Kevin MurphyFighting for Charitable Giving

By: Kevin Murphy In: Philanthropy| Public Policy| Tax Reform

13 Aug 2013

Council staff, consultants and I recently met with Senator Max Baucus of Montana who serves as chair of the Finance Committee. Three weeks ago, the Council’s CEO, Vikki Spruill, met with Representative Dave Camp, the chair of the Ways and Means Committee. These two men guide the tax writing committees that will decide what form, if any, federal tax reform will take. For Vikki and me, these meetings were valuable opportunities to press the case for charitable incentives with the two most important congressional leaders on tax reform.

While these were key meetings, they were also just two of hundreds of meetings that Council staff, members, and volunteers have held since the Ways and Means Committee kicked off the debate on the future of the charitable deduction in February.

In the past few weeks some members have asked us why we’re focusing so much on the charitable deduction and less on other public policy issues. I want to use this space to address that question, but the simple answer is, as my kids would say, “it’s getting real.”

Some very serious people are questioning the value of keeping the charitable deduction in the tax code, or others have outright called for limiting it. The National Commission on Fiscal Responsibility and Reform (usually called the “Simpson-Bowles Commission”) proposes replacing the deduction with a credit. According to the Urban Institute that would reduce charitable giving by between 5.3% and 14.2%. President Obama has proposed capping the charitable deduction at 28% of adjusted gross income, a proposal that the American Enterprise Institute estimates would cause a drop in charitable giving of about nine billion dollars.

So why do we care?

During this tax reform process, the Council has consistently encouraged Congress to maintain, if not enhance, incentives for charitable giving in the tax code. We support provisions that at the very least would maintain the current level of charitable giving in this country. Moreover, we challenge Congress to consider provisions that might increase giving. And, those incentives might not be limited to just the charitable deduction or some substitute for that. There are other provisions in the code, including incentives for IRA rollovers and non-cash gifts, which are important incentives for giving. I would argue that even changes to simplify the private foundation excise tax could increase giving from those institutions as funds can be redirected from financial advisors to the community.

We know that the Council has a diverse membership. But all of our members (or almost all of them) support nonprofit organizations that provide health care to the poor, educate our children, bring arts to our communities, protect the environment and work in a host of other ways to improve the lives of people in our nation and across the world. For us to be successful those grantees have to be healthy, vibrant organizations and a significant loss of charitable giving would be a devastating blow to many of them. So protecting the charitable deduction benefits all of our members by protecting the strength of their grantee networks.

As the CEO of a community foundation, I know that community foundations have an added interest in protecting incentives for charitable giving. Unlike most of the Council’s members, we’re charged with attracting new contributions to grow our capacity. The Council’s leadership is acutely aware of the need to support the growth of community foundations. And because members of Congress are more familiar with community foundations, we’ve found a very receptive audience for our message.

Some have suggested that the prospect of major tax reform “isn’t real” or that “nobody would ever touch the charitable deduction.” Yes, the prognosis for a tax reform package being enacted during this Congress is unclear. But it’s naïve to imagine that the debate won’t spill over to future sessions and absurd to imagine that tax reform will never come. As to the supposed sanctity of the charitable deduction, the words one senator used, “if you’re not at the table during this debate, you’re on the menu” always haunt me.

This point is worth emphasizing. Even if tax reform does not happen in this session of Congress, actions taken now will alter the form and subject of the next debate in Washington. As we see now with immigration reform, ideas that were supported in 2006 have re-emerged as central to the policy battles of today. Our hope is to impact not just today’s tax reform discussion but also tomorrow’s.

While we focus on preserving the charitable incentive, we’ve also raised two other issues at every meeting: The need to simplify the excise tax on private foundations and the opportunity to simplify the code by allowing IRA rollovers into donor advised funds. We know these issues are important to our members, and we’ll keep raising them, but it’s important for our members to understand that—in the current environment—these items aren’t attracting a lot of attention.

What Congress is focused on is the core of the deduction itself, whether it is being abused, whether all causes should be treated equally and whether modifications to the deduction offer an opportunity to generate additional federal revenues. That’s why we’ve focused our work on those issues.

I can tell you having been in these meetings that Vikki and a top-rate public policy team led by Sue Santa is making sure that we’re “at the table.” All of us in the field need to keep communicating to members of congress the importance of preserving charitable incentive so that we don’t end up “on the menu.”

Kevin Murphy is Chairman of the Council on Foundations and President & CEO of the Berks County Community Foundation.

1 Response to Fighting for Charitable Giving


August 13th, 2013 at 3:44 pm

“In the past few weeks some members have asked us why we’re focusing so much on the charitable deduction and less on other public policy issues.” And your answer is that “its getting real?” By other policy issues, I assume you mean sequestration, cuts to SNAP, and even more draconian budget cuts to important programs that fund nonprofits in the House of Representative budget proposals. Perhaps you even mean “Obamacare”, whose implementation will have an enormous impact on the nonprofit sector. In any event, by any “realness” standard, all of those are already happening or are far more “real” than the potential for changes to the charitable tax deduction. The first round of sequestration has happened, the second will happen soon. SNAP has been entirely left out of the House-passed Farm Bill. Obamacare is coming. The House has actually passed a budget that devastates many programs nonprofits rely on; some of those proposals will inevitable make it into whatever final appropriations bill is passed. That is all “real”.
It is, of course, the Council on Foundations’ prerogative to focus on the charitable deduction. The Council has chosen its priorities; they are evident through its actions. And you are absolutely correct that what happens in the policy development process matters, even if nothing becomes real “soon”, that all policy in DC is an iterative process. But please don’t pretend that changes to the charitable tax deduction, particularly as part of a larger tax reform package, are more imminent than the changes that will occur- and have already occurred- around those “other” public policy priorities your members are concerned about.

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