Posted on May 12, 2006

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Charity Provisions Dropped From Tax Bill

Provisions designed to encourage charitable giving and improve nonprofit accountability and transparency have been dropped from the $69 billion tax reconciliation bill approved by House and Senate Republicans, the New York Times reports.

Had they been adopted, the proposals would have increased excise taxes on foundations, prohibited charitable deductions for contributions to certain kinds of donor-advised funds, and prohibited donor-advised funds and supporting organizations from making payments and distributions to donors and related parties, while encouraging charitable giving via tax-free distributions from IRAs, a charitable deduction for non-itemizers, and tax incentives for donations of property for conservation purposes. The Congressional Joint Committee on Taxation has estimated that the charitable giving provisions would reduce government revenues by $528 million over the next five years.

The provisions, which, according to the Times, have been bumped to a secondary piece of legislation, where their fate is uncertain, had been endorsed by the United Way of America and other large nonprofit associations, but opposed by a number of groups, including the Alliance for Charitable Reform, which represents largely conservative foundations.

Critics of the proposals say the United Way and other large associations have been co-opted by the Senate Finance Committee and its chairman, Charles E. Grassley (R-IA). Among the proposals the Alliance for Charitable Reform has lobbied hardest against is a plan that would expand the types of investments subject to an excise tax that Congress imposed on foundation investment income in 1969. "Every dollar that goes to the government," said Cleta Mitchell, a lobbyist for the alliance, "is a dollar that doesn't go to charities."

According to Diana Aviv, president and CEO of Independent Sector, the debate over the reform package is dividing the nonprofit sector. "We've gone on record as a whole sector saying we think these reforms are important and will improve the quality of our practices," said Aviv. "I'm disappointed that organizations are putting their individual interests against the common good of our collective sector."

Strom, Stephanie. “Charity Provisions Dropped From Measure on Tax Cuts.” New York Times 5/11/06.

Primary Subject: Public Affairs
Location(s): National, Washington, D.C.

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