June 2008
June 30, 2008
Senators Propose Tax Incentives for Midwestern Disaster Relief
A group of Midwestern U.S. senators have introduced legislation to create tax incentives for charitable giving to help victims of the storms, tornados, and floods that have hit their region.
The Midwestern Disaster Tax Relief Bill—an amendment to H.R. 3221, an unrelated bill designed to ease the housing crisis—would allow individuals and corporations to get unlimited charitable deductions for donations to relief efforts in the affected areas through the end of 2008. (The measure would not apply to contributions to donor-advised funds.)
It would also allow people using their vehicles for disaster relief to deduct 70 percent of the business mileage rate. (The rates now are 14 cents per mile for charitable activities and 50.5 percent for business activities.) Volunteers could also exclude from their income reimbursements from charities for use of their vehicles.
The bill, S. AMDT. 5035, would also extend provisions that expired at the end of 2007 allowing a variety of businesses such as restaurants, grocery stores, or farms to earn an “enhanced deduction” for donating surplus food to charity. In general, federal law allows companies to deduct the production costs of certain goods they donate, which is usually below their fair market value. The “enhanced deduction,” which is now is limited to certain kinds of corporations, allows donors to deduct production costs plus some of the difference between production costs and fair market value.
Sponsors include 10 senators from Illinois, Indiana, Iowa, Minnesota, Missouri—including Charles Grassley, Republican of Iowa, the senior Republican on the Senate Finance Committee, and Barack Obama of Illinois, the presumptive Democratic presidential nominee.
The Council on Foundations offers this analysis of the amendment on its Web site.
Child-Sex Organization Denied Tax-Exempt Status
The Internal Revenue Service has revoked the tax-exempt status of an organization that seeks to decriminalize consensual sexual activity between adults and minors.
The organization had applied to receive tax-exempt status, saying that its charitable mission was to work for “law change to protect the rights of sexual-active consenting kids and adults, and to amend child pornography law; to provide counseling to sexual-active kids and adults; and scientific studies; educational and artistic.”
The group’s founder and executive director said in filings with the IRS that he had served prison time for two counts of sex abuse with minors before starting the organization. The man was listed as its sole officer and board member.
The IRS denied the request, saying that it organizations that work to violate laws do not have a charitable purpose. As is its policy in these rulings, the organization was not named.
June 25, 2008
Nonprofit Leaders to Attend Obama Economic-Competitiveness Conference
Several nonprofit and philanthropic leaders are among a dozen people who have been invited to attend a conference on economic competitiveness that Sen. Barack Obama, the presumptive Democratic presidential nominee, is holding on Thursday in Pittsburgh.
Participants in the “American Competitiveness Summit” will discuss ways the country’s work force can remain competitive in a 21st-century global economy, according to a statement by the Obama campaign.
They will include Lael Brainard, vice president of the Brookings Institution, a think tank in Washington; Eli Broad, founder of the Broad Foundations, in Los Angeles; Geoffrey Canada, chief executive of the Harlem Children’s Zone, a charity that serves poor children in New York; Steve Case, chairman of the Case Foundation, in Washington; Susan Hockfield, president of the Massachusetts Institute of Technology; and Harold Varmus, president of the Memorial Sloan-Kettering Cancer Center, in New York.
They will join business, labor, and other leaders at the conference.
“Obama has called for a strategy that creates the jobs and opportunity of the future built upon an improved education system, investments in energy, green jobs, innovation and infrastructure, and a commitment to fiscal responsibility and fair trade,” the Obama campaign statement said.
Mr. Broad said in a statement that he would discuss ways to improve the country’s public schools and other education issues.
To learn more about the 2008 campaign and nonprofit issues, go to our special election section.
June 23, 2008
Congress Considers Giving Volunteers More Money for Mileage Expenses
Congress is considering legislation that would increase the tax deduction for people who use their automobiles as part of their volunteer work for charities.
Under federal law, volunteers who drive their cars for charitable purposes may be reimbursed up to 14 cents per mile without the payments being subject to federal income tax.
Some members of Congress say that rate is too low, particularly as gas prices have reached more than $4 per gallon.
Bills pending in Congress would increase the reimbursement to reflect the business mileage rate, which was raised this week to 58.5 cents per mile.
Sen. Russell D. Feingold, a Wisconsin Democrat, is sponsoring a Senate bill that would increase the reimbursement. Rep. Todd Russell Platts, a Pennsylvania Republican, has introduced legislation in the House.
Both lawmakers have introduced similar bills in the past, with no success.
But with costs for energy rising quickly, Senator Feingold said volunteers should be entitled to a larger reimbursement.
“By increasing the amount of reimbursable mileage, we can make it easier for volunteers to continue helping these organizations provide important services to their communities without having to worry about the impact it will have on their wallets,” Sen. Feingold said in a written statement.
The reimbursement rate for volunteers has not changed since 1997 — though volunteers who used their cars, trucks, and other vehicles for the Hurricane Katrina relief efforts were able to receive the standard business mileage rate from August 25, 2005 though December 31, 2006.
The Joint Committee on Taxation estimates the government would lose $2-million in revenue from 2008 through 2012 if Congress increases the mileage rate for volunteers.
June 20, 2008
Where the White House Candidates Stand on the Estate Tax
The political debate over the future of the estate tax is being watched closely by those in the philanthropic world, many of whom believe the tax motivates people who inherit wealth to give more to charity.
Not surprisingly, the tax is becoming a key issue for those in the nonprofit world who are sizing up how the contenders for the White House would affect charities if they are elected.
Sen. John McCain wants to cut the tax, while Barack Obama favors maintaining it at the levels that go into effect in 2009.
Their positions on the issue have become much more clear in the past month, as the two candidates have been trading barbs over the tax on the campaign trail.
The current law is complex, and varies by year. This year, heirs may exempt up to $2-million ($4-million for couples) from taxation, with amounts over that level taxed at a 45-percent rate. Next year, however, the exemption increases to $3.5-million ($7-million for couples), with the same tax rate.
If Congress does not act, in 2010 the estate tax will die for one year. In 2011, the law would then revert back to the 2001 rules, with a $1-million tax exemption ($2-million for couples) and a 55-percent tax rate.
Mr. Obama is no fan of the new rules governing the tax. In his book The Audacity of Hope, he said it “would be hard to find a tax cut that was less responsive to the needs of ordinary Americans or the long-term interests of the country” than repeal of the tax.
He proposes maintaining the 2009 levels of a $3.5-million exemption ($7-million for couples) and a 45-percent tax rate.
By contrast, Mr. McCain supports a $5-million exemption ($10-million for couples) and a 15-percent tax rate.
Speaking at the National Small Business Summit this month, he called the estate tax “one of the most unfair tax laws on the books,” adding, “the first step to reform is to keep it predictable and keep it low.”
A summary of the two candidates’ positions on the estate tax, and on other issues affecting the nonprofit world, can be found on The Chronicle‘s Campaign 2008 page.
June 18, 2008
Foundation Leader Wins Congressional Seat
Donna Edwards will soon be reporting to a new office in Washington.
Ms. Edwards, the executive director of the Arca Foundation in Washington, won a special election Tuesday to represent Maryland’s Fourth Congressional District in Congress.
The Democrat had defeated Rep. Albert R. Wynn, who now holds the seat, in the Maryland primary in February. After his loss, Mr. Wynn decided to vacate his seat to allow Ms. Edwards to get a jump start in her new role — provided she was able to win Tuesday’s special election.
Because Ms. Edwards lives in a largely Democratic district, she was heavily favored to defeat Republican nominee Peter James.
Ms. Edwards and Mr. James will go head-to-head again in November’s general election.
But for now, at least, she is relishing her victory, which makes her Maryland’s first black female member of Congress.
“It really didn’t hit us about the element of history, but what it says is that we’re ready for change and for people who represent all of us,” Ms. Edwards told The Baltimore Sun.
New Effort Seeks to Educate Americans About Tax Policies
With help from the Bill & Melinda Gates Foundation, two Washington think tanks have created a new fund to help policy makers, journalists, and the public better understand the way tax dollars are raised and spent.
The Urban-Brookings Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, hopes to use a $2.5-million challenge grant from the Gates foundation to create a $10-million fund to analyze tax issues.
The Seattle grant maker will match one out of every three dollars the fund receives before April 1, 2011.
“Getting objective estimates and analyses into the public domain allows policy deliberations to unfold based on facts rather than spin, leading to improved decision making,” said Leonard Burman, director of the Tax Policy Center, in a statement.
Mr. Burman said the new fund would enable his organization to expand its activities, including developing models for improving the tax system and building better analyses of state, local, corporate, and international taxes.
The next few years will be a particularly opportune time to discuss tax policies, said the organization’s leaders. Most of the tax cuts enacted in 2000 are set to expire in 2010, and tens of millions of baby boomers will retire, placing unprecedented demand on the tax system.
June 16, 2008
Decision Day Near for Foundation Leader's Congress Bid
A Washington foundation leader will learn tomorrow whether she will be the newest member of Congress.
Donna Edwards, executive director of the Arca Foundation, in Washington, is the favorite to win Tuesday’s special election to represent Maryland’s Fourth Congressional District.
Ms. Edwards, a Democrat, defeated Rep. Albert R. Wynn, who now holds the seat, in the Maryland primary in February.
Mr. Wynn has since decided to vacate his seat — a decision that is expected to allow Ms. Edwards to get a head start in Congress and solidify her effort to win the seat in November’s general election.
June 10, 2008
Senator Blasts Payment Policies at Nonprofit Hospitals
Sen. Charles E. Grassley, the senior Republican on the Senate Finance Committee, once again blasted nonprofit hospitals during a Senate hearing today about ways to fix the country’s health-care system.
The Iowa senator, who frequently questions whether nonprofit hospitals are earning their tax breaks, specifically criticized institutions that have an “upfront collection policy,” or demand cash payments from people with inadequate or no insurance before treating them.
He cited an article in The Wall Street Journal about a leukemia patient who had trouble getting care at the M.D. Anderson Cancer Center, in Houston, because her insurance did not cover all of her treatment.
That patient, Lisa Kelly, was scheduled to testify at the Finance Committee’s hearing, “47 Million and Counting: Why the Health Care Marketplace Is Broken.” “The troubling thing about her story is that these were actions taken by a hospital that is funded through taxpayer dollars and charitable gifts,” Mr. Grassley said.
He said nonprofit hospitals receive $40-billion in benefits through their exemptions from income, sales, and property taxes; tax-deductible contributions; and tax-exempt bonds.
“The current environment is no different than where we were over a hundred years ago,” he added. “Back then, people with money had private physicians who made home visits. The poor received treatment at alms houses supported by philanthropy. The only difference now is that many of those former ‘alms houses’ have become rich institutions that believe they no longer need to serve the poor to reap all the beneits of their tax-exempt status.”
M.D. Anderson told the Journal that it started the upfront-collection system in 2005 after its unpaid patient bills jumped by $18-million, to $52-million, threatening its mission to cure cancer.
IRS Says Number of Charities Rose 6% in 2007
More than 1.1 million charities and private foundations were registered with the Internal Revenue Service as of September 30, 2007, according to figures released by the tax agency.
The IRS reported that the number of groups classified under Section 501(c)(3) of the Internal Revenue Code rose from 2006 to 2007 by 64,176, or 6 percent — the highest percentage increase in four years.
In 2007, a total of 1,128,367 charities and foundations were registered with the federal government, compared with 1,064,191 in 2006.
The number of groups classified under Section 501(c)(3) has increased by 73 percent over the past dozen years. In 1996, the revenue service counted a total of 654,186 of them.
Until last year, the pace of growth of all charitable organizations had been gradually slowing down. The number of groups increased by 1.7 percent from 2005 to 2006; 3.5 percent from 2004 to 2005; 4.8 percent from 2003 to 2004; and 6 percent from 2002 to 2003.
The IRS acknowledges that an unknown number of the organizations classified under Section 501(c)(3) are still on the government’s books, even though they have shut down.
The IRS’s statistics show that the total number of tax-exempt organizations classified under all parts of Section 501(c) of the Internal Revenue Code rose by 62,827, or 4 percent, from 2006 to 2007.
The statistics were published in the IRS’s Data Book for 2007.
June 06, 2008
IRS Panel Finds Problems With Deductions Taken by Art Donors
The Internal Revenue Service has recalculated the value of hundreds of pieces of artwork for which deductions were claimed by taxpayers who donated them to charities or left them to heirs.
As it has in the past, the tax agency’s Art Advisory Panel found that many people exaggerated the value of paintings and other items contributed to charities and placed too small a value on objects left to heirs.
Each year, a committee of art experts meets to review appraisals submitted by people the IRS is auditing. The committee steps in when a taxpayer says a work is worth at least $20,000.
In its report for 2007, the art panel said that 61 percent of 1,002 items in 131 cases had been valued incorrectly. The committee agreed with taxpayers on 36 percent of the appraisals; 3 percent needed further study.
Taxpayers had claimed a total value of $279-million for the items, most of which were estate and noncharitable gifts to heirs.
The art panel recommended total adjustments of more than $94.5-million. That figure included a 47-percent reduction in the values of items for which an excessive charitable deduction had been claimed, and a 58-percent increase on undervalued items in estate and noncharitable gift appraisals.
June 04, 2008
Pa. Legislators Form Charitable Nonprofit Caucus
An alliance of nonprofit groups in Pennsylvania has worked with the state’s General Assembly to set up the Pennsylvania Charitable Nonprofit Caucus, a grouping of state legislators that will discuss charity-related issues.
The Pennsylvania Association of Nonprofit Organizations, or PANO, and the United Way of Pennsylvania led the effort to create the caucus, which includes Democratic and Republican members of both the house and senate.
“State government and charities share the common goal of promoting quality of life in our communities,” Joe Geiger, PANO’s executive director, said in a statement. “The caucus will help both nonprofits and lawmakers by preventing the unintended consequences of otherwise good legislation.”
David Ross, PANO’s public-policy officer, said charities would like to discuss legislation in areas like charitable tax exemptions, sales taxes on services, lobbying, volunteerism, and government money for human services and the arts. He said they are worried, for example, about a bill, SB 1328, that would allow local governments to charge tax-exempt organizations fees for “essential services” like police and fire departments.
Saying that charities have “one arm tied behind their backs” because they are unable to contribute to political campaigns and can do only limited amounts of lobbying, Mr. Ross said the caucus would offer a way to give feedback to lawmakers.
The legislative caucus, which will officially debut on June 17, will be co-chaired by Sen. Andy Dinniman and Rep. W. Curtis Thomas, both Democrats, and Rep. Mario Scavello, a Republican, with a Republican senate co-chairman yet to be named.
A group of 30 charities and public foundations will act as an advisory board to the caucus.