Jun 30, 2011
ACR newsletter (6.30.11)
Thursday, June 30, 2011
The latest edition of the ACR newsletter is available below. We are sending this newsletter one day early before the long Independence Day Weekend.
Happy Independence Day!
As our nation celebrates its declaration of independence from British rule, we pause to remember that among the freedoms we as Americans enjoy is the freedom to give to the issues, causes and organizations we value in the manner we choose –what we call philanthropic freedom. Have a happy, safe Fourth of July!
You’ll see below that we’ve updated the format of our ‘Making Headlines’ section to provide you with greater context on the news items we report. What do you think of this new format?
The House and Senate are both in session this week and next, hammering away on their agendas. The following two weeks each House will alternate recesses: the House from June 27th thru Independence Day and the Senate from July 4th thru 8th.
Following are updates from Capitol Hill:
- Deficit Reduction/Debt Ceiling Talks
On Wednesday, President Obama held a press conference regarding the debt limit talks, criticizing Congressional leaders for their lack of urgency. The President said, “I’m very amused when I hear, ‘The president needs to show more leadership on this.’ [Members of Congress] need to do their jobs. Now’s the time to go ahead and make the tough choices. That’s why they’re called leaders.” The President urged Republicans to “be more balanced” in their approach to the negotiations and would examine more options to solving the debt crisis than just spending cuts. In response to the President’s remarks, Senate Majority Leader Harry Reid (D-NV) decided Thursday to cancel the scheduled July 4th recess so that deficit reduction negotiations can continue.
Earlier in the week, House Majority Leader Eric Cantor (R-VA) and the number two Republican in the Senate, Jon Kyl (R-AZ), both dropped out of the deficit reduction talks convened by Vice President Joe Biden. Republicans have rejected the idea that tax rate increases should be included in any deal, and have hinted that other higher fees and closing corporate tax loopholes might be considered.
With Vice President Biden’s group stalled, President Obama individually met with Majority Leader Reid and Senate Minority Leader Mitch McConnell (R-KY) in order to reach an agreement on how to proceed. While Senator McConnell did not make any comments after his meeting, it was reported that he maintained an unwillingness to couple tax increases with spending cuts in further negotiations. Since the Biden Group is reported to have reached over $1.5 trillion in cuts, roughly two-thirds of the final goal, a compromise is within sight.
Another possibility is a short-term debt limit increase. Senator McConnell floated this idea recently, saying “The president and the vice president, everybody knows you have to tackle entitlement reform. If we can’t do that, then we’ll probably end up with a very short-term proposal over, you know, a few months, and we’ll be back having the same discussion again in the fall.” On Tuesday, Senator Dick Durbin (D-IL) voiced his support for a short-term deal, calling the first deal a “down payment” on a final deal that can be reached given more time. Other Members of Congress, however, believe that the Treasury Department can postpone the deadline for default through creative juggling of accounts. On Wednesday, Senator Kyl said he understands that the deadline could be postponed to the end of August, which would give extra time for talks to continue. The Treasury Department, however, was quick to note that the deadline cannot be postponed, and the urgency for a solution is very real in order to calm financial markets.
- Tax Provisions
Charitable Deduction: In early June, House Ways and Means Committee Ranking Member Carl Levin (D-MI) spoke at the Center for American Progress about the need for comprehensive tax reform. As part of his speech, Rep. Levin, who is a thought leader on tax reform among his colleagues, discussed how certain tax provisions have a positive impact beyond those who take advantage of them and really benefit the whole American middle class. One such provision he mentioned was the charitable deduction: “The benefit of the charitable deduction and the deduction for state and local income taxes are somewhat more concentrated in the upper-income ranges, but in both cases nearly half of the benefit is still going to more than 20 million households making less than $200,000… In the case of the charitable deduction, one has to keep in mind that the recipients of the contributions include universities, hospitals, churches and soup kitchens that provide critical services to working families.” The Ranking Member’s remarks are important to note, since, as Ezra Klein of the Washington Post reminds us, the charitable deduction remains on the chopping block during deficit reduction negotiations.
Excise Tax: As we have previously reported, Senator Charles Schumer (D-NY) introduced legislation that would reduce and streamline the private foundation excise tax on investment income to a flat 1.39%. Last week, it was reported that Representative Erik Paulsen (R-MN) introduced companion legislation in the House. While neither bill is expected to be brought up while the debt limit and deficit reduction are dominating discussions on Capitol Hill, Rep. Paulsen’s bill indicates an understanding of the importance of the philanthropic sector and how the government can better stimulate grantmaking.
Debt Ceiling “Soaps” – Drama Unfolds on Capitol Hill
It is high soap opera season here in Washington, DC.
After effusively praising the Vice President for his role in high-level debt ceiling negotiations one week, Congressman Eric “Young and the Restless” Cantor (R-VA) abruptly walked out of those negotiations the following week.
We are reminded by an old budget hand – a former staff director of the Senate Budget Committee - that in a negotiation with stakes as high as these, there has to be accompanying soap opera-like drama.
Expect more of the same the closer we get to the August 2nd deadline to raise the debt ceiling. It will be “Days of our Lives” meets “Another World” meets (Paul) “Ryan’s Hope.” ... (continued)
Here are recent headlines you may find interesting:State/Local
Massachusetts: Previously, we covered the budget amendment banning board compensation and capping executive compensation for charities in the bay state. The Chronicle of Philanthropy reports that unless the legislature decides to remove the measure, it may go into effect as early as July 1, 2011 when the budget takes effect. At the time of this writing, we learned that a budget resolution had been reached but details not released. We do not yet know if the prohibition on board compensation is included. We will post updates on our website.
Relatedly, Andrew Schulz, Vice President of Government Relations and Public Policy at the Council on Foundations, voices disagreement with this and other legislative measures to ban board compensation explaining that they challenge the independence and flexibility of nonprofits.
New York: The Wall Street Journal reports that New York’s attorney general has asked leaders from social service, religious and cultural organizations to devise recommendations for overhauling regulatory requirements of nonprofits in the state. The aim is to address issues with redundant auditing demands from state agencies and delays in state contracting.
Michigan: We previously reported that the Michigan legislature passed a tax reform package eliminating income tax credits for charitable donations. Michigan nonprofit executives and leaders are now responding, voicing mixed expectations about the impact on future giving.
IRS Revocations: Previously, we reported on the hundreds of thousands of nonprofit organizations whose exemptions were revoked by the IRS for failing to submit the appropriate tax filings. Leslie Lenkowsky of Indiana University and tax attorney Suzanne Garment opine in the Wall Street Journal on this latest IRS activity.
In a response on the Charity Navigator blog, attorney and CPA Jack Siegel agrees with Garment and Lenkowsky on their argument related to the infringement of government, but contests that the fault lies with Congress not the IRS for the increased regulations and inadequate systems funding to track nonprofit organizations.
Giving Statistics: Last week, the Giving USA Foundation and Indiana University’s Center on Philanthropy released its annual report on giving statistics for 2010. The headline as captured by the Wall Street Journal is that overall giving increased by 3.8 percent (2.1 percent adjusted for inflation) to $290.89 billion. Foundation grantmaking represented 14 percent of the total and the majority of independent grantmaking came from family foundations. The findings have generated discussion across the charitable sector, and as a Utah newspaper editor highlights from the findings, the generosity of Americans continues to be a hallmark of this nation despite tough economic circumstances, and should be protected.
Yesterday, the Chronicle of Philanthropy released news that the Bill and Melinda Gates Foundation has given a $1 million, three-year grant to the Urban Institute to study the impact of tax proposals including reducing or eliminating the charitable deduction, revoking charities’ exemptions from property taxes, simplifying the excise tax, and requiring foundations to give away more of their money each year.
Bloomberg Business reports on a recent poll of 1,000 adults which finds that 48 percent of Americans favorreducing tax breaks for charitable contributions compared with 47 percent who are opposed. Opposition to tax breaks was strongest among low-income Americans, who are less likely to benefit from the deductions. This is in contrast to a recent Gallup poll that reported almost three-quarters of Americans oppose eliminating
the charitable deduction. These polls suggest that Americans are more likely to support modifying the charitable deduction than scrapping it entirely.
Atlantic Philanthropies: Christopher Oechsli, an attorney and aide to former Democratic Senator Russ Feingold, has been named as the interim head of Atlantic Philanthropies, the Chronicle of Philanthropy reports.
Mobile Giving: The New York Times profiles new modes of mobile giving that target young generations and underscore the value in mobile connections which can garner more than just donations.
In the Chronicle of Philanthropy, Leslie Lenkowsky discusses on criticisms of the Thiel Foundation’s new program to turn high-achieving 20-years-olds into entrepreneurs by luring them away from college to work for two years on their business ideas.
The Richmond Time-Dispatch reports that in Ohio a 7-year-old nonprofit organization JumpStart, which invests public and private funds in entrepreneurial startups, is now serving as the basis for two major national initiatives that will invest billions and accelerate high-growth entrepreneurship nationwide: JumpStart America and the Obama administration’s recently announced Startup America campaign.
2011 Philanthropy Roundtable Annual Meeting
Is America in decline? Not if creative philanthropists have anything to say about it. The 20th Annual Meeting of The Philanthropy Roundtable will bring together some of our nation’s brightest minds and most inspiring leaders. Together we will explore how your private independent giving can—and does—solve America’s greatest challenges.
Can-Do Philanthropy: Solving America’s Greatest Challenges
October 27-29, 2011 at the Phoenician in Scottsdale, Arizona
Paul Brest, president, William and Flora Hewlett Foundation
Arthur Brooks, president, American Enterprise Institute
Michael M. Crow, president, Arizona State University
Robert L. Gallucci, president, John D. and Catherine T. MacArthur Foundation
Vartan Gregorian, president, Carnegie Corporation of New York
Charles G. Koch, chairman and CEO, Koch Industries
Peter and Carolyn Lynch, trustees, Lynch Foundation
Jeff Raikes, chief executive officer, Bill & Melinda Gates Foundation
Carl Schramm, president and CEO, Ewing Marion Kauffman Foundation
Charles R. Schwab, chairman of the board, The Charles Schwab Corporation
Thomas J. Tierney, chairman and co-founder, Bridgespan Group
Dynamic ACR sessions will cover topics including transparency, federal budget/deficit reduction, and more. Join us in Scottsdale!
To learn more or register visit: