Philanthropic Achievement of the Week

1903: Scripps Institution of Oceanography

Ellen Browning Scripps, whose fortune derived from the Scripps family’s newspaper empire, generously supported a range of charitable causes across Southern California. She donated the land and first building for a Catholic college-prep school for girls, and supported it financially for years. She endowed what would become Scripps College, a part of the Claremont Colleges that she had helped to found. She commissioned a Women’s Club’s headquarters and community center, and the country’s first public playground, in La Jolla. She funded Egyptian explorations that resulted in the San Diego Museum’s Ancient Egyptian collection. She founded the Scripps Memorial Hospital and the Scripps Metabolic Clinic.

Nature philanthropy was one of Ellen Scripps’ favorite causes. She helped preserve the area that would become Torrey Pines State Natural Reserve. She was a financer of the new headquarters of the San Diego Natural History Museum. She gave the San Diego Zoo an aviary and an animal research hospital. And in 1903, she underwrote the founding the Marine Biological Association of San Diego. Ellen gave it a sizeable endowment, and the Scripps family provided its entire operating budget for a decade until it was taken over by the University of California at San Diego and renamed the Scripps Institution of Oceanography—which is today one of the oldest, largest, and most important centers in the world for research, education, and public service on the oceans, earth, and atmosphere.

ACR News 02.20.15 - House and Senate Advance Charity Legislation

>> Federal: Senate Finance Committee Approves Charitable Bills
>> Federal: Tax Reform Talk Continues
>> Federal: ACR Summit
>> Consider This: What is the end game?
>> Top Reads: Obama Budget Again Calls for Limit to Charitable Deduction


Washington Roundup

Before leaving town for the Presidents’ Day recess, the House passed H.R. 644 – the America Gives More Act of 2015 – by a vote of 279 to 137. This bill would streamline the private foundation excise tax to a flat one percent (a longstanding ACR priority) while also making permanent the IRA charitable rollover, the deduction for conservation easements, and the deduction for gifts of food inventory. 

The vote fell generally along party lines, with Democrats objecting because the bill is not paid for, and because they would like to take up tax provisions through a comprehensive tax reform effort. However, upon passage of the bill, Ways and Means Chairman Paul Ryan (R-WI) said Congress needs to “get off this merry-go-round” of continually renewing various tax incentives. “We all know that businesses and charities need the kind of certainty that we are providing,” Ryan added.

At this time, it is unclear whether the Senate will take up H.R. 644.


Senate Finance Committee Approves Charitable Bills

Last Wednesday, the Senate Finance Committee marked up and approved a package of 17 miscellaneous tax bills by voice vote, three of which impact the nonprofit sector. The first applies the charitable deduction to agricultural research organizations, the second creates an exception to the excess business holdings rules for certain philanthropic business holdings, and the third is a bill sponsored by Senator Dan Coats (R-IN) that requires the IRS to give nonprofit organizations advance notice if their 501(c)(3) status is in jeopardy. You may recall that ACR wrote a letter of support for the Coats bill last June.

Finance Committee Chairman Orrin Hatch (R-UT) said he plans to hold similar markups “in the near future,” though he has not identified another block of bills to advance in the same way. Hatch also noted that any bill the committee would take up in this context must “have bipartisan support and be non-controversial to both sides.” 


Tax Reform Talk Continues

On February 13, House Ways and Means Committee Chairman Paul Ryan (R-WI) told reporters that tax reform must be “done by summer,” otherwise it will be difficult to move. He also said he favors comprehensive tax reform over business-only reform, but added that he is “open” to doing it in phases. According to Ryan, business tax reform could be the bulk of “phase one” of the process, and “phase two” could be to “finish the job of comprehensive tax reform” further down the road.

Across the Capitol, a spokeswoman for Chairman Hatch said that the committee is continuing to look at tax reform through the small working groups unveiled last month. The working groups are expected to begin holding roundtables in mid-April. Chairman Hatch said recently that he believes “there is real momentum to get something done on tax reform this year if we remain committed…And, believe me, I’m committed.”  He added that the committee will begin tax reform efforts with the business side of the code: “We’re going to go forward with [tax reform], but we’re going to start on the business tax [side] first since [the President] requested that,” he said. He did not provide an exact timeline for action.

Lastly, the Senate Finance Committee held a hearing on February 10 featuring former Chairman Bob Packwood (R-OR) and former committee member Bill Bradley (D-NJ) to discuss lessons Congress can learn from the comprehensive Tax Reform Act of 1986. Both Packwood and Bradley attributed their success to a commitment towards bipartisanship and the pursuit of comprehensive reform as opposed to strictly corporate tax reform. They also stressed the importance of leadership from the White House.


ACR Summit

You are invited to the sixth annual ACR Summit for Leaders.

With so many tax issues still to be debated, nothing is completely on or off the table. Now is not the time for the philanthropic community to stay on the sidelines. We hope you will join us at the 2015 ACR Summit for Leaders to learn what we can do to protect private giving and educate lawmakers about the critical role of charitable organizations in a free society.

Registration: To register for the ACR Summit as well as other events during Philanthropy Week in Washington, click here. Attendance is free.


Consider This: What is the end game?

Washington is officially exhausted after having Congress in town for the last six weeks. What does Congress have to show for it?

In the tax world, there has been an excess of activity without clear and coordinated goals over the last month and a half. The House has been passing bills making various tax provisions permanent, but those bills aren’t likely to be taken up by the Senate. Meanwhile, House Republican Ways and Means members had a retreat to talk about taxes in general and tax reform specifically. As far as we can tell, they did not really return with a plan. 

On the Senate side, the Finance Committee is plowing ahead on tax reform. The committee has divvied up the work into five areas and is hoping to make recommendations by Memorial Day. In a hearing last week, two of the key architects of the last big tax reform effort in 1986, Senators Packwood (R-OR) and Bradley (D-NJ) testified. When asked what is really needed to get tax reform across the finish line, Senator Packwood said a President that leans in to the effort. Senator Bradley told the committee that if the members cannot come to some agreement on raising or not raising revenue, they are never going to get anywhere and should spend their time doing something else. If those two things are true, the committee may be working toward, but never really getting to, the desired end result of reform. All signs point to reform not being high on the President’s list of priorities and there is no real agreement on whether tax reform should or should not be revenue neutral.

We don’t really know how all of this will shake out. With Republicans in control of both the House and Senate, we thought we’d see a little more coordination on the tax front. We certainly think they feel pressure to get something done to prove they’ve earned their majority. All of that may still come to pass. However, for now the end game is murky. We expect a clearer sense of where all of this is going by Memorial Day and we will be sure to keep you updated.


Top Reads


Please feel free to email us at info@acreform.com if you have any questions, stories or topics you would like us to include in our newsletter.


Looking for ARCHIVES of this newsletter? Click here.

Philanthropic Achievement of the Week

2008: Cause-oriented Journalism

Take one scoop of donors looking for new ways to affect public opinion and government policy, mix with three scoops of mainstream journalism bleeding red ink in the face of new Internet-based competition, and you get a layer-cake of donor-funded reporting operations. The granddaddy of these creations is ProPublica, founded by hyperactive liberal donors Herb and Marion Sandler to be a twenty-first-century muckraker, with a special focus on topics like gun control, civil rights, health care, fracking, campaign finance limits, labor laws, the Gulf oil spill, Guantanamo, and other policy hot buttons. With more than $35 million of checks written by the Sandlers, ProPublica quickly hired a deep stable of reporters and editors and started churning out heavily researched exposés. The organization posts articles on its own website and lets newspapers run them for free. The operation quickly became a favorite of the journalistic establishment, and was awarded the first Pulitzer Prize for investigative reporting given to an online publication. It now receives support from large foundations like Ford, MacArthur, Annie E. Casey, and Hewlett.

Many local variants of ProPublica, and a few national ones, followed with their own angel funders. These range from the Texas Tribune, funded by Democratic Party donors in that state, to the MinnPost, launched by four public-minded families in Minneapolis, to the Honolulu Civil Beat financed by eBay founder Pierre Omidyar. Watchdog.org, a project of the Franklin Center, was established as a miniature version of ProPublica digging from the right in 29 states as of 2015, and the American Media Institute is struggling to launch itself as another investigative reporting operation positioned on the right side of the political spectrum.

All of these are digital-only publications to contain costs, and they all depend on philanthropic support—primarily annual operating grants, supplemented by small donations from readers. All have demonstrated some ability to influence local or national debates on policy and politics.

(Blog): Charity Bills Pass House of Representatives, Senate Finance Committee

The House of Representatives passed today a package of four charity-related bills, H.R. 644, that includes legislation sponsored by Representatives Erik Paulsen (R-MN) and Danny Davis (D-IL) to streamline the private foundation excise tax to one percent – a provision the Alliance for Charitable Reform (ACR) has promoted for several years. H.R. 644 also makes permanent the IRA charitable rollover, the deduction for gifts of food inventory, and the deduction for conservation easements.

Continue reading…

Philanthropic Achievement of the Week

2014: New Orleans School District Goes All-charter

Before Hurricane Katrina, New Orleans public schools were the worst district in the second-lowest-performing state in the entire U.S. Fully 78 percent of NOLA students attended a school designated as “failing” by state standards. Then the storm wrecked 100 of the city’s 127 schools. Rather than rebuild the dysfunctional and corrupt school district, local leaders decided to instead create the nation’s most complete necklace of charter schools, then let them independently pursue a new set of higher common standards. Decision-making power was decentralized away from the old school-board bureaucracy and transferred to individual principals, teachers, and schoolhouses. Top charter operators from across the country were invited in to set up shop, and more than 40 different entities now operate charters in the city on a competitive basis. At the same time, school performance began to be monitored intensely, with the understanding that new schools given five-year operating charters would be shut down at the end of that period if their students were not succeeding.

This was bold new territory never before explored on a citywide basis, and education-reform donors leapt to help out. It is estimated that philanthropists have poured an average of $20 million per year into New Orleans charter schooling over the past decade. In 2012, the Laura and John Arnold Foundation alone unveiled $40 million of support for high-quality schools and the organizations erecting them in New Orleans. In addition to writing checks, donors have set up oversight and assistance organizations, helped social entrepreneurs plan and build new schools, aided various training and support organizations in coming to the city to support the education upgrade, created a solid voucher program to give poor children access to private schools, and worked to give families as many choices as possible. In 2014, the Recovery School District (which runs all but five of the public schools in New Orleans) closed the last of its conventional schools and became the first in America to shift entirely to charter schools to educate its children. Much work remains to be done, but already the high-school graduation rate has climbed from 54 percent to 80 percent.

ACR News 02.06.15 - Hot, Warm, and Cold

>> Federal: Washington Roundup
>> Federal: Ways and Means Approves Charitable Bills
>> Federal: Charitable Proposals in Budget a ‘Mixed Bag’
>> Federal: Chairman Hatch Announces Working Groups and Timeline
>> Federal: ACR Summit
>> Consider This: Hot, Warm, and Cold
>> Top Reads: Obama Budget Again Calls for Limit to Charitable Deduction


Washington Roundup

The President unveiled his $4 trillion fiscal year (FY) 2016 budget on Monday. His proposal includes a series of new tax cuts aimed at low-to-middle income earners and government spending programs paid for with new taxes on upper-income earners, fees on big banks, and additional taxes on companies’ overseas revenues. According to Administration officials, the budget reduces the deficit by $1.8 trillion over the next 10 years and raises $640 billion in new revenue from capital gains tax increases and other tax changes.


Ways and Means Approves Charitable Bills

On Wednesday, the House Ways and Means Committee marked up and approved a package of bills making permanent several expired tax provisions, including the IRA charitable rollover, the deduction for gifts of food inventory, and the deduction for conservation easements. The committee also approved legislation sponsored by Representatives Erik Paulsen (R-MN) and Danny Davis (D-IL) that would streamline the private foundation excise tax to one percent – a provision ACR has promoted for several years. House Majority Leader Kevin McCarthy (R-CA) indicated last week that the House could vote on all of these bills the week of February 9, but a final decision will not be made until next week. We are very pleased and will update you as the bill moves forward on the House floor.


Charitable Proposals in Budget a ‘Mixed Bag’

The President’s budget contains four provisions that are of interest to ACR. Similar to previous budgets, the document caps all itemized deductions – including the charitable deduction – at 28 percent. The budget also resuscitates the Fair Share Tax (aka the Buffett Rule), imposing a minimum 30 percent tax on income above $1 million. The Fair Share Tax provides a credit against taxes owed for charitable donations, but limits that credit to 28 percent. New for FY2016 is a 28 percent capital gains tax for upper income earners (the current rate is 23.8 percent). However, the proposal does safeguard charitable donations by exempting appreciated property donated or bequeathed to charity from the tax.

The budget also simplifies the private foundation (PF) excise tax to a flat 1.35 percent.

ACR released a statement in response to the President’s budget, which notes the “charitable community is receiving mixed signals from the White House about charitable giving.” The statement also notes ACR “is encouraged by [the PF excise tax simplification] proposal, but strongly supports establishing a flat rate of one percent.” We provide more insight into these proposals below in this week’s Consider This section.

It is important to note that the President’s budget stands little chance of passage in a Republican-controlled Congress. Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee Chairman Paul Ryan (R-WI) both criticized the President’s budget for its tax increases and new spending. “For six years the President has pursued higher taxes and higher spending, and our economy has paid the price,” Ryan said in a statement. Hatch added that the document “shamelessly panders to the Democratic base and does nothing to put our nation back on a sound fiscal footing.”

Instead, the proposal should be viewed as the Democrats’ opening gambit for future tax reform discussions. As such, we take each provision seriously.


Chairman Hatch Announces Working Groups and Timeline

Last week, Senate Finance Committee Chairman Orrin Hatch (R-UT) told reporters he wants the Committee’s five bipartisan working groups to identify “key issues” as soon as March. He added that he does not expect any legislative text to be produced until later in the year. As you may recall, Hatch formed these groups in January to analyze current tax law and examine possible reform options within the group’s designated topic areas.

This Tuesday, Hatch announced the makeup of these working groups. We believe the individual income tax group and the business income tax group will have primary jurisdiction over ACR’s issues. Members of these groups are as follows:

Individual Income Tax
Republicans

  • Co-Chair Senator Chuck Grassley (R-IA)
  • Co-Chair Senator Mike Enzi (R-WY)
  • Mike Crapo (R-ID)
  • John Cornyn (R-TX)
  • Pat Toomey (R-PA)

Democrats

  • Co-Chair Senator Debbie Stabenow (D-MI)
  • Charles Schumer (D-NY)
  • Bill Nelson (D-FL)
  • Robert Menendez (D-NJ)
  • Michael Bennet (D-CO)

Business Income Tax:
Republicans

  • Co-Chair John Thune (R-SD)
  • Pat Roberts (R-KS)
  • Richard Burr (R-NC)
  • Johnny Isakson (R-GA)
  • Rob Portman (R-OH)
  • Pat Toomey (R-PA)
  • Dan Coats (R-IN)

Democrats

  • Co-Chair Benjamin Cardin (D-MD)
  • Debbie Stabenow (D-MI)
  • Tom Carper (D-DE)
  • Bob Casey (D-PA)
  • Mark Warner (D-VA)
  • Robert Menendez (D-NJ)
  • Bill Nelson (D-FL)


ACR Summit

The release of the President’s budget proposal comes just as we are gearing up for our annual ACR Summit for Leaders on March 18. With congressional staffers once again speaking on one of the panels at the Summit, attendees are sure to get the latest news and insights from Capitol Hill. We invite you to join us.

To register for the ACR Summit as well as other events during Philanthropy Week in Washington, click here. Attendance is free.


Consider This: Hot, Warm, and Cold

The President sent his FY 2016 budget to Capitol Hill earlier this week. As we combed through the details, we felt a tinge of whiplash as the document ran hot, warm, and cold on charitable giving. Quite simply, we are confused.

The President wants to raise the capital gains rate. BUT, charitable giving is exempt from this provision. That is a full recognition from the Administration that charitable giving is unique.

At the same time, the budget calls for the “Buffett Rule” – the proposal that taxes incomes over $1 million with a 30 percent tax and a limited credit for charitable giving. This provision is at least a partial recognition that charitable giving is important and unique.

And finally, the budget calls for a cap of 28 percent on ALL tax deductions, including the charitable deduction.  That is no recognition of the charitable deduction’s importance at all.

While we don’t expect these proposals to go anywhere in the near future, we will be watching and working to preserve the one deduction we view as first among equals in the tax code – the charitable deduction. 


Top Reads


Please feel free to email us at info@acreform.com if you have any questions, stories or topics you would like us to include in our newsletter.


Looking for ARCHIVES of this newsletter? Click here.

ACR Blog: PF Excise Tax Bill Headed to House Floor

On Wednesday, the House Ways and Means Committee marked up and approved a package of bills making permanent several expired tax provisions, including the IRA charitable rollover, the deduction for gifts of food inventory, and the deduction for conservation easements. The committee also approved legislation sponsored by Representatives Erik Paulsen (R-MN) and Danny Davis (D-IL) that would streamline the private foundation excise tax to one percent – a provision ACR has promoted for several years. House Majority Leader Kevin McCarthy (R-CA) indicated last week that the House could vote on all of these bills the week of February 9, but a final decision will not be made until next week. We are very pleased and will update you as the bill moves forward on the House floor.

Continue reading…

Philanthropic Achievement of the Week

2007: Healing the Upper Midwest

The business triumphs of Denny Sanford allowed him to retire to Florida at age 45–but he was soon itchy and returned to the upper Midwest where he had spent his entire previous life. After further commercial successes, he started giving away money. He turned his attention to the Sioux Valley Hospitals and Health System, beginning with a $16 million gift for a children’s hospital designed like a fairy castle. With his $400 million donation in 2007 (the largest single gift ever made to a U.S. health-care organization), the nonprofit was renamed Sanford Health. Sanford Health now includes nearly three dozen hospitals and more than 140 clinics, centered on South and North Dakota but spread across eight states, making it one of the largest rural, not-for-profit health systems in the nation. After the latest in Denny Sanford’s string of gifts to the health system–a $125 million donation made in 2014 that launched new efforts to tailor patient care using genetic information–his total contributions to Sanford Health exceeded $800 million.

In Fargo, Sanford Health is in the midst of one of the largest construction projects in the history of the Dakotas. The result will be a top-shelf medical facility filled with the best technology and some of the brightest medical experts in the country. It will bring a new level of care to the region, including a major trauma center, enhanced pediatric services, a heart center, an expanded cancer center, and new services in areas such as eating disorders and rehabilitation.

Sanford has also donated money to the University of California at San Diego to make it a leader in stem-cell studies, including a $100 million pledge at the end of 2013.

A signatory of the Gates-Buffett Giving Pledge, Sanford says he aims to “die broke.” With these latest gifts pushing Sanford’s lifetime philanthropic giving past the $1 billion mark, that day comes a little closer.

Mixed Signals From the President in Budget Proposal

Exempts Some Charitable Giving From Increased Taxes But Still Recommends Cap

WASHINGTON, D.C.— The Alliance for Charitable Reform (ACR) issued the following statement upon the release of President Barack Obama’s budget proposal for fiscal year (FY) 2016.

“The charitable community is receiving mixed signals from the White House about charitable giving,” Sandra Swirski, executive director of ACR, said. “On one hand, the President’s budget would hamper charitable giving by proposing a 28 percent cap on the charitable deduction, despite studies showing that this cap would reduce gifts to charities by as much as $9 billion in one year. On the other hand, the President’s budget somewhat safeguards charitable giving by carving out gifts to charities both from his Buffett Rule proposal and his new capital gains tax.”

President Obama’s capital gains proposal, which was first introduced alongside this year’s State of his Union address, would exclude assets donated to charitable organizations from an increased capital gains rate on upper-income earners. The so-called Buffett Rule institutes a minimum 30 percent tax on incomes of $1 million or more, but allows for a charitable deduction providing credit against taxes owed. However, the deduction in the Buffett Rule is capped at 28 percent.

“We encourage the President to reevaluate his insistence on capping the charitable deduction, which is a lifeline for Americans in need and not a taxpayer loophole,” Swirski added. “ACR will continue to work with our colleagues in the sector to educate our elected officials on the unique nature of the charitable deduction.”

The President also proposed streamlining the private foundation excise tax at 1.35 percent. ACR is encouraged by this proposal but strongly supports establishing a flat rate of one percent.

“While we applaud the President for recommending a simplified private foundation excise tax, he has done so at a rate that will ultimately increase taxes on many grantmaking nonprofits. We believe the tax needs to be streamlined at a flat one-percent rate, such as the proposal that passed the House of Representatives last year,” Swirski concluded.

The release of President Obama’s FY2016 budget comes as ACR is preparing for the 2015 ACR Summit for Leaders. The budget proposal is sure to be among the topics discussed.

Philanthropic Achievement of the Week

1853: Connecting Orphans to Families

Charles Loring Brace was emphatic that the thousands of miserable homeless children roaming the streets of nineteenth-century New York had the “same capacities” and the same importance “as the little ones in our own homes.” That was an essential part of his Christian creed. But Brace also believed that “habits of life and the inner forces which form character” ultimately drive success and happiness, so it is important for unformed children to be given both love and good examples. He didn’t like traditional orphanages, which he thought fostered passivity and dependence, so in 1853 Brace founded the Children’s Aid Society and began helping boys and girls leave the streets and enter lodging houses that required small payments from the children to remind them of their capacity to support themselves. The society offered workshops and industrial schools that taught trade skills.

Brace eventually came to the view that the “orphan trains” the society established later were the best long-term solution to abandonment. These transported tens of thousands of children to permanent new homes across the country, especially on the frontier. A precursor to the modern foster-care system, the placements had economic value to the receiving family as well as security and emotional value to the child. Successful results varied from mutual economic support to full-blown substitute-family bonds. These out-placements were a great improvement on traditional indentured servitude because either the child or the host family could end the arrangement at any time. To help ensure the children’s proper treatment, the Children’s Aid Society used local community leaders to guide and supervise placements.

Because his appeals to New York’s wealthy found willing ears, Brace was able to build his aid work to a very large scale. A 1917 CAS annual report noted that the program’s alumni included two governors, two district attorneys, two sheriffs, two mayors, a justice of the Supreme Court, two college professors, 24 clergymen, and 97 teachers. Though its mission has changed, the society still exists as one of America’s largest child-welfare agencies. It created the first PTA, first visiting nurse service, first free school lunch program, first free dental clinics, and first day schools for handicapped children.

  • Stephen O’Connor, Orphan Trains: The Story of Charles Loring Brace and the Children He Saved and Failed (University of Chicago Press, 2004)
  • Society website, childrensaidsociety.org