Posted on October 28, 2005

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Katrina Tax Provision Could Provide Windfall for Charities

A provision in the federal tax relief package designed to aid survivors of Hurricane Katrina could provide a year-end windfall to charities while potentially curtailing billions in tax revenue, the New York Times reports.

The provision allows donors who make cash gifts to almost any charity by the end of 2005 to deduct an amount equal to virtually 100 percent of their adjusted gross incomes — double the normal limit. Moreover, some donors may be able to use the provision to take deductions this year for gifts made in past years.

Based on information from 2002 tax returns, Robert F. Sharpe, Jr., a fundraising consultant whose clients include the American Heart Association and the University of California, Los Angeles, speculated that the provision could spur $4 billion to $10 billion in additional giving this year. Sharpe also estimates that the additional giving would result in $1 billion to $3.5 billion in lost revenue for the U.S. Treasury — more than the $819 million the government anticipates. "Congress intended this, but I'm not sure they understood how big the tab is going to be," he told the Times. "There are just so many ways donors can use this bill to maximize their charitable giving."

According to Senate Finance Committee chair Charles E. Grassley (R-IA), the bill was intended to increase donations, particularly for organizations not involved in disaster relief. "My hope in passing this provision is that Americans' generosity for those harmed by Hurricane Katrina won't mean a trade-off for other important charitable work in this country," said Grassley.

But some fundraising experts question whether the decline in charitable giving that followed the 9/11 attacks was the result of donor fatigue, rather than economic factors. "After 9/11, 65 percent of our members were raising the same or more, and the following year, the numbers went up again," said Paulette V. Maehara, president of the Association of Fundraising Professionals. "There wasn't the sky-is-falling impact that a lot of people thought there would be, and there won't be now, either, unless the economy does a nosedive."

Strom, Stephanie. “In Hurricane Tax Package, a Boon for Wealthy Donors.” New York Times 10/27/05.

Primary Subject: Philanthropy and Voluntarism
Secondary Subject(s): Hurricane Relief
Location(s): National, United States

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