• January 25, 2015

Members of Congress Question How Much Help Charities and Donors Give to the Needy

Many large nonprofit groups and wealthy donors are failing to give enough money and other resources to regions with large concentrations of minority and poor residents, charity leaders and other experts today told members of a key Congressional committee.

In turn, they said the regions most in need of resources are not getting adequate help.

That message was reinforced throughout a hearing of the House Ways and Means Subcommittee on Oversight, which has jurisdiction over U.S. tax policy.

And it prompted some lawmakers on the subcommittee to question whether Congress should examine how the tax system rewards people who donate money to charity.

Rep. Xavier Becerra, Democrat of California, said during the hearing that he has reservations about whether donations to institutions such as art museums and universities should be given the same tax treatment as contributions to social-services charities that help the poor.

Mr. Becerra said that when Congress examines federal tax policies, it should “take a look at whether or not we are serving the best purpose” by maintaining the current system, which allows donors to write off their gifts to all charities regardless of their mission

Response to Katrina

That issue was also raised by U.S. Rep. John Lewis, a Georgia Democrat and the chairman of the subcommittee, who said he believes not enough attention is being given to the nation’s minority and poor populations.

Mr. Lewis called the hearing after witnessing what he believed was an inadequate response by charities and the federal government to help citizens in Louisiana and Mississippi who were displaced by Hurricane Katrina in 2005.

Most of those who were harmed by the hurricane were poor and minorities.

“Sadly, those with the greatest need are not always served,” Mr. Lewis said at the beginning of the hearing. “We must ask the question: how well do we reach diverse populations?”

A significant portion of the hearing, in fact, was devoted to the American Red Cross’s efforts following the disaster — a response that highlighted the strained relationship between some nonprofit groups and low-income people and minorities who needed assistance.

Kevin M. Brown, the Red Cross’s chief operating officer, told the committee that his organization drew considerable criticism following its response to Katrina because it did not have a diverse staff of workers and volunteers and because it had not established relationships with local and national nonprofit groups that were also working to help those who had been displaced by the storm.

The charity’s failure to develop those relationships, he said, meant that many victims did not receive adequate help.

“The sense was that the Red Cross lacked cultural competence in its response to Katrina,” Mr. Brown said in his testimony.

The Red Cross has since been working to build relationships with local charities in low-income neighborhoods and to redesign the way it provides help to people who speak other languages.

How Donors Give

More broadly, experts said national organizations such as the Red Cross and most donors are more likely to focus their philanthropic efforts on what they know — rather than taking the time to find out who has the greatest need for help.

“If diversity is defined as synonymous with concentrated poverty and social needs, then charitable organizations are woefully short of resources commensurate with needs,” said Julian Wolpert, a professor of public affairs at Princeton University in Princeton, N.J. “Little charity or volunteerism passes from wealthy suburbs to inner cities or rural areas of Appalachia. Local charity in those needy communities, no matter how generous, makes only a small dent.”

The current tax system, Mr. Wolpert said, is not giving wealthy donors enough incentive to dedicate money to needy people and minorities. “They are not redistributing,” he said. “We already know that.”

That point prompted Mr. Becerra to question whether the government should instead structure tax incentives to give more-generous breaks to donors who contribute to groups that serve the poor and minorities[—]and less to those who contribute to other charitable efforts.

Byron Laher, director of public policy at the Greater Twin Cities United Way, in Minneapolis, offered another possible solution[—]allowing those who do not itemize their tax returns to deduct their charitable contributions on their federal tax returns.

Mr. Laher said such an effort would encourage more giving by less-affluent donors who would be more likely to contribute to causes that would support the needy.

“I know it’s an expensive issue,” he said. “But it’s an important thing that as a country we need to consider.”

Lesley Grady, vice president of community for the Community Foundation for Greater Atlanta, said extending legislation that allows donors the opportunity to avoid tax penalties when they donate money to charity directly from their individual retirement accounts would also help to democratize philanthropy. A law that now allows such a tax break expires at the end of of the year.

“It allows everyday people to use their IRA’s to help charitable organizations,” Ms. Grady said. “That’s a good starting point to figure out how to better work together to improve the communities we all care about.”

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