowing in
2020. In the first few weeks of the pandemic, despite an outpouring of
community support, Oregon Food Bank could not keep up with the enormous
demand for food assistance. We began to run out of food. Then Governor
Kate Brown came through with $1 million per week for food purchases.
Then USDA commodities arrived through the CARES Act.
We believe that it was primarily Federal intervention that drove
down the hunger curve in 2021. This intervention took the form of
enhanced unemployment and SNAP benefits, relief payments to families,
and more. The Child Tax Credit alone drove down child poverty by an
incredible 41 percent and reduced food insecurity by 26 percent.
Right now, Congress should reinstate the Child Tax Credit--which
was a great idea with proven results in reducing hunger and poverty.
In the next crisis, Congress should again provide immediate
assistance--to nonprofits like us and to families directly. Congress
should once again increase unemployment benefits, which was in many
cases life changing. Congress should once again provide direct payments
to families.
Before the next crisis happens, Congress should work with states to
ensure that systems like Unemployment Insurance, SNAP, and Pandemic EBT
are able to administer benefits quickly. One of the reasons food banks
saw such alarming increases in requests for food in the early days of
the pandemic was because people who were newly eligible for programs
like UI faced weeks--and sometimes even months--of waiting for benefits
to be administered. That was unacceptable in 2020, and it would be
unthinkable if we let this happen again.
We recommend more immediate action to prevent a housing crisis,
such as an eviction moratorium. We recommend targeting cash assistance
at families at or below median income with no strings.
Also, as I said in my testimony, it is important that any new
incentives are designed to encourage charitable giving that helps our
communities now. Hunger is a crisis today and charitable support is
needed now--not tucked away for some hypothetical future. Sustain the
100-percent Adjusted Gross Income deduction. Increase the amount
private foundations must grant annually. Ensure donor-advised funds
held by large commercial wealth firms have minimum annual distributions
of 7 to 10 percent and spend-down timelines, while making exceptions
for community foundations.
______
Questions Submitted by Hon. Mike Crapo
Question. I appreciate you sharing your ``on-the-ground''
experiences with us. I was struck by your opening statement, in which
you seemed to indicate an overall story of success despite the
challenges your organization faced.
What has been the greatest challenge your organization has faced
since the pandemic began?
Answer. Oregon Food Bank's greatest challenge during the pandemic
has been adaptation.
In the first few weeks of the pandemic, requests for food
assistance nearly doubled. We were drawing down our inventory. We moved
most of our workforce--except for the warehouse crew and drivers--to
remote work. We suspended our massive volunteer program. We watched as
food pantries and meals sites across the State lost the core of their
volunteers--people 60+--as they went into quarantine. We instituted
masking and deep cleaning.
I have never in my life been so consistently afraid. Our community
needed us so much--and for those first few weeks, I was so scared we
would fail . . . that we would run out of food, or have an outbreak and
have to close our warehouse or abandon truck routes, or that food
assistance sites would close due to lack of hands.
And yet, we succeeded. We, collectively. Congress came through with
the CARES Act, which provided direct support to families and
unemployment benefits and SNAP and thus drove down demand. The CARES
Act also provided us with a reliable source of USDA commodities. Our
community came through with unprecedented generosity, which allowed us
to hire more staff, pay hazard pay, buy laptops for remote work and
generally afford all this adaptation. And our community came through
with new volunteers--younger people who were out of work or working
flexible hours from home--to take the place of volunteers who had
quarantined.
Question. From your perspective, what is the number one issue you
believe this committee should tackle to help support organizations like
yours?
Answer. Reinstate the monthly Advance Child Tax Credit and ensure
all members of our community can access it. When it went into effect
last July, it cut the number of people struggling to afford food by a
quarter. When it expired in January, 3.7 million more kids in America
went back into poverty. If you want to ensure fewer people in America
need to access emergency food, bring back the Advance Child Tax Credit.
______
Question Submitted by Hon. Maria Cantwell
Question. As you're aware, charitable organizations depend on
volunteers to help deliver vital programs and services in local
communities. However, the number of volunteers in the nonprofit sector
have not returned to pre-pandemic levels.
Prior to the pandemic, the annual volunteerism rate in Washington
State was over 35 percent, contributing 202 million hours of service
valued at nearly $5 billion. In November 2020, the University of
Washington reported that volunteerism rates among Washington State
nonprofits had decreased by 30-50 percent, harming their ability to
operate at full capacity just when their services were needed most.
Nonprofits have been essential to helping or local communities
during the pandemic, even as they faced health risks, labor shortages,
and operational challenges themselves. I think that it is important
that we are able to support charitable nonprofits and address this
volunteerism shortage.
Has the Oregon Food Bank experienced a decline in volunteers since
the start of the pandemic? How has that impacted your operations and
ability to serve Oregonians in need?
Answer. Oregon Food Bank suspended our volunteer program entirely
for the first 2 months of the pandemic. In June 2020, we restarted
volunteer shifts at a much smaller scale: down to 10-15 people instead
of 100--to ensure social distancing.
Oregon Food Bank relies on volunteers to sort donated food and to
repack bulk purchased food. So during the pandemic, we also completely
stopped accepting food from food drives, because we did not have
volunteer labor to sort it. We started purchasing food, such as
macaroni, in retail pack sizes instead of bulk--spending more money
because we did not have the volunteer labor to repack it. We paid to
have apples put into five pound bags instead of asking volunteers to
bag apples.
As of early April 2022, we have not yet relaunched our full
volunteer program. So 2 years later, we are still spending tens of
thousands more dollars annually than we would if we had our prior
levels of volunteer assistance.
______
Questions Submitted by Hon. John Thune
Question. When the Tax Cuts and Jobs Act was enacted in 2017, some
observers predicted that overall charitable donations would decline as
a result of a larger standard deduction.
Has that been the Oregon Food Bank's experience? Have overall
charitable contributions and grants to the Oregon Food Bank increased
or decreased over the last 5 years? For each of those years, did
overall charitable contributions and grants increase or decrease
compared to the prior year?
Answer. Total contributions to Oregon Food Bank declined in FY17-18
and FY18-19, and then increased dramatically during the pandemic. With
hunger at historically high rates, everyone knew someone who was facing
hunger, and our community reached deep and gave with extraordinary
generosity.
Here is actual data on Oregon Food Bank's contributions:
Approximate Number of Donors
FY15-16 37,500
FY16-17 41,500
FY17-18 41,000
FY18-19 3,0000
FY19-20 49,000
FY20-21 65,000
It is also worth noting that the types of giving also shifted. As
seen in the data below, we received a much higher rate of IRA and Donor
Advised funds after the 2017 Tax Cuts and Jobs Act. Both types of
giving are known to be avenues that wealthier, disproportionately white
donors utilize--so while the worst year for OFB came directly after the
tax adjustment in FY17/18, certain donors were able to tap into assets
and continue to receive tax breaks more easily than others.
IRA Rollover Gifts Donor Advised Fund Gifts
FY15-16 1 311
FY16-17 0 376
FY17-18 12 489
FY18-19 269 633
FY19-20 805 1,455
FY20-21 973 1,904
We would also like to State that no single organization can
represent the complex experience of the entire nonprofit sector,
including as it relates to charitable giving. For example, I understand
that after the election of Donald Trump in 2016, the ACLU was
overwhelmed with new supporters. That was not Oregon Food Bank's
experience. During times of economic crisis, our communities understand
the struggles of their neighbors and tend to give to social services
nonprofits--like Oregon Food Bank. Any number of influencing factors--
economic, political, tax policies, etc.--may change a single nonprofit
organization's experience.
Question. Americans are the most generous people on earth, and
overall charitable donations continue to grow, but some have suggested
that these donations are not going to working charities like yours as
efficiently as possible.
As a representative of a working charity, what is your perspective
on this topic and how does the Oregon Food Bank work to ensure that you
efficiently utilize your donations?
Answer. The vast majority of Oregon Food Bank's revenue comes from
donations from individuals or families. Philanthropic contributions
are, in our view, an expression of love--love for our fellow human
beings and love for our communities.
We have absolutely no concerns about the efficiency of charitable
donations. People write us a check or make an online donation or wire
money from their stockbroker. It is generally an easy process and easy
(if labor intensive) to track. We thank each and every donor.
We do want to ensure that everyone in America has the opportunity
to show love through philanthropy. We are concerned that, while the
total charitable giving has increased, the total number of households
who give has declined. While several factors are at play, one of these
is income inequality and the growing wealth gap.
Finally, we ensure that contributions to Oregon Food Bank are used
efficiently--and more importantly effectively--by maintaining an active
Board of Directors that is representative of our community and that
takes its fiduciary responsibilities seriously.
______
Prepared Statement of Una Osili, Ph.D., Efroymson Chair in Philanthropy
and Economics, and Associate Dean for Research and International
Programs, Lilly Family School of Philanthropy, Indiana University
My name is Una Osili, and I am the associate dean for research and
international programs at the Indiana University Lilly Family School of
Philanthropy and the Efroymson chair in philanthropy and economics. I
want to thank the distinguished members of the committee for this
opportunity to speak today about how the pandemic has influenced
charitable giving, how technology has changed the ways people give, and
how policymakers can facilitate cross-border giving.
Philanthropy has long been a cornerstone of our nation. Many early
Native American giving traditions were rooted in cultural beliefs of
mutual responsibility and reciprocity. The Massachusetts Bay Colony led
one of the first successful fundraising drives in 1641.
America's longstanding tradition of generosity has persisted over
time. The philanthropic sector is a vital part of the provision of
public goods, disaster relief, and risk capital for innovation, as well
as a contributor to the health and vitality of civil society.
giving during the covid-19 crisis
In the past 2 years, giving, both informally and formally, has
played a visible role in responding to the pandemic in the U.S. and
abroad. Furthermore, during the COVID-19 era, philanthropy has been
unprecedented in size, scale, and scope. During this crisis, religious
congregations, grassroots organizations, community foundations, and
nonprofits in areas such as health and food insecurity have
demonstrated resilience and creativity in meeting urgent needs.
It is important to emphasize that charitable giving grew during the
first year of a global pandemic, with 2020 being the highest year of
charitable giving on record at $471.44 billion.\1\ Total philanthropic
giving in 2020 rose 5.1 percent over 2019. When we consider inflation,
the total amount still increased, with a total increase of 3.8 percent.
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\1\ Giving USA Foundation. (2021). Giving USA: The Annual Report on
Philanthropy for the year 2020. Chicago: Giving USA Foundation.
Researched and written by the Indiana University Lilly Family School of
Philanthropy.
Sixty-nine percent of this total--approximately $324.10 billion--
was contributed by living individuals. Foundations, charitable
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bequests, and corporations account for the remaining 31 percent.
Research has long established that charitable giving is linked with
key economic and financial factors.
When we examine the subsectors of charitable giving during the
pandemic era, two categories of charitable giving saw significant
growth in giving in 2020. Public-society benefit organizations showed
the largest increase at 15.7 percent, and these organizations include
national donor-advised funds, United Ways, and civil rights
organizations, among a wide range of nonprofits. Giving to
environmental and animal organizations went up by 11.6 percent.
Giving to education also increased by 9 percent, driven by a robust
end-of-year stock market. Human services organizations experienced
increases in giving, growing by an estimated 9.7 percent, or 8.4
percent adjusted for inflation.
However, not all subsectors experienced growth. Giving to arts,
culture, and humanities declined 7.5 percent, or 8.6 percent, adjusted
for inflation.
how are americans giving, and to whom are they giving?
Initial evidence also suggests that the global COVID-19 pandemic is
altering how and why people give.\2\ The events of 2020 have
accelerated innovation in the ways individuals are participating in
philanthropy today and expanded more traditional methods, such as in-
kind giving and mutual aid. At the local level, community-based
emergency funds have coordinated efforts to avoid duplication and
address unprecedented health and economic needs. Informal acts of
generosity were also widespread. For example, masks were sewn and
gifted to health-care workers,\3\ and local restaurants distributed
meals.
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\2\ Wyke, M. (January 22, 2021). ``The New Face of Charitable
Giving During the Pandemic,'' The Wall Street Journal. Retrieved from
https://www.wsj.com/articles/the-new-face-of-charitable-giving-during-
the-pandemic-11611334800.
\3\ Enrich, D., Abrams, R., and Kurutz, S. (March 25, 2020). ``A
Sewing Army, Making Masks for America,'' New York Times. Retrieved from
https://www.nytimes.com/2020/03/25/business/coronavirus-masks-
sewers.html.
At the same time, American households have grown in their reliance
on technology for connecting with others during the global pandemic;
nonprofits have adapted to virtual events, online fundraising, and
donor engagement. In 2020, online giving in the U.S. increased by
approximately 21 percent compared to 2019.\4\ Online giving continued
to grow in 2021, with an increase of 9 percent from 2020.\5\
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\4\ Blackbaud Institute. (2021). 2020 Charitable Giving Report.
Retrieved from https://institute.blackbaud.com/.
\5\ Blackbaud Institute. (2022). 2021 Charitable Giving Report.
Retrieved from https://institute.blackbaud.com/.
The use of technology interconnected donors and sectors on common
platforms. Technology brought donors and many nonprofits together and
often maximized contributions through collective giving and matching
gifts. It also increased transparency by allowing donors and nonprofits
to understand better how funds were being used and their effectiveness.
At the same time, technology also presents new challenges for
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nonprofits who seek to engage donors and build trust and confidence.
In addition to technology, crowdfunding, giving via cryptocurrency,
and impact investing have altered fundraising approaches and enlarged
volunteer opportunities and donor engagement. Crowdfunding--raising
capital from a large and diverse pool of donors via online platforms--
is a noteworthy example of innovation in giving mechanisms. Like other
forms of online giving, it has expanded in recent years. During 2020-
2021, the COVID-19 pandemic, the racial and social justice movement,
and economic uncertainty accelerated the use of crowdfunding by
individuals to address health and financial hardships and to raise
funds for various racial and social justice causes.
Based on a national survey conducted in 2020, a new study examines
closely who crowdfunding donors are, how they are different from more
traditional charitable donors, and the activities they support and
their motivations.\6\ The study found that about one-third of Americans
typically donate to crowdfunding projects. Motivations for crowdfunding
donors are similar to those factors for traditional charitable donors.
However, the study also showed that crowdfunding donors tend to be
younger and more diverse than traditional donors.
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\6\ Indiana University Lilly Family School of Philanthropy. (2021).
Charitable Crowdfunding: Who Gives, to What, and Why?. Retrieved from
https://scholarworks.iupui.edu/bitstream/handle/1805/25515/
crowdfunding210331-1.pdf.
To assess the impact of individual giving during the pandemic, the
Lilly Family School of Philanthropy also conducted and examined two
comprehensive national surveys on household giving priorities and
motivations.\7\
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\7\ Indiana University Lilly Family School of Philanthropy. (2021).
Understanding Philanthropy in Times of Crisis: The Role of Philanthropy
in COVID-19. Retrieved from https://scholarworks.iupui.edu/bitstream/
handle/1805/26934/philanthropy-crisis-nov21.pdf.
Survey questions explored how COVID-19-related factors may affect
charitable giving. These factors include social distancing and
lockdowns, COVID-19 infections amongst friends and family, and
financial uncertainties incurred. In addition, the surveys asked about
motivational factors for giving to COVID-19-related causes. The surveys
revealed that self-reported giving of all types among Americans went up
by 4-6 percentage points from May to September 2020.\7\ Informal giving
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and volunteering also remained strong during this period.
Taken together, the data also suggests that the philanthropic
sector is facing a greater demand for services and increased giving
from existing and new donors. Nonprofit organizations are adapting new
modes of service delivery, staffing shortages, and virtual modes of
engagement.
According to additional survey evidence from 2021, the share of
households who gave directly to charitable organizations, individuals,
or businesses for COVID-19 relief increased by 9.3 percentage points
from May 2020 to May 2021.\8\
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\8\ Indiana University Lilly Family School of Philanthropy. (2021).
COVID-19, Generosity, and Gender: How Giving Changed During the First
Year of a Global Pandemic. Retrieved from https://
scholarworks.iupui.edu/bitstream/handle/1805/27002/covid19-nov21-
report.pdf.
In response to the pandemic, overall charitable giving to
organizations focused on basic needs and health saw strong growth from
May 2020 to May 2021. While giving to organizations focused on religion
and all other purposes also increased during this time, U.S. households
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are giving less to these organizations than before the pandemic began.
Donations to racial and social justice causes increased in 2020.
This increase included donations to Historically Black Colleges and
Universities, as well as grassroots organizations, with 15.7 percent of
Americans contributing to these causes in 2020.\9\
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\9\ Indiana University Lilly Family School of Philanthropy. (2021).
Everyday Donors of Color: Diverse Philanthropy During Times of Change.
Retrieved from https://scholarworks.iupui.edu/bitstream/handle/1805/
26496/donors-color-report.pdf.
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cross-border giving
Philanthropy plays a vital and increasingly visible role in the
global economy. Charitable contributions can be targeted to meet real-
time challenges, provide risk capital for innovation, and support
recovery in communities.
The outpouring of cross-border generosity in response to the
devastation from the COVID-19 pandemic has been tremendous.\10\ Not
only have private donors increased their giving, but they used new
tools and vehicles for giving, including impact investments,
cryptocurrency, collective giving, and pooled funds.
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\10\ In addition to intergovernmental funds, we have seen an
outpouring of generosity by Africans in response to the crisis. For
details by country, see https://globalindices.iupui.edu/tracker/
country-reports/index.html.
Despite this progress, addressing the urgent humanitarian issues in
many regions, including the refugee crisis in Ukraine, requires an
acceleration of efforts to harness private sector resources from
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individual donors, foundations, and corporations.
The most recent Global Philanthropy Environment Index (GPEI),
released in March 2022, reveals significant obstacles to expanding
philanthropic flows.\11\ The Index, which measures philanthropic
environments worldwide using data collected by country-based experts,
examines the incentives and barriers that could affect individuals' and
organizations' charitable efforts.
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\11\ Indiana University Lilly Family School of Philanthropy.
(2022). The 2022 Global Philanthropy Environment Index. Retrieved from
https://globalindices.iupui.edu.
Findings from the 2022 GPEI suggest that the global philanthropic
environment was slightly more favorable in 2018-2020 than in 2014-2017.
Three-fifths of the 91 countries and economies studied reported a
favorable environment for philanthropy. Yet, among the 79 countries and
economies studied in both 2018 and 2022 GPEI, this improvement was
inconsistent, with about 30 economies reporting a shrinking space for
philanthropy due to their political environments. When examining the
enabling environment for cross-border philanthropic flows, over 30
percent of the 91 countries and economies studied in the 2022 GPEI
reported a restrictive space for cross-border philanthropic flows.
Among the 79 countries and economies included in both 2018 and 2022
GPEI, more than one-third reported a shrinking space for cross-border
philanthropy. Some countries have imposed high costs and burdensome
administrative requirements on philanthropic inflows and outflows with
implications for donors and nonprofits working across borders.
final observations
The generous response by U.S. donors during the global pandemic,
racial and social justice movement, and humanitarian crisis provides
essential context for our ongoing understanding of the rapidly changing
philanthropic landscape.
While total charitable giving has been increasing during the
pandemic, we have to be concerned about post-pandemic giving patterns
by Americans of all income backgrounds.
Despite the economic shocks and social upheaval induced by the
COVID-19 pandemic, recent data show that affluent households remained
very generous in their support of charitable organizations, with 88
percent giving to charity in 2020--consistent with the 90 percent rate
we saw in 2017.\12\ And, the average amount given increased
substantially, by 48 percent, from just over $29,000 in 2017 to just
over $43,000 in 2020.
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\12\ Indiana University Lilly Family School of Philanthropy.
(2021). 2021 Bank of America Study of Philanthropy: Charitable Giving
by Affluent Households. Retrieved from https://scholarworks.iupui.edu/
bitstream/handle/1805/26654/bank-america-sept21.pdf.
In contrast, however, recent data from the Philanthropy Panel Study
(PPS) show the fraction of low- and middle-American households that
contribute to charity decreased between 2000 to 2018.\13\
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\13\ Indiana University Lilly Family School of Philanthropy.
(2021). The Giving Environment: Understanding Pre-Pandemic Trends in
Charitable Giving. Retrieved from https://scholarworks.iupui.edu/
bitstream/handle/1805/26290/giving-environment210727.pdf.
While two-thirds of Americans gave to charitable causes in 2000,
only 49.6 percent of Americans gave in 2018, nearly a seventeen-
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percentage point decline.\13\
The Philanthropy Panel Study (PPS) is the largest and most
comprehensive study of American philanthropy. It tracks the share of
American households who donated to charity for a nationally
representative sample in a given year. For middle and low-income
Americans, the declines in the overall giving rate occurred among
nearly all socio-demographic groups.
Most of the decrease in giving participation occurred during the
Great Recession.\14\ The Great Recession of 2008 (December 2007 to June
2009) substantially affected whether people donated to charity and how
much they contributed, but the trends did not slow or reverse once the
economy had recovered from the Great Recession.
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\14\ Osili, U., Clark, C.J., and Han, X. (2019). ``Heterogeneity
and giving: Evidence from U.S. households before and after the Great
Recession of 2008.'' American Behavioral Scientist, 63(14), 1841-1862.
In the PPS data, one-third of the decrease in charitable giving
participation from 2000-2016 can be directly attributed to shifts in
income, wealth, and homeownership.\13\ This suggests that factors such
as decreases in interpersonal trust, empathy, among other factors, may
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also play a role.
As we look ahead, we have an opportunity to address issues of
equity and efficiency among donors and nonprofits since giving is
becoming increasingly concentrated among high-income households.
A growing body of work has examined the effects of extending the
charitable deduction to non-itemizers. Results indicate that a non-
itemizer charitable deduction could increase charitable donations and
induce an expansion in the number of donor households.\15\
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\15\ Rooney, P., Zarins, S., Bergdoll, J., and Osili, U. (2020)
``The Impact of Five Different Tax Policy Changes on Household Giving
in the United States.'' Nonprofit Policy Forum, 11(4), 1-18.
There are many issues to consider when examining the impact of tax
policies. Nonprofit leaders and advocates, as well as policymakers will
need to consider the effect of each policy on charitable giving
dollars, the number of households that donate, and Treasury revenue,
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but they should also consider issues of donor equity and efficiency.
To meet complex challenges triggered by COVID-19, the racial and
social justice movement, and a global humanitarian crisis, expanding
tax incentives for lower- and middle-income Americans can help bolster
the role of the philanthropic sector.
Making timely decisions about policies that support and enhance the
long tradition of American generosity can help strengthen the role of
the philanthropy now and in the future.
Thank you, again, for the opportunity to testify, and I am happy to
answer any questions you may have.
______
Questions Submitted for the Record to Una Osili, Ph.D.
Question Submitted by Hon. Ron Wyden
Question. We have all been watching the crisis unfold as a result
of the Russian invasion of Ukraine, and we are just beginning to see
the effects of the humanitarian toll that will certainly follow.
Many Americans may want to help by giving to international aid
organizations. One area of focus in your research is international
philanthropy.
What guidance do you have for Congress and taxpayers about best
practices in making donations to international aid organizations?
Answer. During armed conflicts and the subsequent humanitarian
crises, the role of philanthropy and civil society increases both
locally and internationally. As of May 26, 2022, Candid has tracked 816
grants valued at USD 1.1 billion and 163 pledges worth USD 683.4
million provided in response to the crisis in Ukraine (Candid,
2022).\1\
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\1\ https://topics.candid.org/issue-pages/ukraine/.
American taxpayers--who have a desire to donate--have several
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opportunities to give, including:
Make donations and grants to registered non-U.S. nonprofit
organizations working in Ukraine and affected areas internationally if
such organizations meet the requirements of the Internal Revenue
Service, including equivalency determination or expenditure
responsibility;
Work with intermediaries and pooled funds headquartered in the
United States; such as the Ukraine Humanitarian Fund organized by
GoFundMe in collaboration with the U.S. Department of State's Office of
Global Partnerships; and the Ukraine Crisis Relief Fund organized by
GlobalGiving; or
Fund U.S.-based philanthropic organizations working in the
region, such as the Red Cross or donate to international organizations,
such as UNHCR, UNICEF, or WHO (Council on Foundations, 2022).\2\
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\2\ https://cof.org/content/guidance-making-grants-support-ukraine.
Overall, donors should make donations to international aid
organizations by giving to nonprofit organizations or causes that are
closest to their heart. Many resources are available to find
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trustworthy nonprofit organizations:
Charity Navigator \3\ has published a list of highly rated
nonprofit organizations involved in humanitarian relief.
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\3\ https://www.charitynavigator.org/
index.cfm?bay=content.view&cpid=9366.
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GlobalGiving,\4\ along with other crowdfunding platforms, have
hosted numerous projects focusing on Ukraine; and
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\4\ https://www.globalgiving.org/search/
?size=25&nextPage=1&sortField=sortorder&selected
Locations=00ukrain&loadAllResults=true.
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List of response funds and organizations responding directly
to the crisis are available at the Council on Foundation's website.\5\
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\5\ https://cof.org/news/philanthropys-response-russian-invasion-
ukraine.
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Local initiatives, such as the Fund for Ukrainian Civil
Society \6\ (led by Ednannia, one of the largest Ukrainian NGO
established the emergency fund for civil society organizations all over
Ukraine), provide ways to give directly to organizations working in
Ukraine.
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\6\ https://sos.ednannia.ua/?utm--
medium=email&_hsmi=205839157&_hsenc=p2ANqtz-_TVa2
LKo6DsXEuyjV3EMo00WBiGoOXHw8phUrpeV3EnjGoD-
FnJFHsNatoCk9GpaEV40sqjbL9OGLy
wMardsc3trNVxw&utm_content=205839157&utm_source=hs_email.
______
Questions Submitted by Hon. Mike Crapo
Question. In your written statement, you mentioned the need to
think about changes in how individuals give, highlighting new forms of
giving such as crowdfunding.
Could you elaborate on how you see these new forms of giving
affecting the nonprofit sector?
Answer. According to the results of Charitable Crowdfunding: Who
Gives, to What and Why--a study conducted in 2021 by the Indiana
University Lilly Family School of Philanthropy, crowdfunding and other
forms of online fundraising, such as via social media and nonprofit
organizations' websites, have the potential to extend opportunities for
a wider audience. The reduction in barriers to giving makes it easy for
donors to reach organizations and individuals they want to give to.
Based on existing data, crowdfunding may tend to complement donors'
giving rather than replace it.
Unlike nonprofit organizations which build networks of
supporters and leverage them on social media to raise funds,
individual crowdfunding donors have yet to fully harness the
power of social media to advocate for their projects. They
seldom, if ever, ask friends, family, and acquaintances via
social media to contribute to the causes they are supporting on
crowdfunding platforms. This behavior seems different from
fundraising on social media platforms where networks are
paramount to successful fundraising campaigns. More research is
needed to better understand the reluctance of crowdfunding
donors to fully engage their friends and acquaintances in this
type of fundraising. (Indiana University Lilly Family School of
Philanthropy, 2021) \7\
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\7\ https://scholarworks.iupui.edu/bitstream/handle/1805/25515/
crowdfunding210331-1.pdf.
As individuals gravitate more to online giving and researchers
continue to study this growth, creating clearer distinctions
between charitable fundraising via crowdfunding and via social
media will allow for better understanding not only of how the
giving vehicles differ but also how donors using each vehicle
are similar or different. (Indiana University Lilly Family
School of Philanthropy, 2021) \8\
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\8\ https://scholarworks.iupui.edu/bitstream/handle/1805/25515/
crowdfunding210331-1.pdf.
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Question. How does tax policy play into these changes, if at all?
Answer. The issue around tax-deductibility and crowdfunding raises
interesting questions about donor motivations for giving on these
platforms. A contribution to a charitable organization with 501(c)(3)
status can be deducted on taxes according to the tax laws. As this
study finds, many crowdfunding donors give to individuals or to
community campaigns, which may not be tax-deductible. Crowdfunding
donors may be less motivated by tax-deductibility than typical
charitable donors. Moreover, income and wealth are not closely linked
to giving via crowdfunding platforms compared to typical charitable
donors.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. The deduction for charitable donations is meant to
encourage contributions that benefit the public. With donor-advised
funds, the donor gets the deduction now, but the charitable benefit may
not happen for years.
Are there any reforms to donor-advised funds that should be
considered?
Answer. Overall, donor-advised funds (DAF) are considered among the
fastest-growing charitable giving vehicles, but there has been little
quantitative research on where DAF grant dollars go. The Giving USA
Special Report, Donor-Advised Funds: New Insights, a publication of
Giving USA Foundation, researched and written by the Indiana University
Lilly Family School of Philanthropy shows that DAF grant dollars
doubled from 2014 to 2018, while grant patterns remained stable.
Education, religious, and public-society benefit organizations--which
include United Ways and many organizations focusing on community
development and civil rights--attracted the most DAF grant dollars
between 2014 and 2018. The report also includes preliminary findings
from a subset of DAF-sponsoring organizations with data from 2019 and
2020. According to the data, DAF grant dollar amounts grew by 39
percent and the number of distinct grantees grew 11 percent between
2019 and 2020. DAF giving to human services grew 138 percent, while
giving to public-society benefit organizations nearly doubled. DAF
grants to Historically Black Colleges and Universities (HBCUs) and
other racial justice organizations more than quadrupled. (Giving USA
Foundation and Indiana University Lilly Family School of Philanthropy,
2021) \9\
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\9\ https://store.givingusa.org/pages/giving-usa-special-report-
donor-advised-funds-new-insights.
With the rise of commercial DAFs since the 1990s, DAFs have
generally recorded average higher payout rates than private
foundations, which operate under a similar model of tax deduction
immediately, charitable granting later. While some research has found
that there are a minority of DAF accounts that sit idle, it has not
been determined if these accounts are of significant size.
Additionally, many of the larger organizations in the DAF sector, such
as Fidelity Charitable, and community foundations have internal
policies designed to combat this, removing a donor's control from their
funds if they sit idle for a number of years. Based on data from 13,000
DAF accounts collected from community foundations and religiously
affiliated DAF sponsor organizations across the U.S., about half (52
percent) of DAF accounts have 4-year average payout rates between 5
percent and 49 percent (Vance-McMullen and Heist, 2022).\10\ Around 71
percent of these DAF accounts made a grant in a typical year. A
majority (86 percent) made at least one grant over the 4-year period.
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\10\ https://static1.squarespace.com/static/
6011def87418a462fcb03978/t/6242d5b62b2ff70cccde
478c/1648547257883/DAFRC+Patterns+and+Trends+Report.pdf.
Currently, the legal framework that supports DAFs does not require
a specific payout rate. Based on existing data, DAFs have reported
higher average payout rates compared to private foundations. However,
as DAFs grow in size and visibility, there may be a need for additional
data and research on how best to strengthen the overall donor-advised
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funds landscape in order to benefit the charitable sector.
Question. We have heard that reforms which require tracking when
donations come in and when they are distributed from donor-advised
funds can be an administrative burden.
Do you have ideas for ameliorating any administrative burden that
may exist?
Answer. It is worth noting that DAFs vary in their size and
capacity across various types (community foundations, single-issue
charity, and commercial DAF sponsors). Technology may have a role to
play in reducing the administrative burden. However, detailed tracking
and reporting on grants and distributions may require additional staff
and organizational capacity for small organizations. In contrast, an
investment in the administration and tracking of either significant
transfers or of transfers from larger organizations may be beneficial
for the charitable sector while still allowing for adequate overview.
______
Questions Submitted by Hon. Chuck Grassley
Question. As part of the CARES Act, Congress sought to boost
charitable giving during the pandemic by relaxing limits on the
individual and corporate itemizer deduction. These provisions
temporarily allowed individuals to deduct up to 100 percent of AGI and
corporations to deduct up to 25 percent of taxable income.
Do you have any data or information you could share on the
effectiveness of these provisions? What should Congress consider in
deciding whether to extend either provision?
Answer. In response to historic levels of unemployment and an
economic downturn during the early months of the COVID-19 pandemic,
Congress passed the Coronavirus Aid, Relief, and Economic Security
(CARES) Act in March 2020. While significant portions of the act
targeted disaster relief, unemployment assistance, and taxpayer
support, the law also included provisions that affect the nonprofit
sector. The CARES Act was initially in place for tax year 2020, but it
was extended in December 2020 under the Consolidated Appropriations Act
(2021).
Key components of the CARES Act that affect charitable giving
include (Internal Revenue Service, 2021):\11\
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\11\ https://www.irs.gov/newsroom/expanded-tax-benefits-help-
individuals-and-businesses-give-to-charity-during-2021-deductions-up-
to-600-available-for-cash-donations-by-non-itemizers.
1. An above-the-line (non-itemizer) charitable deduction up to USD
300 for all taxpayers in 2020 and USD 300 for single filers and USD 600
for married couples filing jointly in 2021.
2. Suspension of the adjusted gross income limit on cash
contributions (with some limitations).
3. An increased limit on corporate deductions for cash
contributions (25 percent, up from 10 percent); and
4. Additional incentives for businesses that donate food
inventory.
The above-the-line charitable deduction has the potential to
incentivize additional charitable giving while providing tax relief to
more households. However, researchers have raised concerns that small
incentive--while reducing non-itemizers' tax burden--will not
significantly increase overall giving (Steuerle et al, 2021).\12\ The
Congressional Research Service estimates that the USD 300/USD 600 non-
itemizer deduction will cost the Treasury USD 2.865 billion (Sherlock
et al., 2021).\13\ The Tax Policy Center estimates that the deduction
could cost the Treasury USD 1.5 billion (2020-2030) while providing
taxpayers as little as USD 100 million in relief and charities with a
nonsignificant benefit (Steuerle et al, 2021).\14\ These estimates
differ based on whether they were calculated before or after the
passage of the extension and which tax years are included. Gravelle
(2021) \15\ summarizes these analyses.
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\12\ https://www.urban.org/sites/default/files/publication/103824/
designing-an-effective-and-more-universal-charitable-deduction.pdf.
\13\ https://crsreports.congress.gov/product/pdf/R/R46649.
\14\ https://www.urban.org/sites/default/files/publication/103824/
designing-an-effective-and-more-universal-charitable-deduction.pdf.
\15\ https://crsreports.congress.gov/product/pdf/IN/IN11420#:%7E:
text=The%20CARES%20Act%20and%20the,who%20take%20the%20standard%20deducti
on.
Regardless of the tax treatment of charitable giving, Americans
have responded to the increased need resulting from the COVID-19
pandemic. Giving USA: The Annual Report on Philanthropy estimated that
in 2020, USD 471 billion were donated to U.S. charities with USD 324
billion of that total (69 percent) donated by individuals (Giving USA
Foundation, 2021).\16\ This total includes an adjustment for giving to
COVID-19 relief and racial justice giving in 2020 of USD 4.1 billion.
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\16\ https://philanthropy.iupui.edu/news-events/news-item/giving-
usa-2021:-in-a-year-of-unprecedented-events-and-challenges,-charitable-
giving-reached-a-record-$471.44-billion-in-2020.html?id=361.
Candid and the Center for Disaster Philanthropy published a report,
Philanthropy and COVID-19: Measuring One Year of Giving, which reported
that giving (including pledges) totaled over USD 15 billion during the
first year of the pandemic (Candid and Center for Disaster
Philanthropy, 2021).\17\ and as of May 26, 2022, Candid's summary of
grants and pledges made to support COVID-19 relief is over USD 28
billion (Candid, 2022).\18\
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\17\ https://www.issuelab.org/resources/38039/38039.pdf.
\18\ https://candid.org/explore-issues/coronavirus.
Question. In December 22, 2020, I released the results of an
investigation conducted by my staff into the relationship between World
Vision, a 501(c)(3) non-profit organization, and the Islamic Relief
Agency, which had been sanctioned by the U.S. Government. My
investigation concluded in part, ``A more robust and fundamentally
sound system of screening and vetting is needed to restore the public's
trust that contributions to World Vision are not funding illicit
organizations.'' The full results of that investigation are available
on my webpage here: https://www.grassley.
senate.gov/news/news-releases/grassley-releases-results-investigation-
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world-vision-s-interactions-isra.
Do you believe that charities have implemented adequate safeguards
to ensure that grants from the U.S. Government and donations from
Americans are not even inadvertently funneled to the benefit of
individuals or groups that have been sanctioned by the U.S. Government?
Are there additional steps charities can take to ensure they are in
compliance with applicable rules and regulations, or is there any
action Congress should take to promote that compliance?
Answer. There are many regulations and safeguards that have been
implemented to combat terrorist financing in the nonprofit sector. The
Financial Action Task Force (FATF) (2015) \19\ as well as the U.S.
Department of the Treasury (2010) \20\ provides guidelines and best
practices to ensure that nonprofit organizations are in compliance with
counterterrorism and anti-money laundering regulations. Some of these
guidelines and best practices are mentioned below:
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\19\ https://www.fatf-gafi.org/media/fatf/documents/reports/BPP-
combating-abuse-non-profit-organisations.pdf.
\20\ https://home.treasury.gov/.
Congress should raise awareness about terrorist financing by
regularly consulting with charities and publishing guidance for the
nonprofit sector. Please see an example developed by the Australian
Government: Safeguarding Your Organization against Terrorism
Financing.\21\
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\21\ https://www.homeaffairs.gov.au/criminal-justice/files/
safeguarding-your-organisation-against-terrorism-financing.pdf.
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Congress should also promote and advocate for the use of an
effective, risk-based approach by the nonprofit sector. Please see an
example developed by the U.S. Department of the Treasury's Office of
Foreign Assets Control: Risk Matrix for the Charitable Sector.\22\
---------------------------------------------------------------------------
\22\ https://home.treasury.gov/.
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To implement risk-based approaches, charities need to better
understand the various risk that may emerge during cross-border
donations. Thus, Congress should promote and support education and
training that are offered to charities in these topics, as well as in
good governance and financial responsibility.
Simultaneously, Congress should safeguard that the legislation
does not create burdensome reporting requirements and does not take
overly broad interpretation of the FATF recommendations by focusing on
those charities or sub-groups of charities that are at greatest risk
after due-diligently reviewing the nonprofit sector in the U.S.
Finally, charities themselves can also decrease this global
threat and ensure that their grants are well used by self-regulating
themselves to enhance transparency and accountability in their
operations and safeguard their own organizations against terrorist
financing. Establishing an independent monitoring organization could
help charities make adequate risk management and responsible decisions,
could award accreditation to member charities who meet the requirements
and could also monitor the sector and raise awareness on recent
threats.
Overall, as the nonprofit sector is diverse, it is important to
focus on mitigating risks through:
Ongoing outreach to the sector;
Proportionate, risk-based supervision or monitoring;
Effective investigation and information gathering; and
Effective mechanisms for international cooperation.(FATF,
2015) \23\
---------------------------------------------------------------------------
\23\ https://www.fatf-gafi.org/media/fatf/documents/reports/BPP-
combating-abuse-non-profit-organisations.pdf.
Question. In an article published in 2020 in the Maryland Law
Review, Professor Johnny Rex Buckles concludes in part, ``Federal tax
law permits foreign actors to influence U.S. politics and policies
through their interactions with American charities.''\24\ He goes on to
note in his conclusion, ``Even the existing restrictions on lobbying,
and the prohibition against political campaign intervention, safeguard
against only the most obvious exploitation of charities by politically
motivated foreign actions.''\25\
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\24\ Johnny Rex Buckles, ``Curbing (or Not) Foreign Influence on
U.S. Politics and Policies Through the Federal Taxation of Charities,''
Maryland Law Review, Vol. 79:590, (2020).
\25\ Id.
In a theoretical case study, the article presents an example where
a Russian oil baron donates to a U.S. charity that educates the
American public on the dangers of fossil fuels with the intent of
promoting increased regulation of U.S. fossil fuel interests that would
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serve to confer a comparative advantage on their Russian competitor.
This example may in fact not be very theoretical. In an opinion
piece published in The Hill in March of 2022, Institute for Policy
Innovation resident scholar Merrill Matthews wrote, ``U.S. policymakers
are finally realizing that Russia may have been covertly funding U.S.
environmental organizations to shape public opinion and policies--
especially energy and anti-fossil fuel policies--to Russia's liking and
benefit. Such Russian skullduggery has long been an open secret in
Europe.''\26\
---------------------------------------------------------------------------
\26\ Matthews, Merrill, ``Russia used `soft power' to influence EU
policies and anti-fossil fuel efforts,'' The Hill, March 22, 2022,
available at https://thehill.com/opinion/energy-environment/599113-
russia-used-soft-power-to-influence-eu-policies-and-anti-fossil.
Do you have concerns that foreign actions are able to exploit U.S.
tax-exempt organizations to promote their own priorities and extend
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influence over U.S. policy?
Answer. Foreign actions including cross-border charitable donations
may exploit U.S. tax-exempt organizations either for using the
organization for money laundering or for promoting certain policies,
even though there are several regulations that aim to decrease the
possibility of any foreign influence over U.S. policy through nonprofit
organizations (Buckles, 2020).\27\
---------------------------------------------------------------------------
\27\ https://digitalcommons.law.umaryland.edu/cgi/
viewcontent.cgi?article=3858&context=mlr.
Countries where strict regulations on foreign-funded nonprofit
organizations have been implemented, such as Russia, Israel and
Hungary, show that control on foreign donations might be harmful for
the overall nonprofit sector. In these three countries, regulations
targeted primarily human rights and watchdog organizations, however,
the laws often undermined the reputation of the entire sector too.
Additionally, such regulations often violated national and
international laws and agreements. As an example, the Hungarian Act
LXXVI of 2017 on the Transparency of Organizations Supported from
Abroad violated the freedom of association, the right to privacy and
personal data protection and freedom of expression of the organization
among others (Hungarian Helsinki Committee and Tarsasag a
Szabadsagjogokert, 2017).\28\
---------------------------------------------------------------------------
\28\ https://helsinki.hu/wp-content/uploads/What-is-the-Problem-
with-the-Law-on-Foreign-Funded-NGOs.pdf.
It is crucial to find a balance between national security,
enhancing philanthropy, and promoting accountability simultaneously.
Thus, if Congress decides to further regulate foreign-funded U.S. tax-
---------------------------------------------------------------------------
exempt organizations:
Congress could conduct public consultations (within the
nonprofit sector and across the U.S. society) to develop accurate
safeguards without creating burdensome requirements for tax-exempt
organizations; and
Congress could promote accountability and due diligence and
support the implementation of professional guidelines or a universal
``bill of rights'' for
foreign-funded tax-exempt organizations to avoid any harmful actions
against U.S. policies and to strengthen these organizations' own
legitimacy and credibility.
Congress could tailor current and future regulations to
distinguish different types of foreign support and their various
beneficiaries. Foreign action can often be crucially important, just
let's think of cross-border giving to natural disasters or foreign-
funded organizations that support global causes internationally.
Question. Are there reliable measures of how much foreign money is
poured into U.S. non-profit entities and the source of that funding?
Answer. While there are other sources available to the government
for tracking such information, within the publicly available Form 990
data, data on foreign funding to U.S. nonprofit organizations (cross-
border philanthropic inflow) is limited. While the Form 990 requires a
decent amount of information about grants or payments to foreign
entities, there is not much in terms of donations to nonprofit
organizations.
Additionally, organizations have to file Schedule B of the Form
990, but it is not publicly available data. In Schedule B, U.S.
nonprofit organizations have to list every contributor who gave more
than USD 5,000 to the organization. It would be a good starting point
to audit foreign-funded--including Russian-funded--U.S. nonprofit
organizations in the future.
Question. Do you have an estimate of funding for U.S. non-profits
that originated from sources aligned with Russia, or Russian policy
priorities?
Answer. Unfortunately, there is no publicly available information
on this matter. Please see above.
______
Question Submitted by Hon. Rob Portman
Question. In recent years, charitable giving through
cryptocurrencies have skyrocketed, and we should only expect this to
continue to grow as cryptocurrency becomes more and more prevalent.
However, right now it is difficult to make a tax-deductible charitable
donation with cryptocurrency. If you are making a donation worth over
USD 5,000 in cryptocurrency, you have to get a qualified appraisal
whereas with publicly traded stock an appraisal is not needed. Even for
non-publicly traded stock gifts below USD 10,000 do not need a
qualified appraisal. Given that cryptocurrency is traded on a public
market, it seems that the value is readily ascertainable.
Wouldn't it be helpful to allow taxpayers to make charitable crypto
donations without requiring qualified appraisals? Do you consider the
appraisal as necessary in a marketplace in which the value can easily
be determined in online crypto exchanges?
Answer. With the growth of the cryptocurrency market, we have seen
an expansion in intermediary organizations that work with donors and
registered nonprofit organizations to reduce the barriers to giving via
cryptocurrency. One of these intermediaries is the Giving Block \29\
that provides an ecosystem for nonprofit organizations to fundraise via
cryptocurrencies. Intermediary organizations have expanded access to
crypto currency donations for nonprofit organizations while providing
channels for donors to give cryptocurrencies to the organizations and
causes they support.
---------------------------------------------------------------------------
\29\ https://thegivingblock.com/.
______
Questions Submitted by Hon. Todd Young
Question. I would like to follow up on our discussion regarding the
barriers to establishing more community foundations around the country.
As we discussed during the hearing, Indiana has had tremendous success
in establishing community foundations across the State, in large part
due to the generosity and long-term vision of the Lilly Endowment.
However, not all States are fortunate enough to have Indiana's
extensive community foundation structure and support.
Based on your scholarship and experience, are you aware of any
Federal barriers that prevent or hinder the creation of community
foundations across the country? If so, what are your recommendations
for addressing those barriers?
Answer. Community foundations have expanded in the U.S. and many
parts of the world. Within the U.S., the National Standards for U.S.
Community Foundations Accreditation Program \30\--which ``certifies
U.S. community foundations that meet and exceed Federal and State law
requirements in practice and by policy--has provided guidance over
time.
---------------------------------------------------------------------------
\30\ https://www.cfstandards.org/.
While research has not focused on specific barriers that hinder the
growth of community foundation, there is a recognition that funders can
provide financial resources to assist with the creation of new
community foundations and strengthening existing ones. Funders have
also provided initial funding to encourage the development of community
foundations for start-up and technical assistance, challenge grants to
build endowment, and grants for specific programs and initiatives. Non-
monetary resources can raise a community foundation's profile and help
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build trust with potential donors, grantees and the community at large.
State and local governments can also play a role in strengthening
community foundations through partnerships and collaboration. In some
States, gifts to community foundations are eligible for tax credits.
For example, in Kentucky, charitable donations to endowed charitable
funds at Community Foundation are eligible for up to 20 percent in
State tax credits. Only gifts to endowment funds at accredited
community foundations qualify for this tax credit. Unlike tax
deductions, tax credits are subtracted from a donor's tax bill, dollar
for dollar. A gift of USD 5,000 has the potential to reduce the
taxpayer burden in State taxes by USD 1,000.
Question. During the hearing, I mentioned a collaboration between
the Central Indiana Community Foundation and Indianapolis-based
technology company, Selflessly, who partnered together to reduce
obstacles to giving and help individuals and businesses better execute
on their giving goals. I raised this example to demonstrate how
Indiana's charitable giving sector is embracing innovation and
technology.
Another example is the launch of the Labs for Industry Futures and
Transformation (LIFT) Network in the South Bend-Elkhart region of my
State. This partnership leverages generous grant funding and local
community foundations, networks, and organizations, including Notre
Dame's iNDustry Labs, to link expertise, technologies, workforce
development programs, and innovation-based facilities throughout the
area.
What are some other ways Indiana leads the country in innovation
with respect to expanding or utilizing charitable giving?
Answer. One area where Indiana has led the country in innovation is
community foundations' growth. There are over 94 community foundations
(legal entities, affiliates, and area funds), with at least one
community foundation based in every county. Indiana's community
foundations are tax-exempt charitable organizations. The Lilly
Endowment, through its Giving Indiana Funds for Tomorrow \31\ (GIFT),
has awarded USD 126.5 million to community foundations across Indiana.
In the seventh phase of the initiative (GIFT VII), the Endowment looked
to build upon the momentum and successes of GIFT's earlier stages and
enhance Indiana's community foundations as trusted and valued
institutions.
---------------------------------------------------------------------------
\31\ https://lillyendowment.org/our-work/community-development/
strengthening-indiana/giving-indiana-funds-for-tomorrow/.
Question. As violence has raged on in Ukraine, hopefully with an
end in sight, it has been heartwarming to hear stories about Hoosiers
taking action. For example, an organization out of Noblesville, IN,
called Mission to Ukraine, usually assists women in crisis and children
with severe disabilities. However, during this conflict, Mission to
Ukraine has pivoted to collecting and handing out food, water,
medicine, and clothes to the most vulnerable on the ground in Ukraine.
Many Americans who listened to this hearing may be wondering what they
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can do to help.
What would be your recommendation to Americans who have a desire to
assist humanitarian efforts in Ukraine?
Answer. There are various ways to assist the humanitarian effort in
Ukraine.
Make donations and grants to registered non-U.S. nonprofit
organizations working in Ukraine and affected areas internationally if
such organizations meet the requirements of the Internal Revenue
Service, including equivalency determination or expenditure
responsibility;
Work with intermediaries and pooled funds headquartered in the
United States; such as the Ukraine Humanitarian Fund organized by
GoFundMe in collaboration with the U.S. Department of State's Office of
Global Partnerships; and the Ukraine Crisis Relief Fund organized by
GlobalGiving; or
Fund U.S.-based philanthropic organizations working in the
region, such as the Red Cross or donate to international organizations,
such as UNHCR, UNICEF, or WHO (Council on Foundations, 2022).\32\
---------------------------------------------------------------------------
\32\ https://cof.org/content/guidance-making-grants-support-
ukraine.
Question. What trends or innovations have you observed with respect
---------------------------------------------------------------------------
to Americans' charitable giving to Ukraine?
Answer. According to Fidelity Charitable (2022),\33\ one in four
Americans supported Ukraine through giving to nonprofit organizations,
giving directly to affected individuals, or supporting local businesses
or purchasing a product with proceeds to benefit Ukraine. The top three
causes supported by Americans were medical support (60 percent),
children's issues (58 percent) and short-term humanitarian aid, such as
temporary housing, meals, and personal supplies (52 percent).
---------------------------------------------------------------------------
\33\ https://www.fidelitycharitable.org/content/dam/fc-public/docs/
insights/all-eyes-on-ukraine-how-americans-are-responding-to-the-
crisis.pdf.
There are many innovative ways how donors in the United States and
across the globe have supported individuals and communities affected by
---------------------------------------------------------------------------
the crisis such as:
Booking Airbnbs: It became a popular way to instantly support
Ukrainians and booking Airbnbs in Ukraine has grossed nearly USD 2
million as of March 5, 2022 (NPR, 2022);\34\
---------------------------------------------------------------------------
\34\ https://www.npr.org/2022/03/05/1084739721/airbnb-ukraine-
direct-aid.
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Donating cryptocurrencies: Ukraine has also received a total
of ``close to USD 100 million'' in crypto donations as of March 9, 2022
(CoinDesk, 2022) \35\ and the government has spent USD 35 million of
the donations on military supplies, USD 10 million on humanitarian
support, and USD 6.5 million on general aid (Times, 2022);\36\ and
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\35\ https://www.coindesk.com/business/2022/03/09/ukraine-has-
received-close-to-100-million-in-crypto-donations/.
\36\ https://time.com/nextadvisor/investing/cryptocurrency/donate-
crypto-to-ukraine/.
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Buying NFTs: The Ukrainian government has launched a webpage
\37\ for selling an estimated 300 nonfungible tokens (NFTs) to collect
donations for the support of Ukraine (Bloomberg, 2022).\38\
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\37\ http://104.21.42.112:6080/php/
urlblock.php?args=AAAAewAAABCC7Q6VHrfEInQN7Vb9d
S8TAAAAECLO04cn4v9fV2XBxh8qfAAAAABLAAAAS48dy3whJ4ZeEWR1tCQ553dScTycSanE
o
eHnNTgL0IXkvsXLeR1jthqvBbEMcxzp4VuO5CfaLoDLLlmmFXmMYaGKvbs3HfHxkn0kA==&u
rl
=https://metahistory.gallery%2fwarline.
\38\ https://www.bloomberg.com/news/articles/2022-04-05/ukraine-
readies-nft-sales-as-crypto-donations-top-60-million.
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Providing support through Facebook communities: Facebook and
other social media groups has served as an effective channel to
communicate urgent needs and connect donors and beneficiaries in a
timely manner (Vinnikov, 2022).\39\
---------------------------------------------------------------------------
\39\ https://globalindices.iupui.edu/doc/
Vinnikov%20GPEI%20Presentation.pdf.
Question. The recently published 2022 Global Philanthropy
Environment Index Report from the Indiana University Lilly Family
School of Philanthropy,\40\ which I understand you helped prepare,
found that while philanthropic giving grew worldwide between 2018 and
2020, cross-border giving decreased, even as countries became richer
and their residents more prosperous. I understand these findings were a
surprise given that one of the hypotheses was that cross-border giving
would increase as economic conditions in a country improved.
---------------------------------------------------------------------------
\40\ https://scholarworks.iupui.edu/handle/1805/28202.
What is your theory as to why cross-border giving declined even
---------------------------------------------------------------------------
while overall philanthropic giving grew worldwide?
Answer. I would like to clarify that while the global environment
for philanthropy slightly improved between 2018 and 2022, the
environment for cross-border giving experienced a decrease. The global
philanthropic environment--comparing the 79 countries and economies
included in both the 2018 and 2022 Global Philanthropy Environment
Index--showed a modest increase between 2014-2017 and 2018-2020.
However, one third of the 79 countries and economies included in both
2018 and 2022 GPEI reported a shrinking space for cross-border
philanthropy. This can be attributed to the importance of political
factors (and not just economic factors) in shaping philanthropy.
Country experts reported continuous and burdensome regulatory
requirements for sending or receiving cross-border donations in 2018-
2020, often due to anti-money laundering and counter-terrorism
disclosure requirements.
As part of the global counter-terrorism efforts, the
International Monetary Fund's Financial Action Task Force
(FATF) Special Recommendation 8 on nonprofit organizations,
originally published in 2012, is aimed at ensuring nonprofits
are not misused by terrorist organizations for illegitimate
purposes and suggests a group of measures to take action in
this direction. . . . These restrictions have been reported in
several countries to affect the capacity of the organizations
in the philanthropic sector to receive funding, send donations,
and introduce barriers to the flows of cash donations (Global
Philanthropy Environment Index, 2018).\41\
---------------------------------------------------------------------------
\41\ https://scholarworks.iupui.edu/handle/1805/15958.
Since then, FATF advocated for the review the adequacy of measures
implemented by countries across the globe in order to take
proportionate actions to address the possible risks without targeting
the nonprofit sector through excessively rigid regulations to meet the
FATF guidelines. However, such guidelines are still in place in many
countries, negatively affecting the ability of sending or receiving
---------------------------------------------------------------------------
cross- border donations.
Additionally, between 2018 and 2020 some countries suffered
from heavily regulated cross-border philanthropic flows, because of
practices that restricted philanthropic inflows and/or outflows with
high costs and burdensome administrative requirements often to fight
against ``foreign agents.''
In terms of the amount of cross-border giving globally, in 2018, 47
economies contributed USD 68 billion in cross-border philanthropic
outflows and a combined USD 834 billion through four cross-border
flows, including philanthropic outflows, official development
assistance, remittances, and private capital investment (Indiana
University Lilly Family School of Philanthropy, 2020).\42\
---------------------------------------------------------------------------
\42\ https://globalindices.iupui.edu/tracker/index.html.
According to the Global Philanthropy Tracker, the United
States contributed a total of USD 212.1 billion across the four cross-
border flows and the second largest flow was private philanthropy, at
USD 47.6 billion (22.45 percent) in 2018. Private and voluntary
organizations provided USD 35.3 billion in cross-border giving, private
foundations contributed USD 6.3 billion, and corporate foundations
accounted for USD 251 million. Religious organizations contributed USD
5.71 billion to cross-border philanthropy (Indiana University Lilly
Family School of Philanthropy, 2020).\43\
---------------------------------------------------------------------------
\43\ https://globalindices.iupui.edu/tracker/index.html.
According to the most recent Giving USA: The Annual Report on
Philanthropy, giving to international causes has increased in the last
---------------------------------------------------------------------------
couple of years, except for 2018 in the United States.
In 2019, giving to international affairs was estimated to be
USD 28.89 billion. Adjusted for inflation, giving to international
affairs organizations declined 2.2 percent, after 2 strong years of
growth (Giving USA Foundation, 2020).\44\
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\44\ https://givingusa.org/giving-usa-2020-charitable-giving-
showed-solid-growth-climbing-to-449-64-billion-in-2019-one-of-the-
highest-years-for-giving-on-record/.
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In 2020, giving to international affairs is estimated to be
USD 25.89 billion in 2020. Adjusted for inflation, giving to
international affairs organizations increased 7.8 percent (Giving USA
Foundation, 2021).\45\
---------------------------------------------------------------------------
\45\ https://philanthropynetwork.org/news/giving-usa-2021-year-
unprecedented-events-and-challenges-charitable-giving-reached-record-
47144.
Question. Are there any actions Congress should take to help reduce
---------------------------------------------------------------------------
barriers to cross-border giving?
Answer. Policymakers may review and assess anti-money laundering/
counterterrorism regulations and implement adequate measures that
relate to the subset of the nonprofit sector that may be at risk of
financing terrorism, while encouraging cross-border giving overall.
A 2010 decision by the U.S. Supreme Court (Holder v.
Humanitarian Aid) upheld the constitutionality of these
policies, including the prohibition of gifts to organizations
on a list of suspected terrorist groups maintained by the U.S.
Department of State, even if the funds are earmarked for a
group's charitable work. These rules have generally required
donors to exercise greater diligence in making international
gifts, or face penalties, and have been accused of reducing
giving, especially to the Middle East. (Lenkowsky, 2022) \46\
---------------------------------------------------------------------------
\46\ https://scholarworks.iupui.edu/bitstream/handle/1805/28202/
2022GPEIUnitedStates.pdf.
Policymakers may review regulations that surrounding cross-border
donations to create more transparent and less burdensome reporting
requirements and to provide tax incentives for international giving by
having tax treaties with other countries. Such tax treaties are in
force with Canada, Mexico, and Israel, where certain foreign
---------------------------------------------------------------------------
philanthropic organizations are granted 501(c)(3) exempt status.
Americans can give cross-border donations without prior
government approval, but they can obtain a charitable tax
deduction only for contributions to POs ``created and
operated'' in the United States. However, they may be able to
exclude such gifts from taxable income if they can show that
the cross-border organization would qualify as a charity in the
United States. (Lenkowsky, 2022) \47\
---------------------------------------------------------------------------
\47\ https://scholarworks.iupui.edu/bitstream/handle/1805/28202/
2022GPEIUnitedStates.pdf.
______
Prepared Statement of C. Eugene Steuerle, Ph.D., Co-founder, Urban-
Brookings Tax Policy Center; Center on Nonprofits and Philanthropy,
Urban Institute; and ACT for Alexandria, a Community Foundation
Mr. Chairman and members of the committee, it is an honor again to
testify before you, this time on charitable contributions and taxes.
The views I express in this testimony are my own and should not be
attributed to the Urban-Brookings Tax Policy Center, its trustees, or
its funders.
According to estimates by the Urban-Brookings Tax Policy Center,
Congress's temporary changes to the tax law in 2017 reduced the Federal
Government's total individual income tax subsidies for charitable
giving by about 30 percent--from an average subsidy of about 21 cents
to 15 cents per dollar contributed (Steuerle et al. 2021).
Charitable giving, in turn, almost assuredly decreased giving from
what it otherwise might have been. Using a commonly used estimate on
behavioral response, my colleagues at the Tax Policy Center calculated
that giving declined about 4 percent to 7 percent (Rosenberg and
Stallworth 2017). At the same time, giving overall increased somewhat
near the end of the last decade (Indiana School of Philanthropy,
various years; Faulk, et al. (2021) due to other factors, such as
income growth, higher employment, and in response to the COVID crisis.
Some research also indicates that the share of people giving to
charity has declined (Jones 2020), although this trend may also be
attributable to the higher concentration of cash income. That, too, may
be among the concerns that motivates this hearing.
While there are legitimate debates about some of these numbers and
the extent to which households have changed their behavior, the decline
in subsidies provided is a straightforward calculation.
Let me be clear. That decline in charitable giving subsidies was an
indirect byproduct of several features of that 2017 law--in particular,
a substantial increase in the standard deduction. That increase
benefited many low- and middle-income taxpayers--not just those who
switched to a standard deduction now worth more than all their
otherwise itemizable deductions, but those who were already using the
standard deduction and never took a charitable deduction to begin with.
Nonetheless, the current charitable tax incentive now benefits only
about one-tenth of all households, mainly those with higher incomes. I
doubt seriously that the public will long support a deduction so
narrowly applied (Steuerle 2018). As Roger Colinvaux (2017) suggests, a
nonparticipatory deduction undermines many of the altruistic,
pluralistic, and other rationales for a deduction. Whether to confront
those concerns or simply address the upcoming expiration of the 2017
provisions, these pressures provide a real opportunity to consider ways
to create an even more effective charitable incentive, and I
congratulate the committee on conducting these hearings on that matter.
possible ways to compare options at different cost levels
As a policy researcher, I find it helpful to define a rubric to
compare options. Here, I suggest an informative way to compare reform
options, whether proposed by me or anyone else.
First, for different levels of total subsidy, compare different
types of options on a revenue-neutral or cost-neutral basis. For
instance, you might make these comparisons at the current level of
total subsidy and the cost equivalent of restoring the 30-percent
cutback in total subsidies. The Joint Committee on Taxation and the
Congressional Budget Office have within their substantial capacities
the ability to provide such comparisons. Applying this technique,
analogous to cost effectiveness analysis, both focuses on effectiveness
and compels advocates to discuss with you whether the money involved in
the charity tax changes they propose could be spent better. I think you
will find from most economic analyses, not just my own, that the
conclusions on which designs best promote charitable giving will not
vary greatly, whatever the level of total subsidy or assumption on
behavioral response.
Second, consider maximizing gains for charitable beneficiaries for
each dollar of subsidy as the prize on which Congress focuses its eyes.
That is, estimate the impact on charitable beneficiaries side by side
with the net impact on taxpayers and on government revenues. In a
balanced income statement, the total change in income of charitable
beneficiaries equals the revenue loss to government minus any increase
in taxpayers' net income (their tax reduction less the additional
giving they make). Traditional distributional tables mislead when
revenue losses appear to represent gains for taxpayers; in the case of
a charitable tax incentive, some of, all, or more than all those gains
are distributed to charitable beneficiaries.
the power of signals both large and small
Though much of what I present today relates to what we think we
know about incentives, there is a higher level where we have some broad
theoretical understanding, though limited empirical evidence, of likely
consequences. I refer to the broader signal that Congress sends to the
public about the role of charitable giving in our society.
In 1835, Alexis de Tocqueville singled out United States citizens
for their extraordinary level of civic activity and association. Though
communal efforts remain high, and the United States today still stands
out among developed nations for the share of income devoted to
charitable giving, neither should be taken for granted. Indeed, some
research indicates that participation in both associations, including
religious gatherings, and charitable giving has been declining.
Meanwhile, many online groups and media have become increasingly
partisan, political, and in-group focused. Also, as our Nation has
become several time richer per capita over recent decades, we have not
been able to increase the share of income given to charity.
As many current events remind us, we cannot blandly assume that the
blessings with which we have been endowed will pass automatically to
our children. The legacy we leave should be greater than our
inheritance. And though only a small piece of a much bigger picture, a
bipartisan effort to improve how tax law serves charitable
beneficiaries can have ripple effects beyond the charitable sector,
including setting an example for how bipartisan and effective
legislation can be achieved.
On a less lofty level, my testimony will attempt to demonstrate how
the signals and nudges that Congress sends should be carefully
considered on several fronts:
Value Promotion. In addition to its direct incentive effect, a
deduction for only a few taxpayers weakly promotes and markets the
value our society places on charitable giving.
Ceilings. Caps and ceilings on the amount of giving eligible for a
deduction or credit don't simply limit incentives to give more; as
signals, they can provide further disincentives, especially when people
stop giving at what they perceive as the maximum that Congress thinks
is worth encouraging.
Floors. Floors can encourage giving. They allow incentives to be
concentrated where they are most likely to change behavior--that is,
for giving beyond what one would do in absence of a tax subsidy. A
floor set at some measure of average or median giving as a share of
income also sends a signal to people that they might want to give above
that level to attain their ``fair share.''
Administrability. Incentives that can't be monitored by IRS at some
reasonable level invite corruption within the charitable sector, create
inequity among taxpayers, and discourage giving.
Saliency and Nudges. When and how signals are given, such as timing
rewards close to the time that people pay taxes think of the
connection, can increase charitable giving.
Taking account of these various signals, I focus the remainder of
my discussion on what we know more directly about the effectiveness of
different types of incentives.
the distribution of charitable giving subsidies
Reducing the marginal incentives for people with higher incomes
might unintentionally decrease charitable giving, just as increasing
the standard deduction may have done for people with low and middle
incomes. Today, higher-income people contribute a very high percentage
of total national giving (Figure 1).
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
.epsAn incentive that significantly caps subsidies for richer or
more generous donors can easily reverberate to significantly reduce the
money available for charitable beneficiaries. Remember that charitable
giving, not just government transfers, provides society a way to
redistribute income and ameliorate inequalities. If a donor would give
$1 less because of a loss of a deduction worth $1 in reduced taxes, the
donor's net income doesn't fall at all; some charitable beneficiary
somewhere receives $1 less in charitable goods and services.
There's also a longstanding issue of equal justice or horizontal
equity that reinforces the incentive case for a charitable deduction
even for those with higher levels of income. Think of this in the
context of a simple tax system that assesses a tax rate of 20 percent
on all income. If you make $100,000 a year and give away $30,000,
should you be taxed like someone who makes $100,000 and gives away
nothing or like someone with $70,000 of net income? Without a tax
deduction, the net income of someone who gives away $30,000 is $50,000;
with a deduction, it's $56,000. The nongiver still has $80,000 left in
either case. If one wants to tax
higher-income people more, increasing taxes on all of them may be
fairer than simply going after charitable donors.
designing a more universal deduction
In a recent brief, my colleagues Robert McClelland, Nikhiti Airi,
Chenxi Lu, Aravind Boddupalli, and I (2019) examined how lawmakers
could expand the existing deduction, at whatever revenue cost Congress
entertains, to maximize benefits for people who rely on charities. Some
parts of the following discussion come from that brief and a related
paper. In this research we used a modest estimate of the behavioral
response to incentives, one that does not take account of the potential
long-run signaling power of an incentive. A higher estimate for the
behavioral response, however, would tend to show the same relative
advantages of different types of proposals.
It's easy to design a subsidy that mainly benefits taxpayers but
not charitable beneficiaries. For example, the $300 per tax unit
nonitemizer charitable deduction in 2020 provided charitable recipients
with as little as $100 million at a cost of $1.5 billion in forgone
Federal revenue (Steuerle 2020). Since most donors already give more
than $300 annually, the subsidy created an incentive for almost no one.
And the IRS has almost no way to audit bogus claims, effectively making
the $300 deduction available to any nonitemizer, whether they donate to
charity or not. A somewhat similar $300 subsidy per individual taxpayer
in 2021 had the same features.
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.epsTo better understand the effectiveness of the charitable
deduction, we created a balance sheet that shows how income of
government, taxpayers, and charitable recipients changes under various
proposals (Figure 2). As noted above, additional contributions
represent transfers that flow through charities to their beneficiaries,
while the change in the taxpayers' net income equals their increase in
contributions less their additional tax saving. We used a behavioral
response commonly applied to this type of analysis. If you double that
behavioral response, the increase in charitable contributions would be
about double what you see in the chart, but the relative advantages of
proposals, measured by increase in giving relative to the revenue cost
to Treasury, stay about the same.
We first studied an unrestricted deduction that would allow both
itemizers and nonitemizers with a positive tax liability to deduct
their contributions. While this would create a new tax break for many
households, it would be very inefficient at helping the beneficiaries
of charities since most of the subsidy would go for donations that
would have occurred anyway.
On net, an unrestricted charitable deduction would have lowered
Federal revenue in 2019 by about $27 billion but increased
contributions by only $9 billion.
We also examined several alternative forms of a universal
deduction. One version would allow a single deduction for itemizers and
nonitemizers alike only for contributions in excess of 1 percent of the
taxpayer's adjusted gross income (AGI), and another would subsidize
contributions only in excess of 2 percent. A third would provide a
separate deduction for nonitemizers for any giving up to one-third of
the standard deduction--for example, up to a little more than $8,000 in
2020 for most married couples.
Compared with an unrestricted universal deduction, a 1-percent
floor would reduce contributions by about a quarter but cost only one-
third as much. Put another way, a universal deduction with no floor
would cost $17 billion more than a universal deduction with a 1-percent
floor, while generating only $2 billion extra for charitable
recipients. The rest would be an additional windfall for taxpayers.
Any floor also makes converting to a more universal deduction more
progressive by eliminating some deductions from current itemizers with
little effect on their incentive to give.
The nonitemizer deduction of up to one-third of the standard
deduction would have cost more than $20 billion in 2019 but increased
contributions by less than $4 billion. This proposal runs into three
sets of problems that limit its incentive effect: it provides subsidies
for first dollars of giving that would be done anyway, it caps
incentives for those moderately generous taxpayers who are often the
backbone of the charitable sector, and, once again, it spends a lot on
higher-income taxpayers who already itemize charitable contributions
but switch to the standard deduction.
The Switcher Problem
Almost all attempts to expand the charitable tax deduction runs
into what is called the ``switcher'' problem, whereby substantial tax
benefits are provided to those who already itemize their deductions.
Consider a married couple in 2021 who pays $10,000 in State and
local taxes, contributes $20,000 to charities, and declares itemized
deductions of $30,000. Now suppose that an unlimited charitable
deduction had been allowed. The couple already could deduct any
additional amount given to charity, so the incentive effect of the new
regime is practically nil. The couple nonetheless would have received a
windfall from the change in the law, as it could then have taken a
standard deduction of $25,100 as well as a charitable deduction of
$20,000, thereby getting an additional $15,100 in total deductions.
Though current itemizers are not the intended target of additional
subsidy dollars, they would still garner a large share--so large that a
simple universal deduction would provide higher total tax subsidies for
the richest 20 percent of households than for any other quintile
(Steuerle et al. 2021).
A nonitemizer deduction with a cap runs into the same issues.
Suppose the cap for the married couple is $8,000. By switching to the
standard deduction, a couple formerly itemizing with $8,000 of
charitable giving within $26,100 of itemizable expenses could now
garner $7,000 of additional deductions. In this example, the couple
also moves from a world where they had an incentive to give some
additional dollars to one where they had no incentive, at least for up
to $1,000 of additional giving.
By using a floor under which charitable contributions are not
allowed, Congress can limit these types of gains for those already
itemizing and improve the progressivity of an expanded deduction. A
floor is also consistent with other provisions in the tax law that
limit the deduction to expenses that are above normal.
A universal deduction above 2 percent of AGI increases charitable
giving while raising revenues for government.
Is there a sweet spot where government can increase giving without
any loss in revenues? My colleagues and I found that a floor of 1.9
percent would just about break even for government under the law in
place after 2017 but before COVID-19, while raising contributions by
about $2.5 billion. If Congress were to restore subsidies to pre-2017
levels, a revenue-neutral floor of less than 1 percent would
efficiently promote giving.
Proposals with floors also avoid providing the highest average
additional subsidy to the 20 percent of taxpayers with the highest
incomes who often already itemize.
administrability
Unfortunately, the current charitable deduction has serious
enforcement and tax administrative problems. It's not simply that tax
administration is collapsing under the weight placed on it. An IRS that
audits significantly less than 1 percent of taxpayers can hardly
discover whether voluntarily reported transactions are valid. How can
it possibly trace what cash I threw in the collection basket or donated
to someone? This problem provides a real threat to creating a more
universal deduction that would potentially add tens of millions of
additional returns claiming hundreds of millions of individual
contributions for which verification would be difficult if not
impossible.
Reporting on Charitable Contributions
A more universal deduction with a floor under what charitable
contributions can be deducted helps avoid adding to the IRS's
administrability problems. And to be clear, at least for those owing
positive tax liability, it is still a deduction universally available
to anyone giving amounts closer to what the average giver contributes.
But that still leaves the problem inherent even in current law.
Over 30 years ago I went on an IMF mission to China and tried to
explain how tax administration works in a market-based economy. One top
Chinese administrator kept asking questions about how many people we
punished. I tried to explain that what makes our tax system work--at
least to the extent it does work--are accounting systems where private
parties need and want accuracy; the IRS can latch onto those private
accounting systems, rather than try to audit everyone, which it can't
do anyway, or severely punish the noncompliant.
These accounting systems take advantage of divergent interests
within the private sector. Workers want to be paid the amount that
businesses want to deduct. Banks want to deduct the same cost of
interest that savers want to receive. Value-added taxes work because
buyers want to get full credit for the tax already paid by the
intermediate producer before them. Tariffs worked for millennia because
buyers and sellers would gather to inspect bills of lading. In each
case, tax administrators rely mainly upon systems of accounting in
place because one party to the transaction wants to insure against
overreporting, and the other party against underreporting.
Unfortunately, we have no such system in place for charitable
contributions, even though the taxpayer wants to take the maximum
deduction possible and the charity wants to receive the maximum
contribution. When there is both reporting and withholding to IRS,
mainly for wages that can be computer matched, the net underreporting
is estimated to be only 1 percent; when there is substantial
information reporting to IRS on items like interest and dividends, the
figure is more like 5 percent. Compliance rates fall off substantially
from there, even when there is partial reporting to IRS (Figure 3).
We really don't know how well charitable contributions are reported
partly because the IRS doesn't study this matter to any great extent.
But, even if the IRS tried, it has no way of judging the accuracy of
many claims. If Congress tripled the size of the IRS, it could probably
audit more people for confirmation, especially of individual
contributions above $250, for which charities are supposed to provide
acknowledgment to donors. But auditing is terribly expensive,
burdensome to taxpayers, inadequate even in the best of cases, and
fairly useless when no records are available. Bottom line, there is no
way on this green earth that the IRS can check on and audit billions of
charitable transactions under current, very outdated systems of
accounting and reporting.
Though I focus here mainly on limits for IRS enforcement, there are
also burdens on taxpayers. Think of all taxpayers now having to keep
track of the extra dollar of contribution implicit in each box of Girl
Scout cookies purchased.
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.epsFortunately, there may be no more opportune time for Congress
to create a system of electronic reporting for charitable deductions.
In an era where recording of transactions extends even to
cryptocurrency, I have little doubt that technology can easily meet the
challenge of creating a much better and not-too-expensive system of
reporting to the IRS. Third-party intermediaries, including tax
preparers, payroll providers, and credit card companies, likely would
create ways to do this easily. If people don't want to share their
Social Security numbers, they could make their contributions through,
say, tax preparers who already must know that Social Security number.
Or people might limit that information by channeling their
contributions through a single donor-advised fund, as some people do
already to simplify their tax filing. Almost all transactions today are
recorded electronically. I give to many charities, large and small, and
nary a one doesn't generate electronic information for me.
Even if Congress does not require electronic filing for everyone,
it could limit the eligibility for a more universal deduction to
contributions made through record-
keepers. With so many taxpayers ineligible today for a charitable
deduction, Congress would still be significantly expanding the number
of people who get a deduction. No charity need be left out except on
its own volition. And perhaps some subsidies for administrative costs
could be made available to charities for a transition period.
I don't deny that charities would need time and effort to adjust to
a better information system, but bearing that cost might support an
even more generous deduction than Congress could otherwise supply. A
more generous deduction might, in turn, generate tens of billions of
dollars of additional contributions annually and help create a more
transparent sector with fewer temptations for donors and charities.
Moreover, the charities with the least sophisticated accounting systems
likely depend more on less wealthy donors. If so, most of their
contributors don't get a deduction currently anyway.
In-Kind Charitable Contributions
Some attention must also be paid to the ability of IRS to monitor
in-kind charitable contribution (Colinvaux 2019). More than 83 percent
of noncash charitable donations in 2018, or over 11 million donated
items valued at over $12 billion, were in the form of clothing or
household items (Statistics of Income, IRS, for 2018). Imagine
multiplying that number of items several fold with a more universal
deduction.
Issues here extend from outright cheating to questionable
valuations to costs to Treasury in excess of what flows through to the
charities. Most of us have probably gotten the blank slip to fill out
ourselves when we donate some items. Also consider the case where
someone uses a household good or piece of clothing a few times, donates
it, and values it at half the original market price. Then a profit-
making firm acting as an agent for a charity transfers the item to a
thrift store. There the item sells for one-twentieth of its original
value, and most of those proceeds are paid to the store and the profit-
making agent. Such a set of transactions may be totally legal, even
though the charity gets only a tiny fraction of what the donation cost
the government.
Another option often put on the table is to allow deductions for
the sales price of complex assets. Again, I wonder whether this type of
reform would reduce charitable giving very much; if so, the additional
revenue pick-up could be put back into a better incentive for more
administrable contributions.
If we can't figure out better ways to deal with these and other
types of in-kind contributions, then perhaps the more universal
deduction should be confined to cash contributions.
saliency and behavioral science
The behavioral public finance literature encourages us to think
about psychology, not just economic incentives, when designing features
of a tax system.
Allowing Deductions at Time of Tax Filing (the April 15th Idea)
For more than a quarter-century I have suggested that allowing
deductions up until April 15th or the time of filing of a return would
provide more bang per buck, or increased contributions relative to
revenue cost, than almost any other reform.
My thoughts came from some simple observations. First, the best
time to advertise the value of a charitable deduction is when people
fill out their tax returns and tax preparers help them look for
additional ways to reduce taxes. Second, many people tend to
underestimate their marginal tax rate or the size of the subsidy for
giving. They may equate the subsidy rate with their average, not
marginal, tax rate. At filing time, however, tax preparers and tax
software companies can show people directly how much they would save
for each $100 of contributions they make. They can also help taxpayers
donate enough to avoid any significant penalty for underpayment of
taxes due.
A version of this alternative deadline for claiming charitable
deductions was included in the America Gives More Act that passed the
House of Representatives in July 2014.
Since this additional advertising does almost nothing to change the
size of the incentive (other than perhaps a minor timing change on when
the contribution is made), the cost to the Treasury is modest, perhaps
$15 or $30 (or the average marginal tax rate that applies to
contributions) for every additional $100 contribution made.
In April 2016, Alex Rees-Jones and Dmitry Tabuinsky, two scholars
who work at the intersection of public economics and behavioral
economics, prepared a brief on ``Tax Psychology and the Timing of
Charitable-Giving Deadlines.'' They examined this type of reform in
more detail and concluded that it would likely increase charitable
giving when (1) individuals, who tend to be focused on the present more
than the future, can claim an incentive payment very quickly after the
donation; (2) tax rules are more salient and more likely to be examined
by the taxpayer, as at tax filing time; and (3) taxpayers, who are
generally tax averse, find immediate opportunities to turn that
aversion into reducing taxes even as they are paying them.
To deal with the enforcement issues I relayed above, however, this
April 15th allowance might be allowed only for contributions
accompanied by an improved reporting system, as is the case with IRA
contributions that can also be made up to the time of tax filing.
Otherwise, at least one Treasury official I talked to in the past
feared that some taxpayers would take the deduction twice--for example,
on April 15, 2022, for 2021 income taxes and again in 2023 for 2022
taxes.
Lottery Winnings
People who come into sudden windfalls by winning lotteries are
quickly get confronted with the tax consequences. If winners are
charitably minded, they might make donate some of or all their
winnings, then find themselves unable to take a full deduction for that
donation.
Suppose I spend $1 on a winning lottery ticket that has a 1 in 10
million chance of winning $5 million. If I donate the ticket to a
charity before the lottery drawing, I effectively have given away a
ticket only worth 50 cents, and the income from the winnings would flow
directly to the charity. Of course, charities might not even want to
handle contributions of almost worthless lottery tickets. When I win
and try to give the winnings away, however, I probably can't avoid
paying tax on up to $2 million or so of the winnings (when the maximum
deduction is set at 60 percent of AGI).
Why not simplify this whole mess for lottery winners and grant them
a limited period within which to donate the winnings, or some share of
the winnings, to charity with no deduction limit? Why trap them into
the arcane formalities of the tax laws? The most salient time for
people to think about what to do with possible winnings is when they
win, not when they buy the ticket.
Matching Grants Versus Tax Reductions
A third way to consider behavioral science is to consider matching
grants in lieu of tax reductions. I recognize that I am bringing up
many difficult issues here, including potential cross-jurisdictional
authority across congressional committees and direct expenditures
versus tax subsidies.
Consider a taxpayer with an effective tax deduction of 40 cents for
a dollar contributed. In effect, that taxpayer's net contribution is 60
cents, and the government effectively provides a 2-for-3 or 67-percent
match for the net contribution. The 67-percent figure sounds higher
than the 40-percent figure, yet the $1 tax-deductible contribution is
equivalent to the 60-cent contribution matched by a grant. I've already
discussed how many taxpayers may underestimate the size of the
incentive they face with today's deduction. Many further likely also
underestimate the size of the government match.
For at least some donors who give away the same gross amount either
way and ignore incentives, the amount going to charity will be much
higher with a matching grant. In the example above, the $1 eligible for
a tax incentive yields only $1 to the charity and 40 cents back to the
taxpayer; the matching grant yields $1.67 to the charity and nothing
back to the taxpayer.
As one example of this type of arrangement, for over 6 years the
United Kingdom offered a UK Aid Match, run by the Foreign, Commonwealth
and Development Office, to support public engagement in international
development work. It matches generous donations from the public pound
for pound. Total subsidies are capped, however, which severely limits
the impact of the program and its net incentive effect.
These three examples show ways we can use behavioral science to
create a more effective design of charitable subsidies.
conclusion
In the early 1990s I wrote a book called The Tax Decade. The title
alluded to the fact that almost every major tax, budget, and spending
reform of that decade was led by efforts within the Senate Finance and
Ways and Means committees. Almost all those reforms engaged in trade-
offs that would offend someone. Today many members of Congress, as well
as constituents, talk about the failure of those very same processes. I
think that failure relates directly to our increasing inability as a
people to accept that trade-offs are necessary to enact good policy--
that money used one way inevitably can't be used another way. And we
pull Congress in the same direction. Yet reforms that require trade-
offs must be led by Congress and can't be expected from membership
organizations that try to represent all their members.
Based on that experience, I recommend turning to nonpartisan or
bipartisan congressional or other staff to provide options based upon
how well they improve charitable giving at whatever net subsidy dollars
you specify. Along those lines, I suggest paying close attention to how
the societal, not just individual, value of giving can be promoted; how
for any given level of subsidy, caps significantly weaken and floors
significantly strengthen the incentive provided; how to decrease rather
than add to compliance problems for IRS while using the saving from
improved compliance to provide a more generous charitable incentive;
and how making incentives more salient can add to charitable giving.
All these recommendations aim to create a more participatory
charitable sector, along with maximum gains for charitable
beneficiaries for whatever total subsidy level Congress provides.
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``All Individual Returns With Noncash Charitable Contributions Reported
on Form 8283, by Donation Type, Tax Year 2018.'' SOI Tax Stats--
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https://www.irs.gov/statistics/soi-tax-stats-individual-noncash-
charitable-contributions.
Colinvaux, Roger. 2017. ``The Importance of a Participatory Charitable
Giving Incentive.'' Tax Notes 154 (605), https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=
2924562.
------. 2019. ``Fixing Philanthropy: A Vision for Charitable Giving and
Reform.'' Tax Notes 162 (1007), https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=3354717.
Faulk, Lewis, Mirae Kim, Teresa Derrick-Mills, Elizabeth Boris, Laura
Tomasko, Nora Hakizimana, Tianyu Chen, Minjung Kim, and Layla Nath.
2021. ``Nonprofit Trends and Impacts, 2021.'' Washington, DC: The Urban
Institute, October 15, 2021, https://www.urban.org/sites/default/files/
publication/104889/nonprofit-trends-and-impacts-2021_3.pdf.
Jones, Jeffrey M. 2020. ``Percentage of Americans Donating to Charity
at New Low.'' Gallup, May 14th, https://news.gallup.com/poll/310880/
percentage-americans-donating-charity-new-low.aspx.
Indiana University Lilly Family School of Philanthropy. Giving USA.
Chicago, IL: Giving USA Foundation, various years.
McClelland, Rob, Eugene Steuerle, Chenxi Lu, and Aravind Boddupalli.
2019. ``Tax Incentives for Charitable Contributions.,'' Washington, DC:
Urban-Brookings Tax Policy Center, November 12, 2019, https://
www.taxpolicycenter.org/publications/tax-incentives-charitable-
contributions.
Rees-Jones, Alex, and Dmitry Taubinsky. 2016. ``Tax Psychology and the
Timing of Charitable-Giving Deadlines.'' Washington, DC: Urban
Institute, https://www.urban.org/research/publication/tax-psychology-
and-timing-charitable-giving-deadlines.
Rosenberg, Joseph, and Phillip Stallworth. 2017. ``The House Bill Is
Not Very Charitable to Nonprofits.'' Tax Vox (blog), Tax Policy Center,
November 15th, https://www.taxpolicycenter.org/taxvox/house-tax-bill-
not-very-charitable-nonprofits.
Steuerle, Eugene. 2018. ``Challenges and Opportunities for Charities
After the 2017 Tax Cuts and Jobs Act.'' Presentation to the ABA Tax
Meetings Exempt Organization Section, Washington, DC, May 11th, https:/
/www.taxpolicycenter.org/publications/challenges-opportunities-
charities-after-2017-tax-cuts-and-jobs-act.
------. 2020. ``The CARES Act Charitable Deduction for Non-Itemizers
Was a Lost Opportunity to Help Beneficiaries of Non-Profits.'' Tax Vox
(blog), Tax Policy Center, May 19th, https://www.taxpolicycenter.org/
taxvox/cares-act-charitable-deduction-non-itemizers-was-lost-
opportunity-help-beneficiaries-non.
Steuerle, C. Eugene, Robert McClelland, Nikhita Airi, Chenxi Lu, and
Aravind Boddupalli. 2021. ``Designing an Effective and More Universal
Charitable Deduction.'' Washington, DC: Urban-Brookings Tax Policy
Center, https://www.
urban.org/research/publication/designing-effective-and-more-universal-
charitable-deduction.
______
Questions Submitted for the Record to C. Eugene Steuerle, Ph.D.
Question Submitted by Hon. Ron Wyden
Question. In the CARES Act, Congress created a non-itemizer
charitable deduction of up to $300 in 2020, which was later extended
and expanded for 2021. You proposed a number of thoughtful policy
options in your testimony which would make charitable incentives more
efficient. But some proposals to better target giving incentives may
not be supported by the broader charitable sector.
Where are the areas of disagreement? And are there practical ways
to bridge those divides?
Answer. 1. Enforcement and Administration. One area of disagreement
is over enforcement and administration. I believe this is an optimal
time to make a more extended deduction in exchange for a system of
reporting to the IRS, though I realize some charities will object to
the additional burden. I suppose that one could offer the more extended
deduction only for those contributions that are reported to the IRS,
thus taking nothing away from any charity that it doesn't already have.
In that ``political'' sense, it would create no losers. Charities would
then ``volunteer'' to report to trigger the expanded deduction for
donors.
In the long run, however, I think the charitable sector is already
hurt by a deduction that is not well administered, while the American
taxpayer loses out by the extent of cheating that this lack of
administration likely invites. Creating a greatly expanded deduction
could exacerbate both problems and damage the reputation of charities.
If one creates an expanded deduction with some notion that some later
Congress could tackle the issue, charities would be much more likely to
view that later effort simply as an attack on them, rather than a
modest new burden enacted to get an enhanced deduction.
By the way, there are numerous ways in which taxpayers can limit
access to their information about themselves. For instance, they could
contribute through an intermediary such as a tax preparer or a donor
advised fund that maintained anonymity and provided the matchable
documents to IRS.
2. A floor. Much of the study of economics is built around the
notion of marginal incentives. Most all economists would agree that a
floor (e.g., a deduction only for giving above, say, 1 or 2 percent of
income) provides much more charitable giving per dollar of contribution
made. A few charities, mistakenly in my view, believe a floor would
leave out many of their donors. But this seems to be based on their
receipt of some average contribution like $300 to that charity alone,
when most donors give to multiple charities. Moreover, most very small
givers have never been eligible for a charitable deduction, even under
pre-2017 law.
Suppose that Congress allowed a deduction for giving above 1
percent of AGI (subject to a reporting requirement, which, in my view,
is the only way it can be administrable). This is a universal deduction
option for everyone who gives more than 1 percent of income. Note that
2 percent is the average for all taxpayers and 3 percent is closer to
the average for givers, those who give some positive amount).
Additionally, the whole purpose of the standard deduction and the floor
under medical expense deduction was to limit burdens not just to IRS
but to taxpayers when amounts are small.
3. Tradeoffs. Like other organizations, charities have difficulty
dealing with tradeoffs. Their membership organizations want to be
appreciative to each member of Congress for anything they can get.
Also, they fear offering trade-offs and then only getting the raw end
of the bargain in some deficit cutting exercise. To deal with their own
constituencies and members, they often get trapped in supporting
efforts that give away money to most charities without any to give up
anything, even when such an incentive is a very bad deal for most
charities relative to one that would increase charitable giving more
for the same level of cost.
I believe the only way to help the sector representatives get their
members to face up to the trade-offs is to present equal cost options.
By its very nature, a fixed budget for considering options shows the
trade-offs involved. (To be clear, this can be done at multiple levels
of fixed budgets; at each level, the trade-offs are then made
apparent.) As I indicated in my testimony, those options should be
accompanied by estimates of the amount of charitable giving generated
from each option. Then the sector representatives can tell their
members that, say, ``Here's option 1. It costs, say, $10 billion but
generates only $2 billion in charitable giving and $8 billion of net
taxpayer relief that doesn't go for charitable purposes. Option 2 also
costs $10 billion but likely generates $10 billion in charitable
giving.'' While there are more winners and losers in the second option,
this comparison allows both the charities and Congress to keep eyes on
the prize--the charitable beneficiaries we are trying to help.
Mr. Chairman, a number of years ago you expressed admiration for my
work in helping organize and design the study that led to the Tax
Reform Act of 1986. One of the reasons that engagement worked
politically was that the negotiations that followed were conducted
under a set revenue goal. Advocates were then forced to argue for why
their alternative was superior to others. I think the Senate Finance
Committee, along with Ways and Means and Treasury, will soon be facing
a period where tax, budget, Social Security, and Medicare reform will
force many tougher comparisons and tradeoffs to be considered. I
realize that the tax treatment of charitable contributions represents
only a modest amount policy arena compared to some of these other
issues. Setting up a good process now can set a precedent that might be
quite helpful for the future.
______
Question Submitted by Hon. Mike Crapo
Question. You have raised a lot of tax-specific points that are
important for the Finance Committee to consider. In your written
statement, you raised an interesting idea: that perhaps Congress should
allow individuals to take deductions for charitable donations up until
the time of the tax return filing deadline.
Even if implemented correctly, what other challenges do you think
could arise?
Answer. I have heard two objections made to this provision. First,
some people might be confused as to whether the donation at time of tax
filing might again be available the following year. For instance, I
take a deduction at tax filing time in 2021 on my 2020 return. I then
must be sure not to take the deduction again in 2021. (The same issue
arises with IRA contributions.) I think that potential problem is
easily solved by a system of reporting. If not the more elaborate
system required with a more universal deduction, then simply make this
option available exactly at time of filing. Almost everyone uses tax
software or an accountant who uses such software that could report
accurately just when and how the deduction is made.
The second objection I have heard is that contribution deductions
at time of tax filing change the status quo for charities that
emphasize end-of-year advertising. I don't find this very convincing in
an age when charities send out requests year-round. First Tuesday or
other ``days of giving'' offer yet another recent option that many
charities latched onto. They didn't ask the First Tuesday organizers to
shut down because people confuse it with end-of-year efforts.
The main reason for offering a deduction at time of tax filing is
that by making the size of the tax incentive transparent, it is highly
likely to increase the perceived incentive to give. Taxpayers also like
to get refunds rather than write checks to Treasury, and this option
allows them to make avoid those extra payments. As a result, the bang
per buck for this option is greater than almost any other that I have
been able to conceive. If a taxpayer is in a 25-percent bracket, any
extra giving yields something like a 4-to-1 ratio of extra giving
relative to extra cost for the Treasury.
Why doesn't such a ratio exist for the current deduction? That
deduction provides incentives for every dollar of giving, not just
additional dollars. For the most part, the deduction at time of filing
doesn't really add any new incentives for the dollars of giving already
being made; it simply makes apparent the incentives so as to entice
additional giving.
In my testimony, I have quoted some behavioral economists who
provide related arguments on why this incentive might be fairly
powerful.
I invite you also to look at the small proposal I made with respect
to lottery winnings. State governments might also be able to take
advantage of this type of simplification to encourage winners of their
big lotteries to donate to charity.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. The deduction for charitable donations is meant to
encourage contributions that benefit the public. With donor-advised
funds, the donor gets the deduction now, but the charitable benefit may
not happen for years.
Are there any reforms to donor-advised funds that should be
considered?
Answer. To me the questions surrounding donor advised funds are
ones that apply to charity more generally. To give a few examples:
First, endowments and assets. Charities that grow their endowments
and assets, whether defined as endowments at all, tuck away far more
money that sits in donor advised funds. All asset buildup defers the
spending of money for charitable beneficiaries, to some extent favoring
future beneficiaries over current ones. I have asked charities whether
they would prefer to have an endowment (or more assets, whether labeled
``endowment'' or not), and most of any size almost uniformly indicate,
``Yes.'' It's not clear to me, therefore, that ``spend now, not later''
argument applies more to DAFs than other charitable assets.
There's also a technical question whether DAF rules could prevent
operating charities from effectively running DAFs. For instance, an
operating charity might tuck away enough operating funds to offset any
payout requirement.
The DAF is a far more flexible instrument than many other assets
and endowments within the charitable sector. For instance, the donation
of a building to a charity determines the use of those funds for
decades or even a century to come and typically locks in assets and
their use far more than a DAF. DAFs also tend not to be locked into
fulfilling some donor intent that may be a less efficient use of
charitable money down the road.
Second, political uses of charities. The use of charities for
political purposes is indeed an issue but is hardly confined to donor-
advised funds. Whatever rules need to apply here, including on
disclosure, seems to me to be considered across the charitable sector.
Third, self-dealing. One issue that tended to drive past rules for
foundations was self-dealing or using the foundation for control of a
business. If that is an issue, then I would try to think of rules here
that identify the abuses. Also, here it seems sensible to require
national DAFS to ensure that the fund investment they sponsor have as
low of a fee structure as is available for equivalent investments in
the market generally.
Fourth, the wealthy. In a study of rules applying to foundations,
Ben Soskis and I found that the motivation that led to the 1969 Act,
sometimes by Democrats and sometimes by Republicans, centered around
suspicion of the wealthy and what they were doing with the money.
Treasury did focus its study leading to that Act in part on money was
tucked away and not paid out over time. If that's the issue here, then
perhaps some simplified payout rules such as apply to foundations
should apply to very large DAFs. Keep in mind, however, that the very
wealthy generally don't get a current contribution deduction anyway for
giving away very much of their wealth (most of their income is accrued,
not realized). They can avoid most rules by simply giving away less,
or, as some wealthy donors already are doing, setting up a ``not-for-
profit'' firm that generates little income because it gives away its
money or subsidies activities at below cost.
My experience as a cofounder of a community foundation is that DAFs
are sometimes created to build up funds for specific purposes. Some are
of modest size, and annual payouts may make little sense. Some are
meant to provide permanent support to the community foundation, as when
one designates a regular payout for that purpose but wants to maintain
flexibility in case some other need becomes greater. Some are modest
family efforts for the long-term purpose of teaching children and
grandchildren to give. At the community foundation, we might have one
fund for accumulating money to garner public support for a swimming
pool or building, but, again, the donors may want to maintain
flexibility in case that option doesn't work out. Another fund might
gather money for racial equity work, with uncertain dates as to how and
when that money will be distributed. Most DAF donors give away money to
non-DAF charities; if combined, their ``effective payout'' is quite
high even if the DAF pays out little in a given year.
Finally, I note again that charities build up assets all the time.
The main distinction with a DAF is that the right of decision-making
for future rests with donors or someone they designate; at the same
time, the money is often much more flexible and not locked up for some
specific purpose.
Question. We have heard that reforms which require tracking when
donations come in and when they are distributed from donor-advised
funds can be an administrative burden.
Do you have ideas for ameliorating any administrative burden that
may exist?
Answer. If you go down this route, I suggest just using beginning-
of-year asset value to determine some minimum payout, though, as noted
above, even a minimum payout, other than perhaps for some foundation
equivalent treatment very large DAFs not set aside for some specific
future purpose, gives me concerns. If you're referring to some limited
life rule, it could become much more complex in trying to date every
dollar of income that comes in or goes out so that each dollar has the
``right'' limited life. Our community foundation relies upon some
donors for year-after-year contributions of a certain percentage of DAF
assets for the operations of the community foundation itself.
The appeal of DAFs is their simplicity, which very likely increases
charitable giving. I would try to avoid any rule that forces people to
create multiple DAFs to get around the rules, weakens the
attractiveness of this inducement to additional giving, and restores
the power over endowments only to the big players rather than the
democratization of endowment giving that DAFs have helped create.
______
Questions Submitted by Hon. Chuck Grassley
Question. In your testimony you raised important policy
considerations for developing a cost-effective universal charitable
deduction. In the CARES Act, Congress established a temporary non-
itemizer deduction for small dollar donations that expired at the end
of 2021. This deduction is strictly limited to cash donations and
contributions to certain organizations do not qualify.
In the event Congress decides to extend this deduction, do you have
a view on whether Congress should maintain or eliminate the current
restrictions?
Answer. Many types of in-kind deductions are extremely hard to
administer and enforce. Even with a well-designed reporting system, a
good case can be made for limiting a more universal deduction to cash.
For some types of assets, it might be reasonable to allow the deduction
when the charity sells the asset, though I think in-kind donations each
have their own sets of enforcement issues and offer different type of
regulatory or self- regulatory options that need to be considered.
Question. In addition to enacting a non-itemizer deduction,
Congress also sought to boost charitable giving during the pandemic by
relaxing limits on the individual and corporate itemizer deduction.
These provisions temporarily allowed individuals to deduct up to 100
percent of AGI and corporations to deduct up to 25 percent of taxable
income.
Do you have any data or information you could share on the
effectiveness of these provisions? What should Congress consider in
deciding whether to extend either provision?
Answer. I do not have empirical evidence on the effect of these
higher deduction limits. In many cases, corporations can treat
charitable contributions as expenses of doing business or creating
goodwill, so I'm not sure how effective that higher corporate limit is,
other than making it easier to ``market'' their charitable efforts
(which may be a good thing). A higher individual deduction, on the
other hand, does add to incentives, though historically we have found
that temporary incentives often lead many donors to change the timing
of their donations over years to maximize the incentive they receive.
We have also found that people often take time to learn about
incentives, so a more permanent increase tends also to have a higher
annual effect than a temporary one. But, as I say, most of this is
theoretical speculation about the latest limits, not empirical.
Question. In your written testimony, you discuss issues pertaining
to in-kind charitable contributions. Last year, Richard Rubin of The
Wall Street Journal tweeted that at a tax conference a senior IRS
staffer had expressed concerns that people were donating yachts and
claiming deductions far greater than the fair market value. This is
concerning to me as I led efforts in the 2000s to clamp down on such
abuses by limiting the deduction for a vehicle or boat, including a
yacht, to its sale value in most cases and strengthened rules governing
appraisals where a fair market value deduction continued to be
permitted.
Do you have any suggestions for reforming our reliance on
appraisals to correct this problem?
Answer. Many in-kind contributions are extremely hard to value. I
gave the example in my testimony of gifts of clothing that might
legitimately get valued at a multiple of any money that eventually goes
to charities. As for yachts, the incentive to take the higher of
reasonable appraisal values may still exist.
When I've talked to IRS officials, they tell me that they simply
don't have the resources to tackle these issues. First, very few people
get audited. Then, even if they are audited, the auditor may have no
expertise with yachts or easements or other types of in-kind gifts.
Next, the auditor would have to decide how much time and money would be
required to pay different appraisers to come up with some alternative
valuation. Further costs would be entailed for IRS if the taxpayer
decided to fight the alternative appraisal. Finally, IRS must consider
how many other important audits have been neglected as a result of
expensive audits of in-kind contributions.
IRS often gets limited support for its efforts here, as well. Since
the losses from excess deductions usually are shifted to the Treasury
and the public it represents, private assessors, charities and
government recipients of gifts often have little or no incentive to
restrict valuations to more appropriate levels.
One solution for some in-kind gifts would be to allow a deduction
only upon final sale; one might also consider some requirement as to
what minimum portion of declared valuation must be turned over to
charities. In some cases, charities might be held accountable for the
assessment, with some strict penalties for noncompliance. The
charitable sector might also be engaged to come up with strict
standards.
The time to bargain with the sector over these issues is while
Congress is considering expanding the charitable deduction. It is
entirely proper to ask something in return from the sector to ensure
that the dollars provided by Congress most likely lead to increases in
charitable goods and services, not just claimed deductions that do
little for charitable beneficiaries.
Question. On December 22, 2020, I released the results of an
investigation conducted by my staff into the relationship between World
Vision, a 501(c)(3) non-profit organization, and the Islamic Relief
Agency, which had been sanctioned by the U.S. government. My
investigation concluded in part, ``A more robust and fundamentally
sound system of screening and vetting is needed to restore the public's
trust that contributions to World Vision are not funding illicit
organizations.'' The full results of that investigation are available
on my webpage here: https://www.
grassley.senate.gov/news/news-releases/grassley-releases-results-
investigation-world-vision-s-interactions-isra.
Do you believe that charities have implemented adequate safeguards
to ensure that grants from the U.S. Government and donations from
Americans are not even inadvertently funneled to the benefit of
individuals or groups that have been sanctioned by the U.S. Government?
Are there additional steps charities can take to ensure they are
following applicable rules and regulations, or is there any action
Congress should take to promote that compliance?
Answer. I do not know the full story behind this particular
incident. I do know from experience that many charities have to pay a
higher hourly rate to their lawyers and accountants than to their own
staff, so I worry about the net impact of expanded regulatory
requirements. Groups like World Vision, Catholic Relief Services, and
Lutheran World Relief also attempt to maximize the amount of money that
reaches beneficiaries. These groups inevitably face problems everywhere
in trying to help beneficiaries avoid having to pay bribes or be sucked
up in some other misuse of funds in areas when the rule of law is not
well established. Determining the legitimate needs of beneficiaries is
also difficult at home and abroad. For instance, the food bank at my
church has limited ability to monitor each beneficiary, just as State
governments face problems in determining true eligibility for welfare.
I don't know any perfect way to deal with these issues. At best,
government can establish imperfect bright lines and continually try to
reassess them. But very limited resources have been provided by both
Congress to IRS and by State officials to their Attorneys General to
monitor this and many other aspects of the charitable sector.
Question. In an article published in 2020 in the Maryland Law
Review, Professor Johnny Rex Buckles concludes in part, ``Federal tax
law permits foreign actors to influence U.S. politics and policies
through their interactions with American charities.''\1\ He goes on to
note in his conclusion, ``Even the existing restrictions on lobbying,
and the prohibition against political campaign intervention, safeguard
against only the most obvious exploitation of charities by politically
motivated foreign actions.''\2\
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\1\ Johnny Rex Buckles, ``Curbing (or Not) Foreign Influence on
U.S. Politics and Policies Through the Federal Taxation of Charities,''
Maryland Law Review, Vol. 79:590 (2020).
\2\ Id.
In a theoretical case study, the article presents an example where
a Russian oil baron donates to a U.S. charity that educates the
American public on the dangers of fossil fuels with the intent of
promoting increased regulation of U.S. fossil fuel interests that would
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serve to confer a comparative advantage on their Russian competitor.
This example may in fact not be very theoretical. In an opinion
piece published in The Hill in March of 2022, Institute for Policy
Innovation resident scholar Merrill Matthews wrote, ``U.S. policymakers
are finally realizing that Russia may have been covertly funding U.S.
environmental organizations to shape public opinion and policies--
especially energy and anti-fossil fuel policies--to Russia's liking and
benefit. Such Russian skullduggery has long been an open secret in
Europe.''\3\
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\3\ Matthews, Merrill, ``Russia used `soft power' to influence EU
policies and anti-fossil fuel efforts,'' The Hill, March 22, 2022,
available at https://thehill.com/opinion/energy-environment/599113-
russia-used-soft-power-to-influence-eu-policies-and-anti-fossil.
Do you have concerns that foreign actions are able to exploit U.S.
tax-exempt organizations to promote their own priorities and extend
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influence over U.S. policy?
Answer. Yes, I certainly do. Though my concerns extend far beyond
foreign actors and tax-exempt organizations. The ``noise'' that
surrounds our policy discussions today is increasingly exploited to
mislead and create division among us. I have no easy answers here,
though higher levels of penalties to individual actors, not just
organizations, might be considered.
Question. Are there reliable measures of how much foreign money is
poured into U.S. non-profit entities and the source of that funding?
Answer. I do not know the answer to this question. I believe one
could engage some statisticians and social scientists to help tease out
whether a better answer could be obtained with some surveys. Better
reporting might also make it possible to come closer to an answer.
I might also note that IRS recently dropped the requirement that
nonprofits (other than 501(c)(3)s) provide the Schedule B (major donor
disclosure) to the IRS. That was one of the few tools available to
track the financing of nonprofits.
Question. Do you have an estimate of funding for U.S. non-profits
that originated from sources aligned with Russia, or Russian policy
priorities?
Answer. No, I do not.
______
Question Submitted by Hon. Todd Young
Question. During the hearing, I had the opportunity to discuss with
Dr. Osili some of the barriers to establishing more community
foundations around the country. Unfortunately, I did not have enough
time to solicit your response to that question.
Given your experience as founder and chair emeritus of ACT for
Alexandria, what Federal barriers, if any, did you observe that may
prevent or hinder the creation of more community foundations across the
country? For any Federal barriers you identify, please provide your
recommendations to address them.
Answer. I cannot think of any major Federal barriers right now.
Some of the efforts with respect to DAFs--in particular, limited life
for DAF funds, if applied to community foundations--might easily have
prevented the survival of the community foundation I helped found. I
applaud the efforts of the broader foundation community to create,
encourage, and continually improve standards of operation for community
foundations.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
The Finance Committee meets this morning to discuss ways to go
about promoting charitable giving in America. Americans are generous
people, and that's why charity is one of the key incentives embedded at
the heart of our tax code and a top priority for Democrats and
Republicans on this committee.
I've always said that the charitable tax deduction is a lifeline,
not a loophole. That's never been truer than it was in early 2020 when
the pandemic arrived in the United States.
Over the course of just a few weeks that March, the pandemic wiped
out a quarter of a million jobs in my home State of Oregon. This is in
a State with a workforce of just over 2 million people. In a flash,
Oregon's unemployment rate jumped by 10 percentage points. As terrible
as those figures are, other States had it even worse in terms of those
early pandemic job losses. More than 22 million Americans lost their
jobs or had their hours reduced to zero. The unemployment rate hit 14.8
percent, the highest ever recorded.
That economic devastation added to a hunger crisis that had been
causing pain among families in America for far too long. According to
the Children's Defense Fund, prior to the pandemic, more than 10
million American children were growing up in households where there
wasn't enough to eat. Black and Latino families were twice as likely to
be short on food. Again, that was the situation before anybody had
heard of COVID-19.
The crisis exploded in 2020. Everybody remembers the images of cars
stacked up for miles outside of food pantries. There was an added
challenge of feeding vulnerable children, many of whom were unable to
get the free lunches they rely on for nutrition at school.
The committee is fortunate to be joined this morning by my Portland
neighbor Susannah Morgan, the CEO of the Oregon Food Bank. She's going
to share with us the story of how this crisis hit Oregon families, as
well as how her wonderful organization was able to respond through the
1,400 food pantries it supports across Oregon and into southwest
Washington. Many times, prior to the pandemic, I'd seen the Food Bank's
incredible work firsthand. And the Food Bank found an extra gear over
the past 2 years to support families in need.
The record shows that in 2020, in Oregon and across the country,
Americans stepped up when their neighbors needed help. Charitable
giving reached new highs. The Federal and State Governments also
stepped up.
There are some important lessons this committee ought to consider
going forward, because there are still millions and millions of people
across the country who need support. Organizations like the Oregon Food
Bank are still seeing demand at higher levels than they did in 2019.
Two quick examples. First, the CARES Act, which the Congress passed
in March 2020, included a tax deduction for charitable donations of up
to $300 for the vast majority of taxpayers, who don't itemize their tax
returns. The 2017 tax law took some of the punch out of the existing
charitable tax deduction by greatly reducing the number of taxpayers
who itemize. The new $300 deduction helped correct that, and it helped
promote giving in 2020. It was extended and expanded in 2021, but it
expired on January 1st. There ought to be bipartisan interest in
reviving it and expanding it to promote even more giving.
Second, in addition to promoting donations, the Senate ought to
look at ways of helping nonprofits operate, keep their doors open, and
keep their workers on the job. The CARES Act also created an Employee
Retention Tax Credit that helped save a lot of jobs nationwide, and it
was also extended and expanded in 2021. The credit was designed with
parity for nonprofits in mind, so that those nonprofits and their
workers could benefit just like other employers.
Last year, along with Senator Brown, Senator Klobuchar, and Senator
Schatz, I also introduced a bill called the WORK Now Act, which would
help nonprofits grow and hire. It would create a new grant program to
help nonprofits retain staff and hire unemployed Americans--while also
supporting their efforts to scale up the services they offer.
My view is, organizations like the Oregon Food Bank are part of the
backbone of the communities where they operate. In addition to
promoting charitable giving, it is a no-brainer that the Congress ought
to find smart ways to help those nonprofits do their essential work
too.
______
Communications
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American Alliance of Museums
2451 Crystal Drive, Suite 1005
Arlington, VA 22202
T 202-289-1818
F 202-289-6578
https://www.aam-us.org/
Statement of Laura L. Lott
Chairman Wyden, Ranking Member Crapo, and members of the Committee,
thank you for the opportunity to submit this statement. My name is
Laura L. Lott and I am the President and CEO of the American Alliance
of Museums (AAM). Thank you for holding this hearing. We urge Congress
to enact a universal charitable deduction, expand the IRA Charitable
Rollover, and restore and expand the Employee Retention Tax Credit
(ERTC). We also request that Congress restore the 100% AGI cap on
individual donations and the 25% income tax cap on corporate donations
that expired at the end of 2021.
Representing more than 35,000 museum professionals and volunteers,
institutions--including aquariums, art museums, botanic gardens,
children's museums, cultural museums, historic sites, history museums,
maritime museums, military museums, natural history museums,
planetariums, presidential libraries, railway museums, science and
technology centers, and zoos--and corporate partners serving the museum
field, AAM stands for the broad range of the museum community.
Before detailing these priorities for the museum field, I want to
express my appreciation for Congressional relief for nonprofit
charitable organizations, including museums, which helped them cope
with and respond to the devastating impact of the COVID-19 pandemic.
Early in the pandemic, essentially all museums were closed to the
public. 33 percent of directors felt their museums were at some risk of
permanent closure without immediate support--a threatened loss of
12,000 museums and 124,000 jobs. While federal relief funding and tax
policy provisions have provided critical lifelines, a recent survey \1\
shows attendance remains down 38 percent on average from pre-pandemic
levels and 17 percent of directors still feel there is some risk of
closing permanently without additional relief.
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\1\ https://www.aam-us.org/2022/02/08/museum-field-experiencing-
compounding-financial-losses-new-survey-reveals/.
Museums--the vast majority of which are 501(c)(3) nonprofit
organizations--play a key role in education, job creation, tourism,
economic development, historic preservation, environmental
conservation, and advancing scientific literacy and global
competitiveness. They are essential community infrastructure and are
part of a vibrant and diverse charitable nonprofit sector. In unity
with the broader nonprofit sector, we support the requests in this
coalition letter \2\ and urgeCongress to strengthen charitable giving
incentives to ensure that all nonprofits, including museums, have the
resources to serve their communities.
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\2\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-workforce-shortage-relief-letter.pdf.
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Museums are essential community infrastructure for many reasons:
Museums are economic engines and job creators. According to ``Museums
as Economic Engines: A National Report,'' U.S. museums (pre-pandemic)
support more than 726,000 jobs and contribute $50 billion to the U.S.
economy per year. The economic activity of museums generates more than
$12 billion in tax revenue, one-third of it going to state and local
governments. For example, the total financial impact that museums have
on the economy in the state of Oregon is $585 million, including
supporting 9,740 jobs. For Idaho, it is a $228 million impact
supporting 3,098 jobs. This impact is not limited to cities: more than
25% of museums are in rural areas. The import of these data is not the
numbers alone--but the larger point that museums give back tremendously
to their communities in numerous ways--including economically.
Museums are key education providers. Museums spend more than $2 billion
yearly on education activities; the typical museum devotes 75% of its
education budget to K-12 students, and museums receive approximately 55
million visits each year from students in school groups. Museums also
answered the call and significantly ramped up online educational
programs and resources for students and families throughout the
pandemic. Museums help teach the state and local curriculum in subjects
ranging from art and science to history, civics, and government.
Museums have long served as a vital resource to home-school learners.
It is not surprising that in a public opinion survey, 97% of
respondents agreed that museums were educational assets in their
communities. The results were statistically identical regardless of
political persuasion or community size.
Museums will be essential to rebuilding communities as we emerge from
the pandemic. During the COVID-19 pandemic, museums across the country
have continued contributing to the ongoing education of our country's
children by providing lesson plans, online learning opportunities, and
drop-off learning kits to teachers and families. They are using their
outdoor spaces to grow and donate produce to area food banks, as well
as maintaining these spaces for individuals to safely relax, enjoy
nature, and recover from the mental health impacts of social isolation.
They provided access to childcare and meals to families of health care
workers and first responders, have donated their PPE and scientific
equipment to fight COVID-19, and are serving as vaccination centers.
Despite the financial and psychological stress caused by the pandemic,
museum professionals are filling the gaps to meet the needs of their
communities and will be vital to their recovery. Museums are
demonstrating the critical role they play in our country's
infrastructure and deepening their social impact in their communities,
addressing learning loss, and fostering intra-community trust and
dialogue.
Congress Should Enact a Universal Charitable Deduction
Contributions to 501(c)(3) charities such as museums are tax-
deductible, incentivizing those who itemize deductions to greater
generosity. Only about ten percent of taxpayers now itemize, however,
and multiple measures show that both the amount given and the number of
donors were declining prior to the pandemic. Giving appears to have
increased during the pandemic, especially smaller gifts, due to the
temporary provision that allowed people to deduct up to $300 ($600 for
couples) of charitable gifts even if they do not itemize.
The deductibility of charitable gifts is of fundamental importance for
museums. Charitable giving accounts for more than one-third of museums'
operating funds. The CARES Act established a limited and temporary
deduction for non-itemizers. Data from various sources shows that after
declining in 2019, charitable giving increased following the temporary
enactment of a ``universal charitable deduction'' that allowed everyone
to deduct. A universal charitable deduction democratizes giving by
incentivizing all taxpayers to contribute, regardless of income.
We urge the renewal--and expansion--of the universal charitable
deduction to make it permanent. Along with other members of the
Charitable Giving Coalition,\3\ we urge members of the Committee to
cosponsor the Universal Giving Pandemic Response and Recovery Act, S.
618, which would renew the universal charitable deduction that expired
at the end of 2021 and is a step in the right direction. The
legislation would raise the $300/$600 cap to roughly $4,000 for
individuals/$8,000 for couples, renew the availability of the deduction
through the 2022 tax year, and make gifts to donor-advised funds
eligible for the universal charitable deduction. We applaud the
Committee's cosponsors of S. 618, including Senators Lankford, Cortez
Masto, Scott, Stabenow, Hassan, and Brown.
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\3\ https://charitablegivingcoalition.org/universal-charitable-
deduction/.
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Expand Existing IRA Charitable Rollover
We support the bipartisan Legacy IRA Act, S. 243, sponsored by Senators
Stabenow and Cramer. Currently, individuals aged 70.5 and above may
contribute up to $100,000 from their IRA accounts to charity, counting
it toward their required distribution, but not paying tax on it. The
Legacy IRA Act would expand this provision by allowing gifts to planned
giving accounts, raising the cap to $400,000, and lowering the age to
65. Seniors typically make up more than 40% of the donor base for
charities. This bill expands the existing IRA Charitable Rollover,
which is the fastest growing area of philanthropy. Recent survey data
from FreeWill's online giving platform found a 390% increase in total
IRA Charitable Rollover gifts from 2019 to 2021. A modified version of
the Legacy IRA Act was included in the Securing a Strong Retirement
Act, H.R. 2954, and we urge the Senate Finance Committee to include S.
243 in a future retirement package.
Retain and Expand the Employee Retention Tax Credit
The ERTC has been a critically important tool for nonprofits, including
museums, to be able to rebuild and continue to deliver critical
services to the communities that they serve, now and into the future.
Moreover, many nonprofit employers had been counting on quarter four
2021 access to the ERTC to support the decisions they have made to
bring employees back on the payroll and increase operating capacity to
serve their communities. Unfortunately, the Infrastructure Investment
and Jobs Act (IIJA) eliminated ERTC for the fourth quarter of 2021,
which hurt museums that were planning on this relief.
We urge members of the Committee to cosponsor the bipartisan Employee
Retention Tax Credit Reinstatement Act, S. 3625. It retains the ERTC
for nonprofits, including museums, and small businesses in the fourth
quarter of 2021, allowing organizations to keep critical staff on the
payroll to continue meeting community needs. The Act was introduced in
early February by Finance Committee Members Senators Hassan, Scott,
Warner, Cardin, and non-Committee member Capito. We are grateful for
their leadership.
This action to retain the ERTC is supported by the broad cross-section
of the nonprofit sector,\4\ the third largest employer in the U.S.
economy (and the for-profit business community). Nonprofits, including
museums, continue to serve communities across America during the
pandemic. Now they need Congress to at a minimum retain this tax policy
through at least the 4th quarter. Ideally, Congress ought to extend it
throughout 2022 to help ensure a strong economic recovery from the
pandemic. Congress can also take action by improving this critical form
of promised COVID-19 relief by amending the definition of ``gross
receipts'' under the law to better reflect revenue available to support
nonprofits amid the ongoing COVID-19 pandemic.
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\4\ https://www.namanow.org/wp-content/uploads/Letter-Urging-
Inclusion-of-ERTCRA-in-
Omnibus-
Final.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advocacy%20
Updates%20%20March%207%202022&utm_medium=email.
In closing, I encourage members of the Committee to visit the museums
in their states to witness firsthand the positive impact they have on
their communities and the importance of charitable giving to their
public service missions. Thank you for taking time to hold a hearing on
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these critical issues and for the opportunity to submit this statement.
______
American Heart Association
National Center
7272 Greenville Avenue
Dallas, TX 75231
On behalf of the American Heart Association (AHA) and its more than 40
million volunteers and supporters, we thank you for the support shown
to the charitable sector during the COVID-19 pandemic. AHA is the
world's leading voluntary organization focused on heart and brain
health and research, and we are proud to have funded more than $4.6
billion in cardiovascular research since 1949. We appreciate the
opportunity to share our recommendations on the incentives that can
help support charitable giving and urge the Senate Committee on Finance
to include the bipartisan Legacy IRA Act (S. 243) in future retirement
legislation.
Rapid Response of American Heart Association to COVID-19
For the approximately 120 million people in the United States who have
one or more cardiovascular diseases, this is a particularly worrisome
time. Cardiovascular disease and hypertension are associated with more
severe coronavirus cases and an increased fatality rate of two or three
times higher than the general population. The situation is even more
dire for communities of color, where reports indicate that minorities
have been disproportionately affected by COVID-19 and have suffered
higher rates of death. There is also mounting evidence that COVID-19
may lead to heart failure, stroke, kidney failure, chronic lung
disease, blood pressure abnormalities, neurological conditions, and
other long-term health complications in people who have survived the
virus.
AHA recognizes the urgency of this issue and is part of the global
response. AHA responded quickly to the pandemic in March 2020 by
funding rapid response research awards to better understand COVID-19
and its interaction with heart and brain systems. This initiative
offered fast-tracked research grants for short-term projects to better
understand the diagnosis, prevention, treatment, and clinical
management. In December 2021, as COVID-19 variants continued to spread,
AHA announced a $10 million research initiative to fund new studies on
the long-term effects of the disease. These initiatives--and others
like them--would not be possible without charitable giving.
Need for Charitable Giving Will Continue Beyond Pandemic
AHA urges Congress to reinstate and expand the temporary universal
charitable giving deduction that expired at the end of 2021. This
charitable deduction to non-itemizers at $300 for individual and $600
for couples filing jointly along with the suspension of adjusted gross
income (AGI) limitations for cash gifts and increase in limitation for
corporate gifts were all valuable to incentivizing giving behaviors.
Every day, charities are holding communities together with essential
services amid the health and economic crisis, but they need support,
including charitable giving from generous donors. Findings from a
recent poll released by Independent Sector show 88% of Americans
support making the universal charitable deduction permanent for all
taxpayers.
American Heart Association leads a coalition of approximately 60
national charities which support the bipartisan Legacy IRA Act (S.
243), co-sponsored by Senators Debbie Stabenow (D-MI) and Kevin Cramer
(R-ND). The Legacy IRA Act will encourage more charitable giving by
enabling seniors to make contributions from their individual retirement
accounts (IRA) to charities through life-income plans. Seniors are a
key demographic as they typically make up more than 40 percent of the
donor base for charities. This is an expansion of the existing
Charitable IRA Rollover provision, which is the fastest growing area of
philanthropy. Data released this week from FreeWill's online giving
platform shows the value of the current Charitable IRA Rollover as
there was a 390 percent increase in total number of gifts from 2019 to
2021. And yet, in a survey of 300+ nonprofit professionals, 23 percent
said these gifts came from high net worth or upper middle-class
individuals.
The Legacy IRA Act would expand this giving incentive to more middle-
income seniors. A modified version of the Legacy IRA Act was passed as
part of the ``Securing a Strong Retirement Act'' (SECURE Act 2.0), and
we urge the Senate Finance Committee to include S. 243 in its version
of this retirement package.
AHA joins with many others in the nonprofit community in urging
Congress to reinstate and expand the temporary universal charitable
deduction and pass the Legacy IRA Act along with reinstating the
temporary suspension of AGI limitations and increasing the limits on
corporate giving. We stand ready to be of help should you have
additional questions about these requests. Please feel free to contact
Emily Holubowich, Vice President of Federal Advocacy, at
[email protected].
______
Leadership 18
701 North Fairfax Street
Alexandria, VA 22314
March 2022
The Honorable Ron Wyden The Honorable Mike Crapo
Chair Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
Washington, DC 20510 Washington, DC 20510
The Honorable Richard Neal The Honorable Kevin Brady
Chair Ranking Member
U.S. House of Representatives U.S. House of Representatives
Committee on Ways and Means Committee on Ways and Means
Washington, DC 20515 Washington, DC 20515
Dear Chairmen Wyden and Neal and Ranking Members Crapo and Brady:
Leadership 18 supports the bipartisan Legacy IRA Act (S. 243/H.R.
2909), a bill to encourage charitable giving by enabling seniors to
make tax-free contributions from their individual retirement accounts
(IRA) to charities through life-income plans.
To operate effectively and advance our tax-exempt purpose, we are
dependent on private philanthropy, including gift planning. A few years
ago, when the IRA Charitable Rollover provision was made permanent,
many of our organizations saw a dramatic increase in charitable giving
from traditional IRAs. Data from FreeWill's online QCD giving platform
shows the value of the current Charitable IRA Rollover as there was a
390% increase in total number of gifts from 2019 to 2021. And yet, in a
survey of 300+ nonprofit professionals, 23% said their QCDs came from
high net worth or upper middle-class individuals. The Legacy IRA Act
would expand this giving incentive to more middle-income seniors.
The undersigned CEOs support the Legacy IRA bill, which would allow
seniors to make tax-free IRA rollovers to charities through life-income
plans, such as charitable gift annuities. The senior's annual
retirement income from the life-income plan is fully taxed. We believe
this new giving option will be particularly attractive to middle income
seniors, a critical demographic as seniors make up more than 40 percent
of the donor base for most charities.
Leadership 18 is an alliance of CEOs responsible for leading some of
the country's largest and most well-respected charities, non-profits,
and faith-based organizations. As a group, member organizations have
served over 400 million people, with 42.7 million staff and volunteers,
and represent more than $80 billion in total revenue. We are a
community of leaders who share a profound commitment to ensuring that
all individuals have the opportunity to contribute to a vibrant
America, and with opportunity and effort, can live their lives to their
fullest potential.
Leadership 18 offers our support and is willing to work with you and
other Members of Congress to enact the Legacy IRA bill on its own or
attached to a larger legislative vehicle, such as the Securing a Strong
Retirement Act. America is stronger when everyone has the opportunity
to give, to get involved, and to strengthen their communities.
Sincerely,
Leadership 18
Signers:
Nancy A. Brown Sofia Chang
Chief Executive Officer Chief Executive Officer
American Heart Association Girl Scouts of the USA
Gail McGovern Stephanie J. Hull
President and CEO President and CEO
American Red Cross Girls Inc.
Artis Stevens Steven C. Preston
President and CEO President and CEO
Big Brothers Big Goodwill Industries
Sisters of America International, Inc.
Jim Clark Jonathan Reckford
President and CEO Chief Executive Officer
Boys and Girls Clubs Habitat for Humanity
of America International
Sister Donna Markham Eric D. Fingerhut
President and CEO President and CEO
Catholic Charities USA The Jewish Federations
of North America
Charlotte Haberaecker Mike King
President and CEO President and CEO
Lutheran Services in America Volunteers of America
Schroeder Stribling Suzanne McCormick
President and CEO President and CEO
Mental Health America YMCA of the USA
Ramsey Alwin Margaret Mitchell
President and CEO Chief Executive Officer
National Council on Aging YWCA USA
Commissioner Kenneth G. Hodder Jody Levison-Johnson
National Commander President and CEO
The Salvation Army Social Current
______
Help Seniors Increase Charitable Giving
Legacy IRA Act of 2021 (S. 243)
Background
First passed by Congress more than 15 years ago and made permanent in
2015, the Charitable IRA Rollover is a tax provision making it easier
for seniors to use traditional IRA assets to make charitable donations.
This provision allows individuals starting at age 70\1/2\ to make
direct donations to qualified 501(c)(3) charities up to $100,000
annually from their IRAs. The donations are not counted as income.
Since then, nonprofits have reported a surge in this type of charitable
giving. The IRA Charitable Rollover has generated millions of dollars
to local and national charities in the past few years alone.
The Legacy IRA Act: A Win-Win for Donors and Charities
The Legacy IRA Act builds upon the IRA Charitable Rollover by allowing
seniors to make tax-free IRA rollovers to charities through life-income
plans, such as charitable gift annuities. The senior's annual
retirement income from the life-income plan would be fully taxed. The
bill allows seniors starting at age 65 to make a life-income plan gift
up to $400,000 annually. Additionally, the bill raises the IRA
Charitable Rollover annual cap to $130,000 and indexes this figure for
inflation--an important step as the cap hasn't been increased since
2006.
The bipartisan Legacy IRA Act would give seniors more flexibility to
make charitable donations from their traditional IRA accounts. An IRA
rollover through a life-income plan would provide the senior with a
secure income for life. After the donor passes away, the charity
receives the remainder of the gift to be used towards their mission.
This new giving incentive is anticipated to be particularly attractive
to middle-income seniors. Growing charitable giving from seniors is
critical for nonprofits as seniors are more than 40 percent of the
donor base for most charities. Increasing charitable giving will allow
nonprofits to continue to provide critical services in local
communities such as health research and patient education, food
assistance, domestic violence services, childcare, youth homeless
shelters, and cultural and arts programming.
Bill Status
The bipartisan Legacy IRA Act was introduced by Senators Cramer (R-ND)
and Stabenow (D-MI). This coalition strongly urges Congress to pass the
legislation on its own or as part of a broader retirement package. It
is expected to raise $1 billion annually for charities.
In the House of Representatives, a modified version of the Legacy IRA
Act (H.R. 2909) was introduced by Representatives Beyer (D-VA-08) and
Kelly (R-PA-16). This proposal was included in the bipartisan Securing
a Strong Retirement Act of 2021 (H.R. 2954), led by Ways and Means
Committee Chairman Neal and Ranking Member Brady. The Securing a Strong
Retirement Act of 2021 was unanimously approved by the committee in May
2021. The Legacy IRA provision is estimated to cost $2.266 billion over
ten years by the Joint Committee on Taxation.
This coalition strongly supports the bipartisan Legacy IRA Act and
urges Congress to pass the legislation on its own or as part of a
broader retirement package.
The Undersigned Coalition of National Nonprofits Supports the Bipartisan
Legacy IRA Act
Arab Community Center Council on Foundations National Association
for Economic and of College and
Social Services University Business
(ACCESS) Officers
ALS Association Covenant House National Community
International Action Partnership
Alternate ROOTS DANCE/USA National Council of
Nonprofits
Alzheimer's Association The Evangelical National Health
and the Alzheimer's Lutheran Good Council
Impact Movement Samaritan Society
American Alliance of Girl Scouts of the USA National Multiple
Museums Sclerosis Society
American Cancer Society Girls Inc. The Nonprofit Alliance
Cancer Action Network
American Council for Goodwill USA OPERA America
Gift Annuities
American Heart Habitat for Humanity Performing Arts
Association International Alliance
American Lung Hemophilia Federation Providence St. Joseph
Association of America Health
American Red Cross Immune Deficiency The Salvation Army USA
Foundation
Americans for the Arts Independent Sector ServiceSource, Inc.
Asian Pacific Community JDRF Social Current
Fund
Association of Art Jewish Federations of Theatre Communications
Museum Directors North America Group
Association of League of American UNICEF USA
Fundraising Orchestras
Professionals
Big Brothers Big Lutheran Services in United Philanthropy
Sisters of America America Forum
Boys and Girls Clubs of March of Dimes Volunteers of America
America
Catholic Charities USA Mental Health America YMCA of the USA
Council for Advancement National Alliance on YWCA USA
and Support of Mental Illness
Education
Council for Christian National Association of
Colleges and Charitable Gift
Universities Planners
We urge Members of Congress to support the Legacy IRA Act. For more
information about the bill, please contact Emily Horowitz at American
Heart Association at [email protected].
______
Letter Submitted by Melanie Anthony
March 17, 2022
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200
I have worked in the Oklahoma nonprofit sector since 1997 addressing
food insecurity, the unhoused, mental health and economic development.
It is particularly important to keep the $300 deduction. I agree with
Dr. Steuerle's statement that the peak of giving in 2020 did not meet
the need of the charitable community.
Giving is critical because, at some point, it is important that those
who working in the nonprofit sector, specially social services, are
paid living wages. Those front-line workers are often paid at a low
wage. Those who chose to work in the nonprofit sector, helping those in
crisis, should not themselves find themselves struggling to meet their
family needs.
Unless charitable giving increases to not only meet the needs of those
in our various communities, especially those underserved and overlooked
communities, we will continue to see an exodus of nonprofit employees.
Historically, when nonprofit professionals would leave their nonprofit,
it was really about climbing the nonprofit job ladder. It would usually
include a title change, minimal increase in salary and maybe a better
work environment. The nonprofit sector has always been forced to work
with minimal budgets unlike our corporate counterparts--as if serving
others, having personal fulfillment and growth pay the rent, buy
groceries and school supplies. They do not.
The nonprofit sector, particularly social services, are seeing workers
get agitated, overwhelmed and burnout at rates not seen before.
Nonprofit employees are leaving the sector in masses.
Any opportunity to continue to offer incentives to give to charity to
increase charitable giving would allow nonprofits to not only meet the
needs of those in crisis in their communities, but also invest in those
doing the hard, forward-facing, often traumatic work.
Thank you,
Melanie Anthony
______
Association of Art Museum Directors
120 East 56th Street, Suite 520
New York, NY 10022
Statement of Christine Anagnos, Executive Director
The Association of Art Museum Directors (AAMD) is composed of the
directors of approximately 225 of the leading art museums in North
America, including more than 200 in the United States. We are grateful
for the opportunity to submit written testimony on charitable giving
and trends in the nonprofit sector.
All AAMD members in the U.S. operate on a not-for-profit basis. Nearly
all are organized under Section 501(c)(3) and qualify as public
charities, though many also have hybrid governance structures in
partnership with state and local governments as well as public and
private colleges and universities. They generally depend on charitable
giving for about a third of their operating budgets. Gifts both large
and small come from those who support museums' work, though as at most
charities, small gifts far outnumber large ones. Moreover, about 80
percent of museum collection objects arrived as charitable gifts.
For that reason, AAMD supports federal incentives for charitable gifts
of both cash and property and for donors of both large and small gifts.
Chief among these incentives are the itemized charitable deduction; the
deduction for non-itemizers, which was enacted as a temporary provision
in 2020 and expired at the end of 2021; and the IRA Charitable
Rollover, a relatively recent provision whose use is growing as more
taxpayers become aware of it.
As may be clear, these incentives can be utilized by specific groups of
taxpayers: itemizers, non-itemizers, and seniors. AAMD believes it only
fair that all taxpayers are incentivized to give, and for that reason
we support the retention of the itemized deduction, the reinstatement
and expansion of the non-itemizer deduction, as provided by S. 618,
introduced by Senator Lankford and cosponsored by Finance Committee
members Cortez Masto, Hassan, Scott, and Stabenow; and the expansion of
the IRA charitable rollover as provided by S. 243, introduced by Sen.
Stabenow and cosponsored by Finance Committee members Cornyn and
Daines. Both of the aforementioned bills are bipartisan and are
supported across the charitable sector. We share the concern of many in
the charitable sector that confining the availability of tax incentives
to a narrow slice of upper-income taxpayers could deeply harm the
vitality of civil society.
During the pandemic, art museums have profoundly changed how they
interact with the public, finding new audiences online, often among
people who were not visitors before. Whether filling time or looking
for online educational programming for their children, people found
what they were looking for in art museums. According to an extremely
large-scale study conducted in the first months of the pandemic
(culturetrack.com/covidstudy), 40 percent of art museums' online
audience had not physically visited in the previous year. As a visitor
cited in that study said:
``Right now, I am looking for things to do with my children that allow
us to be together and to enjoy something I don't have to organize
myself. I want them to learn and to experience the world.''
Similarly, during the social and political unrest of the past two
years, art museums have found themselves in new and expanded
conversations about their role in the community, as well as about how
and for whom they have used their collections. Practices built on
previously unquestioned assumptions are changing. An ever-
growing priority on audience and community needs has consequences for
museums' physical plants as well curatorial and educational practices.
To cite one example, the Portland (ME) Museum of Art changed its
expansion plans, which had been necessitated by a growing collection
and audiences: instead of simply adding gallery space, the new facility
will include space for local nonprofits, with the aim of lacing the
museum more fully into Portland's cultural and community life. To cite
another, an exhibition currently at the Cleveland Museum of Art
reexamines the art historical canon through new scholarship, focusing
on six key works of Black art in the museum's collection, as well as an
accompanying publication that delves into the materiality, making, and
relevance of the works. Together, they seek to transform how art
history is written, introduce visitors and readers to complex objects
and theoretical frameworks, illuminate meanings and untold histories,
and open new entry points into Black art.
Because of charitable giving, art museums are accessible. One-third of
AAMD member museums offer free admission to all, and two-thirds offer
free admission for children under 12. Those with admission fees nearly
always offer some form of free admission (for example, a weekly or
monthly free day) and discounts for seniors and students. Many museums
participate in Museums for All, an initiative that provides free or
reduced admission to people who present an Electronic Benefits Transfer
card. AAMD estimates the average cost of admission at AAMD museums to
be about five dollars or less. At the same time, the cost to museums
per visitor is about $54, based on 2019 figures. Charitable giving
subsidizes the difference.
While we do not have field-wide data on use of the non-itemizer
deduction and IRA Rollover, anecdotes abound. For example:
The Des Moines Art Center reports that its highest level of membership
growth was in the $250 to $550 range, which grew by 14 percent in 2021.
It also reports good use of the charitable rollover.
The Cleveland Museum of Art reports that IRA Rollover gifts increased
by 140 percent in 2021.
The Walters Art Museum in Baltimore, MD found that messages about the
tax deduction in 2020 and 2021 were effective in generating a number of
gifts of $300 and $600 from museum supporters. As for the IRA
Charitable Rollover, the museum saw a 498% increase in gifts from FY20
to FY21 and the number of participants increased by 127 percent. Gifts
ranged from as low as seven dollars up to $100,000, with an average
gift in 2020 of $981.
AAMD members share a commitment to serving the public, partnering with
their community institutions, including health, human service, and
education organizations, and applying the unique resources of the arts
to serving a wide variety of purposes. Museums are anchors in their
communities, often serving as the centerpiece of a neighborhood,
providing jobs, attracting tourists as well as residents, and in a less
literal sense, helping to form the community's identity--its sense of
self.
For all of these reasons, AAMD urges Congress to retain the itemized
charitable deduction; to reinstate and expand the universal charitable
deduction, preferably on a permanent basis; and to expand the IRA
charitable rollover.
______
Association of Fundraising Professionals
4200 Wilson Blvd., #480
Arlington, VA 22203
(703) 684-0410
afpglobal.org
Statement of Mike Geiger, MBA, CPA, President and CEO
Chairman Wyden, Ranking Member Crapo and Members of the Senate
Committee on Finance:
The Association of Fundraising Professionals (AFP) appreciate your
efforts to seek stakeholder and public feedback about charitable giving
and trends in the nonprofit sector. AFP is pleased to present the
following comments based not only on research--developed by ourselves
as well as in collaboration with partners in the sector--but also on
the comments and perspective of our more than 23,000 members in the
United States.
AFP represents both individual fundraisers and charities that raise
more than $100 billion annually. Our members work for a wide variety of
organizations, from multi-national institutions to small, grassroots
organizations, addressing every mission conceivable, from religion and
social services, to education, healthcare, and the arts. Every member
agrees to abide by AFP's Code of Ethics, the only enforceable
fundraising code in the world.
Our members are on the ground, communicating with donors everyday and
running capital campaigns, direct mail operations, major gifts meetings
and email and social media initiatives. They see first-hand the impact
of government policy on fundraising and charities and understand the
importance of tax policy that incentivizes giving and volunteering.
Giving Trends and Challenges
Overall
At first glance, one might look at charitable giving numbers overall
and think that the state of giving in the United States is very strong.
Giving USA 2021: The Annual Report on Philanthropy for the Year 2020,
published by Giving USA Foundation, reported that overall giving to
U.S. charities in 2020 reached an estimated $471.44 billion, the
highest level ever recorded. Giving was led by individuals, who
accounted for roughly 70% of overall giving. That giving grew to record
levels in 2020, despite the pandemic, is a testament to the generosity
of the American people.
In addition, AFP's own Fundraising Effectiveness Project (FEP),
administered by the AFP Foundation for Philanthropy in collaboration
with GivingTuesday, found that giving increased by over 10.6% and the
number of donors grew by 7.3% in 2020 compared to 2019. The FEP tracks
data from almost 3,000 charities, ranging in budget size from $100,000-
$10 million, tending to exclude larger organizations such as hospital
and universities and making the data more representative of the typical
charity experience in the U.S.
However, these numbers, impressive as they are, overshadow an important
trend that is slowly transforming our country's philanthropic
tradition: Participation in charitable giving is declining. The Giving
Environment: Understanding Pre-
Pandemic Trends in Charitable Giving, published by the Indiana
University Lilly Family School of Philanthropy at IUPUI in 2021, found
that just 49.6% of U.S. households made a charitable contribution in
2018. That figure is a decrease of almost 17 percentage points from
2000, when 66.2% of American households gave charitable donations.
Fewer Americans are giving to charity every year, but fortunately they
are giving significantly more. Essentially, it is wealthy Americans--
what fundraisers call major donors and now even mega-donors--who are
driving the increase in charitable giving every year.
The Fundraising Effectiveness Project's (FEP) preliminary 2021 data
underscores this challenge. Gifts from small donors (less than $500)
fell sharply and accounted for just 9.5% of all giving in 2021. The
main drivers of giving, and the growth in giving seen in 2021, were
again major donors.
This is not to say that the average American is not generous.
Crowdfunding campaigns--where charities, other kinds of organizations
and even individuals ask for very small donations from a very large
group of donors--continue to be successful, and Americans are generous
in these and other informal ways of giving and volunteering.
Nevertheless, this trend is a huge challenge for the charitable sector
and for all of American society. Our charitable sector is a crucial
partner with the governmental sector in meeting the needs of
communities that are disadvantaged and straining to provide services.
Our tradition of philanthropy is based on egalitarian principles where
everyone contributes to the greater good. Philanthropy should not
become the domain of only the wealthy. We need to encourage giving from
all segments of our society, not just the wealthy, and tax policy is
one means to do that.
2021
The Fundraising Effectiveness Project publishes quarterly data, and
final figures from the fourth quarter of 2021 are still coming in.
However, the FEP noted throughout 2021 that giving continued to grow--
significantly in the first quarter (roughly 10%) and then flattening
out in the second and third quarter. The FEP is estimating that giving
for 2021 will have grown slightly overall, roughly by 2.7% compared to
2020 numbers, once all data is accounted for from participating
charities.
However, it should be noted that giving, including the 2021 estimated
increase by the FEP, is not uniform across the sector. Larger charities
that are well-known tend to receive a majority of contributions. In
2015, giving to the top 400 largest charities, as noted in The
Chronicle of Philanthropy that year, exceeded $100 billion. In 2020,
roughly $1 out of every $11 donated went to the 100 largest charities
in the U.S., as detailed by The Chronicle of Philanthropy.
During the pandemic, this trend was even more pronounced, as larger
charities, especially those in pandemic relief, health care and social
services, saw their giving rates increase rapidly, while smaller
organizations, and especially arts and humanities groups, saw their
giving shrink. 2021 data from the FEP saw this trend slowly begin to
reverse as the world recovered from the pandemic, with smaller
charities finally beginning to see gains in their giving rates.
However, AFP member comments from our Fundraising Confidence Survey,
January 2022 reveal that many charities, especially smaller
organizations, have a long way to go in recovering from the pandemic.
Fundraisers have been unable to meet with donors in-person, which is so
important in developing relationships. Others report donor fatigue,
whereby donors are overwhelmed by so many growing needs that originated
from the pandemic and aren't as interested in giving for the moment.
In addition, just as the pandemic was winding down and fundraisers were
feeling more optimistic, charities and their donors are now faced with
skyrocketing gas prices, rising inflation costs, geopolitical conflict
and weak consumer confidence. These challenges are likely to impact
low- to mid-level donors the most, exactly the group of donors who are
participating less in philanthropy.
Policy Changes to Encourage Giving
This daunting set of challenges, coupled with the household decline in
charitable giving participation, could severely hinder the ability of
the sector to meet the needs of communities across America. But
Congress can help charities overcome these challenges and at the same
time encourage more Americans to participate in philanthropy. AFP
recommends that Congress support two important charitable tax giving
incentives. Each will incentivize different groups of donors to give to
their favorite causes and allow charities to continue to meet the needs
of our communities.
Universal Charitable Deduction
The universal charitable deduction allows donors to take a tax
deduction, up to a certain level, for their charitable gifts whether or
not they itemize their taxes. The deduction incentivizes all donors to
give but can be especially attractive for donors who make smaller level
gifts, as they are typically taxpayers who do not itemize their taxes.
The universal charitable deduction has been enacted into law by
Congress temporarily several times in the past only to expire and be
reinstated by later Congresses. The latest version was created in 2020
through both the CARES Act and the later Consolidated Appropriations
Act, creating together a deduction of $300 for an individual taxpayers
and $600 for married couples filing jointly. The deduction expired at
the end of 2021.
Research from the Fundraising Effectiveness Project has found that the
incentive in the universal charitable deduction was quite powerful for
gifts of $300, the limit of the deduction for individual taxpayers.
There was a 7.5% jump in $300 gifts in 2020 compared to 2019
(the latest year without the universal charitable deduction).
There was a 7.5% jump in $300 gifts in 2021 compared to 2019.
On December 31, the last day of the year when many charitable
contributions are given so donors can take advantage of tax incentives,
charities experienced a:
33% jump in $300 gifts in 2020 compared to 2019.
7% jump in $300 gifts in 2021 compared to 2019.
The data for gifts of $600, the limit for the deduction for couples
filing jointly, also demonstrates the power of the incentive, though
it's important to note that the couple's deduction was enacted in
December 2020. Nevertheless, the data shows the difference the
deduction had:
There was a 1.2% decrease in $600 gifts overall in 2020 compared
to 2019 (again, the couple's deduction was not available until December
2020).
Nevertheless, on December 31, 2020, there was still a 12%
increase in gifts of $600 compared to the same day in 2019.
Then in 2021, when the couple's $600 deduction was available throughout
the year:
There was a 5.0% increase in $600 gifts overall in 2021 compared
to 2019.
There was a 5.1% increase of $600 gifts on December 31, 2021,
compared to the same day in 2019.
While there are many factors that contribute to increased donations,
one contributing factor was clearly the availability of the charitable
deduction to nonitemizers. The universal charitable deduction works,
and this data only accounts for two specific levels of gifts, just to
show the deduction's impact.
Congress can help alleviate some of the difficulties the sector is
facing by approving another universal charitable deduction.
AFP encourages Senators to support and approve the Universal Giving
Pandemic Response and Recovery Act led by a bipartisan, bicameral group
of lawmakers, including Senators James Lankford (R-OK), Chris Coons (D-
DE), Mike Lee (R-UT), Jeanne Shaheen (D-NH), Tim Scott (R-SC), Amy
Klobuchar (D-MN), Susan Collins (R-ME) and Catherine Cortez Masto (D-
NV), as well as Reps. Chris Pappas (D-NH) and Jackie Walorski (R-IN).
The legislation would raise the previous $300/$600 cap to roughly
$4,000 for individuals/$8,000 for couples and make gifts to donor-
advised funds eligible for the universal charitable deduction.
We note that the deduction created through the Universal Giving
Pandemic Response and Recovery Act is only effective until the end of
2022. Given the impact of the deduction, we believe that it should be
extended through, at least, the end of 2023.
The universal charitable deduction will democratize giving by further
incentivizing all American taxpayers--regardless of their income--to
give to charity, thereby ensuring that our country retains a strong and
independent civil society. It will also provide needed resources for
charitable and faith-based organizations to continue providing vital
services to families, workers, and communities, especially those
critically impacted by the ongoing pandemic and now facing challenges
related to rising inflation and weak consumer confidence. We urge
Congress to pass and enact the universal charitable deduction swiftly.
IRA Legacy Act
In 2015, Congress passed the PATH Act, which included the IRA
Charitable Rollover provision that allows individuals age 70\1/2\ to
make direct tax-free gifts of up to $100,000 annually to charities from
their IRA.
The IRA charitable rollover provision is complementary legislation to
the universal charitable deduction in that it is also a strong
incentive for donors to give, but focuses on a different group of
donors than the universal charitable deduction.
Seniors typically make up more than 40% of the donor base for a
charity, and with the historically strong performance of the economy
and the stock market often have significant funds in their IRAs. While
some donors might balk at giving thousands of dollars in cash to a
charity, transferring funds from their IRAs, especially if their
retirement is taken care of, is eminently more attractive and doable.
The impact of the IRA Charitable Rollover is significant. Recent survey
data from FreeWill's online giving platform found a 390% increase in
total IRA Charitable Rollover gifts from 2019 to 2021. That increase is
even more impressive given that required minimum distributions from
IRAs were eliminated for 2020 as part of Congress' pandemic relief
measures.
Given the IRA charitable rollover's effectiveness and the need for
greater participation in philanthropy, AFP supports an expansion of the
rollover, and specifically the bipartisan Legacy IRA Act (S. 243),
sponsored by Senators Debbie Stabenow (D-MI) and Kevin Cramer (R-ND).
The legislation would allow taxpayers age 65 and over to direct up to
$400,000 annually in IRA distributions to charities, charitable gift
annuities and charitable remainder trusts. A modified version of the
Legacy IRA Act has been included as part of a bipartisan retirement
package, the Securing a Strong Retirement Act (H.R. 2954) that has been
approved by the House Ways and Means Committee. We urge the Senate
Finance Committee to include S. 243 in a future retirement package.
Conclusion
The charitable deduction--created more than 100 years ago--is a
powerful symbol of the American tradition and system of philanthropy.
It represents a gesture of confidence on the part of the people by way
of their elected representatives, an acknowledgement of the
effectiveness of nonprofit and community action and a commitment to the
longstanding tradition of philanthropy in America. The deduction binds
together the interests and concerns of all of us for the betterment of
our society.
The charitable deduction is the only deduction where the money a person
spends or contributes doesn't benefit themselves directly. The mortgage
deduction is for buying a house. Scholarship, education and health
deductions relate to money spent to help a person's family. But the
charitable deduction involves a selfless, generous motivation--giving
to a cause that might never directly benefit the donor.
The deduction's enhancement value is clear: a calculation of the
deduction shows that for every $1 of potential tax revenue invested
through the deduction, the public and communities across America
receive approximately $2.5 in philanthropic services. That rate of
return is extraordinary. We should be investing more in the deduction
and encouraging additional philanthropy though provisions such as:
The Universal Charitable Deduction through the Universal Giving
Pandemic Response and Recovery Act; and
An expansion of the Charitable IRA Rollover through the Legacy
IRA Act.
Thank you for your consideration and your work in keeping the American
tradition of philanthropy strong and vibrant for decades to come.
Respectfully,
Mike Geiger, MBA, CPA
President and CEO
[email protected]
______
Statement Submitted by Paula J. Beugen
Chairman Wyden, Ranking Member Crapo and Committee Members, thank you
for the opportunity to submit this statement. Your attentiveness and
action to support the nonprofit sector is vital to assuring a thriving
nonprofit sector throughout the United States. I applaud and am
grateful for the United States Committee on Finance's March 17, 2022
hearing entitled Examining Giving and Trends in the Nonprofit Sector.
Appreciation is due to you as well as to the renowned leaders who
testified in person at the hearing. Important and timely issues were
raised for your consideration and further leadership. Take related
action.
While I am greatly concerned about and active on a number of issues
pertaining to the future of the entire nonprofit sector in the United
States, volunteerism is the main focus of this brief statement to the
Committee on Finance (Committee). My nearly 47 years of experience in a
range of capacities in the volunteerism part of the sector prepares me
to bring a particular perspective to the Committee.
A healthy nonprofit sector--including the millions of volunteers who
are a key part of it--is essential to the well-being of our democracy.
People who volunteer build relationships across communities and
perspectives, gain greater understanding of issues confronting
communities and become more informed voters. They learn and give a lot.
They provide leadership and services that are not available through
other means. They bring hope and often survival to many which is
especially important during this daunting time in the life of our
country.
Given the role volunteers play in the lives of people, communities and
democracy a much greater focus on volunteerism by Congress is
essential. Volunteers selflessly give of their time, talent,
creativity, innovation and problem-solving abilities. Yet, minimal
investment is made in assuring that volunteers who serve without a
stipend have the resources and supports required to maximize the impact
of their efforts. This is a great loss to all involved. We must
implement strategies that help defray out-of-pocket volunteer-related
expenses and strengthen the ability of nonprofit organizations to
partner with volunteers in order to advance their mission-
accomplishment. Steps must be taken to strengthen the volunteer
community and to make the opportunity to volunteer more accessible and
equitable.
To illustrate, I reflect on the issue of the charitable driving mileage
rate. In an article I wrote, ``Towards a More Cohesive Volunteerism
Public Affairs Strategy: A Story, Steps and Lessons from Minnesota,''
published in e-volunteerism: The Electronic Journal of the Volunteer
Community, Vol. IX, Issue 4, July 15th-October 14, 2009, some history
around this issue was outlined. Noted in the article was that
discussion of this topic was taking place back in 1981. According to
the article, ``Efforts to advance this cause continued throughout the
1980s and 1990s.''
In 1984 the former Minnesota Association of Volunteer Directors
distributed an informal survey that was redistributed to 526
volunteers. Responses were anonymous. What was learned from this group
was at that time 20 percent of volunteers who responded to the survey
would find it difficult to volunteer without an ``adequate tax
deduction for charitable driving,'' according to the article. The
situation is exacerbated today. Many organizations and leaders
subsequently advocated and continue to advocate to raise the rate. I
have heard volunteers discussing that they no longer can afford to be a
volunteer driver. Raise the charitable driving rate to match the
allowable business rate and keep it in parity with the business rate
into the future.
The above issue is one of many volunteerism topics that need to be
addressed. Let's work to eliminate the recent shortage of and decline
in volunteerism. An independent, substantial sector of Americans who
volunteer in high quality efforts is so crucial to the well-being,
stability, hope and future of our nation. Invest in our precious
resource--volunteers.
______
BIPOC Executive Directors Coalition of Washington
c/o Byrd Barr Place
722 18th Ave.
Seattle, WA 98122
[email protected]
https://bipocedcoalitionwa.org/
Statement of Ananda Valenzuela, Co-Executive Director
Thank you for the opportunity to share our insights, as co-founders of
the BIPOC Executive Directors Coalition of Washington, a multicultural,
cross-sector collaborative of 200+ Black, Indigenous, and People of
Color (BIPOC) nonprofit leaders working in solidarity to promote
wellness and restore resources in our communities.
We would like to amplify the excellent testimony shared by Susannah
Morgan, CEO of Oregon Food Bank, and bring your attention to this quote
in particular: ``I would like to just drive home the fact that hunger
is a symptom. Its cause is poverty, and poverty itself has a cause,
which is systemic inequities. It's not an accident that our communities
of color are more likely to be hungry. It's not an accident that single
moms are more likely to be hungry. It's because we've designed systems
to prevent prosperity and allowed those to happen. And so I would say
that actions--like the ones that you have suggested that redistribute
wealth and tear down barriers to prosperity--are exactly what we need
our federal government to do.''
Our coalition strongly agrees with the Oregon Food Bank that Congress
must urgently take action on the following:
1. Reinstate the Child Tax Credit.
2. Modernize SNAP to reflect the true cost of healthy food.
3. Invest in housing and child care.
4. Raise revenue by requiring the wealthiest corporations,
individuals and estates to pay what they owe.
5. Increase the amount private foundations must grant annually.
6. Ensure donor-advised funds have minimum annual distributions of
at least 7% to 10% and spend-down timelines to ensure money is invested
in communities and not sitting idly for decades.
As a society, we have been working to address the impacts of inequities
without redesigning the structures and systems that create and
perpetuate them. For generations, we have needed to do more and spend
more to support the health and well-being of our communities without
the adequate resources to do so. Wealthy corporations, philanthropies,
and individuals benefit from the very systems that give rise to
inequities. This must change in order to advance racial justice.
We look forward to continuing to be in dialogue with Congress about how
best to address the systemic inequities barring us from meaningfully
addressing the core challenges facing the nonprofit sector and BIPOC
communities.
______
Business Coalition for Fair Competition
10340 Democracy Lane, Suite 300
Fairfax, VA 22030
(703) 383-1330
www.governmentcompetition.org
The Business Coalition for Fair Competition (BCFC) \1\ is a coalition
of private sector firms, large and small, trade associations, think
tanks, organizations, and individuals who support the competitive free
enterprise system and seek relief from unfair government sponsored
competition with private business.
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\1\ https://www.governmentcompetition.org/.
BCFC is deeply concerned that some non-profit organizations operate
activities in direct and unfair competition with for-profit, tax-paying
private businesses. At a time when small business is struggling and job
creation is not being maximized in the private sector, small business
cannot afford to compete against non-profits that don't pay their fair
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share of taxes.
Private enterprise constitutes the strength of the United States
economic system and competitive private enterprises remain the most
productive, efficient, and effective sources of goods and services.
There are thousands of legitimate non-profits that do exemplary work
filling a societal need. The tax treatment of these organizations is
not an issue for BCFC. However, when the organizations encroach on
private business activities, there are a number of undesirable
consequences.
Entities organized under various provisions in section 501(c) of the
Internal Revenue Code are provided special tax ``exempt'' treatment
were clearly intended to perform activities and provide services
otherwise considered ``governmental'' in nature, not those that are
commercially available. A 1954 report by this Committee noted:
The exemption from taxation of money or property devoted to
charitable and other purposes is based upon the theory that
government is compensated for the loss of revenue by its relief
from financial burden which would otherwise have to be met by
appropriations from public funds and by the benefits resulting
from promotion of the general welfare.
Source: (Unfair Competition: The Profits of Non-profits, James
T. Bennett, Thomas H. DiLorenzo, Hamilton Press, 1989, p. 26)
The problem is, this policy has not been adequately codified by
Congress or efficiently implemented by the IRS. The situation has
become so pervasive that unfair government-sponsored competition has
been a top issue at every White House Conference on Small Business.
In 1980, the first White House Conference on Small Business made unfair
competition one of its highest-ranked issues. It said, ``The Federal
Government shall be required by statute to contract out to small
business those supplies and services that the private sector can
provide. The government should not compete with the private sector by
accomplishing these efforts with its own or non-profit personnel and
facilities.''
In 1986, the second White House Conference made this one of its top
three issues. It said, ``Government at all levels has failed to protect
small business from damaging levels of unfair competition. At the
federal, state and local levels, therefore, laws, regulations and
policies should . . . prohibit direct, government created competition
in which government organizations perform commercial services. . . .
New laws at all levels, particularly at the federal level, should
require strict government reliance on the private sector for
performance of commercial-type functions. When cost comparisons are
necessary to accomplish conversion to private sector performance, laws
must include provisions for fair and equal cost comparisons. Funds
controlled by a government entity must not be used to establish or
conduct a commercial activity on U.S. property.''
And the 1995 White House Conference again made this a priority issue
when its plank read, ``Congress should enact legislation that would
prohibit government agencies and tax-exempt and anti-trust exempt
organizations from engaging in commercial activities in direct
competition with small businesses.'' That was among the top 15 vote
getters at the 1995 Conference and was number one among all the
procurement-related issues in the final balloting.
Non-profit organizations unfairly compete with private, for-profit
businesses by engaging in commercial activities, but not paying taxes.
Billions of dollars in economic activity occurs each year that is
untaxed. This results in lost revenue to Federal, as well as state and
local government agencies. And it creates an unlevel playing field for
the private sector, particularly small business. When this occurs in
universities, it unnecessarily drives up the cost of room, board,
tuition and fees.
The 2013 IRS Colleges and Universities Compliance Project studied the
unrelated business income tax (UBIT) for which tax-exempt entities,
such as most universities, are required to pay on any activities and
revenue unrelated to their tax-exempt status. The April 25, 2013 IRS
report \2\ ``found increases to unrelated business taxable income for
90 percent of the colleges and universities examined, totaling about
$90 million. There were over 180 changes to the amounts of unrelated
business taxable income reported by colleges and universities on Form
990-T; and disallowance of more than $170 million in losses and net
operating losses that could amount to more than $60 million in assessed
taxes.''
---------------------------------------------------------------------------
\2\ https://www.irs.gov/pub/irs-tege/CUCP_FinalRpt_042513.pdf.
Non-profit organizations are provided special tax status under section
501(c) of the Internal Revenue Code. These groups are required to pay
an ``unrelated business income tax'' or UBIT on its commercial or
---------------------------------------------------------------------------
``non-exempt'' activities. The IRS report showed this is not occurring.
The Federal Government first exempted charitable organizations from tax
in 1913. In 1950, in response to outrageous examples of unfair
competition, Congress changed the tax law by creating the UBIT. Under
UBIT, revenues from sources unrelated to the non-profit's tax-exempt
purpose are subject to taxation.
Attempts by government to address the problem of unfair competition
have been few and far between, and those few measures that have been
taken have been largely ineffective. The UBIT which was intended to
level the playing field by taxing the revenues of non-profits has, for
example, proven difficult if not impossible to enforce. The courts have
not been able to give a rigorous and consistent definition of just what
constitutes an ``unrelated'' business activity by a non-profit. And
because the UBIT tax was to apply only to ``commercial activity which
is not significantly related to the purposes for which the non-profit
organization was established,'' enforcement and collection by the IRS
has been less than successful. For their part, non-profits have taken
an extremely expansive view of what constitutes a related purpose,
making the under-reporting or non-reporting of revenues commonplace.
Unfair non-profit competition impedes the development of small business
by making it hard for them to enter markets and compete. This is
significant because two-thirds of all new jobs are created by
businesses with fewer than 20 employees. Because commercial enterprises
run by non-profits are exempted from taxes and receive other subsidies,
taxpaying businesses must bear an extra burden by paying higher taxes
than they would otherwise to make up for exemptions enjoyed by their
``non-profit'' competitors. Unfair competition ends up crowding out of
the market precisely those firms which are the principal source of new
jobs--ultimately reducing the rate of economic growth.
Unfair non-profit competition takes many forms. It is YMCAs competing
with private health clubs; credit unions competing with community
banks; rural electric and telephone cooperatives competing with
investor-owned utilities; and universities venturing out of the
classroom and into hotels, mapping services, and testing laboratories.
A few examples follow:
Credit unions' tax-exemption currently costs the U.S. Treasury
$2 billion annually. By contrast, the more than 6,000 community banks
that are the lifeblood of towns across the country contribute $4
billion annually in taxes that support our nation and those
communities;
A bicycle rental business in Anchorage, Alaska faced competition
from a non-profit entity approved by state gaming regulators--a free
bike loan program for downtown Anchorage, known as the Earth Bike
Program. The program lasted 2 years and forced other bike rental
businesses out of business, and in one case, leave the state;
A privately owned inn in Fredericksburg, Virginia hosts
functions such as banquets and weddings. The University of Mary
Washington's Alumni Center not only competes for similar events and
opportunities, but it also is building a hotel less than a mile away
that will further compete with the hotels, motels and other lodging
destinations that are not tax-exempt. The only reason provided by lost
clients for choosing the university was the lower price thanks to the
tax differential. University hotels and conference centers are
proliferating across the country; and
A laundry and cleaner in San Antonio, Texas faces competition
for its laundry services from a non-profit, Federal tax-exempt Bexar
County (government) cooperative entity. The unfair business practice
involves, in addition to competing with and eliminating the opportunity
for private business services, the co-op going outside its members to
provide laundry services to for-profit businesses and hospitals
throughout South Texas. It is damaging to a long-time minority owned
and operated for-profit business to have to compete in this arena with
its taxing entity, Bexar County.
Unfair university competition takes many forms. It is universities
venturing out of the classroom and into activities unrelated to their
core and exempt education mission, such as hotels, mapping services,
bicycle repair, golf courses, gym and fitness centers, cultural
resource assessments, testing laboratories and others. A few examples
were highlighted in BCFC's 2013 \3\ and 2014 \4\ lists of the most
egregious examples of unfair government competition as collected by
media reports, include:
---------------------------------------------------------------------------
\3\ http://archive.constantcontact.com/fs181/1102588223535/archive/
1116149070767.html.
\4\ http://campaign.r20.constantcontact.com/render?ca=2815dd0f-
8806-4b37-8be2-c63f7bc3d6e0
&c=8d26d950-49b1-11e4-96ee-d4ae5292c3f3&ch=8d2d9010-49b1-11e4-96ee-
d4ae5292c3f3.
The University of Mary Washington's Alumni Center \5\ in
Fredericksburg, VA not only competed for similar events and
opportunities as provided by a neighboring small business in the
wedding, banquet, lodging and catering business, but it also was
building a hotel less than a mile away that would further compete with
the hotels, motels and other lodging destinations that are not tax-
exempt. The only reason provided by lost clients for choosing the
university was the lower price thanks to the tax differential.
University hotels and conference centers are proliferating across the
country;
---------------------------------------------------------------------------
\5\ http://jepsonalumniexecutivecenter.umw.edu/events/weddings/.
---------------------------------------------------------------------------
George Mason University in Fairfax, Virginia announced in
December 2013 it would close its hotel, the Mason Inn, after losing $11
million;\6\
---------------------------------------------------------------------------
\6\ http://www.fairfaxtimes.com/article/20131206/NEWS/131209262/
1064/mason-inn-to-close-in-june-reopen-as-residential-
space&template=fairfaxTimes.
---------------------------------------------------------------------------
Towson University, a Maryland state University in the Baltimore
suburbs, purchased air time on Washington, DC radio stations
advertising a nursery school program \7\ for children 2, 3, and 4 years
of age and a summer camp programs for pre-teens;
---------------------------------------------------------------------------
\7\ http://www.towson.edu/daycare/.
---------------------------------------------------------------------------
``Bluffing'' to win its first contract, St. Mary's University
(MN) performed \8\ commercially available mapping services for the
National Park Service and other clients;
---------------------------------------------------------------------------
\8\ https://www.winonadailynews.com/news/local/article--c6c019aa-
74e2-11e3-a03f-0019bb29
63f4.html.
---------------------------------------------------------------------------
The University of Houston operates the National Center for
Airborne Laser Mapping (NCALM),\9\ mapping services utilizing aircraft
equipped with Light Detection And Ranging (LIDAR), a technology
commercialized by NASA in the 1990s. Towson also runs a mapping program
\10\ that has purchased television ads touting a software system that
is otherwise commercially available;
---------------------------------------------------------------------------
\9\ https://ncalm.cive.uh.edu/.
\10\ http://www.towson.edu/innovation/cgis/.
---------------------------------------------------------------------------
Believing that bicycle repair is inherent to the success of
higher education, Virginia Tech University opened its own shop and
hired a mechanic to pedal \11\ services to students in Blacksburg, VA
in competition with local small business;
---------------------------------------------------------------------------
\11\ http://r20.rs6.net/
tn.jsp?f=001n7O63zKQU6FBce6Ro9HNrwzqeIJiZCIEgKUh9cgTmdCWjC
4MJQm3GgNCmoxlyhvlzXKS1r8fRHfs2Sk8_vklJncTqQXA4Igs1FixMkWNllVd5UyxKOTfwL
Ian
RC05lVLl1DLdtK72h9UEWYTIlV1Gzp74CjP3OpHpOtIaV6GRkQ-x9v7LaBNuK7Tyiis_eI-
GgI-8r
Le4fWZBFbpT-lRWj0et3m9C-
vXBWaIAoDUqfOHJNSZfQ2i0S0fxcVhoSfO10MiGPD80YpezaRX
bJ6x0d1AqUD1PGpPpI8vqGW1P_baqAltcBxXP2VDIHWkO49k&c=&ch=.
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James Madison University in Harrisonburg, VA operates \12\ a
variety of charter bus and transit options to not only university
students, but also to the general public including local school systems
thereby in direct competition and duplication of the local market as
would be provided by the small business operators; and
---------------------------------------------------------------------------
\12\ https://www.jmu.edu/transportation/regional-transportation/
charter-buses.shtml.
---------------------------------------------------------------------------
Elon University in North Carolina started Live Oak
Communications,\13\ a communications agency that provides public
relations, advertising, special event marketing, viral marketing, media
relations, website development, video creation and graphic design
services for businesses and not-for-profit organizations in the North
Carolina region.
---------------------------------------------------------------------------
\13\ https://www.elon.edu/u/academics/communications/.
The previously referenced 2013 IRS report listed the following
activities as within its scope of UBIT research: Fitness, recreation
centers and sports camps; advertising; facility rentals; arenas; and
---------------------------------------------------------------------------
golf.
Another form of university competition is in the schools' bookstore.
These on-
campus, university-owned retail operations go far beyond selling
essential textbooks to students, but compete with local, for-profit,
tax-paying business in offering office supplies, clothes and apparel,
computer equipment and goods under the blanket of the institution's tax
exempt status. Finally, universities historically competed with travel
and tour companies by offering foreign trips that looked more like
vacations rather than instructional endeavors.
Schools of higher education are increasingly venturing away from their
core missions of teaching and conducting basic research. Financial
pressures, ranging from reduced government funding to pressures to
limit tuition increases have led university presidents to transform
academicians into entrepreneurs. Universities are generating revenues
from commercial activities to supplement their budgets.
University engagement in commercial activities could be called the
``Gatorade Syndrome.'' Ever since professors at the University of
Florida invented the popular sports drink to hydrate football players
practicing in the heat, academicians have been trying to find the next
big discovery. Most simply consume tax dollars, divert scarce resources
including tuition, and fail to turn profits. These university-
sponsored enterprises have cost their schools millions, exacerbating an
unaffordable tuition system that has made a college education a
financial burden, if not impossibility, for most students and their
parents.
Universities enjoy significant advantages over for-profit companies.
They are eligible for billions of dollars in grants from Federal and
State governments. They often have the ability to secure non-
competitive, sole source contracts with government agencies. They pay
no taxes. Their overhead--buildings, electricity, even equipment, is
already paid for and is provided for ``free.'' Their student labor
force is either unpaid or compensated at well below prevailing market
wages. They carry no professional liability insurance, do not have to
pay unemployment compensation and in many cases are exempt from social
security contributions. When universities enter into contracts to
perform services, they usually insist on ``best effort'' clauses, which
absolve them of ever completely finishing a project. They are also
recipients of millions of dollars in free or discounted hardware and
software, donated from vendor firms so that students will learn on
their systems, be proficient in their use upon graduation and instill a
consumer loyalty that will translate into sales once these students
move up in the ranks of their private sector employers. The advantages
universities bring to the market make it virtually impossible for
private firms to compete.
Private sector and for-profit colleges and universities face unfair
competition from government institutions. In recent years, such private
schools have been singled out for attack from a bevy of regulations
proposed by the federal government that create an unfair and unlevel
playing field. The latest effort comes in the form of a retooled
``gainful employment'' regulation by the Department of Education that
is impacting private sector schools and largely leaving traditional
public and non-profit schools untouched. The ``gainful employment''
regulation prevents students--often low-
income, minorities, and veterans--from having access to thousands of
programs at private sector higher education institutions.
In addition, federal actions, including the ``90/10 rule,'' regulations
dealing with state authorization, and the definition of a credit hour
all threaten to punish private sector schools to the advantage of
traditional public institutions.
For too many years, the unfair government-sponsored competition issue
has not been a top priority for Congress or Administrations of either
party. The Small Business Administration's Office conducted a series of
hearings and issued a report, ``Government Competition: A Threat to
Small Business'' (March 1980), and ``Unfair Competition by Non-profit
Organizations With Small Business: An Issue for the 1980s'' (June,
1984). The last serious look at non-profits and the UBIT by the Ways
and Means Committee was by Congressman J.J. Pickle (D-TX) in 1987-1988.
In February 2013, BCFC testified \14\ before this Committee including
``unfair university competition'' and UBIT within the hearing \15\
entitled, ``Tax Reform and Charitable Contributions.''
---------------------------------------------------------------------------
\14\ http://www.governmentcompetition.org/uploads/
BCFC_Testimony_Palatiello_House_Ways_
and_Means_Cmte_2-14-2013.pdf.
\15\ http://waysandmeans.house.gov/event/update-new-time-camp-
announces-hearing-on-tax-reform-and-charitable-contributions/.
From April 18 through April 25, 1993, The Philadelphia Inquirer
presented an exhaustive investigative exposition of the multibillion-
dollar world of America's so-called non-profit industries, exposing, in
several different contexts, the abuses of their unique tax-exempt
status. Certainly, this sweeping indictment by The Philadelphia
Inquirer encompasses the world of non-profit sometimes run amok.
However, as you, Mr. Chairman, contemplate future oversight hearings
and legislation to reform this multibillion-dollar, non-tax-paying
competition for many of America's struggling small businesses, you will
find valuable factual, albeit dated, information in the Inquirer
---------------------------------------------------------------------------
series.
Source: (Non-profits: America's Growth Industry They're Called Non-
profit Businesses, But That Doesn't Mean They Can't Make Money. They
Do--Billions Of Dollars. At The Same Time, Their Tax-exemptions Cost
Government More Than $36 Billion A Year,'' by Gilbert M. Gaul and Neill
A. Borowski, The Philadelphia Inquirer April 18, 1993)
In February 1987, a GAO report found:
The U.S. Department of Commerce estimates that $1.2 billion, or
1.3 percent, of the $91 billion gross national product (GNP) in 1930
could be attributed to non-profit institutions. This share grew to $131
billion, or 3.3 percent, of the $3,989 billion GNP by 1985;
A 1975 IRS Statistics of Income (SOI) study found that for tax-
exempt organizations (religious, schools and colleges, cultural and
historical, other instructional, health-related services, scientific
research, business and professional, farming and related, mutual
organizations, employee or membership benefit, sports-
athletic-recreational and social, youth, conservation and
environmental, housing, inner city or community, civil rights,
litigation and legal aid, legislative and political advocacy, other
activities directed to individuals, other activities directed to
organizations, other purposes and activities, no activity reported) on
average, 39% of their total activity receipts were business receipts;
and
Complete data do not exist to quantify the nature, extent, and
impact of competition between non-profits and the private sector.
However, the limited data available indicate that taxable businesses
and some tax-exempt organizations are increasingly competing to provide
similar services.
Source: (GAO Briefing Report to the Joint Committee on
Taxation; ``Tax Policy: Competition Between Taxable Businesses
and Tax-Exempt Organizations'', February 27, 1987--GGD-87-40BR)
In March 1980, a report of the Small Business Administration (SBA)
Advocacy Task Force Group on Government Competition with Small Business
found:
The activities of foundations and universities were of
particular concern to a number of witnesses;
In Fiscal Year 1978, the IRS audited approximately 17,000 of the
150,000 required filings by non-profits. Unrelated business income was
discovered in 1,800 or 10.6 percent of these 17,000 audited cases. Of
the 1,800 audits where unrelated business income was discovered, 46
percent (828 cases) resulted in successful action by IRS to levy
additional taxes, and a combined total of $10 million was recovered. On
average, the IRS recovered additional taxes at the rate of $12,078 per
audited case where unrelated business income was discovered and
recovery action succeeded; and
The small business community's perception of the extent of abuse
of the tax system by non-profits strongly suggests that a more
extensive review of unrelated business income activities is
warranted.Source: (``Government Competition: A Threat to Small
Business'' Report of the SBA Advocacy Task Force Group on Government
Competition with Small Business, March 1980)
This is a problem that is growing, not diminishing. From 1975 to 1990,
the non-profit sector grew by 150 percent, while the gross domestic
product grew about 50 percent.
University competition is part of a larger problem of unfair government
sponsored and tax-subsidized competition with private enterprise
including government (including the insourcing of contracts performed
by tax-paying private sector firms out of the private sector for
performance by Federal employees), non-profits, prison industries, etc.
The Federal government and universities can lower costs and increase
revenue by applying the `` `Yellow Pages' Test,'' a simple test that
says if an activity is available from a private sector company found in
the Yellow Pages, that activity should not be a responsibility of a
college and university and, instead, should actually be performed by a
tax-paying private sector firm.
In December 2012, BCFC attempted to bridge the impasse in negotiations
on the fiscal cliff and sequestration by providing President Obama and
Congressional leaders budget savings of $795 billion \16\ by simply
utilizing tax-paying private sector firms for commercially available
goods and services currently performed by a government or tax-
subsidized entity. The federal government can achieve $795 billion in
savings simply by getting out of activities that duplicate or compete
with the private sector, which subsidize unfair competition with
private, for-profit companies, or by privatizing activities for which
there are current or potential private sector providers. This includes:
---------------------------------------------------------------------------
\16\ http://archive.constantcontact.com/fs181/1102588223535/
archive/1111796462564.html.
Enforce UBIT on commercial activities revenue of non-profits--
---------------------------------------------------------------------------
$36 Billion.
Institutions of higher education should not be able to use their tax-
exempt status to avoid paying income taxes on what are essentially
commercial activities. These tax-subsidized entities should not be
making the same kind of profits on activities that are virtually
identical to those of a for-profit, tax-paying business.
The IRS should more vigorously enforce current rules governing the tax
status of universities to assure that academic activities are indeed
related to research and education, not commercial production. Here are
five very specific recommendations.
1. The Department of the Treasury should be required to provide an
annual public estimate of revenues lost through avoidance of UBIT.
2. The Treasury Department should provide an official public
estimate of potential new revenues to the Treasury if the UBIT law were
expanded to require all commercial operations of universities to pay
their fair share of taxes.
3. The law should be modified or new legislation introduced that
lets the Treasury Department collect taxes that insures that all
commercial activities of universities are taxable. The IRS has only one
option today--that is to revoke an organization's charter to do
business. They simply can't administer the law the way it is.
4. Congress should amend the Higher Education Act to focus
universities on their core missions--education and basic research.
Legislation should be passed to apply a ``commerciality'' test to all
non-core university activities. Any university that receives direct
federal funding, or indirect funding through tax-exempt or ``non-
profit'' status, should be prohibited for using such institutions for
the performance of commercial, tax generating activities otherwise
available in the private sector.
5. Universities entering a commercial undertaking should be
required to form a for-profit subsidiary that must obey all the same
laws and regulations that apply to for-profit enterprises. It is only
when we move beyond hidden subsidies and the ineffectual regulations of
UBIT that both consumers and producers, and all taxpayers, will be able
to enjoy the benefits of even-handed competition. In forming a
commercial subsidiary, this would help implement a ``commerciality
clause,'' and thus implement the `` `Yellow Pages' Test.''
Unfair non-profit competition with the private sector, and small
business, is a public policy issue deserving of immediate attention and
reform. This hearing will provide an important forum for the private
sector to discuss the broader aspects of this issue. As Congress seeks
ways to grow the economy and create private sector jobs, as well as
prepare comprehensive tax reform that lowers the corporate tax rate to
make American business more competitive in the global market and
simplify the tax code, BCFC respectfully recommends reform of the
treatment of nonprofit organizations and UBIT so that unfairness is
eliminated, appropriate revenue is raised, and counter-productive tax
policy that disadvantages private, for profit companies, particularly
small business, is implemented.
We commend your efforts to further explore private sector complaints in
this area and advance the debate. The private sector seeks a
competitive environment in which all participants play by the same
rules including reforms to the tax code that enable, instead of hinder,
the private sector.
______
California Association of Nonprofits
870 Market Street, Suite 985
San Francisco, CA 94102
(800) 776-4226
https://calnonprofits.org/
March 31, 2022
The Honorable Ron Wyden
The Honorable Mike Crapo
U.S. Senate
Committee on Finance
Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Wyden, Ranking Member Crapo, and members of Senate
Committee on Finance:
On behalf of the California Association of Nonprofits (CalNonprofits),
a policy alliance of more than 10,000 members, I write to express
appreciation for your leadership in holding a hearing on charitable
giving, a topic with vital importance to the sustainability of the
nonprofit sector, and for considering reforms that will help ensure
that much-needed resources get to charities more quickly.
Through our advocacy, CalNonprofits protects and enhances the ability
of nonprofits to serve our communities. We advocate for sufficient
public investment in our communities, and because private philanthropy
is also an important funding source for nonprofits, we support efforts
to bring greater accountability to charitable donation utilization and
greater transparency to philanthropy overall.
The events of the past two years reinforce the important role that
nonprofit organizations play in providing services, from serving food
to the hungry to providing clothing and shelter for Americans in need.
In California, there are more than 92,000 active nonprofits. We are key
economic drivers, generating 15% of the Gross State Product; service
providers, providing 32% of Medi-Cal services; and employers, employing
more than 1.2 million Californians.
Nationwide, many nonprofits are struggling to meet increased community
needs and cover higher programmatic costs--without a corresponding
increase in resources. The nonprofit workforce remains deeply affected
by the pandemic. Nonprofits need resources now more than ever.
Current charitable giving laws impede the flow of resources to
nonprofits, and steps must be taken to increase that flow, especially
at a time when our services are most needed. For example, current law
allows donors to receive an upfront tax benefit for their charitable
contributions, yet when funds are donated to vehicles such as donor-
advised funds (DAFs), they can accumulate indefinitely without being
distributed to charities.
In other words, state and federal coffers experience significant losses
as a result of these tax benefits, without the guarantee of comparable
benefits to society of donated funds going to support charitable goals.
Nationwide, more than $1.2 trillion sits in private foundations and
$159 billion sits in DAFs. In fiscal year 2020 alone, contributions to
DAFs totaled $47.85 billion, according to a 2021 National Philanthropic
Trust report.\1\
---------------------------------------------------------------------------
\1\ https://www.nptrust.org/reports/daf-report/.
We believe reform is needed to ensure that tax deductible donations get
to charities in a timely way, so charities can use the funds to serve
our communities. Society should benefit in a timely way that
corresponds closely to the time when the tax deductions are enjoyed by
---------------------------------------------------------------------------
donors.
We ask that the Committee support reforms to charitable giving laws so
that policies are in place to free up resources currently held in
philanthropic institutions, to get more funds to nonprofits, to align
public benefit and public costs, and to help ensure necessary services
for our communities.
We would welcome the opportunity to work with members of the Senate
Committee on Finance and other policymakers as these conversations move
forward. Thank you, again, for your leadership.
Sincerely,
Jan Masaoka, CEO
______
Center for Fiscal Equity
14448 Parkvale Road, Suite 6
Rockville, MD 20853
[email protected]
Statement of Michael Bindner
Chairman Wyden and Ranking Member Crapo, thank you for the opportunity
to address this issue. I will leave trend analysis to the witnesses. My
concern is improving the taxation of this sector. Our current tax
reform plan is attached for context. These comments repeat those
offered in December to the Ways and Means Oversight Subcommittee on the
Pandora Papers and those drafted for a hearing before the Oversight
Committee on houses of worship, charities and nonprofits in June 2019
that never took place.
There are two questions for the taxation of charitable contributions.
The first is where the money comes from. The second is how the outgo
should be taxed.
Under our proposed asset value-added tax, assets would be marked to
market at initial public offering, option exercise and the first sale
after inheritance, gift and donation. When assets are donated to
charities and nonprofits, no tax will be paid. When these institutions
sell these assets, taxes will be collected in full. Whether endowment
income is taxed is an open question, although usually the asset value-
added tax would be levied.
Sales to employee-owned or cooperative firms will be zero rated, just
as they are when a single owner sells out to an ESOP when transitioning
out. We propose expanding this privilege to all asset sales. Note that
as long as a business or family farm is kept in the family or sold to a
cooperative, no tax is levied.
Large religious organizations, charities and nonprofits have become big
business and need to be taxed accordingly, where appropriate. Some are
legally held as the property of the minister or bishop. Taxing such
entities as sole proprietors makes legal sense. While this could be
seen as targeting certain religious organizations, such as the Catholic
and Episcopalians, their choice of organizational form is not the fault
of the public. As such, their tax treatment must match similar business
classes.
Charities that have commercial operations will be subject to an Invoice
VAT (I-VAT), as they essentially are under the TCJA provisions in
question, like any other commercial company, particularly if these
operations compete with type C, type S, partnership or sole proprietor
firms that pay individual taxes at pass-through rates.
The I-VAT will be collected on commercial goods. This is essential
after reform to provide visibility to their customers as to taxes
imposed by the entire supply chain and a commercial vendor or
independent agent must pay an I-VAT. Without such treatment, every
business into some form of charitable organization overnight, this
would not be advisable. Fiscal conservatism should not be synonymous
with empowering tax evasion schemes.
Whether non-commercial operations are subject to an I-VAT depends on
the extent they are used to fund entitlement spending and payroll taxes
versus discretionary government spending. For example, if Social
Security or Medicare were to become I-VAT funded, thus becoming zero
rated at the border and replacing the payroll tax, then charitable
organizations must continue to fund these operations, as they will
benefit the employees of these organizations. If, however, entitlement
services are funded through our proposed Subtraction VAT S-VAT, then
there is an argument to leave the non-commercial activities of these
entities VAT-exempt.
Political organizations and committees also would pay S-VAT on their
payroll and their purchases would not be I-VAT exempt in the long term.
Committees that give little to candidates should not be tax-exempt, as
they are essentially corporations whose high salaries are essentially
partnership income in disguise, without the corresponding risk. As
such, they should be taxed at pass-through rates. If an S-VAT is
enacted, ads through deductions for all individuals would be
eliminated.
Charitable organization employees will continue to pay the employee
contribution to Old-Age and Survivors Insurance, assuming it is not
subsumed into our proposed Subtraction VAT (S-VAT).
Charitable organizations will pay the S-VAT because their employees
will benefit from the programs funded by this levy or from offsets to
it. For example, Catholic Charities employees might designate the
Catholic school system as an alternative provider to public schools,
which would allow Catholic Charities agencies to take a credit on this
levy, which would otherwise be paid against their total value added.
Likewise, employees would be paid the same child tax credit as
commercial employees--again as an offset to S-VAT levies. Health and
higher education credits proposed for other enterprises would also be
available to charitable organizations, as well as any other applicable
credits. Note that because certain payroll and personal income taxes
will be eliminated, the gross pay of charitable employees will decline
in like manner to those of their commercial counterparts once tax
reform is enacted.
Finally, this schema is as applicable to governmental organizations as
it is to charitable organizations, with modifications. State
governments would be the federal S-VAT, while federal organizations
would pay the state S-VAT, both on the same basis relating to value
added through payroll. These organizations would not pay the S-VAT to
themselves, however their personnel systems should contain a similar
range of benefits.
This schema provides a better explanation of how a Fair Tax might work
on these levels, while also providing a rationale for adjusting
government employee salaries and providing for non-governmental
performance of services through the same type of alternative S-VAT
programs.
Thank you, again, for the opportunity to add our comments to the
debate. Please contact us if we can be of any assistance or contribute
direct testimony.
Attachment One--Tax Reform, Center for Fiscal Equity, December 7, 2021
Individual payroll taxes. Employee payroll tax of 7.2% for Old-Age and
Survivors Insurance. Funds now collected as a matching premium to a
consumption tax based contribution credited at an equal dollar rate for
all workers qualified within a quarter. An employer-paid subtraction
value-added tax would be used if offsets to private accounts are
included. Without such accounts, the invoice value added tax would
collect these funds. No payroll tax would be collected from employees
if all contributions are credited on an equal dollar basis. If employee
taxes are retained, the ceiling would be lowered to $100,000 to reduce
benefits paid to wealthier individuals and a $16,000 floor should be
established so that Earned Income Tax Credits are no longer needed.
Subsidies for single workers should be abandoned in favor of radically
higher minimum wages. If a $10 minimum wage is passed, the employee
contribution floor would increase to $20,000.
Wage Surtaxes. Individual income taxes on salaries, which exclude
business taxes, above an individual standard deduction of $100,000 per
year, will range from 7.2% to 57.6%. This tax will fund net interest on
the debt (which will no longer be rolled over into new borrowing),
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the
result of battlefield injuries, including mental health and addiction
and eventual debt reduction.
Our proposed brackets have been increased from $85,000 to $100,000
because this is the income level at the top of the 80% of tax paying
households who earn the bottom third of adjusted gross income. Earners
above this level are considered middle class. Likewise, the top 1% of
income earners are at the $500,000 level, which will be used as the
start of the highest rate.
Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes,
dividend taxes, and the estate tax. It will apply to asset sales,
dividend distributions, exercised options, rental income, inherited and
gifted assets and the profits from short sales. Tax payments for option
exercises, IPOs, inherited, gifted and donated assets will be marked to
market, with prior tax payments for that asset eliminated so that the
seller gets no benefit from them. In this perspective, it is the
owner's increase in value that is taxed. As with any sale of liquid or
real assets, sales to a qualified broad-based Employee Stock Ownership
Plan will be tax free. These taxes will fund the same spending items as
income or S-VAT surtaxes.
This tax will end Tax Gap issues owed by high income individuals. A 26%
rate is between the GOP 23.8% rate (including ACA-SM surtax) and the
Democratic 28.8% rate as proposed in the Build Back Better Act. It's
time to quit playing football with tax rates to attract side bets. A
single rate also stops gaming forms of ownership. Lower rates are not
as regressive as they seem. Only the wealthy have capital gains in any
significant amount. The de facto rate for everyone else is zero. For
now, however, a 28.8% rate is assumed if reform is enacted by a
Democratic majority in both Houses.
Subtraction Value-Added Tax (S-VAT). These are employer paid Net
Business Receipts Taxes. S-VAT is a vehicle for tax benefits, including
Health insurance or direct care, including veterans' health care
for non-
battlefield injuries and long term care.
Employer paid educational costs in lieu of taxes are provided as
either
employee-directed contributions to the public or private unionized
school of their choice or direct tuition payments for employee children
or for workers (including ESL and remedial skills). Wages will be paid
to students to meet opportunity costs.
Most importantly, a refundable child tax credit at median income
levels (with inflation adjustments) distributed with pay.
Subsistence level benefits force the poor into servile labor. Wages and
benefits must be high enough to provide justice and human dignity. This
allows the ending of state administered subsidy programs and
discourages abortions, and as such enactment must be scored as a must
pass in voting rankings by pro-life organizations (and feminist
organizations as well). To assure child subsidies are distributed, S-
VAT will not be border adjustable.
The S-VAT is also used for personal accounts in Social Security,
provided that these accounts are insured through an insurance fund for
all such accounts, that accounts go toward employee ownership rather
than for a subsidy for the investment industry. Both employers and
employees must consent to a shift to these accounts, which will occur
if corporate democracy in existing ESOPs is given a thorough test. So
far it has not. S-VAT funded retirement accounts will be equal-dollar
credited for every worker. They also have the advantage of drawing on
both payroll and profit, making it less regressive.
A multi-tier S-VAT could replace income surtaxes in the same range.
Some will use corporations to avoid these taxes, but that corporation
would then pay all invoice and subtraction VAT payments (which would
distribute tax benefits. Distributions from such corporations will be
considered salary, not dividends.
Invoice Value-Added Tax (I-VAT). Border adjustable taxes will appear on
purchase invoices. The rate varies according to what is being financed.
If Medicare for All does not contain offsets for employers who fund
their own medical personnel or for personal retirement accounts, both
of which would otherwise be funded by an S-VAT, then they would be
funded by the I-VAT to take advantage of border adjustability. I-VAT
also forces everyone, from the working poor to the beneficiaries of
inherited wealth, to pay taxes and share in the cost of government.
Enactment of both the A-VAT and I-VAT ends the need for capital gains
and inheritance taxes (apart from any initial payout). This tax would
take care of the low-income Tax Gap.
I-VAT will fund domestic discretionary spending, equal dollar employer
OASI contributions, and non-nuclear, non-deployed military spending,
possibly on a regional basis. Regional I-VAT would both require a
constitutional amendment to change the requirement that all excises be
national and to discourage unnecessary spending, especially when
allocated for electoral reasons rather than program needs. The latter
could also be funded by the asset VAT (decreasing the rate by from
19.5% to 13%).
As part of enactment, gross wages will be reduced to take into account
the shift to S-VAT and I-VAT, however net income will be increased by
the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will
replace pass-through and proprietary business and corporate income
taxes.
Carbon Added Tax (C-AT). A Carbon tax with receipt visibility, which
allows comparison shopping based on carbon content, even if it means a
more expensive item with lower carbon is purchased. C-AT would also
replace fuel taxes. It will fund transportation costs, including mass
transit, and research into alternative fuels (including fusion). This
tax would not be border adjustable unless it is in other nations,
however in this case the imposition of this tax at the border will be
noted, with the U.S. tax applied to the overseas base.
Tax Reform Summary
This plan can be summarized as a list of specific actions:
1. Increase the standard deduction to workers making salaried
income of $35,000 and over, shifting business filing to a separate tax
on employers and eliminating all credits and deductions--starting at
7.2%, going up to 28.8%, in $50,000 brackets.
2. Shift special rate taxes on capital income and gains from the
income tax to an asset VAT. Expand the exclusion for sales to an ESOP
to cooperatives and include sales of common and preferred stock. Mark
option exercise and the first sale after inheritance, gift or donation
to market.
3. Employers distribute the child tax credit with wages as an
offset to their quarterly tax filing (ending annual filings).
4. Employers collect and pay lower tier income taxes, starting at
$100,000 at 7.2%, with an increase to 14.4% for all salary payments
over $150,000 going up 7.2% for every $50,000 up to $250,000.
5. Shift payment of HI, DI, SM (ACA) payroll taxes to employers,
remove caps on employer payroll taxes and credit them to workers on an
equal dollar basis.
6. Employer paid taxes could as easily be called a subtraction
VAT, abolishing corporate income taxes. These should not be zero rated
at the border.
7. Expand current state/federal intergovernmental subtraction VAT
to a full GST with limited exclusions (food would be taxed) and add a
federal portion, which would also be collected by the states. Make
these taxes zero rated at the border. Rate should be 19.5% and replace
employer OASI contributions. Credit workers on an equal dollar basis.
8. Change employee OASI of 7.2% from $18,000 ($20,000 for $10
minimum wage) to $100,000 income are optional taxes for Old-Age and
Survivors Insurance.
Attachment Two--Tax Administration, Treasury Budget, February 12, 2020
Shifting to a single system for all business taxation, particularly
enacting invoice value-added taxes to collect revenue and employer-
based subtraction value-added taxes to distribute benefits to workers
will end the need for filing for most, if not all, households. Any
remaining high salary surtax would be free of any deductions and
credits and could as easily be collected by enacting higher tiers to a
subtraction VAT.
Subtraction VAT collection will closely duplicate the collection of
payroll and income taxes--as well as employment taxes--but without
households having to file an annual reconciliation except to verify the
number of dependents receiving benefits.
Tax reform will simplify tax administration on all levels. Firms will
submit electronic receipts for I-VAT and Carbon Added Tax (C-AT)
credit, leaving a compliance trail. S-VAT payments to providers, wages
and child credits to verify that what is paid and what is claimed match
and that children are not double credited from separate employers.
A-VAT transactions are recorded by brokers, employers for option
exercise and closing agents for real property. With ADP, reporting
burdens are equal to those in any VAT system for I-VAT and A-VAT and
current payroll and income tax reporting by employers.
Employees with children will annually verify information provided by
employers and IRS, responding by a postcard if reports do not match,
triggering collection actions. The cliche will thus be made real.
High salary employees who use corporations to reduce salary surtax and
pay I-VAT and S-VAT for personal staff. Distributions from such
corporations to owners are considered salary, not dividends.
Transaction-based A-VAT payments end the complexity and tax avoidance
experienced with income tax collection. Tax units with income under
$84,000 or only one employer need not file high salary surtax returns.
Separate gift and inheritance tax returns will no longer be required.
State governments will collect federal and state I-VAT, C-AT, S-VAT
payments, audit collection systems, real property A-VAT and conduct
enforcement actions. IRS collects individual payroll and salary surtax
payments, performs electronic data matching and receive payments and
ADP data from states. SEC collects A-VAT receipts.
I-VAT gives all citizens the responsibility to fund the government. C-
AT invoices encourage lower carbon consumption, mass transit, research
and infrastructure development. A-VAT taxation will slow market
volatility and encourage employee ownership, while preserving family
businesses and farms. Very little IRS Administration will be required
once reform is fully implemented. All IRS employees could fit in a
bathtub with room for Grover Norquist.
______
Colorado Nonprofit Association
789 Sherman Street, Suite 240
Denver, CO 80203
Dear Senate Finance Committee Members:
Thank you for all your work to support Coloradans and Americans
throughout the pandemic, In advance of the upcoming hearing, I write on
behalf of Colorado Nonprofit Association and its 1,100 nonprofit
members to update you on the challenges that nonprofits in Colorado
face and the continued need for relief and support.
Background
Because of the ongoing public health and economic crises, too many
nonprofits in our state face increased demand for services, decreased
revenue and increased expenses, and employee and volunteer shortages.
This letter outlines those challenges and policy recommendations for
the committee.
Nonprofits Experienced Substantial Job Losses and Face Slow Job
Recovery
Before the pandemic, Colorado's nonprofits represented 5% of the
state's private workforce, employed nearly 190,000 Coloradans, and
contributed $40 billion of impact to Colorado's economy.\1\ While
current employment and economic impact data for Colorado's nonprofits
are not available, national trends indicate that nonprofits experienced
substantial job losses in 2020 due to the pandemic and face a slower
pace of job recovery than the private sector.
---------------------------------------------------------------------------
\1\ http://www.cononprofitimpact.org/.
Recent studies on the impact of the pandemic on the nonprofit sector
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indicated the following:
40% reported reduced staffing levels per a 2021 Federal Reserve
survey.\2\
---------------------------------------------------------------------------
\2\ https://fedcommunities.org/data/main-street-covid19-survey-
2021/.
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13% of jobs, or 1.64 million jobs, lost by May of 2020.\3\ This
means 25,000 Colorado nonprofit employees if job losses are presumed
consistent with national data.
---------------------------------------------------------------------------
\3\ http://ccss.jhu.edu/research-projects/nonprofit-economic-data/
covid-nonprofit-employment/.
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337,500 job vacancies still remain as of February 2022.\4\ 5,000
of which are vacancies for Colorado's nonprofits if job losses are
presumed consistent with national data.
---------------------------------------------------------------------------
\4\ Ibid.
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The nonprofit sector has recovered 79% of jobs lost during the
pandemic, which lags behind the total U.S. job recovery rate of
87%.\5\, \6\
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\5\ Ibid.
\6\ https://www.denverpost.com/2022/03/14/colorado-employment-jobs-
pre-pandemic-levels/.
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60% of nonprofits have vacancies between 10% and 30%. 16% have
vacancies greater than 30% according to a December 2021 National
Council of Nonprofits survey. Respondents cited salary competition
(79%) and lack of child care as contributing to workforce shortages
(23%).\7\
---------------------------------------------------------------------------
\7\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
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Charitable Giving Is Down on Federal Returns and up on State Returns
Our review of available national data indicates that charitable giving
is not keeping pace with needs and rising expenses:
0.8% decrease in giving between 2019 and 2020 if one major
donor's contributions are removed from the 2021 Giving USA study.\8\
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\8\ www.givinginstitute.org/resource/resmgr/gusa/2021_resources/
gusa_2021_press_release_
fina.pdf.
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42% of nonprofits with budgets under $500,000 and 29% with
budgets over $500,000 experienced reduced donations in 2020 per the
Urban Institute.\9\
---------------------------------------------------------------------------
\9\ https://www.urban.org/research/publication/nonprofit-trends-
and-impacts-2021/view/full_report.
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Nonprofits stating that donations are essential to their revenue
stream were more likely to experience reduced donations in 2020 per the
Urban Institute.\10\
---------------------------------------------------------------------------
\10\ https://www.urban.org/research/publication/nonprofit-trends-
and-impacts-2021/view/full_report.
Fewer Coloradans took the federal charitable deduction and deducted
---------------------------------------------------------------------------
less giving leading up to the pandemic:
The number of Coloradans taking this deduction fell from 657,300
to 278,050.\11\
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\11\ https://www.irs.gov/statistics/soi-tax-stats-historic-table-2
for CO, 2017-2019.
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Total giving fell from over $4.5 billion in 2017 to $3.5 billion
in 2019.\12\
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\12\ https://www.irs.gov/statistics/soi-tax-stats-historic-table-2
for CO, 2017-2019.
More Coloradans took the state charitable deduction and deducted more
---------------------------------------------------------------------------
giving following passage of the Tax Cuts and Jobs Act:
The number of Coloradans taking the state deduction increased
from 153,000 in 2017 to 362,000 in 2018.\13\
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\13\ https://cdor.colorado.gov/data-and-reports/statistics-of-
income-reports, table 25, 2017 and 2018.
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Giving on state returns increased by from $247.6 million in 2017
to nearly $821.7 million in 2018.\14\
---------------------------------------------------------------------------
\14\ https://cdor.colorado.gov/data-and-reports/statistics-of-
income-reports, table 25, 2017 and 2018.
Without the state deduction, declines in the number of donors and in
overall charitable giving reported on Colorado tax returns would have
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been much greater.
The Pandemic Negatively Impacts Volunteerism Rates in Colorado
Before the pandemic, more than 32% of Coloradans volunteered and
contributed over 121 million hours of service.\15\ Nationally, the
Urban Institute reports that regular volunteers declined by 23% in
urban areas and 41% in rural areas in 2020.\16\ Although many
businesses are fully open to the public again, we remain concerned that
many nonprofits have not seen volunteerism return to pre-pandemic
levels. Lack of access to child care, increased COVID-19 risks for
adults with vulnerabilities, and increased mental health concerns still
contribute to reduced numbers of volunteers.
---------------------------------------------------------------------------
\15\ https://americorps.gov/sites/default/files/document/
Volunteering_in_America_States_508.
pdf.
\16\ https://www.urban.org/research/publication/nonprofit-trends-
and-impacts-2021/view/full_
report, p. 38-39.
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Many Nonprofits Benefited From Pandemic Relief; Many Did Not
Although some nonprofits benefitted from federal and state COVID-19
relief funds, most relief programs have been primarily targeted to
specific industries or for-profit businesses generally. Our
observations regarding pandemic-relief programs are the following:
Over 5,600 Colorado nonprofits received nearly $900 million in
forgiven PPP, which saved nearly 115,000 nonprofit jobs. However, our
review of the data indicates that nonprofits received only 3% of the
more than 192,000 PPP loans completed and 7% of the dollars loaned
($1.04 billion out of $15.06 billion).\17\
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\17\ https://www.pandemicoversight.gov/data-interactive-tools/
interactive-dashboards/paycheck
-protection-program.
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Volunteer-run nonprofits and nonprofits with more than 500
employees typically did not qualify for assistance through PPP. The
requirement to demonstrate 25% revenue losses for PPP Second Draw loans
also left out nonprofits impacted more by increased demand rather than
revenue losses.
Governor Polis' COVID-19 relief fund provided $24 million of
assistance to nonprofits but this program expired at the end of
2020.\18\
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\18\ https://helpcoloradonow.com/covid_relief-fund/.
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Colorado's nonprofits tended to not use federal or state loan
programs without any opportunity for forgiveness (e.g., Main Street
Lending Program, CLIMBER loan fund, et al.). Most nonprofits prefer not
to divert future funding from programs to pay debt.
Colorado Nonprofit Association is asking the Colorado General Assembly
to allocate between $25 million and $50 million of American Rescue Plan
Act (ARPA) funds for grants to support nonprofits' essential work. ARPA
and Treasury regulations make it clear that governments may use these
funds in partnership with charitable nonprofits to address many
challenges in our communities. This is a small but meaningful
percentage of the $5.8 billion allocated to Colorado's governments
through the Coronavirus Fiscal Recovery Fund.\19\
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\19\ https://www.councilofnonprofits.org/trends-policy-issues/
strengthening-state-and-local-economies-partnership-nonprofits.
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Recommendations for the Senate Finance Committee
As long-term recovery from the pandemic is still fragile, the Senate
Finance Committee can take several actions to support Colorado's
nonprofits in the short and long-term.
Restore the Employee Retention Tax Credit (ERTC) from the fourth
quarter of 2021 through the end of 2022 (S. 3625). Colorado Nonprofit
Association joined more than 1,500 organizations from all 50 states in
signing onto the recent letter to Congress and the Biden Administration
seeking pandemic relief for charitable nonprofits. Restoring the ERTC
would help address nonprofit workforce shortages especially if the
``gross receipts'' test is modified so more nonprofits can qualify. We
also recommend adding child care and education subsidies as eligible
expenses. Unlike for-profits, nonprofits cannot receive income tax
relief from these costs.
Continue and expand the charitable giving incentives enacted
during the pandemic, including the universal charitable deduction for
non-itemizers. Even though the pandemic continues to increase demand
for nonprofits' services, several disaster-related giving incentives
expired at the end of 2021. Colorado Nonprofit Association
unequivocally supports renewal of the universal charitable deduction at
least through 2022 and expansion through Universal Giving Pandemic
Response and Recovery Act (S. 618). Passing this act will promote
further giving by all American taxpayers of all incomes and generate
needed resources for charitable and faith-based organizations to
continue serving communities impacted by the pandemic.
We also ask that you speak up during the hearing in support of
extending expired disaster-relief incentive. This includes allowing
itemizers to deduct charitable donations up to 100% of their adjusted
gross income and allowing corporations to deduct charitable donations
up to 25% of taxable income.
Protect levels of ARPA funding allocated to state and local
governments. These funds will also help Colorado's governments and
nonprofits meet the needs of our communities.
Incentivize volunteerism by addressing unfair tax treatment of
volunteer mileage. We ask for the volunteer mileage rate to be the same
as the business rate (currently, 58.5 cents per mile) and for
elimination of the tax on mileage reimbursements up to the business
rate. The rapid increase in gas prices mean increased expenses for
nonprofits reimbursing their volunteer drivers and increased expenses
and income taxes for those drivers.\20\ The volunteer mileage rate (14
cents per mile) disincentivizes many Americans from being regular
volunteer drivers.
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\20\ https://www.9news.com/article/news/local/nonprofits-service-
organizations-gas-prices/73-fb4e061d-40e8-4858-97a4-007073250922.
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Champion the Nonprofit Sector Strength and Partnership Act of
2022. This draft bill, sponsored by Congresswoman McCollum, would
formalize and bolster the ability of the federal government to work in
partnership with the nonprofit sector. Arguably, this is the most
important way that Congress could enhance the mission-driven work of
the nonprofit sector. However, we recognize that some effort would be
needed to implement this bill and change this relationship between
nonprofits and government.
Conclusion
As you consider the issues raised during the Senate Finance Committee
hearing, we ask that you reflect on the important, sustaining work that
Colorado's nonprofits performed throughout the pandemic. Nonprofits
continue to face increasing demand for services with decreasing human
and financial resources. In light of these unrelenting challenges, we
ask that you consider these policy solutions and others that will
strengthen the ability of nonprofits to meet the needs of Coloradans.
Sincerely,
Mark Turner
Senior Director of Public Policy
______
Community Foundation Public Awareness Initiative
Today's Finance Committee hearing, ``Examining Charitable Giving and
Trends in the Nonprofit Sector,'' is exploring current incentives for
charitable giving and whether they can be designed more effectively, to
motivate giving from more taxpayers across the income distribution at
the lowest possible revenue cost. Community foundations are generally
supportive of tax law changes, such as the Universal Giving Pandemic
Response Act (i.e., the Lankford-Coons bill), that would expand the
number of taxpayers receiving a tax incentive for their giving. We
appreciate the Lankford-Coons bill was introduced with changes
suggested by community foundations, such as making donor-advised funds
(DAFs) eligible for charitable gifts under the Act.
We want to offer brief testimony today on one issue which affects all
community foundations to varying degrees: the inability of donors to
use a DAF for IRA Charitable Rollover (Qualifying Charitable
Distribution) gifts under Section 408(d)(8). This seemingly small
provision impacts many of our donors every year, and has the opposite
impact in practice than was intended. It keeps more money locked up,
rather than getting it out into the community; it reduces the ability
of donors to support the charities of their choice; and it makes it
harder for IRA rollover gifts to get to smaller charities that have had
a harder time raising money after the 2017 tax reform law and the
COVID-19 pandemic.
As the Finance Committee knows, the Pension Protection Act of 2006
(PPA) defined DAFs for the first time and included a set of reforms at
the urging of then-
Chairman Grassley and his staff. Since the PPA, for example, a donor
cannot use a DAF to direct gifts to individuals, private foundations,
or non-charitable purposes. A donor cannot recommend a gift that
provides more than an incidental benefit to the donor-advisor. And most
closely held business interests in a DAF must be sold within five
years. As community foundation leaders, we support all these reforms.
The IRA Charitable Rollover was created by the PPA. Because the above
reforms had not yet taken effect, the PPA said a taxpayer could not use
the rollover for a gift to a DAF. A donor can use the rollover to give
to a university endowment, where the money almost certainly isn't
immediately utilized, or to the endowment of a local hospital or art
museum--but they can't address a community's needs by contributing to a
DAF at the local community foundation. Also, and most important,
because most users of the rollover pick a single charity for their
gift, the opportunity to donate to multiple local charities through a
single gift transaction is lost.
This exclusion inhibits community foundations from helping our donors
efficiently get money to local nonprofits they support. Because DAF
payout rates are substantial, the prohibition on DAFs doesn't promote
greater giving. Instead, the DAF prohibition restricts donor
flexibility by (1) codifying a preference of some charities over
others, and (2) making it difficult for a donor to be broad-based in
their giving.
Here is what happens every year at community foundations across the
country. A donor comes in and wants to direct a Qualifying Charitable
Distribution into a DAF, and we tell them it's not allowed. This
frustrates the donors, who don't understand the restriction. After this
initial disappointment, one of three things happens:
1. The community foundation attempts a workaround, in which a
donor makes their rollover gift directly to the foundation, either to
an unrestricted fund or field-of-interest fund (where donors can't
recommend specific charities) or a fund like a designated fund (where
donors can recommend specific charities, but only a portion of the
funds may be granted out each year);
2. The donor will go to another 501(c)3 charity for their gift,
but more likely than not, it will be a single, large charity which
could put the gift into their own endowment (i.e., it won't get spent
immediately to address immediate community needs); or
3. The donor becomes discouraged and doesn't make a charitable
gift.
None of these outcomes are optimal for charitable giving. Therefore,
our partnership of community foundations, representing nearly 150
foundations of all sizes in 47 states, has been leading an effort to
help Members of Congress understand how the DAF exclusion hurts their
constituents. Fixing this provision, either in tax or retirement
legislation, will have negligible revenue impact, but it will have a
positive charitable impact in communities across the country as donors
learn that they can easily divide up their rollover gifts.
One of our participating CEOs, Roxie Jerde of the Community Foundation
of Sarasota County, offers the following observations:
The Sarasota Community is heavily populated with middle-class
retirees who engage in philanthropic grantmaking. Most of our
donors are in their 70s and utilize the IRA charitable rollover
(QCD) in their annual giving. Our donors regularly make grants
in $100, $500, and $1,000 increments to 30-40 organizations
each year. IRA custodians do not want to cut QCD checks in
these increments for this volume of giving. Donors are confused
when they are told they cannot distribute the QCD into their
DAF to make these grants. Further, our donors want to support
grassroots organizations benefiting under-represented
communities, but they want the oversight offered by our
foundation concerning the use and impact of grant dollars. They
get this oversight by granting through their DAFs. We have seen
donors revert to granting to long-term institutional
organizations when told they cannot grant their QCDs into their
DAFs, thus causing grassroots organizations to suffer.
One of the recent trends in charitable giving, which today's hearing
reinforces, is how the 2017 tax law concentrated charitable giving
incentives among higher-
income people, who tend to give large gifts to big institutions. But
what about the smaller organizations that may benefit from $250, $500,
or $1,000 gifts, such as the ones Roxie Jerde is referencing? People
are not going to give their entire Required Minimum Distribution (RMD)
from their IRA to the small charity. The best tool for this small-
dollar giving is the donor-advised fund: Let the taxpayer put their RMD
in their DAF, and then recommend grants as they wish to as many
charities as they choose. It makes giving easier--and when giving is
easy, people give more.
The key takeaway is this: Whether someone uses the Rollover to make one
$30,000 gift, ten $3,000 gifts, or thirty $1,000 gifts, the federal tax
implications are the same. Why not let donors have the flexibility to
make their own choices? Why not make it easy for them to give to
multiple charities?
The IRA Rollover fix has broad support in the charitable field,
including the Council on Foundations, the Alliance for Charitable
Reform (Philanthropy Roundtable), National Philanthropic Trust, Jewish
Federations of North America, United Way, and other leading charitable
groups. Removing the prohibition will help promote community
philanthropy at a time the charitable sector is being asked to do
more--and it will make the rollover work better because it will allow
people to use the rollover to get gifts to smaller charities.
There are some advocates who have recently expressed concerns over the
growth of DAFs as a popular philanthropic vehicle. We believe DAFs are
flexible tools that promote philanthropy, and that the critics are
misguided. But we can't stress enough that the issues sometimes raised
in the DAF context--assertions about inactive funds, how high-net-worth
people use DAFs, tax treatment of complex assets, etc.--these issues
simply do not come up in the IRA rollover context. Qualifying
Charitable Distributions are limited to taxpayers aged over 70\1/2\;
limited to $100,000 per year; and because the money is coming directly
from an IRA (i.e., marketable securities), complex assets like real
estate and closely held business stock aren't an issue. Billionaires
aren't using the rollover; middle-class Americans are.
Our donors want to get money out the door, and they want to get money
to smaller charities. The donor-advised fund is the most effective tool
to do that. Fixing the IRA charitable rollover by eliminating the DAF
prohibition would be a way to incentivize charitable giving and get
more money to small, local charities at very modest revenue cost.
Thank you for your attention to our concerns.
CFPAI Participating Foundations (March 2022)
Alabama
Christopher Nanni, Community Foundation of Greater Birmingham,
Birmingham.
Arizona
Steve Seleznow, Arizona Community Foundation, Phoenix.
Jenny Flynn, Community Foundation for Southern Arizona, Tucson.
Arkansas
Heather Larkin, Arkansas Community Foundation, Little Rock.
California
Ashley Swearengin, Central Valley Community Foundation, Fresno.
Dan Baldwin, Community Foundation for Monterey County, Monterey.
Sheryl Alexander, Community Foundation Sonoma County, Santa Rosa.
Pam Calloway, East Bay Community Foundation, Oakland.
Kristen Beall, Kern Community Foundation, Bakersfield.
Rhea Suh, Marin Community Foundation, Novato.
Shelly Hoss, Orange County Community Foundation, Newport Beach.
Jennifer Fleming DeVoll, Pasadena Community Foundation, Pasadena.
Linda Beech Cutler, Sacramento Region Community Foundation, Sacramento.
Mark Stuart, San Diego Area Foundation, San Diego.
Nicole Taylor, Silicon Valley Community Foundation, Mountain View.
Colorado
Tatiana Hernandez, Community Foundation Boulder County, Boulder.
Javier Soto, Denver Foundation, Denver.
Gary Butterworth, Pikes Peak Community Foundation, Colorado Springs.
Connecticut
William Ginsberg, Community Foundation for Greater New Haven, New
Haven.
Juanita James, Fairfield County's Community Foundation, Norwalk.
Delaware
Stuart Comstock-Gay, Delaware Community Foundation, Wilmington.
District of Columbia
Tonia Wellons, Greater Washington Community Foundation, Washington, DC
Florida
Mark Brewer, Central Florida Foundation, Orlando.
Sarah Owen, Collaboratory (formerly Southwest Florida Community
Foundation), Fort Myers.
Theresa Grimison, Community Foundation for Brevard, Melbourne.
Jennifer O'Flannery Anderson, Community Foundation of Broward, Ft.
Lauderdale.
Eileen Connolly-Keesler, Community Foundation of Collier County,
Naples.
Barzella Papa, Community Foundation of North Central Florida,
Gainesville.
Katrina Rolle, Community Foundation of North Florida, Tallahassee.
Nina Waters, Community Foundation for Northeast Florida, Jacksonville.
Danita Dias, Community Foundation for Palm Beach and Martin Counties,
West Palm Beach.
Roxie Jerde, Community Foundation of Sarasota County, Sarasota.
Marlene Spalten, Community Foundation of Tampa Bay, Tampa.
John Attaway, GiveWell Community Foundation, Lakeland and Winter Haven.
Mark Pritchett, Gulf Coast Community Foundation, Sarasota.
Jeffrey Pickering, Indian River Community Foundation, Vero Beach.
Rebecca Fishman Lipsey, Miami Foundation, Miami.
Duggan Cooley, Pinellas Community Foundation, Largo.
Georgia
Kathryn Dennis, Community Foundation of Central Georgia, Macon.
Betsy Covington, Community Foundation of the Chattahoochee Valley,
Columbus.
Frank Fernandez, Community Foundation for Greater Atlanta, Atlanta.
Randy Redner, Community Foundation of Northeast Georgia, Duluth.
David Carlton, Community Foundation of South Georgia, Thomasville.
Hawaii
Micah Kane, Hawaii Community Foundation, Honolulu.
Idaho
Steve Burns, Idaho Community Foundation, Boise.
Illinois
Helene Gayle, Chicago Community Trust, Chicago.
Indiana
Brian Payne, Central Indiana Community Foundation, Indianapolis.
Rose Meissner, Community Foundation of St. Joseph County, South Bend.
Stephanie Overbey, Kosciusko County Community Foundation, Warsaw.
Tom Kilian, Hamilton County Community Foundation, Fishers.
Iowa
Kristi Knous, Community Foundation of Greater Des Moines, Des Moines.
Les Garner, Greater Cedar Rapids Community Foundation, Cedar Rapids.
Randy Moore, Quad Cities Community Foundation, Bettendorf.
Kansas
Shelly Prichard, Wichita Community Foundation, Wichita.
Louisiana
Chris Meyer, Baton Rouge Area Foundation, Baton Rouge.
Raymond Hebert, Community Foundation of Acadiana, Lafayette.
Andy Kopplin, Greater New Orleans Foundation, New Orleans.
Maryland
Shanaysha Sauls, Baltimore Community Foundation, Baltimore.
Massachusetts
Peter Taylor, Berkshire-Taconic Community Foundation, Great Barrington.
Lee Pelton, Boston Foundation, Boston.
Katie Zobel, Community Foundation of Western Massachusetts,
Springfield.
Beth Francis, Essex County Community Foundation, Danvers.
Carolyn Stempler, Greater Worcester Community Foundation, Worcester.
Kim Heard, SouthCoast Community Foundation, New Bedford.
Michigan
Mariam Noland, Community Foundation for Southeast Michigan, Detroit.
Isaiah Oliver, Greater Flint Community Foundation, Flint.
Carrie Pickett-Erway, Kalamazoo Community Foundation, Kalamazoo.
Minnesota
R.T. Rybak, Minneapolis Foundation, Minneapolis.
Eric Jolly, Minnesota Philanthropy Partners (St. Paul Foundation and
Minnesota Community Foundation), St. Paul.
Mississippi
Jane Alexander, Community Foundation for Mississippi, Jackson.
Missouri
Brian Fogle, Community Foundation of the Ozarks, Springfield.
Debbie Wilkerson, Greater Kansas City Community Foundation, Kansas
City.
Amelia Bond, Greater St. Louis Community Foundation, St. Louis.
Montana
Mary Rutherford, Montana Community Foundation.
Nebraska
Donna Kush, Omaha Community Foundation, Omaha.
Nevada
Gian Brosco, Nevada Community Foundation, Las Vegas.
Claudia Andersen, Parasol Tahoe Community Foundation, Incline Village.
New Hampshire
Richard Ober, New Hampshire Charitable Foundation, Concord.
New Jersey
Hans Dekker, New Jersey Community Foundation, Morristown.
New Mexico
Sue Colliton, Santa Fe Community Foundation, Santa Fe.
New York
Cali Brooks, Adirondack Foundation, Lake Placid.
Clotilde Dedecker, Community Foundation for Greater Buffalo, Buffalo.
John Eberle, Community Foundation for the Greater Capital Region,
Albany.
Sally Cross, Community Foundations of the Hudson Valley, Kingston and
Poughkeepsie.
Peter Dunn, Central New York Community Foundation, Syracuse.
Lorie Slutsky, New York Community Trust, New York City.
Jennifer Leonard, Rochester Area Community Foundation, Rochester.
North Carolina
Elizabeth Brazas, Community Foundation of Western North Carolina,
Asheville.
Michael Marsicano, Foundation for the Carolinas, Charlotte.
Jennifer Tolle Whiteside, North Carolina Community Foundation, Raleigh.
Lori O'Keefe, Triangle Community Foundation, Durham.
LaTida Smith, Winston-Salem Foundation, Winston-Salem.
North Dakota
Eric Wilkie, FM Area Foundation, Fargo.
Ohio
John Petures, Akron Community Foundation, Akron.
Ronald Richard, Cleveland Foundation, Cleveland.
Douglas Kridler, Columbus Foundation, Columbus.
Cynthia Andrews, Community Foundation Lorain County, Elyria.
Mike Parks, Dayton Foundation, Dayton.
Ellen Katz, Greater Cincinnati Foundation, Cincinnati.
Keith Burwell, Toledo Community Foundation, Toledo.
Oklahoma
Nancy Anthony, Oklahoma City Community Foundation, Oklahoma City.
Phil Lakin, Tulsa Community Foundation, Tulsa.
Oregon
Max Williams, Oregon Community Foundation, Portland.
Pennsylvania
McCrae Martino, Community Foundation of Westmoreland County,
Greensburg.
Frances Sheehan, Foundation for Delaware County, Media.
Karen Bilowith, Erie Community Foundation, Erie.
Sam Bressi, Lancaster County Community Foundation, Lancaster.
David Pedri, Luzerne Foundation, Luzerne.
Pedro Ramos, Philadelphia Foundation, Philadelphia.
Lisa Schroeder, Pittsburgh Foundation, Pittsburgh.
Rhode Island
Neil Steinberg, Rhode Island Foundation, Providence.
South Carolina
JoAnn Turnquist, Central Carolina Community Foundation, Columbia.
Darrin Goss, Coastal Community Foundation, North Charleston.
South Dakota
Stephanie Judson, South Dakota Community Foundation, Pierre.
Tennessee
Robert Fockler, Community Foundation of Greater Memphis, Memphis.
Michael McClamroch, East Tennessee Foundation, Knoxville.
Texas
Mike Nellis, Austin Community Foundation, Austin.
David Scullin, Communities Foundation of Texas, Dallas.
Katie Alford, Community Foundation of Abilene, Abilene.
Matthew Randazzo, Dallas Foundation, Dallas.
Kyle Penney, East Texas Communities Foundation, Tyler.
Stephen Maislin, Greater Houston Community Foundation, Houston.
Rose Bradshaw, North Texas Community Foundation, Fort Worth.
Guy McCrary, Permian Basin Area Foundation, Midland.
Matt Lewis, San Angelo Area Foundation, San Angelo.
Marjie French, San Antonio Area Foundation, San Antonio.
Ashley Allison, Waco Foundation, Waco.
Utah
Alex Eaton, Community Foundation of Utah, Salt Lake City.
Vermont
Dan Smith, Vermont Community Foundation, Middlebury.
Virginia
Heather Peeler, ACT for Alexandria, Alexandria.
Jennifer Owens, Arlington Community Foundation, Arlington.
Eileen Ellsworth, Community Foundation for Northern Virginia, Oakton.
Debbie DiCroce, Hampton Roads Community Foundation, Norfolk.
Washington
Beth Stipe, Community Foundation of North Central Washington,
Wenatchee.
Shelly O'Quinn, Innovia Foundation, Spokane.
David Bley, Seattle Foundation, Seattle.
Mauri Ingram, Whatcom Community Foundation, Bellingham.
West Virginia
Susie Nelson, Community Foundation of the Ohio Valley, Wheeling.
Wisconsin
Curt Detjen, Community Foundation for the Fox Valley Region, Appleton.
Sue Bornick, Eau Claire Community Foundation, Eau Claire.
Ellen Gilligan, Greater Milwaukee Foundation, Milwaukee.
Jamie Schloegel, La Crosse Community Foundation, La Crosse.
Liz Powell, Racine Community Foundation, Racine.
Wyoming
Craig Showalter, Wyoming Community Foundation, Laramie.
______
Council for Advancement and Support of Education
1201 Eye Street, NW, Suite 300
Washington, DC 20005-3915
+1-202-328-2273
https://www.case.org/
The Council for Advancement and Support of Education thanks Chairman
Wyden, Ranking Member Crapo, and committee members for this opportunity
to share our comments on charitable giving and trends facing
educational institutions, a major subsector of the overall nonprofit
sector in the United States. CASE strongly supports the renewal and
expansion of a universal charitable deduction to improve the American
tax system and encourage all Americans, regardless of income, to make
charitable gifts to colleges, universities, independent schools, and
other charitable organizations.
CASE is the global association for professionals in advancement--alumni
relations, communications, fundraising, marketing, and advancement
services--who share the goal of championing education to transform
lives and society. Advancement professionals are critical to securing
philanthropic support that solves institutional challenges and help
colleges, universities, and independent schools achieve their teaching,
research, and public service missions. CASE's membership includes
approximately 3,100 colleges and universities, primary and secondary
independent and international schools, and nonprofit organizations in
80 countries around the world, with more than 2,800 of our member
institutions located in the United States.
Charitable donations help colleges, universities, and independent K-12
schools achieve their teaching, research, and public service missions.
According to our most recent Voluntary Support of Education survey,
donors generously contributed $52.9 billion to U.S. colleges and
universities in the fiscal year that ended June 20, 2021, up from $49.5
billion in the previous fiscal year. This 6.9% increase in giving was
buoyed largely by donations to restricted endowments, which often fund
scholarships. Support over the last two years in particular targeted
immediate needs for students and in communities as institutions worked
to serve the public in a variety of vital ways during the pandemic.
Donations help educational institutions fund scholarships and other aid
for low-income students, advance ground-breaking research, and
strengthen academic programs and faculty retention. Private support
raised from individuals is an essential funding source for both private
and public colleges and universities and private independent schools.
Donors make charitable gifts to educational institutions in a variety
of ways, often restricting how their gifts are used. Some make gifts to
support an institution's current operations through the annual fund.
Other donors, typically major donors, create endowed funds that provide
a steady and reliable support long-term funding source in support of
students, teaching, research, and other programs that would otherwise
have to be paid for by tuition or other funding. And still others make
planned gifts, gifts that allow an individual to make a larger gift
from their lifetime income or estate that benefit the institution. All
of these gifts are critical in helping educational institutions achieve
their missions to the benefit of society.
We encourage the committee to consider the following proposals to help
incentivize additional giving to educational institutions.
Renew and Expand the Charitable Deduction for Nonitemizers
CASE is a strong supporter of providing a charitable giving incentive
to all Americans. The charitable deduction is unique in that it
encourages individuals to give away a portion of their income for the
public good. U.S. tax policy should encourage all Americans, regardless
of income, to make donations to educational institutions and other
charitable organizations.
We were very pleased that Congress enacted a modest, temporary
charitable deduction for nonitemizers, also known as a universal
charitable deduction, as part of pandemic relief legislation. This
provision, which allowed non-itemizing taxpayers to deduct cash gifts
of up to $300 for individuals ($600 for joint filers), was a good first
step in encouraging the nearly 90 percent of American taxpayers who do
not itemize to donate more to charity. Colleges, universities, and
independent schools communicated the availability of the universal
deduction to their students, faculty, alumni, and other key supporters.
Unfortunately, the temporary universal charitable deduction expired on
December 31, 2021, leaving a majority of American taxpayers without a
charitable giving incentive. Educational institutions have had to cease
discussing this opportunity with donors given the uncertainty around
whether the provision will be renewed and extended.
CASE strongly supports the Universal Giving Pandemic Response and
Recovery Act (S. 618), which would renew the universal charitable
deduction and increase the cap to one third of the standard deduction
($4,000 for individuals, $8,000 for joint filers). We are grateful for
the bipartisan leadership and support of Senators Lankford, Coons,
Collins, Cortez Masto, Klobuchar, Lee, Shaheen, Scott, and other
cosponsors, including Senators Brown, Hassan, and Stabenow on the
Finance Committee, in moving this measure forward. We urge the
committee and Congress to move quickly to renew and expand the
universal charitable deduction so that all American taxpayers are
incentivized to give more to educational institutions and other
charitable organizations.
Avoid Caps, Floors and Other Proposals that Limit the Value of the
Charitable Deduction
We also encourage the committee to avoid enacting other limitations on
the charitable deduction that would discourage giving to educational
institutions. Donors already face limits on the charitable
contributions. A donor's deduction for charitable contributions cannot
exceed more than 50 percent of the donor's Adjusted Gross Income (AGI).
The limits are even more stringent--contributions cannot exceed more
than 30 percent of a donor's AGI--for gifts made to private non-
operating foundations and some gifts of capital gain property. Donors
can carryover amounts in excess of the limits for up to five years, and
many do carryover large gifts.
Proposals that directly limit the value of the charitable deduction,
such as capping the value of the charitable deduction at 28 percent for
high-income donors, reduce the incentive for donors to give additional
dollars to educational institutions and other charitable organizations.
Donors who give little or nothing to charity would be unaffected by
such a cap. Instead, such a proposal 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 to benefit the public good?
Unfortunately, some have mislabeled the charitable deduction as a tax
break for the wealthy. As Chairman Wyden has said on many occasions,
``the charitable deduction is a lifeline, not a loophole.'' Limiting
the charitable deduction would not hurt high-income donors, many of
whom would likely decide to give less if a cap or other limit was
enacted. Students and others served by educational institutions and
charitable organizations would ultimately be hurt by limits to the
charitable deduction.
The committee should also avoid enacting other limits on the deduction,
including floors. A floor on charitable donations, such as a percentage
of AGI floor, could disproportionately impact giving by low- and
middle-income donors. Gifts by these donors make a tremendous
difference for our institutions, particularly in supporting general
operations. And many of today's low- and middle-income donors will make
larger gifts as they progress through their careers.
Expand the IRA Charitable Rollover to Life Income Gifts
CASE has been a long-time supporter of the current law IRA charitable
rollover, a provision in the tax code that allows taxpayers age 70\1/2\
and older to distribute up to $100,000 annually from their individual
retirement accounts (IRAs) to eligible charitable organizations,
including colleges, universities, and independent schools, without
having to count those distributions as income. This provision has
generated significant new giving from seniors who want to use their IRA
funds to support educational institutions.
The committee can encourage additional giving by supporting the
bipartisan Legacy IRA Act (S. 243), legislation that would expand the
current IRA charitable rollover by allowing individuals age 65 and
older to direct up to $400,000 annually from their IRAs to educational
institutions through split-interest entities such as charitable gift
annuities and charitable remainder trusts. The Legacy IRA Act will
allow more seniors to benefit from the IRA charitable rollover and will
help colleges, universities, and independent schools raise additional
funds to support their missions. We applaud Senators Stabenow (D-MI)
and Cramer (R-ND) and other cosponsors including Senators Cornyn and
Daines on the Finance Committee, for their leadership on the Legacy IRA
Act.
Eliminate the Net Investment Income Excise Tax on Private Colleges and
Universities
Enacted as part of the Tax Cuts and Jobs Act of 2017, the net
investment income excise tax (also known as the ``endowment tax'')
requires private colleges and universities with more than 500 tuition-
paying students and endowment assets of at least $500,000 per student
to pay a 1.4 percent tax on their net investment income. College and
university endowments are collections of hundreds or thousands of
charitable funds managed and invested to serve current and future
needs. Endowments provide a steady and reliable long-term funding
source in support of students, teaching, research, and other programs
that would otherwise not exist, or have to be paid for by tuition or
other funding sources.
Instead of bringing down college costs, the net investment income tax
does the opposite. This tax redirects charitable funds away from their
intended purposes and discourages donor generosity, making it more
difficult for institutions to raise and manage endowed funds that are
essential to supporting institutions as they work to offer high-
quality, affordable, accessible education. We urge the committee to
repeal this misguided tax.
We believe now, more than ever, education is the most effective away to
advance humanity, maintain a civil society, enable the United States to
return to its leadership role in the community of international
scholarship and knowledge generation, and tackle myriad challenges that
our world faces. Policies that encourage Americans to give generously
to colleges, universities, and independent schools will be critical to
helping our institutions meet this calling. We thank the committee for
the opportunity to share our views and comments, and we look forward to
working with you and your staff to identify additional ways to
strengthen charitable giving.
______
Council on Foundations
1255 23rd St, NW, #200
Washington, DC 20037
Thank you for the opportunity to provide written testimony for the
record on the subject of ``Examining Charitable Giving and Trends in
the Nonprofit Sector.'' We commend the committee for holding this
hearing during a pivotal moment for nonprofits and their philanthropic
partners.
The Council on Foundations is a nonprofit leadership organization of
more than 800 grantmaking foundations and corporations. We work to
build trust in philanthropy, expand pathways to giving, engage broader
perspectives, and help create solutions that will lead to a better
future for all.
A robust charitable sector is a core component of American society.
Each year, philanthropy invests tens of billions of dollars in
community organizations throughout the United States and around the
world to advance the greater good. In 2020, charitable giving by
individuals totaled more than $324 billion--the highest amount to
date--and giving by foundations reached a high of $88.5 billion,
according to a GivingUSA report.\1\ In fact, total giving has grown
consistently over the last 40 years, and the World Giving Index \2\
recently named the U.S. the most generous country of the past decade.
Our culture of giving has resulted in vital investments that support
nonprofit organizations, fuel innovation, fund critical research and
projects, supply needed resources when disasters strike, and much more.
---------------------------------------------------------------------------
\1\ https://givingusa.org/wp-content/uploads/2021/06/
GUSA2021_Infographic_Digital.pdf.
\2\ https://www.cafonline.org/docs/default-source/about-us-
publications/caf_wgi_10th_
edition_report_2712a_web_101019.pdf.
Unfortunately, multiple crises are facing our communities here at home
and abroad, and demand for support and vital services has reached
record levels. At the same time, nonprofits are struggling to keep
their doors open because of workforce shortages, declines in
---------------------------------------------------------------------------
volunteers, funding shortfalls, and the rising costs of goods.
When crisis hits, philanthropy and our charitable partners have
demonstrated an unwavering commitment to swiftly act to serve our
communities. But our support alone isn't enough. Foundations and their
nonprofit partners need the government to enact policies that will
enable them to provide the resources and support our communities so
desperately need. Specifically, we encourage Congress to:
Expand and Extend Charitable Giving Incentives
The Council urges Congress to strengthen giving tools available to all
Americans. Additional incentives for charitable giving will continue to
make a difference as nonprofits respond to the needs in their
communities. COVID relief legislation included a temporary $300
charitable deduction for nonitemizers, which likely contributed to the
28 percent increase in gifts of $300 on December 31, 2020 reported by
the Fundraising Effectiveness Project.\3\ With the share of non-wealthy
Americans who donate shrinking, a universal charitable deduction is an
incentive for all taxpayers, and not just the small number who itemize,
to give. The Universal Giving Pandemic Response and Recovery Act (S.
618) would expand the charitable deduction for those who do not
itemize--approximately 90 percent of taxpayers--up to one-third the
standard deduction. It would also recognize gifts to donor-advised
funds (DAFs).
---------------------------------------------------------------------------
\3\ https://afpglobal.org/fundraising-effectiveness-project-giving-
increases-significantly-2020-
even-donor-retention-
rates#::text=%E2%80%9CIt%27s%20striking%20that%20on%20December,
than%2015%25%20throughout%20the%20year.
In addition, as part of COVID relief legislation, Congress increased
the adjusted gross income (AGI) limitation for individual cash gifts to
public charities as well as the amount of charitable donations
corporations can deduct. Unfortunately, gifts to DAFs and supporting
organizations were excluded, limiting donors' flexibility just as
charities need additional funding to keep their operations going. The
Council urges Congress to extend the increased limits for individuals
and corporations to ensure that all charitable vehicles, especially
those that have long provided vital and flexible resources to their
---------------------------------------------------------------------------
communities, are available to donors at this critical time.
The fallout from the pandemic is far from over, and as additional
crises emerge, Congress must continue to incentivize giving to the
charitable organizations doing the on-the-ground work of community,
economic, and public health recovery. These incentives have the
potential to unlock billions of dollars to flow to nonprofits and into
communities that desperately need them.
Protect the Long-Term Flexibility of Donor-Advised Funds (DAFs)
DAFs are a crucial tool for the community foundations doing the day-to-
day work of rebuilding. In times of crisis, DAFs have historically been
the most resilient giving tool, continuing to make grants at relatively
high levels even when recessions deflate other forms of charity. This
flexibility has allowed community foundations and other DAF sponsors to
step up in response to the COVID-19 crisis, with DAF grants to
nonprofits surpassing $30 billion for the first time in 2020.
In addition, donor-advised funds play a vital role in democratizing
philanthropy. They empower middle-income Americans to take control of
their charitable giving, allowing them to plan out their philanthropy
for the medium- and long-term while still giving sponsoring
organizations the flexibility to respond to the emerging needs of their
communities.
The pandemic has highlighted the ability of sponsoring organizations
such as community foundations to respond to local crises as they emerge
while continuing to address long-term needs. The Community Foundation
for the Ohio Valley (CFOV), for example, has maintained its support for
programs in rural Appalachia while also responding to new challenges
related to the pandemic. In addition to continuing support for local
nonprofits, providing personal protective equipment for volunteers and
workers at children's and homeless shelters, and raising and deploying
$300,000 to help with COVID-related food insecurity and mental health
issues, CFOV employed an emergency fund to support after school
programs and gaps in broadband. Simultaneously, CFOV developed
partnerships with local organizations to assess long-term community
needs, including education, healthcare, and living-wage jobs.
In addition, we encourage Congress to ensure distributions from an
individual retirement account (IRA) to donor-advised funds qualify as
part of the IRA charitable rollover. Current law prohibits donors from
contributing to a DAF even though DAFs are a flexible and efficient
philanthropic tool to support community philanthropy. This provision
would provide donors and grantmakers with an important option to
maximize the value of IRA charitable donations and allow them to
support communities in need with financial resources.
We urge Congress to support the continued flexibility of DAFs to
address the emerging and long-term needs of communities across the
country. We recommend that Congress seek to expand the overall
philanthropic giving environment with the aim of delivering more to
those in need--without damaging the charitable vehicles that allowed
for record-breaking giving in 2020, just as Americans needed it most.
Strengthen Support for the Nonprofit Sector
Nonprofits are the backbone of our communities, and too many are
struggling to find and maintain qualified staff, fulfill their
missions, and meet the ongoing needs of their communities.
Foundations have stepped up to support nonprofit organizations. Some,
such as the San Diego Foundation, created funds specifically for
pandemic relief. The San Diego Foundation's COVID-19 Community Response
Fund, developed in partnership with local leaders from government,
business, nonprofits, and schools, granted $64 million in 2020,
including 387 grants to over 250 nonprofit organizations working on the
frontlines of the pandemic. But foundations cannot do this important
work alone. Congress has a duty to support nonprofits and ensure they
can not only survive the pandemic but also thrive in its aftermath.
The Council strongly encourages Congress to prioritize legislation that
will strengthen the nonprofit sector and provide resources to
organizations and communities, including passing the Work Opportunities
and Resources to Keep Nonprofit Organizations Well (WORK NOW) Act (S.
740). The WORK NOW Act would provide nonprofits with the funds they
need to continue to serve their communities in a time of uncertainty
and upheaval.
The Council also urges Congress to pass the Legacy IRA Act (S. 243).
This legislation would enable retiring Americans to make tax-exempt
contributions from their IRA accounts to charities through life-income
plans. Empowering middle-income seniors with an additional option for
their philanthropy would help encourage needed charitable dollars to
flow to community organizations.
Last, the Council strongly supports the Workforce Development through
Post-
Graduation Scholarships Act (S. 2191). This legislation would allow
foundations to help address the student debt crisis head-on by ensuring
post-graduation scholarships are treated the same as traditional
scholarships. These scholarships would provide foundations with an
additional tool to incentivize graduates to return to regions in need
of their skills, creating the opportunity for business growth in
regions that have been impacted by economic upheaval. This legislation
is a win for graduates and for struggling communities.
The United States is the most charitable country in the world, and the
nonprofit and charitable sectors play an essential role in our culture.
We ask that Congress work to ensure this critical role is not eroded by
the COVID-19 pandemic, disasters natural or manmade, or the associated
economic crises by deploying every tool available to ensure nonprofit
organizations can continue to respond to local needs.
Thank you again for this opportunity to include testimony on the
record. We appreciate this committee's leadership and its focus on the
struggles that charitable organizations and the nonprofit sector face
as economic and social upheaval continue. The Council on Foundations
can provide any of the material cited in this testimony and stands
ready to work with you to rebuild in the wake of crisis.
Respectfully submitted,
Kathleen Enright
President and CEO
______
Food Donation Connection
P.O. Box 22787
Knoxville, TN 37933
Statement of Jim Larson, Vice President, Development
Chairman Wyden and Ranking Member Crapo, on behalf of Food Donation
Connection (``FDC''), thank you for holding this important hearing,
``Examining Charitable Giving and Trends in the Nonprofit Sector.'' FDC
greatly appreciates the opportunity to provide this statement for the
record.
Who We Are
Since 1992, FDC has assisted food service companies with the
development and implementation of Harvest Programs designed to provide
an alternative to discarding surplus food.
We have coordinated the donation of over 750 million pounds of quality
prepared food from food service providers located in the United States,
Canada, Poland, Spain, as well as in other countries. In 2021, 1,300
business entities through 14,000+ food-service locations (restaurants,
airports, travel plazas, retailers, hotels, universities, hospitals,
distribution centers) donated 65 million pounds of prepared surplus
food to 10,000 hunger relief organizations.
Our team members have experience with major restaurant chains and
retailers in operations and food quality. Our entire full-time staff of
30 team members is ServSafe certified in food safety.
What We Do
FDC manages food donation programs for food service companies
interested in donating food. The donating process is based on donors
receiving economic benefit through tax savings in addition to
involvement with community and corporate goodwill.
Donors are linked to those in need through existing non-profit hunger
relief organizations.
FDC administers these programs through the use of an efficient
communication and reporting network. Program responsibilities include
linking donor locations with food rescue groups or those feeding the
needy, assisting in the development of product quality and handling
standards, tax valuation, donation reporting and ongoing monitoring and
follow-up to ensure program implementation and growth.
FDC coordinates food donation programs for Pizza Hut, KFC, Whole Foods,
Olive Garden, LongHorn Steakhouse, The Capital Grille, Eddie V's, Yard
House, Bahama Breeze, Seasons 52, Cheddar's, Red Lobster, McDonald's,
Chipotle Mexican Grill, Auntie Anne's, Chick-fil-A, HMSHost, Einstein
Bros Bagels, Wawa, Outback Steakhouse, Fleming's Prime Steakhouse,
Bonefish Grill, Carrabba's and others.
Need for Regulatory Guidance Regarding Contributions of Food Inventory
As noted in the Joint Committee on Taxation document accompanying this
hearing,\1\ contributions of food inventory are entitled to an enhanced
deduction under Section 170(e)(3) of the Internal Revenue Code, which
is intended by Congress to help compensate potential donors for the
administrative costs associated in making inventory donations. These
costs include the identification and selection of appropriate food
banks and other hunger relief agencies as well as the preparation, and
packaging of food in accordance with applicable food safety
regulations.
---------------------------------------------------------------------------
\1\ Joint Committee on Taxation, ``Present Law and Background
Relating to the Federal Tax Treatment of Charitable Contributions''
(JCX-2-22) (March 11, 2022).
Regulatory guidance, however, is necessary to clarify an issue created
by the current Treasury Regulations and ensure that that Section
170(e)(3) works as intended such that donors of food inventory are (i)
allowed to recover their ``basis'' in contributed inventory, and (ii)
able to compute the enhanced deduction. This clarification will help
donors satisfy the increased demand on food banks and other hunger
relief agencies in light of the continuing impact of the COVID-19
---------------------------------------------------------------------------
crisis and the recent increase in inflation.
FDC, along with a number of other organizations, has worked for a
number of years to secure this needed regulatory guidance. A guidance
project to address the issue was included in every Treasury Department/
Internal Revenue Service Priority Guidance Plan from 2015-2016 to 2020-
2021. In addition, H.R. 8817, The Preserving Charitable Incentives Act,
a bipartisan bill introduced in the House of Representatives, includes
a provision encouraging the issuance of this important guidance as soon
as possible.
Despite the time and resources that the government has dedicated to
this guidance project, guidance has not yet been issued and the project
was surprisingly dropped from the 2021-2022 Priority Guidance Plan
without explanation. Nevertheless, we continue to believe that the need
for this guidance should be given a priority in light of the current
food insecurity in the country. Thus, we respectfully request your
assistance in encouraging the Treasury Department and the Internal
Revenue Service to prioritize and issue this important guidance as soon
as possible.
______
Girl Scouts of the USA
Public Policy and Advocacy
816 Connecticut Ave., NW, Suite 5
Washington, DC 20006
P: 202-659-3780
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
March 16, 2022
Dear Chairman Wyden, Ranking Member Crapo and Senate Finance Committee
Members:
On behalf of Girl Scouts of the USA, thank you for calling a hearing on
charitable giving and trends in the nonprofit sector. We look forward
to the testimony of nonprofit experts and to understand the interests
and concerns of committee members.
I am pleased Dan Cardinali, President and CEO of Independent Sector
(IS), is speaking on behalf of the nonprofit community. We are an
active member of IS and appreciate his comprehensive explanation of the
sector's priorities.
As you investigate the nonprofit sector's well-being, it is important
to consider that many funding sources support nonprofit rebuilding and
growth as organizations recover from the pandemic. Among those varied
sources, two provisions have been especially helpful for Girl Scout
councils across the country: the universal charitable deduction and the
Employee Retention Tax Credit (ERTC).
Charitable giving has been one important lifeline for the nonprofit
community throughout the pandemic. As you know, Congress enacted a $300
charitable deduction for nonitemizers in March 2020. Donors responded
to this change with about a 28% increase in gifts of $300 on December
31, 2020--the exact amount of the deduction. Congress extended the
universal charitable deduction through 2021, but unfortunately, the
temporary provision expired at the end of last year.
I am grateful to the sponsors and cosponsors of the Universal Giving
Pandemic Response and Recovery Act (S. 618), including members of this
committee--Senators Lankford, Cortez Masto, Tim Scott, Stabenow, and
Hassan. This bill would further incentivize giving by increasing the
cap, extending the deduction through 2022, and including gifts to
donor-advised funds. However, this bill is only a temporary response to
a long-term issue. We must ensure the sustainability of the universal
charitable deduction for the years to come. Congress must renew and
extend the universal charitable deduction to ensure nonprofits have a
reliable way to secure donations to support their missions. Girl Scout
councils around the country rely in part upon charitable giving to
continue their work of supporting their community and building girls of
courage, confidence, and character.
In addition to charitable giving, Girl Scout councils relied upon the
Employee Retention Tax Credit to help fund operations and maintain
staff who provide programming for girls, support volunteers and
continue to sustain our Movement. The ERTC allowed at least half of our
Girl Scout councils to redirect $50 million toward staff and
operations, primarily in 2021. However, the Infrastructure Investment
and Jobs Act (Title VI, Section 80604) retroactively halted the ERTC,
cutting off one calendar quarter of the tax credit. On behalf of Girl
Scouts of the USA, I strongly urge you to reinstate that credit. The
Employee Retention Tax Credit Reinstatement Act (S. 3625) is an
important first step to help nonprofits rebuild from the pandemic as it
reinstates the ERTC for fourth quarter 2021, but there is more to be
done. Beyond this bill, I will continue to ask Congress to allow
nonprofits to access ERTC for 2022 and to modify nonprofit eligibility
beyond the current ``gross receipts'' test to better reflect how
nonprofits operate.
The ERTC is a tailored relief provision designed to help organizations
that demonstrate need--only those that meet the criteria for decline in
revenue and employee retention are eligible to receive the credit. It
is now--retroactively--repealed, with detrimental impacts to staff,
operations and the communities they serve. Girl Scouts continues to
contribute to our nation's relief, recovery, and rebuilding, and ERTC
has been an important financial component that helps drive our success.
Thank you for your support of the nonprofit sector and for your
dedication to helping girls across the country. I urge you to consider
our important requests, which would ensure that the Girl Scout Movement
can continue to provide girls with an unmatched leadership development
experience. If you or your staff have questions, please do not hesitate
to reach out to me at [email protected].
Sincerely,
Sue Santa
Senior Vice President, Public Policy and Advocacy
______
Statement Submitted by Jon Heymann
Non-profits are the heart and soul of a city. Without them, we would
never know what is occurring in the neediest neighborhoods and
communities--those communities that most people never walk in, shop in,
or worship in.
From the homeless shelters to the afterschool programs, to the early
learning centers, to the hospitals, to the mental health services,
These non-profits do the research no one else does.
These non-profits do the work no one else is equipped to do.
They love mercy, they do justice, and they walk humbly in the midst of
our communities. Sadly, they have been called parasites and leaches of
the public coffers, taking needed resources that could otherwise be
used for potholes, business incentives, downtown development, as well
as the services of our first responders--police, fire, and EMT.
So, yes, we have our first responders (Police, Fire, etc.), we have
business development, we have our school system, we have our colleges
and post-secondary certification programs (plumbing, electrical, etc.)
to fill the high wage, high demand, high skilled jobs.
But what do non-profits do that no one else does--let me repeat that--
that no one else does--not government, not churches, not first
responders, not schools nor colleges? Simply this: non-profits,
especially as it relates to children. take a laser-tight focus on the
gaps that prevent kids from being EDUCATED, SAFE, and HEALTHY. They
study these gaps; they create efficiencies to plug these gaps; they
develop processes and activities to fill these gaps. Furthermore, they
monitor, measure and evaluate the impact of these activities in order
to create the greatest Return on Investment (ROI) of their funding.
Where would we be if it were not for the after-school programs,
mentoring activities, summer camps, mental health services, as well as
the hospitals, etc?
Child serving non-profits. No one else in our cities builds and
rebuilds the countless thousands of young lives that otherwise would
lost to the streets, the gangs, the courts, the jails, and the morgues.
Our marching orders are simple: (1) make a massive positive difference,
(2) for the greatest number of children, (3) in the shortest period of
time. All non-profits worthy of our support should be evaluated against
those three measures.
But non-profits must wrestle with a dreadful assumption: there are not
enough resources to meet all the needs of all the children in all the
neighborhoods. So we find ourselves in a constant state of ``triaging''
our communities, grappling with identifying the most critical needs
that deserve our immediate attention, and then, how do we bring these
best practices to scale.
Non-profits creatively and judiciously leverage their financial
resources to add funding for their critical services and their
underpaid staff. Here are examples of investments, and the leveraged
resources that go into filling the gaps to help kids become educated,
safe and healthy.
Early Learning Coalitions make sure millions of impoverished
children can attend a ``Quality Star Rated'' EL Center and be ready for
kindergarten.
Healthy Families matches local city dollars to do hospital and
home visit to moms of brand new babies to avoid abuse and neglect.
Mental and Behavioral Health programs have totally redesigned
their delivery models in order to reduce the stigma and to bring their
mental health services closer (proximity) to students with mental and
behavioral health issues.
Federal funding for afterschool programming has increased
support for non-profit afterschool programs, as well as the all-day
summer camps to prevent the ``Summer Loss.''
Nutrition. Because of childhood obesity and diabetes, non-
profits operate some of the largest nutrition programs that includes
providing nutritious snacks and meals to afterschool kids, summer camp
kids and thousands of kids throughout our local communities at a
variety of sites: churches, community centers, etc.
Garnering funding to get uninsured children KidCare medical
insurance for working parents that fall below the poverty line. ``Get
well, stay well; be well.'' When healthy well kids attend school more
consistently, working parents don't miss as much work.
Non-profits have talked the monumental tasks of improving their
Data sharing, increasing participation, and improving their quality.
Non-profits also demonstrate how their programs are improving
both Crime Prevention and Economic Development.
Lastly, the non-profit staff are often the very first people to
confront the traumatic and dangerous environment of the children that
they serve, whether it's domestic violence and discord, mental health
emergencies, bullying, school violence, depression, suicide, gangs,
etc., etc., etc.
Clearly, non-profit staff are ``Essential Personnel'' and clearly
should be considered First Responders.
______
Letter Submitted by Aaron Horvath, Ph.D., Postdoctoral Fellow, Stanford
University Center on Philanthropy and Civil Society; and Jean Lin,
Ph.D., Assistant Professor, California State University, East Bay
March 22, 2022
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200
Dear Senate Committee on Finance,
The following is a statement for the record in regard to the March 17,
2022 Committee Hearing, ``Examining Charitable Giving and Trends in the
Nonprofit Sector.'' This brief report, prepared in May 2020 and
provided below, shares details from ongoing research on how nonprofit
organizations around the country rose to meet the challenge of the
COVID-19 pandemic. We observe that nonprofits of all sorts (ranging
from soup kitchens to performance troupes to boxing clubs) proved to be
mainstays of community survival in two crucial regards. First, they
provided public health information, dispelled rampant misinformation,
and helped communicate how broad directives applied to community-
specific circumstances. Second, they adapted their services, both
finding new ways to address longstanding needs (e.g., providing food
and shelter) and innovating entirely new pandemic-related services
using the resources available on hand (e.g., making and distributing
masks).
As we've found in our research, nonprofits served as a critical piece
of social infrastructure, one that propped up American communities at a
time when the public and commercial sectors were struggling to muster a
comprehensive response to an unprecedented situation. Despite all this
activity--which nonprofits undertook at great cost to themselves--
efforts to support these organizations have been underwhelming.
Certainly the Paycheck Protection Program, the nonitemizer deduction,
and the Employee Retention Tax Credit have helped buoy the sector
through difficult moments. But congressional inaction has allowed these
critical measures to lapse. More must be done to sustain nonprofit
organizations, especially as they continue to face fallout from the
pandemic, including financial shortfalls, inflationary pressures, and a
host of workforce challenges.
We offer the following report as an illustration of what we stand to
lose should these and other critical measures not be extended. If we
fail to sustain our civic institutions at this critical moment, we risk
not having them around to sustain us when the next crisis hits.
Sincerely,
Aaron Horvath and Jean Lin
______
May 20, 2022
Report: Nonprofits across the U.S. are helping their communities to
survive the pandemic. But will nonprofits themselves survive?
Aaron Horvath, Stanford University
Jean Lin, Cal State East Bay
``In our 150-year history,'' writes a San Francisco homeless services
nonprofit in a Facebook post, ``we . . . have never faced a challenge
like COVID-19.'' It's an ominous claim for an organization that's
weathered two outbreaks of the bubonic plague (in 1900 and 1907), the
1918 flu, and the HIV/AIDS epidemic. But earlier this month, COVID-19
nearly forced the organization to close. One of the organization's
shelters became the unwitting epicenter of the city's largest
coronavirus outbreak. Ninety-five homeless clients and ten staff tested
positive for the disease. Within two weeks, the shelter had
successfully moved its clients to isolated living arrangements, hired a
hazmat crew to clean the facility, and reopened its doors in service of
a renewed purpose: housing for homeless guests recovering from the
virus. In concluding its Facebook post, the shelter was defiant: even
the pandemic ``#CantStopGood.''
At a time when government is struggling to keep pace with the pandemic,
civic organizations are providing a patchwork of social welfare--both
improvising new means of continuing longstanding, essential community
services and innovating entirely new services in response to unmet
community needs. Through an ongoing study of 800 nonprofits operating
in regions around San Francisco (CA), Dallas (TX), Detroit (MI),
Lancaster (PA), Miami (FL), and Sioux Falls (SD), we are finding that,
beneath a surface of closed offices and canceled events, nonprofits are
demonstrating surprising resilience in the face of unprecedented
adversity. Despite dwindling funds and little support on the horizon,
these organizations--be they knitting clubs, soup kitchens, or
repertory theatres--are serving as a critical lifeline in the fight
against a global pandemic.
Nonprofits are adapting in several ways. They are rearranging
schedules, workforces, and physical spaces to continue providing
essential services. Responding to a tenfold growth in demand, a
nonprofit serving the low-income Latino population of Lancaster
converted its sit-down dining facility into a ``Grab & Go'' model.
Likewise, organizations that, before the pandemic provided in-person
services to homebound seniors--such as providing medicine, food, and
companionship--have reorganized their operations around a delivery
model, even sourcing microwaves and refrigerators to donate to
recipients in need. One Detroit-area senior center moved its extensive
catalogue of fitness classes online, airing some, like ``Gentle Moves
Yoga,'' on a local TV station twice daily. As one organization puts it,
``our programs have not been canceled; they're just different.''
Many nonprofits have also pivoted to meet previously unimaginable
community needs. A science museum in Florida hosted a virtual Q&A with
an infectious disease specialist in order to dispel rumors,
misinformation, and other common misunderstandings about COVID-19. They
also enrolled their powerful computer servers in a grassroots effort to
model SARS-CoV-2 proteins--crucial in the race to develop a vaccine. A
Miami-area business association established a ``rapid relief fund''
providing $500 grants to low-income families otherwise ineligible for
state aid.
A youth boxing gym in Michigan--a state overwhelmed by infections--has
braved snow and sleet to deliver 1,000 gallons of hand sanitizer
throughout the region. The organization's leadership took it upon
itself to inform the community as well. As the executive director of
that organization put it: we ``spent countless hours on the phone
debunking myths, putting together lists of Facebook-based COVID myths,
calling family after family, and kid after kid--anyone who might have a
tendency to believe Internet gossip.'' Parents who are otherwise weary
of public health authorities are now masking up.
In California, costume designers at a Santa Clara theatre company are
crafting masks for state employees, postal workers, and other
vulnerable populations. They've helped to address a PPE shortfall by
distributing 4,000 masks since early April. And, in the lighthearted
spirit of musical theatre, they've even released a song: ``Maskmaker,
Maskmaker, make me a mask!''
Put in historical perspective, one might see nonprofits' collective
contributions to pandemic relief as akin to the auto industry's
contributions to American war efforts during World War II. Where
carmakers repurposed their factories to produce plane engines,
artillery, and armor, nonprofits are deploying staff, volunteers, and
facilities to produce masks, create care packages, and provide other
essential services. But where the work of GM and Chrysler was
underwritten by Uncle Sam, nonprofits are acting on their own volition,
often without sufficient support, and performing services that, in this
unsteady economic moment, are unsustainable and may prove financially
ruinous. The economic fallout of the pandemic threatens to further
undercut already precarious funding streams, and nonprofits are facing
grave difficulties staying afloat.
As nonprofits bend over backwards to serve their communities during the
crisis, who is bending over backwards for them?
To be sure, the CARES Act offers charitable provisions--emergency
funding, loan forgiveness, and donation incentives. But efforts to
access federal support have been hampered by red tape and delay.
Philanthropic foundations, often touted for funding what public funders
miss, have relaxed their grant restrictions, allowing grantees greater
flexibility. But the rules governing philanthropic endowments will
likely impede any substantial increase in the total dollar amount of
foundation giving.
If nonprofits cannot secure continued support, their ability to respond
to community needs will be undermined and the already formidable fault
lines of inequality will grow even wider. Communities will suffer when
neither the state nor nonprofits take the lead.
Social service provision and the protection of public health has
historically fallen to governments. But COVID-19 struck during a period
of public welfare cutbacks when nonprofits were already shouldering an
undue burden. The political climate and unknown duration of the current
emergency do not afford nonprofits the luxury of suspending work until
normalcy resumes. What's become clear over the past several months is
that the whole gamut of nonprofit services are starting to look
essential--both for the maintenance of life and the maintenance of
communities in which we live.
______
Idaho Nonprofit Center
5257 W. Fairview Ave., Suite #260
Boise, ID 83706
March 17, 2022
The Honorable Mike Crapo
U.S. Senate
Washington, DC 20510
Dear Senator Crapo,
On behalf of the Idaho Nonprofit Center and the 7,268 charitable
nonprofits in our state and their more than 60,000 employees, I write
in advance of the upcoming hearing, ``Examining Charitable Giving and
Trends in the Nonprofit Sector,'' to thank you for your past support
for pandemic relief, to update you on the ongoing challenges that
nonprofits are facing, and to explain the need for targeted relief
within the jurisdiction of the Senate Finance Committee.
Idaho has prided itself as a state with a small government footprint
and where solutions to problems are solved by local communities
themselves. As such, Idaho nonprofits have played an immense role in
providing services and community solutions both before and during the
pandemic. In short, we're proud to say that Idaho runs on nonprofits.
But nonprofits need your help.
The Idaho Nonprofit Sector Before and During the Pandemic
Data from the Idaho Nonprofit Center's 2020 State of the Sector Report,
compiled in partnership with the University of Idaho, shows that prior
to the pandemic, 10% of all private sector jobs in Idaho were with
nonprofits. More than 7,000 nonprofit organizations produced 64,073
jobs and paid $4.25 billion in total employee compensation. Notably,
Idaho nonprofits utilized $4.1 billion from out-of-state funding
sources (e.g., Federal grants).
The pandemic has taken a toll on all Idahoans. Surveys conducted over
the past two years demonstrate that Idaho nonprofits have borne an
outsized burden, both as employers and as providers of essential
programs and services:
95% of nonprofits canceled events and expected reduced revenues
as a result.
58% of respondents report an increase in demand for services.
42% of respondents report that the cost of providing services
has increased.
36% of organizations report that their financial reserves have
decreased.
31% of organizations reported decreased individual donations.
51% of organizations reported decreased earned income.
Also, data is not back yet for our forthcoming 2022 State of the Sector
Report, but nonprofit job loss is an expected outcome. Nationally, the
nonprofit sector was still more than 450,000 short of pre-pandemic
levels, according to the report COVID-19 Jobs Update, December 2021 \1\
from the Center for Civil Society Studies at Johns Hopkins University.
That report found, ``as of the end of 2021, nonprofits have recovered
approximately 72.1% of the jobs estimated to have been lost as of May
2020.''
---------------------------------------------------------------------------
\1\ https://ccss.jhu.edu/december-2021-jobs/.
With the above context, now address three areas of challenges that
nonprofits are facing and propose tax policy solutions for your
consideration: the lack of resources, the lack of staff, and the lack
of volunteers--all of which are essential to advancing nonprofit
missions.
Charitable Giving Tax Incentives
Charitable giving nationwide has not kept up with need and rising
expenses. The 2021 Giving USA report found that individual giving
decreased by nearly 0.8 percent in 2020 compared with 2019, when one
major donor's contributions are removed from the data. A separate
analysis, the Nonprofit Trends and Impacts 2021 \2\ from the Urban
Institute, found that small nonprofits were under particular stress.
``Forty-two percent of organizations with budgets under $500,000
experienced decreased donations in 2020, compared with 29 percent of
organizations with budgets of $500,000 or more.'' Nonprofits that said
donations were essential to their revenue stream were also more likely
to experience decreased donations in 2020.
---------------------------------------------------------------------------
\2\ https://www.urban.org/research/publication/nonprofit-trends-
and-impacts-2021/view/full_
report.
There are no up-to-date sources of Idaho giving data. We can look to
the results of the Idaho Gives day, put on by the Idaho Nonprofit
Center, that is the state's largest multi-day giving event. Last year
16,000+ donors contributed $3.9 million to 600+ nonprofits in the
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state. Here is a breakdown in recent years:
2019 ``Idaho Gives'' Giving Total: $1.9M.
2020 ``Idaho Gives'' Giving Total: $3.9M.
2021 ``Idaho Gives'' Giving Total: $3.9M.
2019 Average gift size: $154/person.
2021 Average Gift size: $250/person.
Note that the average donation increased to $250, right in line with
the universal charitable deduction amounts available to those who claim
the standard deduction on their tax forms. We believe these numbers for
``Idaho Gives'' tell a story--the public was likely incentivized to
give more to 600+ Idaho nonprofits when the universal charitable giving
deduction was in effect in 2020 and 2021.
Tax Policy Solutions
In the aftermath of virtually every natural disaster since Hurricane
Katrina, Congress has recognized the value of nonprofit relief and
recovery efforts by enacting charitable giving incentives that
encourage some individuals and corporations to help cover some of the
costs of these community-based services. The COVID-19 pandemic and
resulting economic crises have certainly qualified as natural disasters
and Congress--a bipartisan basis--swiftly enacted giving incentives for
those who itemize and corporations. Recognizing the catastrophic impact
of health and economic crises, Congress went further by enacting, and
then expanding and extending, the universal charitable or nonitemizer
deduction to ensure that all taxpayers, including those who claim the
standard deduction received a tax benefit for giving back to their
communities by supporting the work of charitable nonprofits.
Regrettably, each of these disaster-related giving incentives was
allowed to expire at the end of 2021. Yet, the pandemic continues to
disrupt services, individuals in our communities continue to come to
their local nonprofits for support, and private giving to these
frontline organizations still has not returned to pre-pandemic levels.
We anticipate that the need to restore and improve these giving
incentives will be extensively discussed during the Senate Finance
Committee hearing on Thursday. We want to be clear that the Idaho
Nonprofit Center strongly supports renewal of the universal charitable
(non-itemizer) deduction at least through 2022. Indeed, we fully
endorse the Universal Giving Pandemic Response and Recovery Act,\3\ S.
618, because it will further promote giving by all American taxpayers--
regardless of their income--and generate needed resources for
charitable and faith-based organizations to continue providing vital
services to families, workers, and communities, especially those
critically impacted by the ongoing pandemic.
---------------------------------------------------------------------------
\3\ https://www.congress.gov/bill/117th-congress/senate-bill/618/
text?q=%7B%22search%22%3
A%5B%22s618%22%2C%22s618%22%5D%7D&r=1&s=1.
Similarly, we ask that you speak up during the hearing in support of
extending the two additional disaster-relief giving incentives that
expired on December 31, 2021--the provision permitting individuals who
itemize to deduct charitable donations up to 100% of their adjusted
gross income and the measure allowing corporations to deduct charitable
donations up to 25% of taxable income.
Nonprofit Workforce Shortages Crisis
One of the greatest challenges that nonprofits of every type of mission
are experiencing is the inability to hire and retain qualified workers.
A Federal Reserve survey \4\ found that 40% of responding organizations
reported that staffing levels are down. This past fall, the National
Council of Nonprofits conducted a survey of the difficulties nonprofits
across the country were confronting in retaining staff and filling
vacancies. Three out of five (60%) survey respondents reported
vacancies of between 10% and 30%, according to the NCN report, The
Scope and Impact of Nonprofit Workforce Shortages,\5\ published in
December. Another 16% reported vacancies greater than 30%. Nationwide,
nonprofits explained the causes of the vacancies as salary competition,
typically with employers outside the nonprofit sector (79%) and the
inability of potential employees to find child care (23%).
---------------------------------------------------------------------------
\4\ https://fedcommunities.org/data/main-street-covid19-survey-
2021/.
\5\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
The survey responses of Idaho nonprofits make clear that these
workforce challenges are no mere inconveniences; they are hurting the
people the organizations serve. ``We are a small senior center
providing over 2600 meals per month to both congregate diners as well
as to home bound seniors,'' shared a human services provider,
explaining, ``We have a small staff of 3 to accomplish this task in a
dilapidated kitchen with equipment that is over 20 years old and
falling apart.'' Regarding the workforce shortage, they noted, ``In
addition, we have recently lost 2 staff members, making our situation
even more critical.'' Another Idaho nonprofit summarized the problem:
``Service needs are increasing while staff and resources are
decreasing.'' They added, ``Having to turn clients away due to staffing
is getting harder, our staff are working more hours to meet the
---------------------------------------------------------------------------
needs.''
Idaho nonprofits similarly report significant challenges. Nearly 40% of
nonprofits surveyed in late 2021 said hiring is ``difficult or very
difficult'' right now. A nonprofit human service provider in the state
shared, ``It is much harder to find qualified employees to fill
roles,'' adding, ``It will likely be at least one more full year before
we get back to previous staffing levels that are adequate.''
Tax Policy Solutions
The Idaho Nonprofit Center and dozens of Idaho nonprofits joined more
than 1,500 organizations from all 50 states in signing onto the recent
letter to Congress and the Administration seeking Pandemic and
Workforce Shortage Relief for Charitable Nonprofits.\6\ Among other
things, that letter calls on Congress to address critical staffing
shortages at nonprofits by retroactively restoring the Employee
Retention Tax Credit, as proposed in the bipartisan ERTC Reinstatement
Act (S. 3625), and extend this refundable payroll tax credit through
2022.
---------------------------------------------------------------------------
\6\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-work
force-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advocacy%
20Updates%20%20February%2022%202022&utm_medium=email.
To the address the impact of the unique impact of nonprofit workforce
shortages on individuals and communities, we ask that you modify
nonprofit eligibility under the ERTC beyond the current ``gross
receipts'' test to ensure more nonprofits qualify. We also request that
Congress revise the definition of eligible payroll expenses under the
ERTC to include child care and education subsidies to reflect the
increased costs charitable organizations experienced as they struggle
to maintain or expand services. We believe this improvement is
justified because, unlike for-profit employers, tax-exempt nonprofits
are not currently able to receive income-tax relief for providing those
employee benefits. Our proposal provides a level of tax fairness and
parity that does not currently exist.
Volunteers Have Not Returned
A unique aspect of charitable organizations is that they can expand
their impact by leveraging the commitment of armies of volunteers who
are dedicated to the work of nonprofits in their communities. Pre-
pandemic estimates by AmeriCorps \7\ indicate that the volunteerism
rate in Idaho was 37.9%, contributing 48.6 million hours of service.
Nationally and in Idaho, nonprofits reported throughout the pandemic
that volunteerism dropped precipitously. Now, however, as many
businesses return to public operations, many nonprofits still have not
seen their volunteers return to pre-pandemic levels. Data from surveys
conducted by the Idaho Nonprofit Center confirm that 60% nonprofits
report a decrease in volunteers during the pandemic.
---------------------------------------------------------------------------
\7\ https://americorps.gov/sites/default/files/document/
Volunteering_in_America_States_508.
pdf.
---------------------------------------------------------------------------
Tax Policy Solutions
As discussed in the recent nonprofit letter on policy priorities,\8\
Congress can incentivize volunteerism by eliminating unfair tax
policies. Specifically, we seek an increase in the Volunteer Mileage
Rate for nonprofit volunteer drivers to the business rate (58.5 cents/
mile) for 2022 and the elimination of the tax on mileage reimbursements
up to the business rate. The rapid increase in gas prices mean that
many nonprofits will need to reimburse their volunteers for driving on
the charity's behalf. Yet, those drivers will be forced to pay income
tax on any reimbursement rate greater than the volunteer mileage
statutory rate of 14 cents per mile. This existing tax policy, enforced
at both the federal and state levels, imposes a disincentive on all but
the most well-off volunteers. It is unfair, harmful to the missions of
charitable organizations, and must be changed.
---------------------------------------------------------------------------
\8\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-work
force-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advocacy%
20Updates%20%20February%2022%202022&utm_medium=email.
---------------------------------------------------------------------------
Conclusion
As you consider the issues raised during the Finance Committee hearing,
we ask that you reflect in the important, sustaining work that Idaho
nonprofits performed throughout the pandemic and recognize that our
challenges are far from over. Most for-profit businesses and government
offices have or soon will reopen to something amounting to normal
business. Most charitable organizations--particularly those addressing
the immediate needs of our residents--never closed. Yet, at this stage
in the pandemic when demand for nonprofit services remains high,
Idaho's nonprofits remain short of resources to meet normal as well as
pandemic-related expenses. But we don't just lack adequate resources;
our nonprofits lack the staff and volunteers to meet the very high
needs, which is resulting in waiting lists, denial of services, and
outright closures of local nonprofits. In light of these compelling
challenges, we ask that you champion tax-policy solutions, at the
hearing and in the Senate, that will restore and enhance the charitable
giving incentives and the Employee Retention Tax Credit, and remove tax
disincentives for volunteers to support the missions of nonprofits in
their communities.
Sincerely,
Kevin Bailey, CEO
[email protected]
208-424-2229
______
Indiana Philanthropy Alliance
32 East Washington Street
Indianapolis, Indiana 46204
Dear Chairman Wyden, Ranking Member Crapo, and Members of Committee,
thank you for holding the ``Examining Charitable Giving and Trends in
the Nonprofit Sector'' hearing on March 17, 2022.
Indiana is home to the second largest private foundation in the country
and has the most independent community foundations in the United
States--including at least one in all 92 Indiana counties. Indiana
Philanthropy Alliance represents these foundations as well as a rich
variety of generous family, private, public, and corporate foundations,
and other social investors.
The philanthropic sector plays an important role in promoting and
supporting the quality of life for Hoosiers. Over 1,200 foundations
annually distribute more than $2 billion to nonprofits in support of a
broad range of health, educational, cultural, human service,
environmental, and other causes, with 76% going to Indiana-based
organizations. Not only are these grantmakers investing in Indiana
nonprofit organizations, they convene local leaders, collaborate on
critical issues, seek innovative solutions, share knowledge, and
advocate on behalf of local community needs. Additionally, nonprofit
organizations are a major economic force in Indiana. On average, 1 in
10 Hoosiers are employed by the nonprofit sector.
It is an honor to represent the interests of Indiana's philanthropic
sector and encourage charitable giving for every Hoosier. Given the
opportunity, giving in Indiana has the potential to improve lives now
and for generations to come.
With this in mind, Indiana Philanthropy Alliance respectfully asks for
consideration of the following legislative proposals under the
Committee's jurisdiction:
Oppose the Accelerating Charitable Efforts Act (ACE Act)
To increase charitable contributions, we must find ways to make giving
easy. Fewer restrictions and more incentives clears the way for
organizations to think creatively, build partnerships, and quickly
bring more resources to the needs of our communities.
The ACE Act (S. 1982/H.R. 6595) purports to increase resources for
charities. However, the provisions within the bill would do the
opposite--harming the exact charitable organizations and communities
its authors seek to help.
The bill's payout requirement on donor-advised funds (DAF) seeks a
solution to a problem that does not exist while creating complexity and
administrative burdens for community, private, and family foundations.
This payout assumes a gross underspend from DAFs, without any
substantiating data, while running counter to what is well-documented.
In fact, grantmaking from DAFs to qualified charities totaled almost
$35 billion in 2020 (a 117% increase since 2016) with a 23% average
payout. Research conducted on these funds within the Hoosier state by
Indiana Philanthropy Alliance and national nonprofit data clearinghouse
Candid found DAF payouts by community foundations topped 9%.
Additionally, 37% of all Indiana community foundation grants in 2020
were from DAFs, totaling over $68.4 million going back into local
communities. While ACE Act includes an exception for community
foundation DAFs under $1 million, this leaves out a significant and
growing number of community foundation DAFs over this threshold. In
Indiana, there are at least 63 such DAFs, and in 2021, they paid out an
estimated 7%.
Under the current rules governing philanthropy, organizations can save
and invest to not only address today's needs, but to ensure there will
be a safety net when the next crisis occurs. However, by requiring
certain DAF dollars to be exhausted within 15 years, the ACE Act would
set a dangerous precedent of eliminating endowments and the benefit of
exponential value growth over time. By failing to provide a safety net
for the future, we will be leaving communities vulnerable to future
disasters--like we have seen during COVID-19.
The ACE Act alters the structure of philanthropy without regard for
unintended consequences. The proposed legislation would require
foundations, many with three or fewer employees, to undertake a new
system of accounting, increasing administrative costs. It would also
eliminate donor privacy for some, while holding family foundations to
stricter standards than other private foundations, creating a second
unnecessary set of guidelines to monitor the same aspects of foundation
operations.
Encourage Giving with Universal Charitable Deduction
Indiana Philanthropy Alliance urges the Committee to support
legislation making the charitable deduction available to all
taxpayers--regardless of their tax rate or whether they itemize. This
includes The Universal Giving Pandemic Response and Recovery Act, S.
618, H.R. 1704. Such tax incentives encourage individuals to give away
more of their income, devoting it to their community's needs rather
than their own.
Section 2204 of the CARES Act, signed into law in March 2020, permitted
eligible individuals who do not itemize deductions to deduct $300 of
qualified charitable contributions throughout 2020. In December 2020,
Congress extended the universal charitable deduction availability
through 2021 and increased the cap to $600 for joint filers.
Since March 2020, charitable giving--especially of gifts less than the
$300 cap--has increased significantly. According to data collected by
the Fundraising Effectiveness Project, on December 31, 2020, there was
a 28% increase of gifts of exactly $300, as compared with the previous
year. Plus, gifts of $250 or less increased by more than 15% in the
fourth quarter of 2020. While we know there are many factors that
contribute to increased donations, one very compelling factor is likely
the availability of the charitable deduction to nonitemizers.
Support Current Distribution Requirements by Private Foundations
Indiana Philanthropy Alliance urges the Committee to support the
current 5% payout level for private foundation distributions that
allows for the availability of funds for distribution in perpetuity.
Previous national studies have shown that the current payout is optimum
for supporting the long-term position of a foundation and ensuring the
availability of charitable grantmaking for the future. This 5% is
merely a minimum, and it's important to note that private foundations
can, and often do, choose to pay much more. For example, Ball Brothers
Foundation--a private foundation based in Muncie, Indiana--was
established in 1926 with $3.5 million. 2022 marks Ball Brothers
Foundation's highest payout in history--$10 million. This incredible
gift was injected into the local community at a critical moment in time
and would not have been possible with higher mandatory payouts draining
the foundation's principal.
Recognize Nonprofit Cemeteries as Public Charities
Indiana Philanthropy Alliance urges the Committee to support the Grave
Injustice Parity Act, H.R. 6226, which would amend the tax code to
recognize nonprofit cemeteries as public charities. This bill would
make nonprofit cemeteries less reliant on local, state, and federal
dollars. It also simplifies the tax code by creating parity for
501(c)(13) cemeteries across all sections of the tax code listing
deductible charities.
Under the current tax code, nonprofit cemeteries--not categorized as
religious or municipal--are categorized as 501(c)13 organizations, not
501(c)3 public charities. This is a problem because not only are these
cemeteries restricted from receiving estate gifts from people wanting
to maintain family burial sites, they also cannot receive gifts from
public or private foundations. Additionally, community foundations,
which manage endowments benefiting public charities, cannot hold
designated funds or endowments for these cemeteries. There are over
12,000 such cemeteries in existence in the U.S., with Indiana ranking
6th highest in the nation with 607.
This change would have a negligible effect on federal revenues while
continuing to allow charitable dollars to flow towards charities. The
Congressional Joint Committee on Taxation found the 10-year loss of
federal revenue as a result of this legislation would be less than $2
million.
Permit Foundations to Provide Post-Graduation Scholarship Programs
Like many other states, Indiana has a talent problem in rural
communities--with 240,000 vacant positions (Jan. 2022, Bureau of Labor
Statistics). Further exacerbating this problem, about 10,000 people
leave the state each year after they graduate (20% of graduates).
Without an adequate workforce, economic growth cannot occur. To
strengthen Indiana's economy, efforts must be made to incentivize
workers to return to their communities after graduation.
Indiana Philanthropy Alliance urges the Committee to support
legislation (including the Workforce Development Through Post-
Graduation Scholarships Act, S. 2191/H.R. 4095) that permits
foundations to provide post-graduation scholarship programs. Doing so
promotes talent attraction and retention in communities by providing
student loan forgiveness to college students after graduation. Such
legislation will combat ``brain drain,'' stimulate regional economic
growth, and address the growing student debt crisis.
A post-graduation scholarship is a type of charitable grant that
foundations would make to attract individuals who have career skills
needed in a particular region, encouraging them to make their homes and
build their careers in that community. It would function much like a
traditional scholarship but would pay off a portion of student loans
held by an individual who has completed a degree or technical program
that qualifies them to work in a chosen career field needed in a
community.
______
Initiative to Accelerate Charitable Giving
March 17, 2022
The Honorable Ron Wyden
The Honorable Mike Crapo
U.S. Senate
Committee on Finance
Dirksen Senate Office Building
Washington, DC 20510
Dear Chairmen Wyden, Ranking Member Crapo, and members of Senate
Committee on Finance:
On behalf of the Initiative to Accelerate Charitable Giving (IACG),\1\
a coalition of philanthropists, leaders of major foundations, non-
profits, and others who represent a broad spectrum of interests across
the philanthropic community, we appreciate your leadership on how to
strengthen America's working charities, including by considering
reforms that will ensure more money reaches these charities faster.
---------------------------------------------------------------------------
\1\ https://acceleratecharitablegiving.org/.
The crises of the last several years have reinforced the important role
that our nation's charities play in providing needed services to our
communities, from serving food to the hungry to providing clothing and
shelter for Americans in need. It has become increasingly clear,
however, that some of our antiquated charitable giving laws no longer
work as intended, and steps must be taken to increase the pace and flow
---------------------------------------------------------------------------
of resources to charitable organizations.
With more than $1 trillion sitting in private foundations and donor-
advised funds (DAFs) for which donors already have received tax
deductions, and almost 90 percent of Americans not receiving any tax
benefit for their charitable giving, one report showed that more than
one-third of nonprofits \2\ throughout the country are in jeopardy of
closing within two years. In addition, the nonprofit workforce is still
roughly 459,000 jobs \3\ below its pre-pandemic level.
---------------------------------------------------------------------------
\2\ https://apnews.com/article/coronavirus-puts-1-in-3-nonprofits-
financial-jeopardy-93d410c99425f0ac54b3190a656db200.
\3\ http://ccss.jhu.edu/december-2021-jobs/.
Now more than ever, we must restore the connection between charitable
tax benefits and benefits to charities. Our coalition has come together
in support of the following common-sense reforms \4\ that we believe
could significantly increase the flow of resources to working
charities:
---------------------------------------------------------------------------
\4\ https://acceleratecharitablegiving.org/reforms/.
For private foundations, close loopholes to better ensure that
distributions qualifying for the payout requirement are available for
use by working charities; and encourage greater payout through reforms
to the excise tax.
For DAFs, adopt measures to ensure that DAF account balances are
distributed to working charities within a reasonable period of time.
For individuals, incentivize greater giving by improving and
extending the new non-itemizer charitable deduction in a cost-effective
way.
We look forward to working with members of the Senate Committee on
Finance and policymakers across the spectrum as this conversation moves
forward.
Sincerely,
Members of the Initiative to Accelerate Charitable Giving
______
Iowa Council of Foundations
6919 Vista Drive
West Des Moines, IA 50266
and
United Ways of Iowa
1111 9th Street, #295
Des Moines, IA 50134
Statement of Kari McCann Boutell, President, Iowa Council of
Foundations; and Deann Cook, President and CEO, United Ways of Iowa
On behalf of over 14,000 nonprofits and over 147,000 nonprofit
employees working in organizations across Iowa, we submit this
statement to encourage additional nonprofit supports and charitable
giving incentives following the Senate Finance Committee hearing,
``Examining Charitable Giving and Trends in the Nonprofit Sector.'' We
appreciate the variety of programs and incentives that have aided the
charitable sector during the pandemic.
We have heard from members of our networks and the broader nonprofit
community in Iowa about the lifeline that programs like the Paycheck
Protection Program and the Employee Retention Tax Credit were over the
last two years. Those programs helped keep doors open but many
nonprofits are still struggling with ongoing challenges. The sector
needs targeted supports to fully recover and sustain operations to
continue providing critical services for our state.
Our organizations jointly advocated for targeted relief for Iowa
nonprofits in the early months of the pandemic. We were able to secure
$10 million in CARES Act funding to establish the Iowa Nonprofit
Recovery Fund. In administering that grant program, we learned that
many Iowa nonprofits experienced a sharp decrease in revenue at the
same time they were experiencing a sharp increase in demand for
services. Periodic nonprofit surveying completed by the Iowa Economic
Development Authority and the University of Northern Iowa's Institute
for Decision Making tells us that these trends are persisting two years
later. That, coupled with rising costs and workforce shortages, has
many nonprofits struggling to meet demands.
We see the following strategies as the most valuable ways Congress can
support the charitable sector now and moving forward:
We urge you to support the Universal Giving Pandemic Response
and Recovery Act (S. 618).
We urge you to support the retroactive restoration of the
Employee Retention Tax Credit, as proposed in the bipartisan ERTC
Reinstatement Act (S. 3625).
We urge you to increase the Volunteer Mileage Rate for nonprofit
volunteer drivers to the business rate (58.5 cents/mile) for 2022 and
eliminate the tax on mileage reimbursements up to the business rate.
We thank you for your support of the charitable sector and ask for your
continued commitment to nonprofit recovery and charitable giving
incentives to strengthen the critical work of Iowa nonprofits. Please
reach out if we can provide additional information or help answer any
questions.
______
Jewish Federations of North America
The Max M. Fisher Headquarters
25 Broadway, Suite 700
New York, NY 10004
p 212-284-6548
f 212-271-6741
https://www.jewishfederations.org/
The Jewish Federations of North America (JFNA) appreciate the
opportunity to submit a statement for the record relating to the Senate
Finance Committee's March 17, 2022, hearing titled ``Examining
Charitable Giving and Trends in the Nonprofit Sector.'' We applaud the
leadership of Chairman Wyden, Ranking Member Crapo, and Members of the
Committee for holding this hearing highlighting issues important to the
charitable sector.
Background on JFNA
JFNA represents 146 Jewish Federations and over 300 Network
communities, which raise and distribute more than $3 billion annually,
and, through planned giving and endowment programs, support social
welfare, social services, and educational needs in society. The
Federation movement, collectively among the top 10 charities on the
continent, protects and enhances the well-being of Jews worldwide
through the values of tikkun olam (repairing the world), tzedakah
(charity and social justice) and Torah (Jewish learning).
In the fields of caregiving, aging, philanthropy, disability, foreign
policy, nonprofit security and health care, we are thought leaders and
advocates. We promote a public-private partnership to support thousands
of agencies serving more than a million clients of all backgrounds,
Jewish and non-Jewish alike, including hospitals, nursing homes,
community centers, family and children's service agencies, and
vocational training programs.
At a time when Jews are less economically and physically secure than a
decade ago, JFNA leads a continental response, providing assistance and
rapidly raising and distributing funds to serve the most vulnerable
among us. We have provided immediate relief and long-term assistance to
Jewish and non-Jewish victims of natural and manmade disasters around
the globe, including Houston, the Philippines, Haiti, Japan, and, now,
in Ukraine.
Current Tax Policy Priorities
JFNA appreciates the opportunity to highlight the below tax policy
issues important to our Federations and the nonprofit sector.
Universal Charitable Deduction
The Jewish Federations strongly supports the renewal and expansion of
the universal charitable deduction and the Universal Giving Pandemic
Response and Recovery Act (S. 618). As the nonprofit sector works to
recover from the crippling effects of the COVID pandemic, it is
critically important to ensure that Americans who donate to charities
and religious organizations can receive a tax deduction at an amount
higher than the most recent $300 deduction level (before the provisions
expired last year).
A significant amount of charitable giving and grantmaking at our Jewish
Federations are conducted through donor-advised funds, which is why we
strongly support the provision in S. 618 that enhances the non-itemizer
provision by including gifts to donor-advised funds. We believe this
would allow for more charitable grantmaking and assist communities and
nonprofits during times of crisis.
Preserving and Strengthening Donor-Advised Funds
Donor-advised funds (DAFs) are an efficient philanthropic tool that
allow Jewish Federations to raise and grant charitable dollars for the
benefit of our local communities. In 2020, Jewish Federations
collectively granted more than $1.5 billion from DAFs, and Federations
typically achieve a payout rate for DAFs that is well over 20 percent.
DAF grants are particularly important during emergencies. Responding to
COVID-19, Federations raised supplemental funds that exceeded $200
million with more than $80 million coming directly from grants from
DAFs. Federation DAF distributions were up 10% in 2020 compared to
2019, mostly because of the pandemic. More recently in response to
Hurricane Ida, JFNA raised and distributed $250,000 in the fall of 2021
to provide assistance in the Gulf Coast with more than half of that
funding originating from DAFs. In the last several weeks, we have
already raised and distributed $24 million in Ukrainian relief with
much more to come. A very significant percent of that funding will have
originated from donor-advised funds.
JFNA urges Congress to protect and preserve DAFs as an important
philanthropic tool and we encourage policymakers to reject legislation
that would disincentivize DAFs and suppress charitable grantmaking.
Attached is a recent letter led by the Jewish Federations signed by
more than 300 charitable groups rejecting legislation that would
negatively impact DAFs. DAF grants have been vital to helping
nonprofits weather the COVID pandemic and continue their charitable
mission.
Employee Retention Tax Credit
The Jewish Federations support extending and modifying the Employee
Retention Tax Credit (ERTC) as one way to assist nonprofits in
combating the effects of the COVID pandemic and the staffing shortages
currently faced by charitable organizations.
Prior to the pandemic, charitable nonprofits employed more than 12
million people, making the nonprofit sector the third largest industry
in the country--larger than the construction, financial services, and
manufacturing industries. As of December 2021, there were 450,000 fewer
employees in the nonprofit sector as charitable organizations report
significant difficulties retaining staff and filling vacancies. As the
economy seeks to recover from the COVID pandemic, having a fully
staffed charitable sector is critical.
To alleviate this workforce crisis in the charitable sector, the Jewish
Federations encourage Congress to:
Retroactively restore the Employee Retention Tax Credit, as
proposed in S. 3625, the ERTC Reinstatement Act,
Extend this refundable payroll tax credit through 2022, and
Modify nonprofit eligibility beyond the current ``gross
receipts'' test and define eligible payroll expenses to include
childcare and education subsidies to reflect the increased costs
charitable organizations are experiencing as they struggle to maintain
or expand services to meet the local needs throughout the health and
economic crisis.
Legacy IRA Act
The Jewish Federations support S. 243, the Legacy IRA Act. The
legislation would permanently expand the current IRA charitable
rollover by allowing seniors starting at age 65 to make tax-free IRA
rollovers to charities through life-income plans (charitable gift
annuities or charitable remainder trusts). The legislation would also
increase the annual rollover limit to $400,000 by which seniors can
give to charities through their IRA.
The current IRA charitable rollover has been a successful philanthropic
tool as it has generated millions of dollars in new charitable
contributions. Expanding the provision will only further charitable
giving and benefit local nonprofits during this critical time. We
encourage Congress to pass this bipartisan piece of legislation.
______
Attachment:
August 2, 2021
The Honorable Ron Wyden The Honorable Mike Crapo
Chair Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
Dear Chairman Wyden and Ranking Member Crapo:
On behalf of the more than 300 undersigned national and community
organizations representing each of the 50 states, we write to express
our opposition to the Accelerating Charitable Efforts Act. This
legislation recently introduced by Senators Angus King (I-ME) and
Charles Grassley (R-IA) as S. 1981 would undermine important charitable
tax incentives in ways that could be devastating to the vulnerable
community members supported by our philanthropy.
S. 1981 seeks to place restrictions on private foundations and donor-
advised funds (DAFs), which are a fast-growing tool for philanthropists
at all levels to make multi-generational commitments to charity. DAFs
are the simplest, most flexible, and most economical way for
philanthropists to make these gifts. Supporters of DAFs call them
``greenhouses'' rather than ``warehouses'' for charitable giving. They
encourage donors and their families to develop long-term giving plans
and ensure that charities have the resources to realize their
philanthropic visions far into the future.
Among the significant benefits of DAFs are that they allow charitable
gifts to grow over time and thus have a much bigger impact, provide a
simpler and less expensive vehicle than setting up and running a
private foundation, and use funds--which are donated irrevocably--
exclusively for charitable purposes. National data from the 2020 DAF
Report shows that DAFs annually allocate an average of 20% of their
assets on hand to qualified charities--by contrast, foundations are
required to distribute 5% of their funds per year.
The core argument promoted by supporters of the Accelerating Charitable
Efforts Act is that DAFs keep funds locked up and unavailable to meet
pressing needs. This is not borne out by our experience in which grants
from DAF holders resulted in the immediate spending of more than $200
million to alleviate suffering from the pandemic.
The Accelerating Charitable Efforts Act would limit DAFs by requiring
that their funds be spent within a prescribed time-period (such as 15
years), limiting the life of a DAF, delaying the charitable tax
deduction until the funds are disbursed, and not permitting the donor
to deduct the fair market value of property given to a DAF. These
provisions would reduce the incentive for donors to use DAFs, pave the
way for their elimination, and sharply curtail philanthropic giving to
charities and their beneficiaries. Moreover, the various restrictions
proposed by the legislation would serve to add to the administrative
burdens and expenses of those charities that sponsor DAF programs. In
short, it would diminish rather than enhance our communities' and their
donors' ability to support urgent charitable needs throughout our
country and across the globe.
The legislation would also restrict the useful ways that private
foundations use DAFs to further their charitable missions, as well as
disallow foundations from treating certain administrative expenses
(such as salaries and expenses paid to family members) as a qualifying
distribution. As opposed to seeking to expand these important
philanthropic tools, the legislation would inhibit their important
charitable work.
We have grave concerns with the Accelerating Charitable Efforts Act and
look forward to working with you and your colleagues to advance the
interests of the charitable sector and enact policy solutions that
promote, rather than suppress, both short-term and long-term
philanthropy. We would welcome the opportunity to brief you and your
staff on our position on this bill. To discuss this legislation, please
reach out to The Jewish Federations of North America (Stephan.Kline@
JewishFederations.org) or the Community Foundation Public Awareness
Initiative ([email protected]).
Sincerely,
The Jewish Federations of North America
The Community Foundation Public Awareness Initiative
National Organizations
ADL Girls Inc.
Agudath Israel of America Good News Communications, Inc.
American Jewish Committee HIAS
American Lung Association Hillel International
American Red Cross JCC Association of North America
Arthritis Foundation Jewish Council for Public Affairs
Association of Jewish Aging Jewish Women International
Services
B'nai B'rith International Lutheran Center for Religious
Liberty
BBYO Lutheran Services in America
Citygate Network Mennonite Health Services
Council for Christian Colleges and National Coalition Supporting
Universities Eurasian Jewry
Council for Health and Human National Philanthropic Trust
Service
Ministries (United Church of Network of Jewish Human Service
Christ) Agencies
Dance/USA One Mission Society
Disabled Children's Fund OPERA America
DonorsTrust Philanthropy Roundtable
Easterseals Stewardship Matters
Evangelical Council for Financial U.S. Council of Muslim
Accountability Organizations
Faith and Giving Union for Reform Judaism
Regional, State, and Local Organizations
Aaron Family JCC of Dallas (TX) CREATE Foundation (Tupelo, MS)
Adath Israel (Cincinnati, OH) Dallas Hebrew Free Loan Association
(TX)
Adath Israel of the Main Line Dayton Foundation (OH)
(Merion Station, PA)
Adirondack Foundation (Lake Placid, East Texas Communities Foundation
NY)
Arizona Community Foundation East Valley JCC (Chandler, AZ)
Arkansas Community Foundation Eau Claire Community Foundation
(WI)
Associated: Jewish Community Erie Community Foundation (PA)
Federation of Baltimore (MD)
Baltimore Jewish Council (MD) Fargo-Moorhead Area Foundation (ND)
Birmingham Jewish Federation (AL) Federated Jewish Charities of
Charleston, Inc. (WV)
Birmingham Jewish Foundation (AL) Federation for Jewish Philanthropy
of Upper Fairfield County (CT)
Brindza Family Fund (Yorktown, VA) Federation Housing (Philadelphia,
PA)
Capin Advisory Services (Grayson, Flint Jewish Federation (MI)
GA)
Cedar Village Foundation Foundation for Delaware County (PA)
(Cincinnati, OH)
Central New York Community Foundation for the Charlotte Jewish
Foundation Community (NC)
Chabad at Dartmouth (Hanover, NH) Gesher Jewish Day School (Fairfax,
VA)
Charleston Jewish Federation (SC) Gratz College (Wyncote, PA)
Cincinnati Community Kollel (OH) Greater Miami Jewish Federation
(FL)
City Mission of Findlay (OH) Greater New Orleans Foundation (LA)
Cleveland Foundation (OH) Greater Toledo Community Foundation
(OH)
Combined Jewish Philanthropies of Greensboro Jewish Federation (NC)
Greater Boston (MA)
Communities Foundation of Texas Guardians of the Sick (Brooklyn,
NY)
Community Foundation Boulder County Gulf Coast Community Foundation
(CO) (FL)
Community Foundation for Brevard Hawaii Community Foundation
(FL)
Community Foundation for Greater Hebrew Congregation of St. Thomas
Buffalo (NY) (VI)
Community Foundation for Northeast Hebrew Day School of Ann Arbor (MI)
Florida
Community Foundation for Northeast Hillel at Temple University
Georgia (Philadelphia, PA)
Community Foundation for the Holland Rescue Mission (MI)
Greater Capital Region (Albany,
NY)
Community Foundation of Acadiana Houston Jewish Community Foundation
(Lafayette, LA) (TX)
Community Foundation of Collier Idaho Community Foundation
County (FL)
Community Foundation of Greater Indianapolis Jewish Community
Birmingham (AL) Relations Council (IN)
Community Foundation of Jackson JCADA (Rockville, MD)
Hole (WY)
Community Foundation of Northern JCC of Greater Baltimore (MD)
Colorado
Community Foundation of Sarasota JCRC of Atlanta (GA)
County (FL)
Community Foundation of St. Joseph JCRC of Greater Washington (DC)
County (IN)
Community Foundation of Tompkins JCRC/AJC (Detroit, MI)
County (NY)
Community Foundations of the Hudson JEVS Human Services (Philadelphia,
Valley (Poughkeepsie, NY) PA)
Community Foundation of Western Jewish Alliance of Greater Rhode
Massachusetts Island
Congregation Agudat Achim Jewish Cemeteries of Greater
(Schenectady, NY) Cincinnati (OH)
Congregation Beth Abraham-Jacob Jewish Communal Fund (New York, NY)
(Albany, NY)
Congregation Beth El (Bangor, ME) Jewish Community Federation of
Richmond (VA)
Congregation Beth Shalom (Missoula, Jewish Community Foundation of
MT) Greater Kansas City (KS)
Congregation Bnai Israel (Little Jewish Community Foundation of
Rock, AR) Greater MetroWest NJ
Congregation Brothers of Israel Jewish Community Foundation of
(Newtown, PA) Greater Phoenix (AZ)
Congregation Etz Chaim (Marietta, Jewish Community Foundation of San
GA) Diego (CA)
Congregation Sha'arei Torah Jewish Federation of Greater
(Cincinnati, OH) Harrisburg (PA)
Jewish Community Foundation of Jewish Federation of Ocean County
Southern Arizona (NJ)
Jewish Community Foundation of the Jewish Federation of Omaha
Minneapolis Jewish Federation (MN) Foundation (NE)
Jewish Community Foundation, Inc. Jewish Federation of Orange County
(Cherry Hill, NJ) (CA)
Jewish Community of Louisville Inc. Jewish Federation of Palm Beach
(KY) County
Jewish Community Relations Council Jewish Federation of Princeton
of Columbus (OH) Mercer Bucks (NJ, PA)
Jewish Community Relations Council Jewish Federation of Reading/Berks
of Greater Charleston (SC) (PA)
Jewish Community Relations Council Jewish Federation of Sacramento
of Minnesota and the Dakotas (CA)
Jewish Community Relations Council Jewish Federation of San Antonio
of Southern New Jersey (TX)
Jewish Community Relations Council Jewish Federation of San Diego
of the United Jewish Federation of County (CA)
Tidewater (VA)
Jewish Community Services Jewish Federation of Somerset,
(Baltimore, MD) Hunterdon and Warren Counties (NJ)
Jewish Endowment Foundation of Jewish Federation of South Palm
Louisiana Beach County (FL)
Jewish Family and Children's Jewish Federation of Southern
Services, San Francisco Bay Area Arizona
(CA)
Jewish Family and Children's Jewish Federation of Southern NJ
Service (Cherry Hill, NJ)
Jewish Family and Community Jewish Federation of St. Louis (MO)
Services of Pittsburgh (PA)
Jewish Family Service of Colorado Jewish Federation of the Berkshires
(Pittsfield, MA)
Jewish Family Service of Greater Jewish Federation of the Bluegrass
Dallas (TX) (Lexington, KY)
Jewish Family Service of Greater Jewish Federation of the Greater
New Orleans (LA) San Gabriel and Pomona Valleys
(CA)
Jewish Family Service of Jewish Federation of the Lehigh
Metropolitan Detroit (MI) Valley (PA)
Jewish Family Service of Somerset, Jewish Federation of the Virginia
Hunterdon and Warren Counties (NJ) Peninsula
Jewish Family Services of Jewish Federation of Western
Northeastern New York Massachusetts
Jewish Federation and Foundation of Jewish Fertility Foundation
Northeast Florida (Atlanta, GA)
Jewish Federation Association of Jewish Foundation of Greensboro
Connecticut (NC)
Jewish Federation in the Heart of Jewish Foundation of Memphis (TN)
New Jersey (South River, NJ)
Jewish Federation of Broward County Jewish Foundation of Nashville (TN)
(FL)
Jewish Federation of Central Jewish Home of Cincinnati (OH)
Massachusetts
Jewish Federation of Chicago (IL) Jewish Interfaith Education
Council, Inc. (Sioux Falls, SD)
Jewish Federation of Cincinnati Jewish Kids Groups (Atlanta, GA)
(OH)
Jewish Federation of Cleveland (OH) Jewish Long Beach (CA)
Jewish Federation of Cumberland, Jewish Museum of Maryland
Gloucester and Salem (NJ)
Jewish Federation of Delaware Jewish Nevada
Jewish Federation of Eastern Jewish Silicon Valley
Connecticut
Jewish Federation of El Paso (TX) Jewish United Fund (Chicago, IL)
Jewish Federation of Grand Rapids Jewish Volunteer Connection
(MI) (Baltimore, MD)
Jewish Federation of Greater Ann Jewish Women's Fund of Atlanta (GA)
Arbor (MI)
Jewish Federation of Greater JEWISHcolorado
Atlanta (GA)
Jewish Federation of Greater JewishColumbus
Charlotte (NC)
Jewish Federation of Greater JFBP LLC (New York, NY)
Chattanooga (TN)
Jewish Federation of Greater Dallas Johns Hopkins Hillel (Baltimore,
(TX) MD)
Jewish Federation of Greater Des JVS Career Services (Cincinnati,
Moines (IA) OH)
Jewish Federation of Greater Katz JCC (Cherry Hill, NJ)
Hartford (CT)
Jewish Federation of Greater La Crosse Community Foundation (WI)
Houston (TX)
Jewish Federation of Greater Long Island Community Foundation
Indianapolis (IN) (NY)
Jewish Federation of Greater Kansas Lubavitch of Montgomery County (PA)
City (KS and MO)
Jewish Federation of Greater Mack's Center for Jewish Education
MetroWest NJ (Baltimore, MD)
Jewish Federation of Greater Naples Main Line Reform Temple (Wynnewood,
(FL) PA)
Jewish Federation of Greater New Mayerson JCC (Cincinnati, OH)
Orleans (LA)
Jewish Federation of Greater Memphis Jewish Federation (TN)
Philadelphia (PA)
Jewish Federation of Greater Michigan Hillel
Phoenix (AZ)
Jewish Federation of Greater Milwaukee Jewish Federation (WI)
Pittsburgh (PA)
Jewish Federation of Greater Minneapolis Jewish Federation (MN)
Portland (OH)
Jewish Federation of Greater N. E. Miles Jewish Day School
Rochester (NY) (Birmingham, AL)
Jewish Federation of Greater Nancy and David Wolf Holocaust and
Rockford (IL) Humanity Center (Cincinnati, OH)
Jewish Federation of Greater Santa New Life Mission (Melbourne, FL)
Barbara (CA)
Jewish Federation of Greater New York Community Trust
Seattle (WA)
Jewish Federation of Greater Toledo North Louisiana Jewish Federation
(OH)
Jewish Federation of Greater Ohio Jewish Communities
Washington (DC, MD, VA)
Jewish Federation of Howard County Omaha Community Foundation (NE)
(MD)
Jewish Federation of Lee and Open Door Mission (Glens Falls, NY)
Charlotte Counties (FL)
Jewish Federation of Madison (WI) Oregon Community Foundation
Jewish Federation of Metropolitan Parasol Tahoe Community Foundation
Detroit (MI) (NV)
Jewish Federation of Nashville and Philadelphia Foundation (PA)
Middle Tennessee
Jewish Federation of New Hampshire Philadelphia Friendship Circle (PA)
Jewish Federation of New Mexico Pikes Peak Community Foundation
(CO)
Jewish Federation of Northern New Pinellas Community Foundation (FL)
Jersey
______
League of American Orchestras
520 8th Avenue, Suite 2005
New York, NY 10018
https://americanorchestras.org/
Statement of Simon Woods, President and CEO
League of American Orchestras
The League of American Orchestras thanks the Senate Committee on
Finance for holding a hearing dedicated to ``Examining Charitable
Giving and Trends in the Nonprofit Sector.'' Given the prolonged
duration of the COVID-19 pandemic and its impact on the nonprofit
sector, the Committee's hearing is a particularly important opportunity
to commit to federal policy action that will respond to the unique and
urgent needs of America's nonprofit sector. The League of American
Orchestras leads, supports, and champions America's orchestras and the
vitality of the music they perform. Its diverse membership runs the
gamut from world-renowned orchestras to community groups, from summer
festivals to student and youth ensembles, from conservatories to
libraries, from businesses serving orchestras to individual
participants in symphonic music. Founded in 1942 and chartered by
Congress in 1962, the League links a national network of thousands of
instrumentalists, conductors, managers and administrators, board
members, volunteers, and business partners.
Orchestras deliver on their nonprofit mission in communities nationwide
through their vibrant artistry, community partnerships, and commitment
to lifelong learning through music. Like thousands of other nonprofits
in the arts, education, and human services, and other local
organizations, the more than 1,600 American orchestras in communities
across the United States are classified as 501(c)(3) tax-exempt
organizations. This exemption and the incentive to give private
donations are essential to sustaining the capacity of orchestras as
employers, community partners, artistic innovators, and providers of
lifelong learning. Even as orchestras faced unprecedented challenges
throughout the course of the pandemic, their resilience and creativity
are evidenced in their ongoing contributions to their communities and
innovative strategies to deliver on their nonprofit mission under the
most extraordinary circumstances. At the height of COVID-19
restrictions on participation in live performance events, orchestras
innovated to provide safe live arts experiences, online performances,
and learning opportunities nationwide. Entering the 2020-21 season,
orchestras participating in a survey indicated that digital orchestra
music was being delivered to at-home audiences in the form of live-
streamed concerts (81%), streaming of archival recordings (41%), and
new creative content curated specifically for social media (59%)--much
of it free of charge (64%). Orchestras continue to offer both live
performance events and online offerings, often partnering with
caregivers, schools, and community-based organizations to reach in-
person and online audiences.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
.epsOrchestras are part of the wider nonprofit economic engine that
supports workforces and community revitalization amid COVID-19
recovery. Orchestra expenses totaled more than $2.1 billion in 2019.
Their economic impact far exceeds that amount as orchestras create
jobs, engage in commerce with local businesses, and spur local
expenditures on related goods and services. Orchestras support a
substantial workforce in communities across the country, engaging a
large ensemble of 80 or more musicians for concerts, supported by a
creative workforce of composers, administrative staff, stage
technicians, ushers, and other professionals. America's adult and youth
orchestras employ a dynamic team of teaching artists, community
engagement professionals, and expert program staff that deliver
lifelong learning through music.
As part of the nonprofit charitable sector, orchestras depend upon
private philanthropy and civic support to fuel programs that serve
community needs. Orchestras are 501(c)(3) nonprofit organizations,
exist in all 50 states, serving virtually every community, with annual
budgets ranging from less than $30,000 to more than $100 million. Two
thirds of all orchestras have budgets under $300,000. The artistic
presentations, educational offerings, and community-based programming
generated by the orchestra workforce is supported by a critical
combination of public and private support, and not by ticket sales
alone. Support from donors across the economic spectrum is essential to
making this work possible, as orchestras respond to the needs of
communities and form partnerships through education, artistic, economic
development, and social service programs. When examining giving to
orchestras by individual donors who are not trustees, there is evidence
of a broad base of community support for the orchestras' work; each
year from 2010 through 2014, roughly 75% of the gifts made by non-
trustee individuals were under $250, including 45% under $100, and 30%
in the $100-$249 range. Community members with a wide range of economic
means find value in their local orchestras and invest in their
sustainability.
The COVID-19 pandemic has made charitable giving even more essential.
Prior to the onset of the pandemic, private giving accounted for 43% of
orchestra revenues. Like for-profit businesses, orchestras suffered
severe earned revenue losses that threatened their workforces and their
missions. By the summer of 2020--even before the full force of the
pandemic was felt--orchestras responding to a League survey reported
that private giving accounted for 51% of the revenues that support the
orchestras' workforces and mission. While decisions about operations
during the pandemic have been closely connected to local and state
public health mandates and each orchestra's individual financial
situation continues to vary based on the return to live in-person
performances, very many continue to suffer significant pandemic-related
revenue losses. As infection rates fell on the retreat of the Delta
variant, orchestras began to make gains in ticket sales, which provided
hope for recovery in the longer term. However, the return of audiences
from week to week was uneven, and the onset of the Omicron variant has
had a severe and long-reaching impact on orchestras' financial capacity
and workforce. Orchestras recently surveyed by the League are
projecting ongoing revenue declines and increasing costs. When asked to
look ahead to their potential organizational capacity for their fiscal
year 2023 operations, only 35% were confident or very confident that
philanthropy would sustain at its current level and only 32% were
confident or very confident that ticket revenue would recover to its
2019 level.
We urge the Committee to partner with the nonprofit sector to ensure
that any future pandemic-related or long-term support for the small
business sector is structured so that nonprofit organizations are
assured eligibility. Careful attention by Congress to nonprofit
eligibility for COVID relief was essential to unlocking access to
relief for orchestras and other nonprofit organizations. Federal
support has made it possible to keep doors open, utility bills paid,
and many workers on payroll, but the duration of the pandemic continues
to strain all revenue sources and new and renewed federal assistance is
needed. We are extremely grateful for the federal support to-date that
has provided essential assistance during such an unprecedented and
prolonged public health crisis. Of orchestras responding to a recent
League of American Orchestras survey, 92% reported that federal relief
had a significant or very significant impact on their ability to
maintain their performance and other program activity, and 90% reported
that these funds had a significant or very significant impact on their
ability to retain their workforce. In addition to Shuttered Venue
Operators Grants and dedicated National Endowment for the Arts funding,
nonprofit access to forgivable Paycheck Protection Program loans,
Employee Retention Tax Credits, enhanced charitable giving incentives,
and other forms governmental assistance have helped to see orchestras
through the first two years of the pandemic. However, most forms of
federal relief expired at the end of 2021, and the need for help
persists.
Orchestras and the wider nonprofit sector will be essential
contributors to our nation's recovery from the pandemic and must be
supported by federal policies that restore and further strengthen the
sector nationwide. The League of American Orchestras is closely
partnered with the National Council of Nonprofits, Independent Sector,
and the Charitable Giving Coalition in support of comprehensive policy
action to increase support for the nation's charitable sector, and we
support the written recommendations submitted to this committee by
those organizations. We urge the Committee to lead Congressional action
on policies that are urgently needed, and to seek partnership with the
nonprofit sector to ensure that long-term federal leadership
proactively supports our nation's charitable and philanthropic sectors.
This Committee can support the following action on active proposals
related to tax policy and the nonprofit sector:
Increase charitable giving by reinstating and making permanent
the above-the-line, universal charitable deduction. Federal COVID-19
Relief recognized how important giving incentives are by including in
the CARES Act a $300 ``universal charitable deduction'' available to
all taxpayers and extending that provision in the COVID-19 Economic
Relief Bill along with allowing up to a $600 deduction for joint filers
in 2021. Expanding and making this provision permanent will grow the
capacity of the nonprofit arts sector to support communities. While the
initial impulse to give comes from the heart, studies have repeatedly
shown that charitable giving incentives have a significant impact on
how much and when donors contribute.
Reinstate the ability for individuals who itemize on their taxes
to deduct up to 100% of their adjusted gross income for charitable
contributions, and the ability of corporations to deduct up to 25% of
taxable income.
Enact the Legacy IRA Act, which would expand the Charitable IRA
Rollover to treat donations made by retirees to gift annuity programs
as pre-tax income.
Reinstate the Employee Retention Tax Credit for the fourth
quarter of 2021 and extend its duration, modifying nonprofit
eligibility beyond the current ``gross receipts'' test. Orchestras are
among the many nonprofit employers that have been counting on quarter
four 2021 access to the ERTC to support the decisions they made to
bring employees back on the payroll and increase operating capacity to
serve their communities.
Enact the Artist-Museum Partnership Act, which would encourage
new gifts by living composers and conductors, including original
manuscripts, marked scores, and performance notes. For composers and
conductors considering whether to contribute their works and archives
to a charitable organization or to make them available to private
collectors, the ability to take a fair-market value tax deduction may
be the key incentive that allows the artist to contribute their work to
a nonprofit cultural organization.
Enact the Performing Artist Tax Parity Act of 2021, which would
reinstate deductions for unreimbursed employee business expenses.
Across occupations, comprehensive tax reform passed into law in 2017
eliminated the opportunity to deduct unreimbursed employee business
expenses that exceed 2% of adjusted gross income. For musicians who are
employees, this means that the costs of supplies, instruments,
professional dues, and other expenses essential to employment are no
longer tax-deductible.
Support dedicated relief resources for nonprofit organizations
and their workforce, as proposed in the WORK Now Act.
On behalf of the 1,200 nonprofit orchestras and 400 nonprofit youth
orchestras across the nation, the League of American Orchestras is
incredibly grateful for the leadership from this Committee to examine
ways that the federal government can support our nation's nonprofit
sector. Enhanced federal incentives for charitable giving and
leadership to support the strength and growth of nonprofit
organizations, will support orchestras' workers, operating costs, and
mission-critical activity. Thank you for this opportunity to share ways
in which this Committee and the broader federal government can increase
support for the nonprofit sector.
______
Michigan Nonprofit Association
330 Marshall Street, Suite 200
Lansing, MI 48912
U.S. Senate
Committee on Finance
On behalf of the Michigan Nonprofit Association and the more than
50,000 charitable nonprofits in our state, I write in advance of the
upcoming hearing, ``Examining Charitable Giving and Trends in the
Nonprofit Sector,'' to thank you for your past support for pandemic
relief, to update you on the ongoing challenges that nonprofits are
facing, and to explain the need for targeted relief within the
jurisdiction of the Senate Finance Committee.
In the face of the ongoing public health and economic crises, too many
Michigan nonprofits are still struggling to meet increased demands for
services, confronting a combination of decreased revenue, expenses that
are higher than pre-pandemic, and nonprofit workforce and volunteer
staffing shortages. See the results of the National COVID-19 Community
Impact Survey \1\ administered by the Federal Reserve System. The
relief provided by Congress made the difference for many organizations
by replacing revenues lost due to declines in individual and corporate
giving, fees for service, and canceled fundraising events. The largest
of these by far was forgivable loans under the Paycheck Protection
Program. More than 6,500 Michigan nonprofits received nearly $1 billion
in forgiven PPP loans in 2020 and 2021, according to Small Business
Administration data.\2\ Those funds saved about 170,000 nonprofit jobs,
the SBA reports, which enabled these organizations to serve our
communities. However, the PPP program and most other pandemic relief
programs have expired, yet the need for, and burdens on, charitable
organizations remain great.
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\1\ https://fedcommunities.org/data/main-street-covid19-survey-
2021/.
\2\ https://www.pandemicoversight.gov/data-interactive-tools/
interactive-dashboards/paycheck-protection-program.
With the above context, we bring to your attention three areas of
challenges that nonprofits are facing and propose tax policy solutions
for your consideration: the lack of resources, the lack of staff, and
the lack of volunteers--all of which are essential to advancing
nonprofit missions.
Charitable Giving Has Not Kept Up
Charitable giving nationwide has not kept up with need and rising
expenses. The 2021 Giving USA report \3\ found that individual giving
decreased by nearly 0.8 percent in 2020 compared with 2019, when one
major donor's contributions are removed from the data. A separate
analysis, the Nonprofit Trends and Impacts 2021 from the Urban
Institute, found that small nonprofits were under particular stress.
``Forty-two percent of organizations with budgets under $500,000
experienced decreased donations in 2020, compared with 29 percent of
organizations with budgets of $500,000 or more.'' Nonprofits that said
donations were essential to their revenue stream were also more likely
to experience decreased donations in 2020. In Michigan, our data show
nonprofits with budgets under $1,000,000 report that financial support
generated by individual donations is down 46 percent. With donations
cut in half, many of Michigan's small nonprofits find themselves in
dire need of financial assistance with only 3 to 6 months of operating
cash on hand.
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\3\ https://store.givingusa.org/pages/annual-subscription.
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Tax Policy Solutions
In the aftermath of virtually every natural disaster since Hurricane
Katrina, Congress has recognized the value of nonprofit relief and
recovery efforts by enacting charitable giving incentives that
encourage some individuals and corporations to help cover some of the
costs of these community-based services. The COVID-19 pandemic and
resulting economic crises have certainly qualified as natural disasters
and Congress--on a bipartisan basis--swiftly enacted giving incentives
for those who itemize and corporations. Recognizing the catastrophic
impact of the health and economic crises, Congress went further by
enacting, and then expanding and extending, the universal charitable or
nonitemizer deduction to ensure that all taxpayers, including those who
claim the standard deduction received a tax benefit for giving back to
their communities by supporting the work of charitable nonprofits.
As a cosponsor of the Universal Giving Pandemic Response and Recovery
Act,\4\ S. 618, you know well the benefits of the nonitemizer
charitable giving incentive. Like you, the Michigan Nonprofit
Association fully endorses this important piece of legislation because
it will further promote giving by all American taxpayers--regardless of
their income--to give to the work of charitable nonprofits, thereby
ensuring that our country retains a strong and independent civil
society. It will also provide needed resources for charitable and
faith-based organizations to continue providing vital services to
families, workers, and communities, especially those critically
impacted by the ongoing pandemic. We ask that you make a strong
statement in support of S. 618 during Thursday's hearing and encourage
your colleagues to join you in supporting this bill to strengthen our
communities.
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\4\ https://www.congress.gov/bill/117th-congress/senate-bill/618/
text?q=%7B%22search%22%
3A%5B%22s618%22%2C%22s618%22%5D%7D&r=1&s=1.
Similarly, we ask that you speak in support of extending the two
additional disaster-relief giving incentives that expired on December
31, 2021--the provision permitting individuals who itemize to deduct
charitable donations up to 100% of their adjusted gross income and the
measure allowing corporations to deduct charitable donations up to 25%
of taxable income.
Nonprofit Workforce Shortages Crisis
One of the greatest challenges that nonprofits of every type of mission
are experiencing is the inability to hire and retain qualified workers.
The Federal Reserve survey, referenced above, found that 40% of
responding organizations reported that staffing levels are down. As of
December 2021, the nonprofit sector was still more than 450,000 short
of pre-pandemic levels, according to the report COVID-19 Jobs Update,
December 2021 \5\ from the Center for Civil Society Studies at Johns
Hopkins University. The report found, ``as of the end of 2021,
nonprofits have recovered approximately 72.1% of the jobs estimated to
have been lost as of May 2020.''
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\5\ https://ccss.jhu.edu/december-2021-jobs/.
This past fall, the National Council of Nonprofits conducted a survey
of the difficulties nonprofits across the country were confronting in
retaining staff and filling vacancies. Three out of five (60%) survey
respondents reported vacancies of between 10% and 30%, according to the
NCN report, The Scope and Impact of Nonprofit Workforce Shortages,\6\
published in December. Another 16% reported vacancies greater than 30%.
Nationwide, nonprofits explained the causes of the vacancies as salary
competition, typically with employers outside the nonprofit sector
(79%) and the inability of potential employees to find childcare (23%).
---------------------------------------------------------------------------
\6\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
The survey responses of Michigan nonprofits make clear that these
workforce challenges are no mere inconveniences; they are hurting the
people the organizations serve. A related challenge is payment
schedules. A nonprofit healthcare provider shared, ``Child Welfare
program consists of taking care of foster care children, licensing of
foster care homes and we have had 50% turn over within the last year
(COVID) and we are not able to find fully licensed social workers to
service our mental health and substance abuse/addiction clients.'' A
Marquette human services provider explained, ``We have significantly
raised our entry wage and created a pay scale for staff,'' adding, ``We
continue to not be able to compete with state wages and benefits for
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the exact same job.''
To another Michigan human service provider, ``The most significant
problem is granted funds are coming in extremely slow.'' In particular,
``Granting municipalities and government agencies have not awarded
funds for the 2021-2022 program year, which began in July 2021.''
Almost needless to say, the nonprofit observed, ``This has hindered our
ability to hire and extend program hours.''
Finally, a professional at an education-focused nonprofit had this
plea: ``Please help to support the concerns within [the nonprofit
policy priorities letter].\7\ As a servant to the community, it is
becoming much more difficult to address the needs of our impoverished
community with limited staffing. Increasing wages at the beginning of a
program year is easy, but the financial struggle is finding funding
throughout the program year for new hires. This would be considered a
financial, unforeseen cost, which has proven to be difficult to
resolve.''
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\7\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-work
force-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advocacy%
20Updates%20%20February%2022%202022&utm_medium=email.
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Tax Policy Solutions
The Michigan Nonprofit Association and dozens of Michigan nonprofits
joined more than 1,500 organizations from all 50 states in signing onto
the recent letter to Congress and the Administration seeking Pandemic
and Workforce Shortage Relief for Charitable Nonprofits.\8\ Among other
things, that letter calls on Congress to address critical staffing
shortages at nonprofits by retroactively restoring the Employee
Retention Tax Credit, as proposed in the bipartisan ERTC Reinstatement
Act (S. 3625) and extending this refundable payroll tax credit through
2022. To the address the unique impact of nonprofit workforce shortages
on individuals and communities, we ask that you modify nonprofit
eligibility under the ERTC beyond the current ``gross receipts'' test
to ensure more nonprofits qualify. We also request that Congress revise
the definition of eligible payroll expenses under the ERTC to include
childcare and education subsidies to reflect the increased costs
charitable organizations experienced as they struggle to maintain or
expand services. We believe this improvement is justified because,
unlike for-profit employers, tax-exempt nonprofits are not currently
able to receive income-tax relief for providing those employee
benefits. Our proposal provides a level of tax fairness and parity that
does not currently exist.
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\8\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-work
force-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advocacy%
20Updates%20%20February%2022%202022&utm_medium=email.
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Volunteers Have Not Returned
A unique aspect of charitable organizations is that they can expand
their impact by leveraging the commitment of armies of volunteers who
are dedicated to the work of nonprofits in their communities. Pre-
pandemic estimates by AmeriCorps \9\ indicate that the volunteerism
rate in Michigan was 29.4%, contributing 185.9 million hours of
service. Nationally and in Michigan, nonprofits reported throughout the
pandemic that volunteerism dropped precipitously. Now, however, as many
businesses return to public operations, many nonprofits still have not
seen their volunteers return to pre-pandemic levels. Volunteering is
still depressed--parents have additional family demands, older
Michiganders and others from vulnerable populations have safety
concerns with returning to in-person volunteering, and in general
people are stressed and have reduced time and energy to volunteer.
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\9\ https://americorps.gov/sites/default/files/document/
Volunteering_in_America_States_508.
pdf.
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Tax Policy Solutions
As discussed in the recent nonprofit letter on policy priorities,\10\
Congress can incentivize volunteerism by eliminating unfair tax
policies. Specifically, we seek an increase in the Volunteer Mileage
Rate for nonprofit volunteer drivers to the business rate (58.5 cents/
mile) for 2022 and the elimination of the tax on mileage reimbursements
up to the business rate. The rapid increase in gas prices means that
many nonprofits will need to reimburse their volunteers for driving on
the charity's behalf. Yet, those drivers will be forced to pay income
tax on any reimbursement rate greater than the volunteer mileage
statutory rate of 14 cents per mile. This existing tax policy, enforced
at both the federal and state levels, imposes a disincentive on all but
the most well-off volunteers. It is unfair, harmful to the missions of
charitable organizations, and must be changed.
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\10\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-
workforce-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advoca
cy%20Updates%20%20February%2022%202022&utm_medium=email.
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American Rescue Plan Act Resources
Before closing, I want to raise an important issue that, while not
within the Finance Committee's jurisdiction, is of critical concern to
the charitable nonprofits in our state. The American Rescue Plan Act
allocated $10.9 billion to governments in Michigan through the
Coronavirus State and Local Fiscal Recovery Fund. The federal
government is showing tremendous trust that governments closest to the
people and their problems are best positioned to decide the best ways
to spend their allocated resources to meet local needs. While available
for many purposes, the statute and Treasury Department regulations make
abundantly clear that governments at all levels may use these funds in
partnership with charitable nonprofits to address many challenges in
our communities. The Michigan Nonprofit Association is actively engaged
in working with state and local officials to ensure the money is
properly invested. We ask that you and your Senate colleagues allow
these ARPA funds to go to the state and local governments as scheduled
so that we may achieve greater impact.
Conclusion
As you consider the issues raised during the Finance Committee hearing,
we ask that you reflect in the important, sustaining work that Michigan
nonprofits performed throughout the pandemic and recognize that our
challenges are far from over. Most for-profit businesses and government
offices have or soon will reopen to something amounting to normal
business. Most charitable organizations--particularly those addressing
the immediate needs of our residents--never had the luxury of closing.
Yet, at this stage in the pandemic when demand for nonprofit services
remains high, Michigan's nonprofits remain short of resources to meet
normal as well as pandemic-related expenses. But we don't just lack
adequate resources; our nonprofits lack the staff and volunteers to
meet the very high needs, which is resulting in waiting lists, denial
of services, and outright closures of local nonprofits. In light of
these compelling challenges, we ask that you champion tax-policy
solutions, at the hearing and in the Senate, that will restore and
enhance the charitable giving incentives and the Employee Retention Tax
Credit and remove tax disincentives for volunteers to support the
missions of nonprofits in their communities.
Sincerely,
Kelley J. Kuhn
President and CEO
______
National Council of Nonprofits
1001 G Street, NW, Suite 700 East
Washington, DC 20001
202-962-0322
councilofnonprofits.org
Statement of Tim Delaney, President and CEO; and
David L. Thompson, Vice President of Public Policy
Charitable nonprofits improve our lives, add vitality to our
communities, contribute to our local and national economies, and
enhance the health of our democracy. But too often, nonprofits are
taken for granted and under-resourced, limiting their ability to
advance their missions.
The National Council of Nonprofits is the largest network of nonprofits
in North America. We focus on the 97% of charitable nonprofits with
budgets under $5 million--food banks, neighborhood health clinics,
community theatres, domestic violence shelters, senior centers, and
more--the organizations whose absence would leave huge voids in their
communities. Working with our core network and other collaborative
partners, we champion, inform, and connect organizations across the
country to get things done for nonprofits and the people and
communities they serve.
Overview
Your constituents and our nation benefit from and depend on local
charitable nonprofits. Those organizations are still struggling under
severe strains as they help our communities through and out of the
worst public-health and economic crises of our lifetimes. Congress
initially enacted tax policies and programs to build a bridge to get
our country, including nonprofits, safely to the other side of the
COVID-19 pandemic. But most of those policies and programs expired
before safety could be reached, in part because surges of the Delta and
Omicron variants prolonged the pandemic, further disrupting lives and
nonprofit operations. The continuing difficulties have made the
unprecedented--and accelerating--nonprofit workforce shortage even more
complex. It is imperative that Congress swiftly restore and revise tax
policies and programs that will enable charitable organizations to
advance their missions on which so many rely.
Multiple Forces Have Put Charitable Nonprofits Under Severe Strains,
Placing Your Constituents at Risk
The public is at risk because nonprofits do not have the resources and
support they need to meet the soaring demands for their services. This
condition predates the pandemic;\1\ the country's dual health and
economic crises have severely exacerbated the problem. Too many
nonprofits are still struggling to meet increased demands for their
services, confronting a combination of both decreased revenues and
higher expenses than pre-pandemic levels. Consequently, extreme burnout
of paid and volunteer staff has created a dangerous nonprofit workforce
shortage. The public cannot afford for Congress to ignore this growing
crisis.
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\1\ https://www.nonprofitimpactmatters.org/site/assets/files/1/
nonprofit-impact-matters-sept-2019-1.pdf.
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The Public's Needs Exceed Nonprofit Capacity
We urge you to consider these alarming trends:
More than 75 percent of the 2,237 charitable nonprofits
responding to an August 2021 nationwide survey by the Federal Reserve
reported that demand for their services had increased over pre-pandemic
levels. See Perspectives from Main Street: The impact of COVID-19 on
communities and the entities serving them,\2\ Federal Reserve Community
Development Staff, Oct. 12, 2021 (separate run of charitable nonprofit
responses).
---------------------------------------------------------------------------
\2\ https://fedcommunities.org/data/main-street-covid19-survey-
2021/.
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Almost half (45 percent) noted a decrease in their ability to
meet those needs.
A quarter (26 percent) of the more than a thousand charitable
nonprofits from all 50 states responding to a late 2021 nationwide
survey by the National Council of Nonprofits reported that demand for
their services had so exceeded their capacity that they had to create a
waiting list that is more than a month long, with some organizations
highlighting that some clients have had to wait years to receive
services. Another 21 percent said they do not have a wait list--
because, without adequate resources, they are no longer accepting new
clients or referrals and have had to turn people away. (Combined, that
is 46 percent unable to meet demands.) See The Scope and Impact of
Nonprofit Workforce Shortages,\3\ National Council of Nonprofits,
December 2021.
---------------------------------------------------------------------------
\3\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
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These results are consistent with what state associations of
nonprofits across the country have documented through their own
statewide surveys \4\ of the pandemic's impact on nonprofits.
---------------------------------------------------------------------------
\4\ https://www.councilofnonprofits.org/data-how-the-pandemic-and-
economic-crises-are-affecting-nonprofits.
The Federal Reserve survey also documented significant financial
strains on charitable nonprofits:\5\
---------------------------------------------------------------------------
\5\ https://fedcommunities.org/data/main-street-covid19-survey-
2021/.
Expenses had increased for nearly three-quarters of the
responding organizations--and that was before inflation shot up to the
current rate of 7.9 percent.
Individual donations and corporate donations were each down for
nearly half of the nonprofits--and significantly down for nearly a
fourth.
Those results are consistent with other recent reports. The Nonprofit
Trends and Impacts 2021 \6\ Research Report from the Urban Institute
found that 40 percent of organizations reported losses in total revenue
for 2020. Smaller nonprofits were under heightened stress. ``Forty-two
percent of organizations with budgets under $500,000 experienced
decreased donations in 2020, compared with 29 percent of organizations
with budgets of $500,000 or more.'' Nonprofits that said donations were
essential to their revenue stream were also more likely to have
experienced decreased donations in 2020.\7\
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\6\ https://www.urban.org/research/publication/nonprofit-trends-
and-impacts-2021/view/full_
report.
\7\ At first glance, two reports suggest that giving increased in
2020 compared with 2019. But when removing MacKenzie Scott's outsized
contributions ($6 billion) to 460 organizations from the data in the
2021 Giving USA report (https://ccss.jhu.edu/december-2021-jobs/),
individual giving decreased by nearly 0.8 percent. The Fundraising
Effectiveness Project [FEP] (https://afpglobal.org/
FundraisingEffectivenessProject) report suggests that the numbers of
donations and donors rose in 2020. However, Ben Miller, Chief Analytic
Officer of Donor Trends and Vice Chair of the FEP, explained when
interviewed, ``An important nuance to the Fundraising Effectiveness
Project's reports is that we are measuring the average increase in
donors and dollars. For 2020, this could be misleading because, while
in total there were more donors and dollars as compared to 2019, the
majority of organizations actually saw decreases in both. While
donations increased by 10.6 percent on average, the median result was
actually a 6.6 percent decrease in donations. Donors increased by 7.3
percent on average, but the median was down by 7.6 percent. This means
that the majority of nonprofits saw declines in both donations and
donors in 2020, even though more people donated more money.'' See The
Data Show What We Already Know: Nonprofit Helpers Need Help (https://
www.nytimes.com/2022/03/10/business/economy/cpi-inflation-february-
2022.html#::text=Inflation%20Rises%20to%207.9%20Percent%20
for%20February%202022%20%2D%20The%20New%20York%20Timeshttps://
www.councilofnon
profits.org/thought-leadership/the-data-show-what-we-know-the-
nonprofit-helpers-need-help), Amy Silver O'Leary, National Council of
Nonprofits, Nov. 23, 2021 (emphasis added).
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Unprecedented--and Dangerous--Nonprofit Workforce Shortages
One of the greatest challenges that nonprofits of every type of mission
are experiencing across the country is the inability to hire and retain
qualified workers. The Federal Reserve survey, referenced above, found
that staffing levels were down for more than 40 percent of the
nonprofits surveyed. Indeed, as recently as December the nonprofit
sector was still more than 450,000 short of pre-pandemic levels,
according to the COVID-19 Jobs Update, December 2021 \8\ from the
Center for Civil Society Studies at Johns Hopkins University. The
report found, ``as of the end of 2021, nonprofits have [only] recovered
approximately 72.1% of the jobs estimated to have been lost as of May
2020.''
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\8\ https://ccss.jhu.edu/december-2021-jobs/.
Yet what was initially considered to be a challenge for nonprofits has
become a crisis due to burdens of the pandemic era. The crisis needs
rapid remedy. To better understand the extent and causes for nonprofits
confronting difficulties in retaining staff and filling vacancies, the
National Council of Nonprofits conducted a survey late last year. A
third of nonprofits (34%) reported job vacancy rates of between 10% and
19%, and a troubling 26% responded that they had job openings for 20%
to 29% of their positions. Another 16% percent reported vacancies
greater than 30 percent. See The Scope and Impact of Nonprofit
Workforce Shortages,\9\ December 2021.
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\9\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Although nonprofits nationwide reported various factors creating
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the difficulties, they identified two predominant causes:
1. Salary competition--four out of five nonprofits (79%)
identified it as a factor. Even those startling numbers do not tell the
full story. Frontline practitioners from across the country shared
their observations about the reasons behind the growing nonprofit
workforce shortages, why they matter in the real world, and how it
affects their communities.
North Carolina human service professional: ``Pay is the
biggest challenge, as many organizations (for profit and nonprofit) are
competing for the same groups of people,'' and ``we can't always
compete with salary, benefits, and hours.''
Texas human service provider: other employers ``are
basically poaching from nonprofits that cannot offer the higher pay.''
Survey participants noticed a distinct change in who is luring
nonprofit employees away:
Massachusetts nonprofit: direct ``competition from retail
sector.''
New York City early childhood center: the City's Department
of Education has its own shortages, and ``as a result, they are
poaching our staff to fill their vacancies.''
Rhode Island family services provider: ``The inability to
compensate staff adequately, based on their education and experience,
often leads to high staff turnover rates, low workplace morale, and
high levels of burnout among providers.''
Maryland nonprofit about government contract/grant problems:
``We cannot provide the same level of service, let alone meet current
increased demands due to COVID, without an increase that allows us to
cover increased costs, the need to raise salaries and bring on new
staff.'' Consequently, ``our ability to meet the demand for our
services continues to decrease every year.''
The result is that nonprofits are suffering a brain and
experience drain as longtime professionals leave the sector--and the
missions they support--because the under-resourced nonprofits cannot
compete. That drain, and the inability of nonprofit to replace staff,
results too often in the public facing delayed or complete loss of
services.
2. Inability to find child care--a quarter (23%) identified it as
a factor. Nonprofit and other employers also face a significant
challenge in attracting and retaining job candidates due to the lack of
availability of high-quality, affordable, and available child care.
Because women comprise 66 percent of the nonprofit workforce, they are
disproportionately impacted by the lack of child care, in part due to
the outsized caregiving burden they carry for their households and
communities. As employers and, in many cases, child care providers,
charitable nonprofits are deeply concerned that the lack of child care
and equitable wages are impediments to all; as one expert said on a
recent Federal Reserve webinar, ``There is no recovery of the economy
without child care.'' Maintaining quality, safety and enriching
environments that nurture children is costly. Yet, nonprofit child care
providers are reluctant to pass on higher costs to families because the
price of child care already makes this critical service out of reach
for too many families. Therefore, we urge Congress to provide robust
funding to expand access to high quality child care that is affordable,
dependable, and accessible, and supports livable wages and skill-based
training for nonprofit child care professionals.
A Precipitous Decline in Volunteerism
The brewing crisis of the nonprofit workforce shortage is not just with
paid nonprofit employees. The shortage extends to nonprofits' volunteer
workforce.
Many types of nonprofits rely on volunteers, such as drivers delivering
meals to homebound individuals. Yet volunteerism has fallen
dramatically since the pandemic hit, thus limiting the ability of
organizations to continue providing pandemic relief and recovery. The
pandemic kept, and is keeping, many long-term volunteers away as they
stopped donating their time and talent out of concern for public health
(their own, and to avoid becoming a carrier who could unknowingly
transmit COVID-19).
For a variety of reasons, volunteers have not been returning. Parents
have additional family demands, older individuals and others from
vulnerable populations have safety concerns with returning to in-person
volunteering, and in general people are stressed and have reduced time
and energy to volunteer.
An old tax policy is also prohibiting volunteers from returning and new
volunteers from stepping forward. Nonprofits have begun hearing from
more people who used to donate their time that they cannot afford to
volunteer because of the high cost of gas. This week, the average price
of a gallon of gasoline is $4.43, following Russia's invasion of
Ukraine, according to USA Today.\10\ When Congress established the
statutory 14 cents per mile as the Volunteer Mileage Rate in 1997, the
average cost of gasoline was $1.23, according to the U.S. Department of
Energy.\11\ Yet for a quarter century, Congress has never gone back to
increase that mileage rate. See generally Charitable Volunteers Mileage
Reimbursement,\12\ Congressional Research Service, RS20296, May 30,
2008.
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\10\ https://www.usnews.com/news/us/articles/2022-03-13/average-us-
gas-price-spikes-79-cents-over-2-weeks-to-4-43.
\11\ https://www.energy.gov/eere/vehicles/fact-888-august-31-2015-
historical-gas-prices.
\12\ https://www.everycrsreport.com/files/
20080530_RS20296_50efe63efb9b50d43b510d7db6c4
b7555051709f.pdf.
When volunteers are no longer available, the only choices for
charitable nonprofits are to stop providing the services or try to hire
people to fill cover those shifts. As a North Carolina human services
nonprofit reported, ``We are finding that volunteers are not returning,
resulting in a need to hire for positions previously filled by
volunteers.'' But that returns to the challenge of raising adequate
funds. As a Minnesota arts organization wrote, ``Because history
museums grew out of volunteer-only organizations (and many still are
volunteer-only), we have had difficulty as a field finding sufficient
funding streams to hire the staff we truly need to operate.''
Profound Risks for the Public When Nonprofits Cannot Operate at Full
Capacity
Participants in the National Council of Nonprofits workforce survey
made clear their views that the toll on community members' lives caused
by workforce shortages is significant and regrettable. Among the
nonprofits reporting at least a one-month waiting list for services is
a domestic violence shelter in Montana. Another organization reported
having as many as 1,500 children on their waiting list. ``We are having
difficulty filling child care positions--educators/teachers,'' a
Vermont human service provider shared. ``This has caused us to close
classrooms, consolidate and put burden and pressure on our existing
staff,'' they lamented, adding ``the alternative is not serving
families who need child care.''
Many organizations explained that, due to job vacancies, they had been
forced to limit services and reduce the number of individuals they
could assist. One stated, ``We do not keep a wait list, but we serve
less than 5% of those calling for shelter or rent and utility
assistance.'' Another acknowledged, ``We have had to close for business
several times during the past 9 months due to being at capacity.''
The human toll extends beyond people needing services; it often
includes nonprofit employees and volunteers working beyond their
sustainable capacities to ensure services continue to be provided to as
many people as possible. As an Illinois nonprofit leader observed when
completing the survey, ``The stress of covering vacant positions on top
of low pay is overwhelming,'' with ``some staff covering
responsibilities for three other positions simultaneously.'' So, being
forced to cut back is not due to a lack of will or dedication. Rather,
there are simply human limitations. A human services provider in Oregon
shared, ``Our frontline workers are exhausted and under stress.'' Added
another, ``The nature of the work we do in providing support to trauma
survivors and the hours we operate take a toll on staff during the best
of times.'' They continued with insights on the reality of our times:
``During a pandemic, where staff have to juggle personal and
professional challenges in new and wildly different ways, the rates of
burnout are exponential.''
In summary, nonprofits facing job vacancies reported a number of coping
techniques ranging from ``cutting programing to focus on client service
delivery'' to having to ``turn people away many times in a month.''
Some described how they adjusted days and times to continue providing
at least some services. Still others have been forced to refuse added
caseloads. Too many organizations in the nonprofit community maxed out
on their capacity long ago. Something must be done, for nonprofits and
for the public relying on those nonprofits.
_______________________________________________________________________
The Context: How We Got Here
Every one of your constituents benefits from the work of America's 1.3
million charitable nonprofits, whether directly or indirectly:
nonprofits protect, feed, heal, shelter, educate, inspire, enlighten,
nurture, and console.
When the pandemic first struck, small and midsize nonprofits embedded
in local communities mobilized to offer critical support. They were
determined, innovative, and--ultimately--exhausted doing so much more,
for so many more people, for much longer than anyone imagined.
The pandemic initially wiped out more than 1.6 million nonprofit jobs.
Simultaneously, the public's reliance on and demand for nonprofit
services skyrocketed for hundreds of thousands of nonprofits while
revenues plummeted for most, straining too many organizations past
capacity and jeopardizing delivery of drastically needed services.
In 2020, recognizing how heavily your constituents were and would be
relying on charitable nonprofits to provide relief, Congress supported
the work of nonprofits by making charitable nonprofits eligible for
Paycheck Protection Program (``PPP'') loans, including nonprofits in
the Employee Retention Tax Credit (``ERTC''), providing (limited)
unemployment insurance relief, and enacting enhanced charitable giving
incentives.
But then Congress closed the PPP program in May 2021, ended
unemployment relief to workers and employers before Labor Day,
retroactively stopped the ERTC program at the end of September, and let
all of the enhanced charitable giving incentives expire on December 31.
In hindsight, Congress ended those programs prematurely, because the
COVID-19 pandemic--fueled by the Delta and Omicron variants that surged
after most of the relief programs ended--continues to ravage our
nation's health, economy, and recovery.
Consequently, the sudden removal of relief programs--while pandemic-
related economic struggles continue--has hit nonprofits especially
hard, once again threatening the ability of nonprofits to operate and
deliver services on which your constituents and our nation rely.
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How to Move Forward: Bipartisan Policy Solutions Exist
The solutions identified below are neither novel nor entirely our own.
Rather, more than 1,500 charitable nonprofits from all 50 states and
the District of Columbia have signed the attached joint Nonprofit
Community Letter on the Pandemic and Workforce Shortage Relief for
Charitable Nonprofits.\13\
---------------------------------------------------------------------------
\13\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-
workforce-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Action%20Alert%20
%20Nonprofit%20Pandemic%20and%20Workforce%20Shortage%20Relief&utm_medium
=email.
Those 1,500+ organizations call on Congress and the President to enact
legislation that would help charitable nonprofits overcome three
obstacles limiting their ability to advance their missions of helping
people in local communities: lack of resources, lack of staff, and lack
of volunteers. That letter identifies multiple policy solutions within
each category. The Senate Finance Committee has direct jurisdiction on
the seven enumerated solutions below.
Generate Resources to Meet the Needs of Relief and Recovery
Charitable giving is down, and giving incentives enacted by Congress
have expired. For charitable nonprofits to have the resources they need
to continue to operate and provide needed disaster relief and recovery
in local communities, Congress needs to restore and improve tax
incentives for charitable giving. We call on Congress to give priority
to the three disaster relief charitable giving incentives that expired
at the end of 2021:
1. Renew the universal charitable (non-itemizer) deduction at
least through 2022 and improve it by significantly increasing the cap
on the deduction, as proposed in the bipartisan Universal Giving
Pandemic Response and Recovery Act (S.618/H.R.1704).
2. Reinstate the 100% AGI cap on individual donations to permit
individuals who itemize to deduct charitable donations up to 100% of
their adjusted gross income.
3. Reinstate the 25% income tax cap on corporate donations to
allow corporations to deduct charitable donations up to 25% of their
taxable income.
Address Critical Staffing Shortages
Charitable organizations need relief from the devastating and well-
documented nonprofit workforce shortage.\14\ Specifically, we ask that
Congress reinstate and improve the Employee Retention Tax Credit (ERTC)
in these ways:
---------------------------------------------------------------------------
\14\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-workforce-shortages-report.pdf.
4. Retroactively restore the ERTC, as proposed in the bipartisan
ERTC Reinstatement Act (H.R. 6161/S. 3625) and extend this refundable
---------------------------------------------------------------------------
payroll tax credit through 2022.
5. Modify the ERTC eligibility for nonprofits beyond the current
``gross receipts'' test to ensure more nonprofits qualify as a way to
address the impact of the unique impact of nonprofit workforce
shortages on individuals and communities.
6. Revise the definition of eligible payroll expenses under the
ERTC to include child care and education subsidies to reflect the
increased costs charitable organizations experienced as they have
struggled to maintain or expand services. We believe this improvement
is justified because, unlike for-profit employers, tax-exempt
nonprofits are not currently able to receive income-tax relief for
providing those employee benefits. This proposed revision provides a
level of tax fairness and parity that does not currently exist.
Promote the Return of Volunteers to Nonprofits
Congress has not adjusted the Volunteer Mileage Rate since setting it a
quarter century ago. On behalf of volunteers, the people they serve,
and charitable nonprofits who depend on volunteers willing to make a
difference in the lives of others, we urge Congress:
7. Eliminate the unfair tax policy that for too long has
effectively discouraged individuals from volunteering and replace the
14 cents/mile volunteer mileage rate by matching it to the business
rate (currently 58.5 cents/mile). Also, eliminate the income tax on
mileage reimbursements by nonprofits up to the business rate so
individuals are not penalized for volunteering.
Conclusion
The charitable nonprofit sector is the backbone of our communities. We
continue to face unprecedented challenges as we assist you and the
American people in providing pandemic relief and economic recovery. We
call on Congress to take action now to alleviate the many challenges
addressed in this Statement. The tax policies proposed here, in the
attached nonprofit community letter, and by charitable organizations
throughout the country are sought for the benefit of the people we
collectively serve. The networks of the National Council of Nonprofits
stand ready to answer questions and work with you to advance solutions
to our communities needs.
Attached: Nonprofit Community Letter on the Pandemic and Workforce
Shortage Relief for Charitable Nonprofits, https://
www.councilofnonprofits.org/sites/default/files/documents/nonprofit-
pandemic-workforce-shortage-relief-letter.pdf?utm_source=
sendinblue&utm_campaign=Action%20Alert%20%20Nonprofit%20Pandemic%20and
%20Workforce%20Shortage%20Relief&utm_medium=email (signed by more than
1,500 nonprofits from all 50 states and DC).
______
National Health Council
1730 M St., NW, Suite 500
Washington, DC 20036-4561
(202) 785-3910
https://nationalhealthcouncil.org/
Statement of Randall L. Rutta, Chief Executive Officer
Chairman Wyden, Ranking Member Crapo, and Members of the Committee on
Finance, on behalf of the National Health Council (NHC), I am writing
to share our perspective on charitable giving trends and potential
policy solutions to strengthen the nonprofit sector, one of the most
vital employment sectors, creating good-paying jobs and providing
needed services and supports to the American public.
Background on the NHC
Created by and for patient organizations more than 100 years ago, the
National Health Council (NHC) brings diverse organizations together to
forge consensus and drive patient-centered health policy. We promote
increased access to affordable, high-value, sustainable health care.
Made up of more than 145 national health-
related organizations and businesses, the NHC's core membership
includes the nation's leading patient organizations. Other members
include health-related associations and nonprofit organizations
including the provider, research, and family caregiver communities; and
businesses representing biopharmaceutical, device, diagnostic, generic
drug, and payer organizations. To learn more about the National Health
Council, visit https://www.nationalhealthcouncil.org.
We thank you for the opportunity to submit our statement ahead of the
Congressional hearing and look forward to providing further support to
the nation's nonprofit sector, particularly the patient advocacy
community.
Importance of the Patient Advocacy Community
Charitable nonprofits are essential to our country's economic and
social well-being. The COVID-19 emergency has highlighted the
importance of nonprofit organizations as they have risen to the
challenge of responding to the health and other trials the pandemic has
presented. The patient advocacy community has particularly stepped-up,
providing services and information to people with chronic conditions
and disabilities as well as advocating for the health and safety needs
of their communities. However, the pandemic has also presented many
challenges for patient organizations. These include reduced giving,
cancellation of fundraising events and meetings that are necessary for
organization's financial health, a decreased workforce, loss of
volunteers, and more. As we emerge from the pandemic, we urge Congress
to undertake efforts to both help the nonprofit community recover from
the effects of the last two years as well as address issues affecting
nonprofits that existed before the pandemic.
Charitable Giving Incentives
Incentives for charitable giving are needed more than ever as
nonprofits respond to the health and economic crises and will be
critical in the future as patient organizations play an essential role
in recovery efforts.
In 2018 the standard deduction was doubled, which resulted in a
significant decrease in the number of taxpayers choosing to itemize
their deductions. This, in turn, disincentivized charitable giving,
resulting in reduced nonprofit revenue. Individual giving declined 3.4%
in 2018 adjusted for inflation, according to Giving USA 2019: The
Annual Report on Philanthropy for the Year 2018.\1\ We are grateful for
the temporary increase in the charitable giving deduction above the
standard deduction in COVID relief legislation. This increase
incentivizes giving by small donors, who are the backbone of many
patient advocacy organizations. We urge Congress and the Administration
to renew the universal charitable (deduction for non-itemizers and
significantly increase the cap on the deduction, as proposed in the
bipartisan Universal Giving Pandemic Response and Recovery Act (S.618/
H.R.1704). Similarly, we call on policymakers to extend two additional
disaster-relief giving incentives that expired on December 31, 2021--
the provision permitting individuals who itemize to deduct charitable
donations up to 100% of their adjusted gross income and the measure
allowing corporations to deduct charitable donations up to 25% of
taxable income.
---------------------------------------------------------------------------
\1\ https://givingusa.org/.
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Addressing the Nonprofit Workforce
The nonprofit sector is the third largest employment sector in the
country. The economic toll of COVID-19 is clear and has a direct impact
on the ability of nonprofits to play the vital role they fulfill in our
communities. As of December 2021, there are 450,000 fewer employees in
the nonprofit sector as charitable organizations report significant
difficulties retaining staff and filling vacancies. The impact of the
shortages can be seen in virtually every community as nonprofits are
forced to restrict needed services, institute waiting lists, or close
operations entirely. We call on Congress to retroactively restore the
Employee Retention Tax Credit, as proposed in the bipartisan ERTC
Reinstatement Act (H.R. 6161/S. 3625), extend this refundable payroll
tax credit through 2022. We also ask Congress to modify nonprofit
eligibility beyond the current ``gross receipts'' test and definition
of eligible payroll expenses to include child care and education
subsidies to reflect the increased costs charitable organizations
experienced as they struggle to maintain or expand services to meet
local needs throughout the health and economic crisis. In addition, we
ask that any relief package should also include core components of the
Work Opportunities and Resources to Keep Nonprofit Organizations Well
Act, or WORK NOW Act (S. 740/H.R. 1987), which would infuse funds into
the nonprofit community across the country to get people back to work
and make sure nonprofits are able to meet the needs of the populations
they serve.
Conclusion
The NHC would like to thank the Committee on Finance for their support
of the nonprofit community. The NHC is ready to work with Congress in
any capacity necessary on the issues pertaining to the health of
nonprofits. Thank you for the opportunity to provide the perspective of
the NHC and, by extension, millions of people with chronic conditions
and disabilities in the U.S.
______
National Taxpayers Union
122 C Street, NW, Suite 650
Washington, DC 20001
Phone: (703) 683-5700
Fax: (703) 683-5722
ntu.org
March 16, 2022
The Honorable Ron Wyden The Honorable Mike Crapo
Chair Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
Dear Chair Wyden, Ranking Member Crapo, and Members of the Committee:
On behalf of National Taxpayers Union (NTU), the nation's oldest
taxpayer advocacy organization, we write in regard to your March 17
hearing, ``Examining Charitable Giving and Trends in the Nonprofit
Sector.''\1\ As a 501(c)(4) nonprofit organization, NTU is directly
affected by Congressional efforts to change or reform the federal
government's policy treatment of charitable giving--as is NTU's
research arm NTU Foundation, a 501(c)(3) nonprofit organization.
---------------------------------------------------------------------------
\1\ United States Senate Committee on Finance. ``Examining
Charitable Giving and Trends in the Nonprofit Sector.'' March 2022.
Retrieved from: https://www.finance.senate.gov/hearings/examining-
charitable-giving-and-trends-in-the-nonprofit-sector (accessed March
15, 2022.)
NTU has also advised Members of Congress and their staff on a variety
of tax policy issues, including the tax treatment of nonprofit
organizations, for decades, and we work with dozens of organizations
across the ideological spectrum that share our nonprofit status. In
other words, NTU has expertise in the subject of the Committee's
hearing and would be significantly impacted by any proposals that arise
---------------------------------------------------------------------------
from this hearing.
Specifically, we have endorsed a number of proposals that we believe
would make it easier for nonprofit organizations to carry out their
missions and for Americans to freely and robustly support those
missions. We have also done extensive policy research and issue
advocacy with regards to conservation easement tax deductions, a
possible topic at the Committee's hearing, and have also
NTU Reform Recommendations
Notwithstanding our concerns with proposals to retroactively increase
taxes and penalties in the administration of certain charitable
deductions (outlined further below), NTU has offered and/or endorsed
several policy proposals in recent years that we believe have
bipartisan potential in the nonprofit and charitable sectors.
Each of these proposals would either make it easier for nonprofits to
carry out their important missions, either by making it easier for
Americans to contribute to nonprofit organizations of their choice or
by making it easier for nonprofits to comply with a complex and ever-
changing tax code.
When Congress considered extending the charitable contribution
deduction for non-itemizers last year, NTU shared some of our concerns
and instead pointed to our support for the bipartisan Everyday
Philanthropist Act from Sens. Ben Sasse (R-NE) and Tammy Baldwin (D-
WI), and Reps. Vern Buchanan (R-FL) and Tom Souzzi (D-NY).
As we wrote in December 2021:
While this provision [to provide a charitable contribution
deduction for non-itemizers] may be well-intentioned, NTU
believes there are better alternatives to encourage charitable
giving in a fiscally responsible manner. One such framework
could be the one proposed in the Everyday Philanthropist Act
(H.R. 4585), introduced by Representatives Vern Buchanan (R-FL)
and Tom Souzzi (D-NY). Similar to Flexible Spending Accounts
(FSAs) that allow Americans to fund medical expenses on a pre-
tax basis, this bipartisan legislation would allow workers to
utilize Flexible Giving Accounts up to $2,700 of their annual
pre-tax earnings. As NTU President Pete Sepp explained, ``the
legislation draws upon the successful infrastructure that has
already been established to support Flexible Spending Accounts,
which were created by law in 1978 and have subsequently been
refined by IRS guidance.'' While there are likely other
alternatives to the $300 above line deduction, this is one
option that would support charitable giving and protect
taxpayers' privacy.\2\
---------------------------------------------------------------------------
\2\ Lautz, Andrew; and Yepez, Will. ``Not All Tax Extenders Are
Created Equal--2021.'' NTU, December 1, 2021. Retrieved from: https://
www.ntu.org/publications/detail/not-all-tax-extenders-are-created-
equal-2021#h.qe2pfuaeq87q.
Indeed, our support for the Everyday Philanthropist Act--which is
sponsored by a Member of this Committee, Senator Sasse--is based in
part on the ongoing need to protect the privacy of donors and
taxpayers, as we noted in an August 2020 support letter for the
---------------------------------------------------------------------------
legislation:
Additionally, [the Everyday Philanthropist Act] augments
administrability in the sense that if they so choose, employers
can provide part of the framework for taxpayers to make
donations to charities whether in place of, or as a complement
to, any other tax-deductible contributions they may wish to
make on their returns. The Flexible Giving Accounts envisioned
in the bill should effectively be less susceptible to audit
because of the documentation trail they establish, giving some
peace of mind to those taxpayers who opt solely for making
gifts directly out of their employer-provided compensation.\3\
---------------------------------------------------------------------------
\3\ Sepp, Pete. ``Letter of Support for the Everyday Philanthropist
Act.'' NTU, August 10, 2020. Retrieved from: https://www.ntu.org/
publications/detail/letter-of-support-for-the-everyday-philanthropist-
act.
NTU also believes that Congress could improve tax administration and
compliance for the nonprofit sector, a particularly important
consideration given many nonprofit organizations are small and/or
---------------------------------------------------------------------------
resource-constrained.
In January 2022, we wrote to Members of this Committee on ways Congress
could simplify and reform the filing process surrounding Form 990.\4\
We recommended:
---------------------------------------------------------------------------
\4\ Sepp, Pete. ``Congress Should Explore Form 990 Reform,
Simplification in 2022.'' NTU, January 31, 2022. Retrieved from:
https://www.ntu.org/publications/detail/congress-should-explore-form-
990-reform-simplification-in-2022.
Revisiting the cash flow and asset filing thresholds for the
Form 990-EZ and the long Form 990, which have not been adjusted for
more than a decade, and pursuing additional opportunities to improve
the filing process for nonprofit organizations;
Examining the rationale for both expanded and reduced filing
requirements for different areas of the nonprofit sector, where
treatment is sometimes unequal;
Giving specific consideration to a comprehensive IRS report on
improving the taxpayer experience--required by the Taxpayer First Act--
that would, if certain reforms are enacted, directly affect nonprofit
organizations; and
Examining state-level developments affecting nonprofits that
could afford opportunities for harmonization and cooperation at the
federal level.
Conservation Easement Deductions
One area of charitable giving tax policy the Committee may re-explore
today (and highlighted in a JCT document prepared for the hearing)
encompasses the Section 170(h) deduction. As part of NTU's longstanding
work on tax administration, we have amassed considerable experience in
this area that may interest the Committee. Why should this be the case,
given the deduction's relatively minor revenue impact?
For one, the Section 170(h) deduction has ably fulfilled bipartisan
Congressional intent by encouraging conservation of land and historic
structures through private management--a far more cost-efficient method
for taxpayers than outright federal ownership of these properties.
Second, and more important from our perspective, despite continuous
statements from the IRS and Members in support of 170(h), detrimental
actions against the deduction have spoken louder than benign words.\5\
---------------------------------------------------------------------------
\5\ For background, see: Hickman, Bryan. ``Environmental Tax
Deduction at Risk Due to Overzealous IRS.'' NTU, July 29, 2019.
Retrieved from: https://www.ntu.org/publications/detail/environmental-
tax-deduction-at-risk-due-to-overzealous-irs; See also: Sepp, Pete.
``Shortsighted: How the IRS's Campaign against Conservation Easement
Deductions Threatens Taxpayers and the Environment.'' NTU, November 29,
2018. Retrieved from: https://www.ntu.org/publications/page/
shortsighted-how-the-irss-campaign-against-conservation-easement-
deductions-threatens-taxpayers-and-the-environment.
Over our 50-plus-year history, we have encountered instances of tax law
enforcement against small groups of taxpayers that have an outsized
impact on the entire filing population (e.g., the expansion of summons
authority as well as designating cases for litigation). In our recent
memory, none have exceeded the collateral damage inflicted on the
system of tax administration more than the Service's pursuit of what it
calls ``syndicated conservation easement transactions'' since the
---------------------------------------------------------------------------
issuance of a listed transaction notice in 2016. This includes:
Retroactivity. Although issued in late 2016, Notice 2017-10 has
been the basis of a near-100 percent IRS audit rate of partnership-
based conservation easement transactions, some dating back many years
prior. Audits are, by their nature, backward-looking, yet they are
normally confined to establishing whether a taxpayer faithfully
complied with laws, rules, and other guidance that were firmly anchored
in place during the year for which the examination was launched.
Current IRS audits of partnership easements are often based on the
Service's shifting interpretations of laws and rulings, some of them
upending decades of established understanding of how Section 170(h)
deductions should be structured. Some legislation in Congress would
effectively ratify and validate this flawed approach.
Arbitrary Litigation Strategies. Going with the Service's
extremely aggressive assertion of retroactive application of its
shifting positions in audits has been its similarly fluid stance in
court. The resulting caseloads have now strained to the breaking point
a tax jurisprudence system that is simultaneously bearing the
administrative fallout of the pandemic. The first wave of IRS lawsuits
challenging Section 170(h) deductions tended to center on the appraised
value of the conservation easements underlying the taxpayers' claims.
Yet, after a string of court losses where the government fatuously
argued zero or minimal value to all the easements under scrutiny,
further waves of IRS litigation made far more exotic arguments against
``foot faults'' involving highly technical details of easement
agreements themselves--details which the entire conservation and
historic preservation communities had long regarded as settled
features. As David Wooldridge, an attorney representing taxpayers in a
conservation easement case, Belair Woods, LLC, noted, ``Proceeds
clauses similar to the one in Belair appear in most conservation
easement deeds that were granted prior to IRS raising this issue in
Rose Hill, and many granted afterwards. These include the so-called
syndicated conservation easements, but they also include most easements
that would be considered `traditional.' The Service's position
therefore would invalidate easement deductions for a majority of
existing conservation easements, both traditional and `syndicated.'
''\6\ This should be unacceptable to thoughtful policymakers.
---------------------------------------------------------------------------
\6\ Reilly, Peter J. ``Conservation Easements: Is IRS Burning the
Forest in Order to Save It?'' Forbes, August 5, 2020. Retrieved from:
https://www.forbes.com/sites/peterjreilly/2020/08/05/conservation-
easementsis-irs-burning-the-forest-to-save-it/?sh=617850624904
(accessed March 16, 2022.)
---------------------------------------------------------------------------
Taxpayer Rights Reversals. Throughout NTU's history, we have
witnessed the development of IRS tactics intended to target one
perceived problem which evolved into widespread use. In its zeal to
scrutinize taxpayers claiming 170(h) deductions, the IRS has trampled
on key protections that NTU has actively championed for many years,
including supervisor approval requirements for penalty determinations,
due process for appraisers, access to independent administrative
appeals, the acknowledgment of facts process for information document
requests, confidentiality of communication between taxpayers and
advisors, and Administrative Procedure Act (APA) conventions in
crafting guidance. As a leading advocate of no fewer than five
significant taxpayer protection bills signed into law since 1988, NTU
implores you to consider this rising toll on the good work of your
predecessors in establishing procedural balance for enforcement of our
tax laws.
Even as they criticized so-called ``syndicated transactions'' in an
August 2020 report both the Chair and Ranking Member of this Committee
recognized Section 170(h) as ``an important tool for the preservation
of our environment'' and ``a program that's critical to preserving open
lands.''\7\ If these statements are to hold true today, then Congress
can make calibrations to the law that will uphold 170(h), protect
taxpayers, and serve the government's long-term interests. A media
account in December 2021 seemed to indicate that lawmakers might
consider 170(h) changes that would be prospective in nature; if true,
this would represent major progress toward a rational response. Other
steps, which we have often recommended, include:
---------------------------------------------------------------------------
\7\ United States Senate Committee on Finance. ``Finance Committee
Releases Report on Syndicated Conservation-Easement Transactions.''
August 25, 2020. Retrieved from: https://www.finance.senate.gov/
chairmans-news/finance-committee-releases-report-on-syndicated-
conservation-easement-transactions (accessed March 16, 2022.)
A legislative branch directive for the IRS to develop ``safe
harbor'' guidance surrounding easement deduction structures (a process
the National Taxpayer Advocate has recommended in reports to Congress,
and which Treasury Secretary Yellen expressed interest in pursuing
during her 2021 confirmation hearing);
Creation of an expert panel to resolve complex questions of
valuation in easements, modeled after a similar body created to provide
clarity for donations of art;
Follow-on legislation that would clarify and require vigorous
implementation of the Taxpayer First Act of 2019, including a
taxpayer's right to appeal; and
Where possible, adopting by statute the recommendations for
conservation easement deductions offered through the IRS Advisory
Council through a detailed report in 2009. Given the recent Oakbrook
ruling, and the prospect for litigation in this space the government
may lose, Congress might better focus its attention on clarifying
directly the terms of a legitimate easement agreement as well as
subjecting the IRS to prudent notice and comment requirements than
seeking punitive legislation driven by prospective (and tenuous)
revenue scores.
As we have written before, solving the administrative issues that have
arisen under Section 170(h) in a fair, responsible, and consistent
manner would serve the government, taxpayers, and practitioners far
better than retroactive, punitive legislation giving cover to an IRS
that has lost all perspective on this area of law--and, in the process,
threatening taxpayers who will never even contemplate claiming
conservation easements.
We appreciate your consideration of NTU's research and reform
recommendations on the important subject of your March 17 hearing.
Should you have any questions, we are at your service.
Sincerely,
Pete Sepp
President
Andrew Lautz
Director of Federal Policy
______
NH Center for Nonprofits
194 Pleasant Street, Suite 14
Concord, NH 03301
Tel: 603-225-1947
The Honorable Margaret Wood Hassan
U.S. Senate
Washington, DC 20510
March 14, 2022
Dear Senator Hassan:
Thank you for your ongoing leadership and advocacy for the nonprofit
sector in New Hampshire. In advance of the upcoming Senate Finance
hearing, ``Examining Charitable Giving and Trends in the Nonprofit
Sector,'' I am writing to update you on the ongoing challenges that
nonprofits are facing, and to explain the need for targeted relief
within the jurisdiction of the Senate Finance Committee.
As you know, relief packages that you helped secure sustained New
Hampshire's nonprofit sector during the pandemic. The largest of these
by far was forgivable loans under the Paycheck Protection Program.
According to Small Business Administration data,\1\ nearly 1,500 New
Hampshire nonprofits received almost than $270 million in forgiven PPP
loans in 2020 and 2021.
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\1\ https://www.pandemicoversight.gov/data-interactive-tools/
interactive-dashboards/paycheck-protection-program.
However, PPP has expired and the nonprofit sector is now operating
within an environment of increased demand for services, a significant
labor shortage including a lack of volunteers, and increased
operational costs. Given this context, we ask you to support policy
solutions outlined herein to support nonprofits in the Granite State.
Nonitemizer Charitable Giving Incentive
We are grateful for your co-sponsorship of the Universal Giving
Pandemic Response and Recovery Act,\2\ S. 618. The NH Center for
Nonprofits fully endorses this important piece of legislation because
it will further promote giving by all taxpayers, regardless of their
income, to donate to charitable nonprofits. We ask that you consider
speaking in support of S. 618 during Thursday's hearing and encourage
your colleagues to join you in supporting this bill.
---------------------------------------------------------------------------
\2\ https://www.congress.gov/bill/117th-congress/senate-bill/618/
text?q=%7B%22search%22%
3A%5B%22s618%22%2C%22s618%22%5D%7D&r=1&s=1.
Similarly, we ask that you advocate for the extension of two additional
disaster-
relief giving incentives that expired on December 31, 2021: the
provision permitting individuals who itemize to deduct charitable
donations up to 100% of their adjusted gross income; and the measure
allowing corporations to deduct charitable donations up to 25% of
taxable income.
Employee Retention Tax Credit
Again, thank you for sponsoring the ERTC Reinstatement Act, S. 3625.
The NH Center for Nonprofits joined more than 1,500 organizations from
all 50 states in signing onto the recent letter to Congress and the
Administration seeking Pandemic and Workforce Shortage Relief for
Charitable Nonprofits.\3\ Among other things, that letter calls on
Congress to address critical staffing shortages at nonprofits by
supporting your bill. To the address the impact of nonprofit workforce
shortages, we ask that you modify nonprofit eligibility under the ERTC
beyond the current ``gross receipts'' test to ensure more nonprofits
qualify. We also request that Congress revise the definition of
eligible payroll expenses under the ERTC to include child care and
education subsidies to reflect the increased costs charitable
organizations experienced as they struggle to maintain or expand
services.
---------------------------------------------------------------------------
\3\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-
workforce-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advoca
cy%20Updates%20%20February%2022%202022&utm_medium=email.
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Volunteerism Incentives
As discussed in the recent nonprofit letter on policy priorities,\4\
the decline of volunteerism is having an adverse impact on the work of
nonprofits. Pre-pandemic estimates by AmeriCorps indicate that the
volunteerism rate in New Hampshire was 35.7%, contributing 36.6 million
hours of service. Nationally and in New Hampshire, nonprofits reported
that volunteerism dropped precipitously. Congress can help incentivize
volunteerism by increasing the Volunteer Mileage Rate for nonprofit
volunteer drivers to the business rate (58.5 cents/mile) for 2022 and
eliminate the tax on mileage reimbursements. The existing policy of low
and taxable reimbursements continue to hamper nonprofits as they seek
to restore and incentivize volunteerism.
---------------------------------------------------------------------------
\4\ https://www.councilofnonprofits.org/sites/default/files/
documents/nonprofit-pandemic-
workforce-shortage-relief-
letter.pdf?utm_source=sendinblue&utm_campaign=Nonprofit%20Advoca
cy%20Updates%20%20February%2022%202022&utm_medium=email.
Please do not hesitate to reach out to the NH Center for Nonprofits if
we can support you in your advocacy and leadership for policies that
strengthen the nonprofit sector that, in turn, strengthen New Hampshire
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communities.
Sincerely,
Kathleen Reardon, CEO
______
Nonprofit Alliance
1319 F Street, NW, #700
Washington, DC 20004
(202) 516-5886
March 17, 2022
Dear Chairman Wyden, Ranking Member Crapo, and Members of the
Committee:
We write to you on behalf of our nearly 300 member organizations
representing the nonprofit sector urging you to renew and increase the
Universal Charitable Deduction.
The Nonprofit Alliance is a broad coalition of charities and firms that
serve nonprofit organizations. We share a common purpose to promote,
protect, and strengthen the nonprofit sector.
Charitable deductions incentivize giving and encourage individuals to
support causes at a higher level than they otherwise would. This
enables vital organizations to generate funds necessary to their much-
needed mission-focused work.
The urgent and immediate need is an extension of the Universal
Charitable Deduction for 2022.
Then, ultimately, we need the passage of S. 618 (and its
companion House bill H.R. 1704) to renew the Universal Charitable
Deduction and increase its cap to one-third of the standard deduction.
Swift enactment of these measures will provide donors with the
certainty they need to continue giving, encourage giving as a critical
part of our vibrant society, and ensure charities across our nation
continue to receive the funds necessary to serve their communities and
fulfill their philanthropic missions. As Chairman Wyden has often noted
about the deduction, ``It's a lifeline.''
The charitable deduction that is currently available for 2022 is
inadequate, as it applies only to those taxpayers who itemize their
expenses. Recent estimates suggest only about 12 percent of all
taxpayers itemize, yet the nonprofit sector depends on many more
individuals to support their causes. This is a missed opportunity to
incentivize the other 88% of middle-class American taxpayers.
The temporary Universal Charitable Deduction that was enacted in 2020
and extended through 2021 was a step in the right direction. It
democratized charitable giving. In 2020, a year of exceptional
challenge and need, individual Americans gave over $324 billion to
charitable causes (Giving USA 2021), generosity that was stimulated by
the charitable deduction for all taxpayers.
This effective deduction expired at the end of 2021, resulting in
uncertainty for some of the most generous Americans and the charities
that rely on their donations to deliver vital services to their
communities.
With the expiration, charities can no longer use the universal
charitable deduction as an incentive for their donors, posting on their
websites or including in their mailings that non-itemizers can claim
either a $600 (if married and filing jointly) or $300 (for single
taxpayers) deduction for charitable contributions.
Time is of the essence. The nonprofit sector relies on the deduction as
an incentive and every day that goes by without a universal deduction
is a missed opportunity. Now already in the second half of March,
charities have lost nearly three months of 2022 when the deduction
could have inspired giving. With shortages in envelopes and other paper
products, nonprofits are also facing long lead times, working today in
late March on mailings that are not expected to reach potential donors
until late June. Without the extension of the Universal Charitable
Deduction now, these charities will not be able to make the most of the
$600 and $300 universal deduction open to non-itemizers.
If Congress does in fact extend the Universal Charitable Deduction
retroactive to January 1, 2022, and the extension becomes law,
charitable organizations can immediately publicize the existence of the
deduction. That can work quickly for websites and social media but not,
of course, for mail (which remains a linchpin of most fundraising
programs).
We recognize this is very different from the corporate entities that
also saw tax deductions expire on December 31, 2021. Most of the
corporate provisions could wait to be enacted as late as April 2023
when most companies will file their 2022 tax returns and still enjoy
the maximum benefit of the extension (provided Congress follows its
customary practice of making the enactment retroactive to January 1,
2022). However, a nonprofit's ability to benefit depends on using the
deduction as an incentive now.
Very simply, the nonprofit community does not have the luxury of time
on its side. We need the immediate extension of the Universal
Charitable Deduction.
We greatly appreciate the strong bipartisan support this legislation
has received, led by Senators Lankford and Coons. On the Finance
Committee, under the leadership of Senator Lankford, support for S. 618
has been joined by Senators Scott, Stabenow, Cortez Masto, Hassan, and
Brown. A total of six members of the Finance Committee and in aggregate
16 Senators--eight Democrats and eight Republicans--have signed onto
this important legislation. Clearly this issue is not defined by party
and is supported by wide swaths of Americans.
We strongly commend the leadership of these 16 Senators and urge the
Senate to join them to renew the Universal Charitable Deduction--and
pass S. 618--as soon as possible.
The Nonprofit Alliance stands ready to offer any and all assistance to
get this important measure enacted into law.
Respectfully,
Mark Micali
Vice President, Government Affairs
______
Philanthropy Colorado
5855 Wadsworth Bypass, Unit A
Arvada, CO 80003
Philanthropy Colorado urges Congress to make charitable giving
incentives available to all.
Thank you for the opportunity to submit a statement to be included in
the record for the Senate Finance Committee Hearing: ``Examining
Charitable Giving and Trends in the Nonprofit Sector,'' held on March
17, 2022.
Philanthropy Colorado leads and serves the diverse network of more than
100 charitable foundations and organizations investing in nonprofits
across our state. These nonprofits provide critical services and create
jobs as they strive to achieve their missions. We join with others in
urging Congress to ensure all taxpayers have access to incentives for
giving generously to nonprofits working on behalf of communities
throughout Colorado and beyond.
Colorado-based foundations provide more than $1 billion annually to
support charitable organizations and the people and causes they serve--
everything from education to health to basic needs. While foundations
provide critical financial resources to these nonprofits, individuals
have historically given an even greater amount--more than $5 billion a
year in Colorado according to IRS data we tracked before the passage of
the 2017 federal tax law reduced the pool of itemizing taxpayers.
We urge you to restore and expand the recently expired ``above-the-
line'' charitable deduction for the almost 90% of taxpayers who now
take the higher standard deduction instead of itemizing on their
returns. Making these taxpayers eligible for even a small temporary
deduction for donations made during the pandemic had a measurable
impact on giving by less wealthy households. According to data
collected by our national partners in the Charitable Giving Coalition,
small donations jumped significantly when this tax break was announced
in 2020.
While many factors contribute to generosity, tax breaks have long
provided an important motivation for giving at every level. A
charitable giving incentive for non-itemizers will engage a broader
range of donors and help them establish a pattern of giving that is
likely to continue. The tax deduction is particularly important at this
time when the need for nonprofit services has surged. We urge you to
support policies that encourage charitable giving long into the future.
Thank you for considering our comments. Please let us know if you have
any questions about the role of foundations and nonprofits, the work
they do to address systemic issues, and their substantial economic
impact.
Joanne Kelley
Chief Executive Officer
______
Statement Submitted by William J. Snape, III, Professor, American
University, Washington College of Law; Director, Program on
Environmental and Energy Law; and Senior Counsel, Center for Biological
Diversity
Over the past several years, I have closely examined many
conservation easements authorized under the federal tax code. My
findings were published in 171 Federal Tax Notes, Volume 171 (May 10,
2021) at 875-885.
In response to repeated criticisms of conservation easements by
Senator Daines of Montana, I have modified the above-cited report to
demonstrate that conservation easements are a very valuable tool in our
national conservation toolbox. Frequently, conservation easements are
the only tool we possess to protect fish, wildlife, plants, and habitat
on private lands.
While there are legislative reforms I could suggest, they would
take diligent time and cautious effort to legislate. Picking easy
scapegoats is neither effective nor accurate in this complex policy
arena. The number of ``bad'' conservation easements appears quite low.
What is unknown is how much the federal government pays for specific
easement gifts under Section 170 of the federal tax code, and how those
properties are maintained or managed in perpetuity. We urge greater
involvement by the U.S. Geological Service (and its mapping and data
services), as well as greater transparency by the Internal Revenue
Service. Some reforms could occur administratively with no new
statutory language.
Thank you for considering this comment as well as the excerpt of
our 2021 report, immediately below.
______
Recently, federal conservation easements under the tax code have
come under attack by some federal legislators. Some easement donations
have been criticized for lack of conservation value. Other easement
donations have been criticized because of the corporate and financial
structure of the donor(s), which itself leads to and/or further
contributes to the more general problem of valuation of these
donations, and whether and to what extent the U.S. Internal Review
Service (IRS) approvals of over-valued appraisals from easement donors
is leading to fraudulent or unfair transactions that drain the Federal
Treasury.
In consideration of these issues, we asked a fundamental threshold
question--how effective are conservation easements at protecting
wildlife and important habitat? Because financial data relating to tax
returns and specific parcels of land and water are confidential pieces
of information, this study does not analyze the cost-effectiveness of
the current federal tax easement system. However, our examination of
several hundred conservation easements leads us to conclude that the
federal tax deduction tool for conservation easements is a very
valuable piece of the overall national conservation puzzle.
Looking at the value of conservation easements in protecting
biological diversity, including wildlife and habitat, a team of
researchers at the American University Washington College of Law
studied 201 conservation easements across the country. The study's
focus was on the biological baseline reports (``BBRs'') prepared for
all conservation easements. Produced by outside experts, the BBRs
provide detail, including maps and photographs, of all the resources
(broadly defined) on the property and layout the conservation purposes
that will define the conservation easement.
This study did not include any analysis on the tax value of the
proposed land donations or any investigation into the type of donor
landowners and donee land trusts. We focused on whether private land
conservation easements significantly contribute to wildlife and habitat
protection and whether this tool is as effective as federal and state
statutes designating public land protections.
The final results revealed that conservation easements are a tool
that effectively contributes to conservation, particularly the
protection of wildlife and habitat.
Table 1: Overall Grades--Assessment Includes Wildlife, Habitat, and
Other Factors
------------------------------------------------------------------------
Overall Rating # of BBRs % of BBRs
------------------------------------------------------------------------
1--Fully meets conservation 118 58.7%
goals
------------------------------------------------------------------------
2--Adequately meets conservation 74 36.8%
goals
------------------------------------------------------------------------
3--Inadequately meets or sets 8 4.0%
conservation goals
------------------------------------------------------------------------
Ranked between 1 and 2 1 0.5%
------------------------------------------------------------------------
Grand Total 201 100.0%
------------------------------------------------------------------------
Where, When, and How Big Are the Easements?
1. Year of Establishment
The BBRs spanned from 2002 to 2018. The majority of easements
reviewed, 184 of 201, or 91.5%, were established between 2013 and 2018.
Table 2: When Were the BBRs Completed?
------------------------------------------------------------------------
Year # of BBRs % of BBRs
------------------------------------------------------------------------
2002 1 0.5%
------------------------------------------------------------------------
2005 1 0.5%
------------------------------------------------------------------------
2007 1 0.5%
------------------------------------------------------------------------
2010 1 0.5%
------------------------------------------------------------------------
2011 1 0.5%
------------------------------------------------------------------------
2012 6 3.0%
------------------------------------------------------------------------
2013 16 7.9%
------------------------------------------------------------------------
2014 31 15.4%
------------------------------------------------------------------------
2015 25 12.4%
------------------------------------------------------------------------
2016 49 24.4%
------------------------------------------------------------------------
2017 54 26.9%
------------------------------------------------------------------------
2018 9 4.5%
------------------------------------------------------------------------
(blank) 6 3.0%
------------------------------------------------------------------------
Grand Total 201 100.0%
------------------------------------------------------------------------
2. Acreage
Our study found a wide variety of donation sizes, ranging from
thousands of acres to just 10. The study also found no correlation
between the size of donation and the potential value of the
conservation easement.
Table 3: Size of Donation
Maximum acreage (largest donation) 3,223
------------------------------------------------------------------------
Average acreage 379
------------------------------------------------------------------------
Median acreage 179
------------------------------------------------------------------------
Minimum acreage (smallest donation) 10
------------------------------------------------------------------------
3. States
The conservation easements are distributed over seventeen states.
Predominantly, the easements in this study are located in eleven states
in the Southeast United States and represent 192, or 95.5% of the BBRs
studied. Nine easements, or 4.5%, are located in the West and Midwest.
Table 4: State Distribution of BBRs in This Study
------------------------------------------------------------------------
Total Acres
State # of BBRs % of BBRs Donated
------------------------------------------------------------------------
AL 22 10.9% 4,683
------------------------------------------------------------------------
CA 1 0.5% 557
------------------------------------------------------------------------
FL 8 4.0% 3,295
------------------------------------------------------------------------
GA 117 58.2% 39,657
------------------------------------------------------------------------
IL 1 0.5% 102
------------------------------------------------------------------------
KY 1 0.5% 180
------------------------------------------------------------------------
LA 2 1.0% 1,184
------------------------------------------------------------------------
MS 2 1.0% 274
------------------------------------------------------------------------
NC 8 4.0% 1,784
------------------------------------------------------------------------
NV 1 0.5% 812
------------------------------------------------------------------------
OK 1 0.5% 80
------------------------------------------------------------------------
OR 1 0.5% 61
------------------------------------------------------------------------
SC 9 4.5% 3,438
------------------------------------------------------------------------
TN 16 7.9% 13,469
------------------------------------------------------------------------
TX 4 2.0% 2,020
------------------------------------------------------------------------
VA 2 1.0% 1,297
------------------------------------------------------------------------
WV 5 2.5% 2,823
------------------------------------------------------------------------
Grand Total 201 100.0% 75,715
------------------------------------------------------------------------
4. Landowners--Donors
One piece of information gathered was donor type, although the
assessment did not undertake to determine the value of an easement
based on its donor type. Differences between these types of donors were
beyond the scope of this study. The statistic relevant to this review
found that most BBRs in the study were syndicated owners. Also, there
was no correlation between the assigned rankings and any of these donor
types.
Table 5: BBRs Prepared for LLC Property Owners or Individual/Family
Landowners
------------------------------------------------------------------------
Donor Business Entity Type # of BBRs % of BBRs
------------------------------------------------------------------------
LLC 172 85.6%
------------------------------------------------------------------------
LLLP 1 0.5%
------------------------------------------------------------------------
LLP 1 0.5%
------------------------------------------------------------------------
LP 1 0.5%
------------------------------------------------------------------------
Unknown \1\ 26 12.9%
------------------------------------------------------------------------
Grand Total 201 100.0%
------------------------------------------------------------------------
\1\ Of the 26 ``unknown'' donor types, 4 appeared to be individual
landowners, however the actual number of individuals vs. syndicated
donors in our data set was not definitively confirmed.
5. Land trusts--Donees
The tax regulations require the conservation easement holder to be
a ``qualified organization,'' a government agency or charitable
organization, capable of holding the land in trust. Nine land trust
organizations hold most of the 201 conservation easement donations in
this study.
6. Conservation Easement Authorization Type
To claim a tax deduction under Sec. 170(h), Congress has required
donation for any of the four following conservation purposes: (1)
outdoor recreation and/or education for the general public; (2)
protection of habitat; (3) preservation of delineated open space; and
(4) historic preservation. Table 6 contains a breakdown of the
easements' conservation purposes.
Table 6: Conservation Easement Authorization Type--Conservation Purposes
------------------------------------------------------------------------
Authorization Under 170(h) # of BBRs
------------------------------------------------------------------------
(i) outdoor recreation, education 18
------------------------------------------------------------------------
(ii) natural habitat/wildlife 175
------------------------------------------------------------------------
(iii) (I) scenic enjoyment 133
------------------------------------------------------------------------
(iii) (II) federal, state or local govt policy 187
------------------------------------------------------------------------
(iv) historic area or structure 29
------------------------------------------------------------------------
While many of the easements listed more than one of these
conservation purposes in the BBRs, this study focused solely on whether
the easements' value in promoting the conservation of natural habitat
and wildlife. The evaluation of an easement reflects the analysis of
the easement's potential to preserve land based on the following four
elements effectively:
Natural habitat and wildlife.
Present and future economic uses of the easement.
Consideration of the impacts of climate change on the
easement.
Monitoring and compliance mechanisms.
This study did not focus on easements with conservation purposes
primarily for historic areas or outdoor recreation unless there was an
impact on the easement's effectiveness to protect natural habitat and
wildlife because of those purposes.
More than 87% of the BBRs reviewed in our study indicate the
easement's primary purpose is to protect specific habitats for
wildlife. The preservation goals were similar across the easements,
despite the variety of ecosystems or size of the donation.
The following two tables display the rankings for habitat
protection and wildlife conservation. The grades assigned are ``1'' if
the protections are outstanding, ``2'' if the protections are average,
and ``3'' if the protections are deficient. The three questions
considered were: (1) if the purpose of the easement appears to be at
least in part for wildlife and/or habitat; (2) if the easement appears
to actually conserve wildlife and/or protect habitat; and (3) whether
the wildlife conservation and/or habitat protection value is
independently validated in the easement by a government agency or
scientific association.
Table 7: Habitat Protection Ranking
------------------------------------------------------------------------
Grade # of BBRs % of BBRs
------------------------------------------------------------------------
1 148 73.6%
------------------------------------------------------------------------
2 47 23.4%
------------------------------------------------------------------------
3 6 3.0%
------------------------------------------------------------------------
Grand Total 201 100.0%
------------------------------------------------------------------------
Together, the 195 BBRs ranked ``1''and ``2'' suggest that of the
conservation easements in this study, 97% have included potentially
effective protections for natural habitats.
Table 8: Wildlife Conservation Ranking
------------------------------------------------------------------------
Grade # of BBRs % of BBRs
------------------------------------------------------------------------
1 107 53.2%
------------------------------------------------------------------------
2 84 41.8%
------------------------------------------------------------------------
3 10 5.0%
------------------------------------------------------------------------
Grand Total 201 100.0%
------------------------------------------------------------------------
Our overall grading of the BBRs for wildlife conservation produced
107, or 53.2%, with superior protection in place. Together, BBRs rated
``1'' and ``2'' account for 191, or 95% of the study's easements. Where
BBRs listed wildlife protection as a core value, over half provided
specific management plans and lists of species to protect, including
but not limited to endangered or threatened species, both federal and
state. In the BBRs, five primary themes emerged: (1) promote healthy
forests, (2) preserve water quality, (3) protect threatened or
endangered species, (4) preserve unique habitats, and (5) establish or
extend wildlife migration corridors.
Summary and Recommendations
Based on the final data and results of the study, our initial
conclusion that conservation easements do contribute to wildlife and
habitat conservation objectives is supported. Conservation easements
are valuable tools that allow agreements between a landowner and land
trust to set aside land for protection, land that might otherwise be
sold for development, for urbanization, or commercial enterprises.
Conservation easements are valuable mechanisms where, if the BBRs
and contracts are written to effectively address the conservation
values the easement is trying to protect, natural habitat and wildlife
will win lasting protection.
While Congress could clarify valuation and other public interest
considerations more specifically, the IRS possesses significant
administrative authority to correct some of the problems identified
over the last decade. These reforms include the following:
The IRS should immediately issue guidance, and perhaps
rulemaking, on how it will analyze and enforce donations of
conservation easements in terms of: (a) transparent and improved
appraisal processes of the donations; (b) transparency of and
requirements for biological baseline reports including public
monitoring to ensure that the donation has an adequate conservation
purpose; (c) creation of a ``safe harbor'' provision to help landowners
decipher the proper ``extinguishment clause'' language to use in in
easement deeds.
Instead of focusing solely on syndicated conservation easement
donations, Congress and the IRS should examine the overall structure of
conservation easement creation, including accurate and transparent
appraisals, independent affirmance of the conservation value of each
conservation easement, and perhaps most importantly, clarifying the
IRS's new role as a de facto federal land agency.
While most 170(h) conservation easements appear legitimate,
the potential for abuse is high and the public should only be paying
for conservation easements through the tax code that tangibly increase
conservation, help mitigate the existential threats of climate change,
and address inequity and environmental justice. It seems sensible to
desire greater involvement by the U.S. Geological Service in evaluating
and monitoring these easements \2\ as part of this country's larger
goal to protect and conserve more land and water by 2030 and beyond.\3\
---------------------------------------------------------------------------
\2\ See U.S. Geological Service, Major Update for America's
Inventory of Parks and Other Protected Areas (July 9, 2019). (A new
version of the Protected Areas Database of the U.S., or PAD-US, has
major federal, state and easement updates, an easier-to-use data
structure, new web services, and mapping capabilities.
\3\ See, e.g., Center for Biological Diversity, Biden Executive
Order Pushes Protection of 30% of America's Land, Oceans (January 27,
2021). (A year ago the Center launched Saving Life on Earth, a plan
that calls for a $100 billion investment to save species and the
creation of new national monuments and parks, wildlife refuges and
marine sanctuaries so that 30% of U.S. lands and waters are fully
conserved and protected by 2030 and 50% by 2050).
______
Theatre Communications Group
520 Eighth Avenue, 24th Floor
New York, NY 10018
(212) 609-5928
[email protected]
https://circle.tcg.org/home
Statement of Laurie Baskin, Director of Advocacy
Theatre Communications Group thanks the Senate Committee on Finance for
holding a hearing dedicated to ``Examining Charitable Giving and Trends
in the Nonprofit Sector.'' Given the prolonged duration of the COVID-19
pandemic and its impact on the nonprofit sector, the Committee's
hearing is a particularly important opportunity to commit to federal
policy action that will respond to the unique and urgent needs of
America's nonprofit sector.
Theatre Communications Group (TCG), the national organization for
theatre, leads for a just and thriving theatre ecology. Since its
founding in 1961, TCG's constituency has grown from a handful of
groundbreaking theatres to over 700 Member Theatres and affiliate
organizations and over 7,000 Individual Members. Through its programs
and services, TCG reaches over one million students, audience members,
and theatre professionals each year. TCG offers networking and
knowledge-building opportunities through research, communications, and
events, including the annual TCG National Conference, one of the
largest nationwide gatherings of theatre people; awards grants and
scholarships to theatre companies and individual artists; advocates on
the federal level; and through the Global Theater Initiative, TCG's
partnership with the Laboratory for Global Performance and Politics,
serves as the U.S. Center of the International Theatre Institute. TCG
is North America's largest independent trade publisher of dramatic
literature, with 18 Pulitzer Prizes for Drama on the TCG booklist. It
also publishes the award-winning American Theatre magazine and
ARTSEARCH, the essential source for a career in the arts. TCG believes
its vision of ``a better world for theatre, and a better world because
of theatre'' can be achieved through individual and collective action,
adaptive and responsive leadership, and equitable representation in all
areas of practice.
Theatres deliver on their nonprofit mission in communities nationwide
through their vibrant artistry, community partnerships, and commitment
to lifelong learning. Like thousands of other nonprofits in the arts,
education, and human services, and other local organizations, theatres
in communities across the United States are classified as 501(c)(3)
tax-exempt organizations. This exemption and the incentive to give
private donations are essential to sustaining the capacity of theatres
as employers, community partners, artistic innovators, and providers of
lifelong learning. Even as theatres faced unprecedented challenges
throughout the course of the pandemic, their resilience and creativity
are evidenced in their ongoing contributions to their communities and
innovative strategies to deliver on their nonprofit mission under the
most extraordinary circumstances. At the height of COVID-19
restrictions on participation in live performance events, theatres
innovated to provide safe live arts experiences, online performances,
and learning opportunities nationwide. Theatres continue to offer both
live performance events and online offerings, often partnering with
caregivers, schools, and community-based organizations to reach in-
person and online audiences.
Theatres are part of the wider nonprofit economic engine that supports
workforces and community revitalization amid COVID-19 recovery. Theatre
expenses totaled more than $2.1 billion in 2020. Their economic impact
far exceeds that amount as theatres create jobs, engage in commerce
with local businesses, and spur local expenditures on related goods and
services. Theatres support a substantial workforce in communities
across the country, employing 93,000 theatre workers in 2020.
As part of the nonprofit charitable sector, theatres depend upon
private philanthropy and civic support to fuel programs that serve
community needs. Theatres are 501(c)(3) nonprofit organizations, exist
in all 50 states, serving virtually every community, with annual
budgets ranging from less than $70,000 to more than $50 million. The
artistic presentations, educational offerings, and community-based
programming generated by the theatre workforce is supported by a
critical combination of public and private support, and not by ticket
sales alone. Support from donors across the economic spectrum is
essential to making this work possible, as theatres respond to the
needs of communities and form partnerships through education, artistic,
economic development, and social service programs. Individual donors
who are not theatre trustees collectively proved to be the largest
contributed income source for theatres.
The COVID-19 pandemic has made charitable giving even more essential.
Prior to the onset of the pandemic, contributed revenue generally
covered about 42% of expenses for the largest theatres and about 70%
for the smallest. Like for-profit businesses, theatres suffered severe
earned revenue losses due to the pandemic that threatened their
workforces and their missions. While decisions about operations during
the pandemic have been closely connected to local and state public
health mandates and each theatre's individual financial situation
continues to vary based on its ability to return to live in-person
performances, many continue to suffer significant pandemic-related
revenue losses. As infection rates fell on the retreat of the Delta
variant, theatres began to make gains in ticket sales, which provided
hope for recovery in the longer term. However, the return of audiences
from week to week was uneven, and the onset of the Omicron variant has
had a severe and long-reaching impact on theatres' financial capacity
and workforce. Theatre managers are deeply concerned about their bottom
lines for fiscal year 2023 and 2024.
We urge the Committee to partner with the nonprofit sector to ensure
that any future pandemic-related or long-term support for the small
business sector is structured so that nonprofit organizations are
assured eligibility. Careful attention by Congress to nonprofit
eligibility for COVID relief was essential to unlocking access to
relief for theatres and other nonprofit organizations. Federal support
has made it possible to keep doors open, utility bills paid, and many
workers on payroll, but the duration of the pandemic continues to
strain all revenue sources and new and renewed federal assistance is
desperately needed. We are extremely grateful for the federal support
to-date that has provided essential assistance during such an
unprecedented and prolonged public health crisis. In addition to
Shuttered Venue Operators Grants and dedicated National Endowment for
the Arts funding, nonprofit access to forgivable Paycheck Protection
Program loans, Employee Retention Tax Credits, enhanced charitable
giving incentives, and other forms of governmental assistance have
helped to see theatres through the first 2 years of the pandemic.
However, most forms of federal relief expired at the end of 2021, and
the need for help persists.
Theatres and the wider nonprofit sector will be essential contributors
to our nation's recovery from the pandemic and must be supported by
federal policies that restore and further strengthen the sector
nationwide. Theatre Communications Group is partnered with the National
Council of Nonprofits, Independent Sector, and the Charitable Giving
Coalition in support of comprehensive policy action to increase support
for the nation's charitable sector, and we support the written
recommendations submitted to this committee by those organizations. We
urge the Committee to lead Congressional action on policies that are
urgently needed, and to seek partnership with the nonprofit sector to
ensure that long-term federal leadership proactively supports our
nation's charitable and philanthropic sectors.
This Committee can support the following action on active proposals
related to tax policy and the nonprofit sector:
Increase charitable giving by reinstating and making permanent
the above-the-line, universal charitable deduction. Federal COVID-19
Relief recognized how important giving incentives are by including in
the CARES Act a $300 ``universal charitable deduction'' available to
all taxpayers and extending that provision in the COVID-19 Economic
Relief Bill along with allowing up to a $600 deduction for joint filers
in 2021. Expanding and making this provision permanent will grow the
capacity of the nonprofit arts sector to support communities. While the
initial impulse to give comes from the heart, studies have repeatedly
shown that charitable giving incentives have a significant impact on
how much and when donors contribute.
Reinstate the ability for individuals who itemize on their taxes
to deduct up to 100% of their adjusted gross income for charitable
contributions, and the ability of corporations to deduct up to 25% of
taxable income.
Enact the Legacy IRA Act, which would expand the Charitable IRA
Rollover to treat donations made by retirees to gift annuity programs
as pre-tax income.
Reinstate the Employee Retention Tax Credit for the fourth
quarter of 2021 and extend its duration, modifying nonprofit
eligibility beyond the current ``gross receipts'' test. Theatres are
among the many nonprofit employers that have been counting on quarter
four 2021 access to the ERTC to support the decisions they made to
bring employees back on the payroll and increase operating capacity to
serve their communities.
Enact the Artist-Museum Partnership Act, which would encourage
new gifts by living playwrights, including original manuscripts, set
designs, and other original materials. For theatre artists considering
whether to contribute their works and archives to a charitable
organization or to make them available to private collectors, the
ability to take a fair-market value tax deduction may be the key
incentive that allows the artist to contribute their work to a
nonprofit cultural organization.
Enact the Performing Artist Tax Parity Act of 2021, which would
reinstate deductions for unreimbursed employee business expenses.
Across occupations, comprehensive tax reform passed into law in 2017
eliminated the opportunity to deduct unreimbursed employee business
expenses that exceed 2% of adjusted gross income. For theatre artists
this means that the costs of travel to auditions or a travel agent and
other expenses essential to employment are no longer tax-deductible.
Support dedicated relief resources for nonprofit organizations
and their workforce, as proposed in the WORK Now Act.
On behalf of the over 700 Member Theatres and affiliate organizations
and over 7,000 Individual Members across the nation, Theatre
Communications Group is deeply grateful for the leadership from this
Committee to examine ways that the federal government can support our
nation's nonprofit sector. Enhanced federal incentives for charitable
giving and leadership to support the strength and growth of nonprofit
organizations, will support theatres' workers, operating costs, and
mission-critical activity. Thank you for this opportunity to share ways
in which this Committee and the broader federal government can increase
support for the nonprofit sector.
______
United Philanthropy Forum
1020 19th Street, NW, Suite 360
Washington, DC 20036
(888) 391-3235
@unitedphilforum
https://www.unitedphilforum.org/
On behalf of United Philanthropy Forum (the Forum), a membership
organization of over 90 regional and national philanthropy-serving
organizations or PSOs, we thank you for your support shown to the
philanthropic and charitable sector during the COVID-19 pandemic. As
the largest and most diverse network in American philanthropy, United
Philanthropy Forum holds a unique position in the social sector to help
increase philanthropy's impact in communities across the country. Our
members, who represent more than 7,000 foundations and other funders,
work to make philanthropy better. Through our members and their
networks, we reach almost every state and district, promoting a
courageous philanthropic sector that catalyzes a just and equitable
society where all can participate and prosper.
We appreciate the opportunity to highlight the value of the nonprofit
sector and our recommendations on policies that encourages charitable
giving.
Extraordinary Response of Philanthropy Associations and Networks to
COVID-19
As we mark the 2-year anniversary of the COVID-19 pandemic, it seems an
appropriate moment to share how philanthropy-serving organizations
(PSOs)--the regional and national philanthropy associations and
networks that comprise the United Philanthropy Forum network \1\--have
responded to the crisis. In short, the response has been extraordinary.
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\1\ https://www.unitedphilforum.org/members.
Over the past 2 years, regional and national PSOs have acted in truly
astounding ways to ensure that philanthropy was being as effective and
impactful as possible in helping our communities tackle a global health
pandemic, demonstrating a powerful level of nimbleness, adaptability
and flexibility. PSOs quickly engaged in new public-private
partnerships, led and managed new collaborative funds, advocated for
philanthropy and nonprofits in COVID-19 legislation, provided a strong
voice of accountability to push philanthropy to respond to the pandemic
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in the most equitable ways possible and much more.
A new Forum report, The COVID-19 Crucible,\2\ details PSOs' response to
the pandemic and offers lessons for the field to inform how we respond
to future crises. The Forum uses ``PSO'' as something of a catch-all
term to describe a diverse and dynamic group of philanthropy
associations and networks that bring funders together with a focus on a
geographic region, funding issue, identity/population group or
philanthropic practice. The report offers many examples of PSOs' COVID-
19 response efforts; here's a sampling:
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\2\ https://www.unitedphilforum.org/resources/covid-19-crucible.
ABFE held funder briefings on COVID-19 relief for Black
businesses and focused its annual conference, which shifted to virtual,
on a range of critical challenges facing Black communities amid the
pandemic, including redlining, the racial wealth divide, and ensuring
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relief efforts reach Black communities.
Minnesota Council on Foundations moved quickly to establish the
Minnesota Disaster Recovery Fund, partnering with the Saint Paul &
Minnesota Foundation to raise and distribute more than $11 million to
more than 1,700 nonprofit organizations and more than 3,000 small
businesses.
Philanthropy Northwest, in partnership with the state of
Washington and major food banks in the state, established the WA Food
Fund to respond to the growing food crisis as a result of COVID-19. The
fund raised more than $14 million from 60 philanthropic institutions
and 9,000 individual donors.
Philanthropy Ohio partnered with the Ohio Department of
Education to establish the Collaborative Fund for Educating Remotely
and Transforming Schools. The fund supported projects to help schools
in the state improve remote education practices and in particular
address inequitable circumstances related to remote education during
the COVID-19 crisis.
The list goes on and on and on. The report identifies some key
learnings that have implications for the broader philanthropy sector.
Many of the learnings relate to trends that were already happening pre-
COVID but were greatly accelerated during the pandemic: PSOs have
become more transformative and less transactional; PSOs are placing a
more central focus on racial equity and on holding the field
accountable on equity issues; PSOs are displaying new kinds of bold
leadership in partnerships with government and the private sector; PSOs
have a renewed focus on networks, as the pandemic was a case study in
the power of networks in responding to a crisis--and the need to build
those networks in advance. Philanthropic leaders are grateful for the
partnership of government, nonprofit, and business partners over the
past 2 years.
Need for Charitable Giving Will Continue Beyond Pandemic
The Forum urges Congress to immediately reinstate and expand the
temporary universal charitable giving deduction that expired at the end
of 2021. This charitable deduction to non-itemizers at $300 for
individual and $600 for couples filing jointly along with the
suspension of adjusted gross income (AGI) limitations for cash gifts
and increase in limitation for corporate gifts were all valuable to
incentivizing giving behaviors.
Longer-term, the Forum supports the bipartisan Universal Giving
Pandemic Response and Recovery Act (S.618). If enacted, this
legislation will further incentivize all taxpayers to give to charity--
regardless of their income or whether they itemize--helping to spur
even more giving as communities continue to fight and recover from
COVID-19 and its economic effects.
The charitable deduction is good tax policy--it encourages individuals
to give away more of their income, devoting it to their community's
needs rather than their own. A simple calculation shows that those in
need receive $2.50 in benefit for every $1 of tax benefit. This is an
impressive return on investment.
This legislation will democratize giving by further incentivizing all
American taxpayers--regardless of their income--to give to charity,
thereby ensuring that our country retains a strong and independent
civil society. Additionally, it will provide needed resources for
charitable and faith-based organizations to continue providing vital
services to families, workers, and communities, especially those
critically impacted by the ongoing pandemic.
The Forum is also proud to join the chorus of 60 national charities
which support the bipartisan Legacy IRA Act (S. 243). The Legacy IRA
Act will encourage more charitable giving by enabling seniors to make
contributions from their individual retirement accounts (IRA) to
charities through life-income plans. Seniors are a key demographic as
they typically make up more than 40 percent of the donor base for
charities. This is an expansion of the existing Charitable IRA Rollover
provision, which is the fastest growing area of philanthropy. The
Legacy IRA Act would expand this giving incentive to more middle-income
seniors. A modified version of the Legacy IRA Act was passed by the
House of Representatives on March 29, 2022 as part of the ``Securing a
Strong Retirement Act'' (SECURE Act 2.0), and we urge the Senate
Finance Committee to include S. 243 in its version of this retirement
package.
The Forum joins with many others in the nonprofit community in urging
Congress to immediately reinstate the temporary universal charitable
deduction, pass the Legacy IRA Act, and pass the Universal Giving
Pandemic Response and Recovery Act. We stand ready to be of help should
you have additional questions about these requests. Please feel free to
contact Matthew L. Evans, Senior Policy Director, at United
Philanthropy Forum at [email protected].
______
United Way
March 16, 2022
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
Dear Chairman Wyden and Ranking Member Crapo:
We the undersigned United Ways request that the Senate Finance
Committee vote to approve legislation to expand and extend charitable
giving tax incentives for tens of millions of Americans who give to
charities every year. We specifically support the Universal Giving
Pandemic Response and Recovery Act (S. 618 Coons/Lankford), which would
allow the overwhelming majority of taxpayers to claim a deduction for
income they give back to their communities and people in need.
We deeply appreciate your inclusion of a $300 deduction in the CARES
Act and your subsequent expansion of that deduction for 2021. However,
that deduction has expired and now most Americans who donate their
hard-earned income must pay taxes on that donated income.
United Way is fortunate to have a number of wealthy supporters who make
very generous donations that have real impact in communities across the
United States. Those donors are able to give more because they do not
pay taxes on those donations, because of the charitable deduction.
However, there is no reason for different tax treatment for millions of
donations from low- or middle-income people. In many cases, these
donors must make difficult financial decisions and sacrifice to donate
to their local charity or church, yet our current tax policy requires
them to pay taxes on money they donate. This is simply unfair.
To be clear, tax policy is very rarely the main reason Americans give
to charity. People give for altruistic reasons. But tax policy
influences behavior. Our tax laws are full of policies designed to
drive behaviors deemed favorable for our society, like home ownership
and business investment. What could be better than Congress sending a
bipartisan message to everyone that giving is a core American value?
We urge the Committee to act as soon as possible to approve S.618/
H.R.1704. And we request that a retroactive nonitemizer deduction be
included in any legislative vehicle possible before the end of the
year.
Sincerely,
Alabama
Walter Hill Jackie Wuska Shannon Jenkins
Chief Executive Officer President and CEO President and CEO
Wiregrass United Way United Way of West United Way of East
Alabama Central Alabama
Becky Goff Kathleen Ross Valerie Burrage
Executive Director President and CEO Executive Director
United Way of Cullman United Way of Morgan North Talladega County
County County
Carrie Thomas Jannah M. Bailey Jill Chenoweth
Executive Director President/CEO President and CEO
United Way of Marshall The River Region United United Way of
County Way Southwest Alabama
Becky Booker Jennifer McNulty
Executive Director CEO
United Ways of Alabama United Way of Northwest
Alabama
Alaska
Clark Halvorson
CEO
United Way of Anchorage
Arkansas
Kristy Williams Nan Tucker Jennifer Boyett
Executive Director Executive Director Executive Director
River Valley United United Way of White United Way of Central
Way County Arkansas
Arizona
Shelley Griffin Laura Mike Tony Penn
Vice President, Executive Director President and CEO
Information Technology
Valley of the Sun United Way of Navajo United Way of Tucson
United Way Nation and Southern Arizona
Allen Villalobos
Chief Executive Officer
United Way of Pinal
County
California
Rosemary Caso Keristofer Seryani Kristen Birtwhistle
Executive Director President/CEO President and CEO
United Way of Tulare United Way of United Way of San
County Stanislaus County Joaquin County
Pete Manzo Ken Wuytens Mari Perez-Dowling
President and CEO Executive Director President and CEO
United Ways of United Way of Imperial United Way of Kern
California County County
Lisa Wright Gwen Rodgers Bob Harlan
President President Executive Director
Inland Southern Arrowhead United Way Yuba-Sutter-Colusa
California United Way United Way
Michelle Murphy Lisa G. Carreno Lindsay Fox
Director, Public President and CEO President and CEO
Affairs
Orange County United United Way of the Wine United Way Fresno and
Way Country Madera Counties
Rick London Kevin Zwick Bob Harlan
CEO CEO Executive Director
United Way of San Luis United Way Bay Area Yuba-Sutter-Colusa
Obispo County United Way
Colorado
Cindy Aubrey Kate Nowak Roweena Naidoo
President and CEO Executive Director Vice President, Policy
and Impact Investing
Pikes Peak United Way Routt County United Way Mile High United Way
Connecticut
Gary Johnson David Rabin Isabel Almeida
President and CEO CEO President
United Way of Milford United Way of Greenwich United Way of Western
Connecticut
Jack Eisenmann Dina Sears-Graves Jeff Kimball
Executive Director President and CEO CEO
United Way of United Way of United Way Coastal
Southington Southeastern Fairfield County
Connecticut
Kristen Jacoby Lisa Tepper Bates David R. Kennedy
CPO President and CEO Interim President and
CEO
United Way of Greater United Way of Valley United Way
Waterbury Connecticut
Eric Harrison Jennifer Heath
President and CEO President and CEO
United Way of Central United Way of Greater
and Northeastern New Haven
Connecticut
Delaware
Michelle Taylor
President and Chief
Executive Officer
United Way of Delaware
District of Columbia
Rosie Allen-Herring
President and CEO
United Way of the
National Capital Area
Florida
Gina Littleton Jennifer Anchors Amber Miller
Interim President Executive Director President and CEO
United Way of Northwest United Way of Suwannee United Way of North
Florida Valley Central Florida
Carol G. Houwaart-Diez Ted Granger Monica Wofford
President and CEO CEO CEO
United Way of Martin United Way of Florida United Way of Lake and
County Sumter Counties
Robert Rains Maureen Mercho Jeff Hayward
President Chief Development President and CEO
Officer
United Way of Brevard United Way of Northeast Heart of Florida
County Florida United Way
Kathleen Cannon Michelle Braun Angie B. Walasek
President and CEO President and CEO CEO
United Way of Broward United Way of Northeast United Way of Hernando
County Florida County
Laura P Gilliam Joe Zubizarreta
President/CEO Interim President and
CEO
United Way of West United Way Miami
Florida
Georgia
Patty Youngblood Rebecca Cannady Brynn Grant
President and CEO Executive Director President and CEO
United Way of West United Way of Thomas United Way of the
Georgia, Inc. County Coastal Empire
George McCanless Ruth M. Goode Justin Callaway
President and CEO Executive Director President and CEO
United Way of Central United Way of Forsyth United Way of Coastal
Georgia County, Inc. Georgia
Milton J. Little, Jr. Jennifer Latour Ben Moser
President and CEO Executive Director President and CEO
United Way of Greater United Way of Gordon United Way of the
Atlanta County Chattahoochee Valley
Brittany Burnett Michael Smith Candice Holcomb
President and CEO CEO Executive Director
United Way of the CSRA Greater Valdosta Habersham County
United Way
Lorie Autry Amanda Burt
Executive Director President
United Way of Screven United Way of Northwest
County Georgia
Hawaii
Nicholas Winfrey John Fink
President and CPO President/CEO
Maui United Way and Aloha United Way
Hawaii State
Association
Idaho
Mark Tuckermark Jim Cooper Bill Maikranz
Executive Director President and CEO President and CEO
United Way of North United Ways of the United Way of South
Idaho Pacific Northwest Central Idaho
Illinois
Deborah Howard Patricia Becker Natalie Wellen
Executive Director Administrative Director Executive Director
United Way of United Way of Logan United Way of South
Livingston County County Central Illinois
Keri Olson Kamala L. Martinez Susan Grey
CEO President and CEO President and CEO
United Way of Whitside United Way of Will United Way of
County County Champaign County
Sean Garrett Kennedy Polanski John Kelker
President and CEO Executive Director President
United Way of Metro United Way of Coles United Way of Central
Chicago County Illinois
Deborah Rudel Linda Blair Debbie Bogle
CEO Executive Director President
Fox Valley United Way Kewanee Area United Way United Way of Decatur
and Mid-Illinois
Antoinette G Hayden Connie Kraft Laun Dunn
Executive Director Executive Director Executive Director
United Way of Southern United Way of Northwest United Way of Knox
Illinois Illinois County
Indiana
Jennifer Million Pamela Beckford Alicia Hazelwood
Interim CEO President and CEO Executive Director
United Way of Greater United Way of Wells United Way of Grant
Lafayette County County
Ann Murtlow Richard Payonk Rene Gellerman
President and CEO Executive Director President and CEO
United Way of Central United Way of the United Way Quad Cities
Indiana Wabash Valley
Sheila Coffin William Rieth Jane Ann Runyon
Executive Director President/CEO Executive Director
Jefferson County United Crossroads United Way United Way of Jay
Way, Inc. County
Amy Canterbury Mark Stewart Chris Armstrong
President and CEO President Executive Director
United Way of United Way of United Way of Cass
Southwestern Indiana Bartholomew County County
Peggy Scott Karli Armstrong
Director of Cass County Impact and Marketing
Reading Railroad Manager
United Way of Cass United Way of Cass
County County
Iowa
Rene Gellerman Ali Wilson Shane J. Orr
President and CEO Executive Director Executive Director
United Way Quad Cities United Way of Wapello United Way of
County Muscatine
Kendra Sorensen Jen Arends Kristin Roberts
Executive Director CEO President and CEO
Marshalltown Area United Way of North United Way of East
United Way Central Iowa Central Iowa
Karen Siefken Michella Friesen Heather Hennings
Executive Director Executive Director President
United Way of the Great United Way of Mahaska United Way of
River Region County Siouxland
Jean Kresse Jessica Lowe Vokes
President and CEO Executive Director
Story County United Way of Jasper
County
Kansas
Jessica Lehnherr Lisa Gleason Mickey Edwards
CEO/President Executive Director CEO
United Way of Greater United Way of Reno United Way of the
Topeka County Flint Hills
Gayle Ausmus
Executive Director/CEO
United Way of Dodge
City
Kentucky
Paul McCreary Paula Yevincy Adria Johnson
President President and CEO President and CEO
United Way of Calloway United Way of the Ohio Metro United Way
County Valley
Timothy Johnson Kevin Middleton
President and Chief President
Executive Officer
United Way of the United Way of Kentucky
Bluegrass
Louisiana
LaToria Thomas Michael Williamson Artis Williams
President and CEO CEO Executive Director
United Way of Northwest United Way of Southeast St. John United Way
Louisiana Louisiana
George Bell Sarah Berthelot Janet S. Durden
President and CEO President and CEO President
Capital Area United Way Louisiana Association United Way of
of United Ways Northeast Louisiana
Denise Durel Michelle Purl
President and CEO CEO
United Way of Southwest United Way of Central
Louisiana Louisiana
Maine
Liz Cotter Schlax Sarah Duncan Shirar Pattersone
President and CEO Executive Director President and CEO
United Way of Southern United Way of Aroostook United Way of Eastern
Maine Maine
Lisa Park Laflin Barbara Reinertsen
Executive Director Executive Director
United Way of the Tri- United Way of Mid Coast
Valley Area Maine
Maryland
Ken Oldham Michele Walker Rosie Allen-Herring
President and CEO Executive Director President and CEO
United Way of Frederick County United Way, Inc. United Way of the
County National Capital Area
Franklyn Baker Sandra Early
President and Chief Executive Director
Executive Officer
United Way of Central United Way of Queen
Maryland Anne's County
Massachusetts
Dennis P. Carman Tim Garvin Christa Collier
President and CEO President and CEO Executive Director
United Way of Greater United Way of Central Northern Berkshire
Plymouth County Massachusetts United Way
Massachusetts
Carrie Thomas John Bidwell Bob Giannino
Executive Director Executive Director Ansin President and
CEO
United Way of Marshall United Way of the United Way of
County Franklin and Hampshire Massachusetts Bay and
Region Merrimack Valley
Michelle N. Hantman Tom Bernard Mark Skala
President and CEO President and CEO President/CEO
United Way of Greater Berkshire United Way Cape and Islands
New Bedford United Way
Michigan
Christine J Robere Chris Sargent Connie L. Carroll
President CEO President and CEO Executive Director
United Way of the United Way of the United Way of Monroe/
Lakeshore Battle Creek and Lenawee Counties
Kalamazoo Region
Michelle Van Dyke Audra Davis Terri Legg
President and CEO President and CEO Executive Director
Heart of West Michigan United Way of Saginaw United Way Montcalm-
United Way County Ionia Counties
James Gaskin Joseph W. Gentry Pam Smith
CEO Executive Director CEO
United Way of Genesee United Way of Northeast United Way of
County Michigan Washtenaw County
Kimberly Hebberd Darienne Driver Hudson, Teresa Kmetz
Ed.D.
Executive Director President and CEO President and CEO
United Way of Lapeer United Way for Capital Area United
County Southeastern Michigan Way
Julie Mallard Brent Gillette
Executive Director Executive Director
United Way of Delta United Way of St. Clair
County County
Minnesota
Erin Haag Annette Duncan John A. Wilgers
Executive Director President President and CEO
United Way of Freeborn United Way of Steele Greater Twin Cities
County County United Way
Elizabeth Child Jerome Ferson Doris Pagelkopf
Executive Director President Executive Director
Rice County Area United United Way of Olmsted United Ways of
Way County Minnesota
Sarah Buhs Meghann Boser Debra Siemsen
Executive Director Executive Director CEO
United Way of Carlton Morrison County United United Way of McLeod
County Way County
Erin Shay Denae Alamano
Executive Director Executive Director
United Way of United Way of Bemidji
Northeastern Minnesota Area
Mississippi
Tee McCovey Tracie Fowler Ira E. Murray, Ph.D.
President and CEO CEO President and CEO
United Way for Jackson United Way of Southeast United Way of the
and George Counties Mississippi Capital Area
Missouri
Vander H. Corliss Greg Burris Ted Frushour
CFO President and CEO President
United Way of Greater United Way of the United Way of
St. Louis, Inc. Ozarks Northeast Missouri
Chris Rosson Michelle D. Tucker
President and CEO President and CEO
United Way of Greater United Way of Greater
Kansas City St. Louis
Montana
Danica Jamison Susan Hay Patrick Roxanna S. Parker
President and CEO CEO Executive Director
Greater Gallatin United United Way of Missoula Northwest Montana
Way County United Way
Gary Owen Emily McVey Beth Storey
President Executive Director Executive Director
United Way of Cascade United Way of the Lewis United Way of
County and Clark Area Beaverhead County
Kim Lewis
CEO
United Way of
Yellowstone County
Nebraska
Karen Rathke Shawna Forsberg Karen Benzel
President and CPO President and CEO Executive Director
Heartland United Way United Way of the United Way of Western
Midlands Nebraska
Nevada
Julian High Michael Brazier
President and CEO CEO and President
United Way of Southern United Way of Northern
Nevada Nevada and the Sierra
New Hampshire
Patrick Tufts Liz LaRose Michael Apfelberg
President and CEO President President
Granite United Way Monadnock United Way United Way of Greater
Nashua
New Jersey
Daniel Altilio Kiran Handa-Gaudioso Michael Gower
President CEO Executive Director
United Way of Hudson United Way of Northern United Way of
County New Jersey Gloucester County,
Inc.
Tom Toronto Gloria Aftanski James Horne
President President, CEO President
Bergen County's United United Way of Central United Way of Greater
Way Jersey Union County
New Mexico
Becca Titus Rodney Prunty
CEO/President President and CEO
United Way of Lea United Way of Central
County New Mexico
New York
Marilyn Smith Tom Gabriel Patrick Dewine
Executive Secretary President and CEO Executive Director
United Way of Northern United Way of United Way of Greater
Yates County Westchester Oswego County
James L. Cox Elizabeth Monaco Elizabeth Monaco
President and Chief Executive Director Executive Director
Executive Officer
United Way of Northern Chenango United Way United Way of Delaware
New York and Otsego Counties
Jeannie Montano Adam Dolce James A. Brown
President and CEO Executive Director President and CEO
United Way of the United Way of Northern United Way of Tompkins
Dutchess-Orange Region Chautauqua County County
Amy Rohler Fred Quist Jaime Saunders
Executive Director Director President and CEO
United Way of Southern United Way of United Way of Greater
Chautauqua County Montgomery County, Rochester and the
Inc. Finger Lakes
Jerome Singletary Peter Gannon Nancy Kern Eaton
Community Outreach and President and CEO President
Advocacy Manager
United Way of Buffalo United Way of the United Way of Central
and Erie County Greater Capital Region New York, Inc.
North Carolina
Denise Cumbee Long Kristie Hege Kendra K. Martin
Executive Director President Executive Director
United Way of Henderson United Way of Davidson United Way of Lee
County County County
Tate Johnson Heidi Norwick Brett Eckerman
Executive Director President Executive Director
Lumber River United Way United Way of Alamance United Way of Iredell
County County
Bill Blake Dan Leroy Raquel Painter
Executive Director President and CEO President
Albemarle Area United United Way of Asheville United Way of Onslow
Way and Buncombe County County
Cynthia Smith Gordineer Maureen Schwind Laura Marx
President and CEO Executive Director President and CEO
United Way of Forsyth Burke County United Way United Way of North
County Carolina
Chuck Taylor Rebecca Hall
Executive Director Executive Director
United Way of Davie High Country United Way
County
North Dakota
Rich Berg Heather Novak Nichole De Leon
Executive Director Executive Director Executive Director
Souris Valley United United Way of Grand United Way of
Way Forks, East Grand Dickinson
Forks and Area
Karla Isley Richard Berg
President and CEO Executive Director
United Way of Cass-Clay Souris Valley United
Way
Ohio
Katie M Koglman Scott Barr Ryan Aroney
CEO President and CEO President and CEO
United Way of Wayne and Shelby County United United Way of Greater
Holmes Way Lorain County
Marynell Townsend Kari Steele August A. Napoli
Executive Director Executive Director President and CEO
United Way of Guernsey, Tiffin-Seneca United United Way of Greater
Monroe, and Noble Way Cleveland
Counties
Moira Weir Amber Wertman Kelly Brenneman
President/CEO Executive Director Executive Director
Greater Cincinnati United Way of North United Way of Knox
Central Ohio, Inc. County Ohio
James Mullen Kelly Brenneman Maria Heege
President and CEO Executive Director President and CEO
United Way of Summit United Way of Knox United Way of Greater
and Medina County Stark County
Lisa Courtice George W. S. Hays Stacy Decicco
President and CEO Executive Director Executive Director
United Way of Central United Way Services of UW Alliance of the MOV
Ohio Northern Columbiana
County
Dawn Cazzolli Kerry Pedraza Vicki Smith
Executive Director Executive Director Executive Director
Orrville Area United United Way of Clark, United Way of Van Wert
Way Champaign and Madison County
Counties
Laura Rauch Jan Fuetter J. Thomas Maultsby
Executive Director Executive Director President and CEO
United Way of Jefferson United Way of Putnam United way of the
County County Greater Dayton Area
Michele Daniels Corinne Bix Meg Deedrick
Executive Director Director Executive Director
United Way of Hardin United Way of Union United Way of
County County Muskingum, Perry, and
Morgan Counties
Stacy Schiemann Thomas Mack Judy Walters
Executive Director Executive Director Volunteer
United Way of Ashland United Way of Henry United Way of Gallia
County County County
Ginny Pasha
President
United Way of Trumbull
County
Oklahoma
Daren Wilson Debby Hampton Alison Anthony
President CEO President and CEO President and CEO
United Way of Norman United Way of Central Tulsa Area United Way
Oklahoma
Ruth Cavins Oriana McElwee Daela Echols
Executive Director Executive Director Executive Director
United Way of Payne Ada Regional United United Way of South
County Way, Inc. Central Oklahoma
Oregon
Noreen J. Dunnells Jim Cooper Ms. Dee Anne Everson
President and CEO President and CEO CEO/Executive Director
United Way of Lane United Ways of the United Way of Jackson
County Pacific Northwest County
Margaret Magruder Ken Wilhelm Melissa Busch
Commissioner Executive Director Registered Nurse
United Way of Columbia United Way of Central United Way of Columbia
Oregon County
Claire Catt Blake A. Pang Tony Erickson
Executive Director President and CEO COO
United Way of Columbia United Way of Linn, United Way of Columbia
County Benton and Lincoln County
Counties
Pennsylvania
Laurie Root Michael J. Rubino Gary Drapek
President and CEO Executive Director President
United Way of Erie Beaver County United Way of
County Lackawanna and Wayne
Counties
William M. Jones Benjamin Green Jennifer Dippold
President and CEO Executive Director Executive Director
United Way of Wyoming Clinton County United St. Marys Area United
Valley Way of PA Way
Phillip Sparacella Michael B. Tukeva Amy Foley
President and CEO President/CEO Executive Director
United Way of Mon Pocono Mountains United Grove City Area United
Valley Way Way
Carrie H. Freeman Kenneth Hunt Ronald Frick
CEO Executive Director President
United Way of Southern United Way Boyertown Lycoming County United
Chester County Area Way
Bobbi Watt Geer MaChal Forbes John ``Herm'' Suplizio
President and CEO Executive Director Executive Director
United Way of Greene County United DuBois Area United Way
Southwestern PA Way
David Lewis Karen Struble Myers Adrienne Mael
President President and CEO President/CEO
United Way of the United Way of the United Way of Columbia
Greater Lehigh Valley Laurel Highlands and Montour Counties
and Greater
Susquehanna Valley
United Way
Kevin M Ressler Kristen Rotz Christopher Saello
President and CEO President President and CEO
United Way of Lancaster United Way of United Way of Chester
County Pennsylvania County
Timothy B. Fatzinger
President and CEO
United Way of the
Capital Region
Rhode Island
Cortney Nicolato
President and CEO
United Way of Rhode
Island
South Carolina
Marisiel Losa Meghan Barp Paige Stephenson
President and CEO President and CEO President/CEO
United Way of the United Way of United Way of the
Lakelands Greenville County Piedmont
Danny DuBose Joann DeLong Dale Douthat
Executive Director Executive Director President and CEO
United Way of United Way of United Way of the
Darlington Hartsville Lowcountry
Blakely Roof Carol E. Burdette Mindy Popovich
President and CEO CEO President
United Way of Horry United Way of Anderson United Way of Sumter,
County County Clarendon and Lee
Counties
Chloe Knight Tonney LaShauna D Harrison Rebecca Melton
President and CEO Chief Executive Officer President
Trident United Way United Way of Oconee United Way of York
County, Inc. County
Meghan Barp Naomi Lett
President and CEO President and CEO
United Way of United Way Association
Greenville County of South Carolina
South Dakota
Carm Roster Laura L. Hoiten Jamie Toennies
Administrative Executive Director Executive Director
Assistant
Mitchell United Way Watertown Area United United Way of the
Way Black Hills
Jamie Toennies
Executive Director
United Way of the Black
Hills
Tennessee
Mary Graham Amy Harper Kenneth S. Robinson
President Executive Director President and CEO
United Ways of United Way of Sevier United Way of the Mid-
Tennessee County South
Matt Marshall Paige Zabo Danelle Glasscock
President/CEO President/CEO Executive Director
United Way of West United Way of McMinn United Way of Greater
Tennessee and Meigs Counties Kingsport
Lisa Cofer Matt Ryerson Mary Graham
Executive Director CEO President
United Way of Bristol United Way of Greater United Ways of
Knoxville Tennessee
Valerie Guzman
CEO/Executive Director
United Way of the
Greater Clarksville
Region
Texas
Lisa Scroggins Kilena Underwood Jamie Johnson
Executive Director Executive Director CEO
Erath County United Way Henderson County United United Way of Mid and
Way South Jefferson
County
Stephanie Chandler, Andrea Grangruth Traci Wickett
M.Ed., MBA
President and CEO Executive Director President and CEO
United Way of Grayson Cooke County United Way United Way of Southern
County Cameron County
Jamie McNulty Lindsey White Maureen McAllister
Executive Director Executive Director President and CEO
United Way of West United Way of Galveston United Way of Orange
Ellis County County
Leah M. King Rev. Dr. Evan M. Dolive Jenna Haviland-Alesna
President and CEO Executive Director Executive Director
Tarrant County Greater Longview United United Way of Brazoria
Way County
Roxanne Saldana Jones Gary Ashcraft Deb Helm
Interim President and President/CEO Executive Director
CEO
United Ways of Texas Nacogdoches Area United United Way of Kaufman
Way County
Tracey P Lopez Christopher F. Martin Barbara Tucker
CEO/Executive Director President and CEO Executive Director
United Way of Rusk United Way of San United Way of Palo
County Antonio and Bexar Pinto County, Inc.
County
Utah
Bill Crim Bill Hulterstrom James A Birman Jr.
President and CEO President and CEO Executive Director
United Way of Salt Lake United Way of Central Cache Valley
and Southern Utah
Tim Jackson
President and CEO
United Way of Northern
Utah
Vermont
Helena Van Voorst Jesse Bridges Ruben R. Garza
Executive Director CEO Executive Director
United Way of Addison United Way of Northwest United Way of Windham
County Vermont County
Clarissa French
Co-Executive Director
United Way of Lamoille
County
Virginia
Ravi Respeto James Taylor Lisa Cofer
President and CEO President and CEO Executive Director
United Way of Greater United Way of Greater United Way of Bristol
Charlottesville Richmond and
Petersburg
Rosie Allen-Herring Abigail Hamilton
President and CEO President and CEO
United Way of the United Way of Roanoke
National Capital Area Valley
Washington
Jim Cooper Eric Fejeran Dona Ponepinto
President and CEO Executive Director President and CEO
United Ways of the United Way of Whitman United Way of Pierce
Pacific Northwest County County
Carl Borg Terry Cox Kelley McDonald
President/CEO Acting CEO and Executive Director
President
United Way of Kitsap United Way of Snohomish United Way of Grays
County County Harbor serving Grays
Harbor and Pacific
Counties
Chris Wells Ted Jackson Angela Heinlen
Executive Director Executive Director Manager of Marketing
and Data
United Way of Thurston United Way of Mason United Way of Cowlitz
County County and Wahkiakum
Counties
Robert Hanny Gordon McHenry, Jr. William T. Morrissey
Core Services Director/ President and CEO President
United Way Board
Member
United Way of Grays United Way King County United Way of San Juan
Harbor County
Lynn Green Jennifer Durney Kristi Birkeland
United Way Board Board Member President/CEO
Secretary
United Way of Grays United Way of Grays United Way of Whatcom
Harbor Harbor County
West Virginia
Rebecca Sias Brett White Carol H. Bailey
Executive Director CEO Executive Director
United Way of Gilmer, Tygart Valley United United Way of the
Lewis and Upshur Way River Cities
Margaret O'Neal Stacy Decicco Trena Dacal
President Executive Director Executive Director
United Way of Central UW Alliance of the MOV United Way of Southern
West Virginia West Virginia
Penny Porter
CEO
United Way of the
Eastern Panhandle
Wisconsin
Alexa Haigh Harper Mruk Amy Lindner
President and CEO Executive Director President and CEO
United Way of Racine United Way of Dodge United Way of Greater
County County Milwaukee and
Waukesha County
Charlene Mouille Amber Kilawee Mary Fanning-Penny
Executive Director Executive Director President and CEO
United Way of Wisconsin Fond du Lac Area United United Way Blackhawk
Way Region
Nancy Schultz Carolynn Friesch Barbara Bates-Nelson
Executive Director CEO Executive Director
United Way of Shawano United Way of Kenosha United Way of Northern
County County Ozaukee
Jeff Sargent Ashley Winch Robyn Davis
Executive Director/CEO Executive Director President and CEO
United Way of Marathon Marshfield Area United Brown County United
County Way Way
Amy Kohnle Joe Marquardt Tari Jahns
CEO Chairman CEO
United Way of Door New London United Way of South
County Wood and Adams
Counties
Tammy Dunn Andrew Neborak Jennifer Thatcher
Executive Director Executive Director Executive Director
United Way of Walworth United Way of the United Way of Dunn
County Greater Chippewa County
Valley
Kate Baer Megan Hartwick Mary Kay Wolf
Executive Director Executive Director Executive Director
United Way of Sheboygan United Way of Jefferson Great Rivers United
County and North Walworth Way
Counties
Kris Schmidt Renee Moe Natasha Khan
Treasurer President and CEO Operations Coordinator
Clark County United Way United Way of Dane United Way Manitowoc
County County
Susan Wilcox
Executive Director
United Way of Portage
County
Wyoming
Evelyn Edson Kelly Frink Anna Wilcox
Executive Director Executive Director Executive Director
United Way of Albany United Way of Southwest United Way of Natrona
County Wyoming County
______
Vanguard Charitable
P.O. Box 9509
Warwick, RI 02889-9509
888-383-4483
[email protected]
Statement of Rebecca Moffett, President
On behalf of Vanguard Charitable, thank you for the opportunity to
submit this statement for the record in follow up to the Senate
Committee on Finance's hearing on ``Charitable Giving Trends in the
Nonprofit Sector.'' We appreciate the Committee for its leadership on
this important subject.
At Vanguard Charitable, a sponsor of donor-advised funds (DAF), we are
avid proponents of ways to increase charitable giving and strengthen
the nonprofit sector and the countless communities it supports,
including encouraging individuals to give in all its many forms--
monetary donations, volunteering of one's time and talents, and active
civic participation. We firmly believe that the more people who are
encouraged and able to give, the better off our communities will be.
Our comments in this testimony will be focused on a donor-advised
fund's role in enabling this.
Vanguard Charitable has the distinct privilege of serving as one of the
largest grantmakers in the United States, providing much-needed
financial support to hundreds of thousands of unique charities at the
recommendation of our more than 25,000 generous donors. Since we were
founded by Vanguard 25 years ago as a 501(c)(3) public charity and
donor-advised fund, we have granted more than $13 billion to charitable
organizations. In 2021 alone, we granted $1.78 billion, an 8% increase
on top of a record year of giving in 2020 (increasing by 25% over 2019)
in the wake of the COVID-19 pandemic.
These billions of dollars represent significant resources for
hardworking nonprofits across the country and around the world who
provide food for the hungry, healthcare for the ill, educational
opportunities for our children, protection of the environment, support
for cultural institutions, and more. Importantly, these dollars are
available and ready to be called to action no matter the external or
economic conditions.
This is the story of donor-advised funds' role in the charitable
sector. In a normal year, they are strong charitable engines that spur
generous donations and help power philanthropy. But when the
unthinkable happens, they are also equipped with a special gear. In the
past few years alone, we've seen our donors respond meaningfully with
grants to 501(c)(3) public charities in the wake of hurricanes in the
U.S. and abroad, wildfires in the western U.S. and Australia, an
earthquake in Puerto Rico, a brutal winter storm in Texas, an explosion
in Beirut, and now a humanitarian disaster in Ukraine, just to name a
few.
Notably, DAFs do not solely help respond to disasters. Evidence shows
they can also be a stabilizing force to the philanthropic world during
economic downturns.\1\ Because DAF donors have already designated the
funds in their DAF for charity, they can respond more easily than other
sources of giving, which tend to dry up during recessions. It's this
upfront commitment to charity--not just to giving, but to long-term,
sustainable support--that sets DAFs and their donors apart.
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\1\ Heist, H. D., Vance-McMullen, D. Understanding donor-advised
funds: How grants flow during recessions, https://www.sp2.upenn.edu/wp-
content/uploads/2019/02/Heist-Vance-McMullen_Understanding-Donor-
Advised-Funds_working-paper-002.pdf.
One of the unique features of DAFs is their ability to grow funds,
creating additional dedicated charitable resources. Our donors choose
from Vanguard Charitable's diversified lineup of high-quality, low-cost
investment options, which have driven tremendous returns on charitable
investments in recent years. One study concluded that DAFs created more
than $5 billion in new charitable dollars from 2015-2019 due to their
ability to grow charitable investments tax-free.\2\
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\2\ Husock, H. Appreciation in Donor-Advised Funds: An Analysis of
Major Sponsors. American Enterprise Institute, https://www.aei.org/
research-products/report/appreciation-in-donor-advised-funds-an-
analysis-of-major-sponsors/.
Not only is the donor-advised fund innately built to drive significant
charitable giving, it also enables effective and compliant giving,
ensuring every donated dollar will be used for charitable purposes.
This is especially critical in the wake of disasters or unplanned needs
when rapid but responsible movement of charitable dollars is sorely
needed. Our due diligence practices help counter the bad actors that
often attempt to solicit funds from unsuspecting and well-intentioned
donors, and they also ensure our donors are giving in compliance with
sanctions or international granting rules--something the average donor
may find challenging to navigate. We have seen both these examples come
to light in the wake of the Ukraine humanitarian crisis: Vanguard
Charitable provided our donors with a list of reputable and carefully
vetted organizations that are getting funds directly to those in need,
minimizing the need for any review the individual donor may need to do
to ensure compliance with international law or quality of the recipient
charity. We also got the money out the door quickly; as of this
writing, Vanguard Charitable donors granted more than 4,300 times,
---------------------------------------------------------------------------
totaling nearly $37 million.
Our strong compliance and granting history is informed by the rules
governing all 501(c)(3) public charities and donor-advised funds. The
Pension Protection Act enacted several provisions to further define
donor-advised funds and regulate our grantmaking and due diligence
practices, thereby penalizing any would-be improper behavior by DAFs or
our donors. Also, Vanguard Charitable, like many of our peer
grantmakers, has a minimum account activity policy to ensure active
granting by all of our donors.
Vanguard Charitable believes in making every dollar that comes into our
donor-
advised fund even stronger and more effective as it moves to the end
charitable recipient. The donor-advised fund's combination of dollars
``at-the-ready'' that are available for ongoing needs over time--all
while granting with the highest level of compliance and due diligence--
makes the tool a formidable and necessary sustaining force in the
giving landscape. At Vanguard Charitable, we build on that by looking
ahead to the future of giving and considering the tools and resources
we can provide to donors to help them make well-informed and effective
giving decisions. The many resources we provide include:
Compiling lists of credible, effective disaster relief
organizations to help donors give immediately in the wake of great
need.
Investing in technology that enables money to get to charities
faster.
Connecting donors with experts and leaders at many of the
nonprofit organizations they support to hear firsthand about their
missions.
Encouraging unrestricted giving to enable charities to use
donations for the greatest need.
Developing innovative and modern giving tools, such as the
Nonprofit Aid Visualizer, a mapping solution that helps donors find
charities in their local communities who are fighting the hunger and
homelessness crises.
As the Committee looks ahead, I respectfully ask you to consider how to
encourage greater charitable giving and support the variety of tools,
like donor-advised funds, that bolster each dollar individuals invest
in the philanthropic sector.
If I can be a resource to the Committee as it considers its next steps
or address any questions, please reach out. Vanguard Charitable and
donor-advised funds broadly have a history of making a significant
impact on communities all over the globe, in times of great need and
when other charitable sources may be less available. We hope to
continue to serve this critical role for our neighbors.
______
YMCA of the USA
101 N. Wacker Drive
Chicago, IL 60606
P 800-872-9622
F 312-977-9063
https://www.ymca.org/
March 14, 2022
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
Dear Chairman Wyden, Ranking Member Crapo and Senate Finance Committee
Members:
I respectfully submit this letter on behalf of the nation's 2,600
YMCAs, which serve 10,000 communities across the nation. We urge you to
support for enactment two bipartisan bills that will address
significant revenue losses and workforce shortages in the nonprofit
sector: the Universal Giving Pandemic Response and Recovery Act
(UGPRRA), S. 618/H.R. 1704, and the Employee Retention Tax Credit
Reinstatement Act, S. 3625/H.R. 6161. These bipartisan bills are
critical to YMCAs and other nonprofit organizations and will help us
continue to provide critically needed services in communities as they
work to overcome ongoing challenges related to the COVID-19 pandemic.
Throughout the pandemic, Ys across the country have provided emergency
services for communities in need, including childcare for health care
workers and first responders, food for kids without access to school
meals, safe and enriching virtual learning spaces, shelter for
marginalized populations and outreach to isolated seniors. Ys also have
been providing holistic health and wellness support for all ages.
Before and throughout this pandemic, the Y has been a leading nonprofit
committed to strengthening community by empowering young people,
improving the health and well-being of people of all ages and inspiring
positive action in and across communities. This action includes
fostering a culture of giving through volunteerism and local
fundraising efforts, which are critical to ensuring YMCAs have the
capacity to meet the need for services in communities. YMCAs
collaborate with a diverse group of partners in the private and public
sectors, as well as individual donors at all levels. Fundraising is
challenging for certain, and Ys and other nonprofits need every tool we
can get to help bolster these efforts, including tax policies that
encourage giving.
We urge you to enact the Universal Giving Pandemic Response and
Recovery Act (UGPRRA), S. 618/H.R. 1704, led by a bipartisan, bicameral
group of lawmakers, including Senators. James Lankford (R-OK), Chris
Coons (D-DE), Mike Lee (R-UT), Jeanne Shaheen (D-NH), Tim Scott (R-SC),
Amy Klobuchar (D-MN), Susan Collins (R-ME) and Catherine Cortez Masto
(D-NV). UGPRRA would increase the cap on the temporary universal
charitable deduction from $300/$600 to one-third of the standard
deduction--and would extend the availability of the deduction through
2022. Increasing charitable contributions is a key factor in addressing
both the increased costs related to the higher demand for services as
well as operational setbacks due to significant revenue losses
experienced by many nonprofits.
An above the line ``universal'' charitable deduction would incentivize
all American taxpayers--regardless of income--to give to charity,
thereby ensuring that our country retains a strong and independent
civil society. In 2020, Congress enacted a temporary nonitemizer
deduction on charitable donations in the CARES Act. It included a $300
cap for individuals and a $600 cap for couples. This marked the first
time in thirty years that all taxpayers were able to claim a deduction
on at least part of their charitable giving, regardless of whether they
itemized. The Fundraising Effectiveness Project's fourth quarter report
for 2020 shows a 15.3 percent uptick in donations of less than $250,
which outpaced the increase in larger donations. Additionally, there
was an estimated 28 percent increase in gifts of $300 on December 31,
2021--the exact amount of the universal charitable deduction. While we
know there are many factors that contribute to increased donations, one
factor was likely the availability of the charitable deduction to
nonitemizers. Unfortunately, that deduction expired at the end of 2021.
As noted, UGPRA would raise the $300/$600 cap to roughly $4,000 for
individuals/$8,000 for couples and extend the availability of the
deduction to the 2022 tax year, helping to spur more giving as
communities continue to recover from COVID-19 and its economic effects.
It also would provide needed resources for charitable and faith-based
organizations to continue providing vital services to families, workers
and communities, especially those most severely affected by the ongoing
pandemic. Additionally, we are urging Congress to extend two additional
disaster-relief giving incentives that expired on December 31, 2021--
the provision permitting individuals who itemize to deduct charitable
donations up to 100 percent of their adjusted gross income and the
measure allowing corporations to deduct charitable donations up to 25
percent of taxable income.
Over the past several months, there has been much discussion about the
negative impacts on nonprofit organizations due to the early
termination of the Employee Retention Tax Credit (ERTC). The ERTC was
instrumental in helping nonprofits like the Y retain staff who deliver
essential services in their communities. We urge you to prioritize
passage of the Employee Retention Tax Credit Reinstatement Act (S.
3625/H.R. 6161). This bipartisan legislation reinstates the ERTC
through the end of calendar year 2021, as Congress intended, to help
struggling nonprofits who were counting on the ERTC to pay their
employees through the end of the year. For YMCAs across America, the
elimination of ERTC for the fourth quarter of 2021 cuts $60M-$100M of
expected operating funds that already were budgeted to keep critical
staff on the payroll to continue meeting vital community needs. Please
pass the Employee Retention Tax Credit Reinstatement Act.
Thank you for the opportunity to submit this letter and for your
support of the YMCA. We greatly appreciate your consideration to
support the provisions outlined here to enhance charitable giving and
to further support nonprofits as we continue to recover from the
pandemic while also continuing to serve our communities.
Sincerely,
Suzanne McCormick
President and CEO
[all]