3/7/14 — Defending the Charitable Deduction at Foundations on the Hill

This post originally appeared on the Forum of Regional Associations of Grantmakers website.

Against the backdrop of President Obama’s recent budget proposal, which proposes to cap the charitable deduction at 28%, and Chairman of the House Ways and Means Committee Representative Dave Camp’s tax reform discussion draft, which includes a 2% floor for the charitable deduction among other changes, philanthropic leaders arrived in Washington, DC to meet with their representatives in Congress as part of Foundations on the Hill (FOTH). As Tim Daleney, President & CEO of the National Council of Nonprofits put it at the FOTH luncheon, “This is the week to be in Washington.”

Since 2003, Forum of Regional Associations of Grantmakers, in partnership with the Council on Foundations, have sponsored Foundations on the Hill, an annual opportunity for grantmakers and regional associations to meet with their federal lawmakers. Foundations on the Hill is now part of Philanthropy Week in Washington, a week of activities around engaging policymakers. During Foundations on the Hill, regional associations, working with foundation trustees, executives and staff, schedule meetings on Capitol Hill to personally discuss their work with members of Congress.
 
Among the messages brought to Members of Congress by each state delegation of grantmakers was the fact that philanthropy is an integral part of the economic and social life and that when philanthropy thrives, communities thrive. Looking at jobs alone, the charitable sector makes a huge contribution to our country’s economy:
 
  • Generates more than $1 trillion every year through jobs and services; 
  • Employs one in 10 U.S. workers – nearly 14 million jobs; 
  • And generates 9 percent of wages paid in the U.S. – nearly $600 billion a year. 
 
Knowing that the charitable sector plays such a strong role in our ecomony and our local communities, philanthropic leaders are asking Congress to protect the charitable deduction as they consider options for tax reform. The largest source of support for nonprofits is from individual givers, $300 billion according to Giving USA. A recent poll by United Way Worldwide found that 62% of respondents said they would reduce giving by at least 25% if the charitable deduction is capped or limited. The President’s proposed cap of 28% is projected to reduce charitable giving by $5.2 billion.  A reduction in the charitable deduction rate will reduce the current incentive for donors to give, thus reducing the amount of money available to support worthy nonprofits. 
 
Members of Congress face tough decisions about how to reform the tax code. As they begin this work, we remind them that the charitable deduction is a unique tax benefit in that it encourages individuals to give away a portion of their income without getting anything back. The proposed changes to charitable giving incentives would cause donations to decline by billions of dollars each year, as we’ve seen on the state level in Maine and Hawaii, stifling philanthropy’s effect during a time when communities are still struggling to overcome the recession. 
 
We’re confident that Members of Congress will come away from their Foundations on the Hill meetings better informed about the work of the charitable sector and the importance of the charitable deduction.  “This is the week to be in Washington,” Tim Delaney said, “but the other 51 weeks, the action is in the states.” Regional associations and their members will return home and continue to engage policymakers around key legislative topics affecting our sector, including the charitable deduction, the excise tax, and the IRA Charitable Rollover. All politics is local and the regional associations are on the ground.