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Nonprofit Issues

(VIDEO) The Effects of a 100 Percent Charitable Deduction

In the August 22  edition of the ACR newsletter, we shared a story about Puerto Rico adopting a 100 percent charitable deduction in 2011. The deduction led to a 70 percent increase in the number of individuals who made charitable donations in Puerto Rico, according to a report released by the Flamboyan Foundation.

The Flamboyan Foundation is a private, family foundation focused on improving educational outcomes for children in public schools in Washington, D.C. and Puerto Rico, according to its website. The Alliance for Charitable Reform recently interviewed Kristin Ehrgood, president of the Flamboyan Foundation, about the implementation of the tax deduction, the results of the Flamboyan Foundation’s study, and how studying donor behavior could help expand charitable giving in Puerto Rico.





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Nonprofit Issues

Constitution Day

Members of the Constitutional Convention officially adopted the Constitution as our nation’s supreme law on this day in 1787. As such, September 17 has officially been designated as a day of observance to commemorate this pivotal moment in American history.

The Constitution has endured for nearly 230 years and preserves the rights the citizens of our country hold dear. They are the very rights that have helped establish a vibrant and generous tradition of American philanthropy. In the Fall 2013 issue of Philanthropy magazine, Adam Meyerson, president of The Philanthropy Roundtable, wrote about the Constitutionally-guaranteed freedom of association and the critical role of anonymous giving in a thriving civil society. To commemorate Constitution Day, we re-publish Meyerson’s letter as a reminder of the importance of philanthropic freedom.

Misconceptions about “Dark Money”
By Adam Meyerson

A long legal tradition protects the rights of Americans to make charitable contributions without publicly disclosing them. This right to confidentiality in charitable giving is grounded in our constitutional freedom of association, and it is one of the most important elements of philanthropic freedom.

The Supreme Court ruled unanimously in NAACP v. Alabama in 1958 that “freedom to engage in association for the advancement of beliefs and ideas is an inseparable aspect of the ‘liberty’ assured by the Due Process Clause of the Fourteenth Amendment.” In a landmark judgment written by Justice John Marshall Harlan II, the court held that the state of Alabama could not compel the NAACP to reveal the names and addresses of its members because doing so would expose its supporters “to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility” and thereby restrain “their right to freedom of association.” This right of confidentiality applies to members of all associations, whether they be religious, educational, cultural, ideological, or devoted to other causes. As professor Anita Allen of the University of Pennsylvania Law School has put it, “Thanks to NAACP v. Alabama, government may not force even a controversial group to identify its members, absent a compelling state interest in disclosure.”

Our tax code similarly protects the confidentiality of individual contributions to public charities. In their 990 tax returns, public charities have to disclose their largest contributors, but this is for purposes of tax administration only. The Internal Revenue Service is strictly forbidden by statute from revealing these names to the public or even, with a very limited number of exceptions, to other government agencies. The same prohibitions apply when individual taxpayers have to provide the IRS with documentation about their charitable contributions. Indeed, one of the most disturbing allegations in the current IRS scandal is the charge that the agency in recent years has violated its rules and long tradition protecting donor privacy.
Donors do have to disclose publicly their contributions to private grant-making foundations, which in turn have to disclose their grants to public charities. These transparency requirements help to protect against self-dealing and to make sure that foundation grants support genuinely charitable organizations.

Donor-advised funds, America’s most rapidly growing charitable vehicle, receive donations from individuals and then make grants to other public charities on the recommendations of the original donors. Like foundations, the sponsors of donor-advised funds (which include regional community foundations; Christian and Jewish funds; and for-profits such as Fidelity and Schwab) are required to disclose the grants they make to other charities; this helps ensure that the grants are going to charities and not to for-profit or partisan political operations. But consistent with America’s historic confidentiality protection for individual donors to public charities, the sponsors can keep private their own donors as well as those donors’ individual grant recommendations.
This protection is sometimes misunderstood. For instance, conservative critics of the Tides Foundation, a liberal-left donor-advised-fund sponsor, have called it a system “to evade transparency.” Liberal critics of DonorsTrust, a donor-advised-fund sponsor for “organizations that promote liberty,” have labeled it as a “secretive funding network” and “dark-money ATM.” But the right to privacy enjoyed by contributors to donor-advised funds is no different than the right to privacy that governs the overwhelming majority of charitable giving.
Most donors of course are happy to see their contributions publicized. But a sizable minority want their philanthropy to be anonymous and will not give unless they can keep their donations confidential.

There are multiple reasons to give privately. The great 12th-century Jewish theologian Maimonides held that the second highest form of giving was “to give to the poor without knowing to whom one gives, and without the recipient knowing from whom he received.” In the Gospel of Matthew, Jesus taught that “when you give to the needy, sound no trumpet before you…do not let your left hand know what your right hand is doing, so that your giving may be in secret.”

Many anonymous donors want to protect themselves from unwanted solicitations, to protect their children from knowledge of their family’s wealth, or to be able to visit prospective grantees and “kick the tires” without anyone knowing they are a funder. Still others, like the 1950s NAACP donors, want the freedom to support controversial organizations without fear of reprisal or ostracism.

So-called “dark money” illuminates our free society.

Adam Meyerson is president of The Philanthropy Roundtable.

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Rep. Ryan: No Top Cap for Charitable Deduction

House Budget Committee Chairman Paul Ryan (R-WI), who is widely expected to take over as Chairman of the House Ways and Means Committee, recently expressed his support for not implementing a cap on the charitable deduction, according to a report from Politico. Ryan stated that the charitable deduction is “the one area where I believe we should not have a top cap.”

As you may recall, Chairman Ryan was one of the members of Congress that ACR leaders met with on July 8 to discuss charity-related issues. He noted in the meeting his strong belief in charitable services and the importance of private giving. The group did not discuss any specifics in terms of how he would treat the charitable deduction, or any other tax incentives, in any future tax reform plan.


Ryan’s recent comment came during an interview with Bloomberg TV in reference to his support for cutting the current mortgage interest deduction.

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Nonprofit Issues

Salt Lake Tribune Op-ed: Don’t let tax reform undermine charitable giving

Fraser Nelson, executive director of the Community Foundation of Utah, and Jeramy Lund, a Utah private investor, co-wrote an editorial in the Salt Lake Tribune  on August 16 urging Utahns to contact their elected officials this month while members of Congress are home. Lund and Nelson explain the importance of constituents letting elected officials know how the decisions they make will affect the nonprofit sector.

“As the public sector continues cost-cutting measures, it’s important our leaders in Washington understand philanthropy’s importance here in Utah and are mindful of how their decisions affect Utahns’ charitable nature. House Ways and Means Committee Chairman Dave Camp’s laudable effort to achieve comprehensive tax reform illustrates how the decisions taken by Congress could have immediate benefits — or cascading consequences — for our community,” wrote Lund and Nelson.

Lund and Nelson further discuss how specific proposals like the IRA charitable rollover and pay out requirements for donor advised funds will affect private charitable giving – for better and for worse. While the editorial focuses primarily on Utah, the sentiment can be applied across the country for those who serve in the charitable community.

The full editorial can be read here.

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Private Charitable Giving: A New Italian Tradition

By Priya Narapareddy


Private charitable giving has played a significant role in the United States in preserving our country’s historical culture and landmarks. For example, David M. Rubenstein is one of many well-known philanthropists who share a passion for preserving American history. According to a recent Washington Post article, Rubenstein, who agreed to cover $7.5 million of the cost of restoration for the Washington Monument after the 2011 earthquake, has also made a donation of $12.35 million to restore Gen. Robert E. Lee’s home at Arlington National Cemetery. 

Few countries in the world can rival Italy when it comes to the number of landmarks and their historical significance. And now Italian officials are beginning to understand that private charitable giving can play a critical role in the preservation of their nation’s historical sites, many of which date back thousands of years.

“Our doors are wide open for all the philanthropists and donors who want to tie their name to an Italian monument,” Italy’s culture minister, Dario Franceschini, said in an interview with the New York Times in July.

The Times piece explains that while the U.S. has historically used public-private partnerships to preserve our landmarks, the Italian government has historically held the primary responsibility for maintaining its country’s historical sites. Italian officials are now asking that the private sector help and they have backed up this request with charitable giving incentives. The Italian government now allows individual donors to receive a credit equal to 65 percent of the gift over three years.

Some of Italy’s most famous citizens and corporations have stepped up to the plate to contribute. Diego Della Valle, the founder of Tod’s, has contributed $34 million, part of which will go to a multi-year restoration project of The Colosseum in Rome. The Salvatore Ferragamo Group has given an $817,000 donation to restore part of the Uffizi Gallery in Florence.

Private charitable giving has proven essential in preserving our nation’s most treasured historical sites. Whether it assumes the same role in Italy has yet to be seen. Regardless, the recent encouragement of private charitable giving by the Italian government is testimony to its critical role in creating and sustaining a vibrant civil society.


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Nonprofit Issues

Paul Ryan on tax policy and private charitable giving

Joanne Florino, senior vice president for public policy at the Philanthropy Roundtable, asks House Budget Committee Chairman Paul Ryan about private philanthropy during a recent event hosted by the American Enterprise Institute.

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Serving Our Veterans

On the eve of the celebration of Independence Day, we wanted to share an interview we conducted with Thomas Meyer who is the program manager of veterans services at The Philanthropy Roundtable. Meyer is also the author of Serving Those Who Served: A Wise Giver’s Guide to Assisting Veterans and Military Families. In this interview, Meyer explains how veterans are a source of great human capital for our country and discusses the approach philanthropy should take in supporting our nation’s veterans.

In addition to the interview, below is an excerpt from Meyer’s guidebook:

There is much alarmism about veterans today. “Judging from media accounts, I’m the rare American veteran who isn’t homeless, homicidal, or suicidal. . . .” started a recent essay in the Atlantic by former soldier James Joyner. Much of this gloomy commentary is inaccurate or misleading.

For instance, a definitive government study released in 2013 found that while suicides among veterans rose 10 percent from 1999 to 2010, the suicide rate among the overall population rose much faster during that same period—up 31 percent. And two-thirds of veteran suicides are among those 50 years and older, suggesting the biggest problem is not among men and women deployed since 9/11.

As a group, it is much more accurate to think of veterans as a national asset than as a national problem, or set of victims. Nearly 6 million Americans have served in the military since the 9/11 attacks: 2.8 million of them are still serving; 3.2 million are civilians as of early 2013. Some of those civilian veterans are in college, at home raising children, or retired; of those who are in the labor force, more than 90 percent are employed.

The annual earnings of all U.S. veterans are 12–15 percent higher than the earnings of non-veterans. Their poverty rate is only a little more than half the overall rate.

None of this is surprising when you notice that veterans rank higher than the general population in levels of intelligence, physical fitness, avoiding a criminal record, finishing high school, and attending college. To help you separate realities from the many myths about veterans in circulation today, we have included at the end of this book a set of vital statistics. You’ll find clear data on the topics above, as well as others like physical health, mental health, family status, and so forth.

While those who have served in the military are—on the whole—in better shape than comparable non-veterans, there are many individuals who need and deserve help. Foremost among these are the men and women who were injured during their service. In this book, we lay out six areas where there are opportunities for public-spirited donors to aid veterans. In all of these areas, donors and charitable groups are already making progress, though both the successes and the remaining gaps vary a lot by region.

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ACR To Meet With Lawmakers About Camp Draft, Part II

This is the second of a two-part series about the issues ACR members will discuss in meetings with congressional offices on July 8.

Members of the Alliance for Charitable Reform (ACR) leadership team are set to meet with members and staff of the House Ways and Means Committee and the Senate Finance Committee on Tuesday, July 8. The group will discuss some of the charity-related proposals in the tax reform discussion draft released earlier this year by House Ways and Means Chairman Dave Camp (R-MI). ACR thoroughly examined the Camp draft and engaged its members and colleagues in the field for feedback in evaluating these provisions. ACR ultimately identified four that raise serious concerns.

Our last post outlined the troubling provisions from the Camp draft that relate to the charitable deduction.  In this post we will explain ACR’s concerns with the proposal related to donor-advised funds (DAFs) and identify the provisions in the Camp draft which ACR applauds.

Donor-Advised Funds
According to the National Philanthropic Trust, 2012 saw a large increase in the number of DAFs to more than 201,000 accounts nationwide. Contributions to these DAFs also reached an all-time high in 2012, totaling over $13 billion and bringing the average account size to over $224,000. Because DAFs are controlled and administered by sponsoring public charities, their management costs are much less expensive than those needed to establish private foundations, which also have stringent reporting and operating requirements. Additionally, because funds from DAFs can quickly be disbursed, they are ideal for funding emergency situations and disaster relief.

The Camp draft would require all contributions to a DAF to be distributed to public charities within five years of receipt. If this requirement is not met, organizations that oversee these funds would face an excise tax equaling 20% of the contributions not distributed from the specific account within the five-year window.

Payout rates from DAFs from 2007 through 2012 annually exceeded 16%, according to the National Philanthropic Trust. When contrasted with the payout rate of a private foundation—which usually hovers around the statutory minimum of 5%—the requirement in the Camp draft appears misguided and unnecessary.

You can access additional information in ACR’s May 28 webinar that examined DAFs and the possible ramifications of the proposed requirement in the Camp draft.

What ACR Supports
While there are proposals in the Camp draft that are troubling, there are also proposals that ACR wholeheartedly supports. In addition to the fact that Chairman camp retained a charitable giving incentive for all three tax brackets, albeit a modified incentive, ACR also thanks the Chairman for:

  • Extending the deadline to April 15 to make charitable contributions and receive a deduction for the prior year.
  • Streamlining the private foundation (PF) excise tax on net investment income to a flat 1%. ACR has supported this measure for several years because the current two-rate structure has the practical effect of deterring foundations from increasing their grants during times of great need.

These two provisions were also recently passed in stand-alone bills by the House Ways and Means Committee. ACR will be expressing gratitude to lawmakers and their staffs in the July 8 congressional meetings for the inclusion of these policies.

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Nonprofit Issues

ACR To Meet With Lawmakers About Camp Draft

This is the first of a two-part series about the issues ACR members will discuss in meetings with congressional offices on July 8.

Members of the Alliance for Charitable Reform (ACR) leadership team are set to meet with members and staff of the House Ways and Means Committee and the Senate Finance Committee on Tuesday, July 8.  The group will discuss some of the charity-related proposals in the tax reform discussion draft released earlier this year by House Ways and Means Chairman Dave Camp (R-MI). ACR thoroughly examined the Camp draft and engaged its members and colleagues in the field for feedback in evaluating these provisions. ACR ultimately identified four that raise serious concerns: three related to the charitable deduction and one related to donor-advised funds. This post will highlight the three provisions related to the charitable deduction.

While the Camp draft ultimately preserves the charitable deduction— a decision that ACR wholeheartedly applauds—it does alter the deduction in ways which would ultimately cause a significant reduction in charitable giving. The proposed changes to the charitable deduction are as follows:

The 2% Floor
This proposal eliminates the charitable deduction for all gifts that fall below 2% of a donor’s Adjusted Gross Income (AGI). When combined with other changes in the deduction, the floor effectively eliminates the charitable deduction for 95% of taxpayers. The charitable deduction was fashioned as a proxy for backing out all gifts to charity from a donor’s income, to insure that those gifts are not taxed. To limit the charitable deduction for most taxpayers means that those gifts will be taxed for the first time in history.

AGI Limit for Cash Donations
Under current law, donors receive a deduction for cash gifts up to 50% of their AGI. For capital assets, donors can take a deduction for gifts up to 30% of their AGI. The provision included in the Camp proposal streamlines those limits to 40%, effectively discouraging gifts of cash and encouraging gifts of capital assets.
Charities typically prefer cash gifts, which can be more quickly absorbed and put to work, especially by human service charities.

Limiting Donor’s Assets to Basis
But while the Camp draft significantly favors capital assets over cash in one area, it includes another proposal that actually claws back the deduction for certain types of assets. For closely held stock and real estate, two of the most common capital assets donated to charity, the proposal generally limits a donor’s charitable deduction to the donor’s basis in the asset, while current law allows a deduction for fair market value. These new limits will radically affect major gift programs, seriously reduce the amount of large noncash gifts, and hinder foundation formation.

Taken together, these proposed changes would hurt charitable giving at both ends of the spectrum, discouraging donors of all income types from traditional forms of giving.

Tomorrow, we will explain how the Camp draft sets its sights on donor-advised funds. We will also identify the proposals in the Camp draft that we support.

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Ways and Means Markup Tax Extenders Bill

House Ways and Means Chairman Dave Camp (R-MI) held a markup (which is a formal amendment process) on May 29 on another group of tax extenders – annually expiring tax incentives – and related bills that the Chairman hopes to make permanent. The Committee considered three charity-related bills: a permanent extension of the IRA charitable rollover (introduced by Rep. Aaron Schock (R-IL) and Rep. Earl Blumenauer (D-OR); a permanent extension of the deduction for qualified conservation easements; and a permanent extension of the enhanced deduction for food donations.

The Committee also considered two other bills, both of which have long been ACR priorities. The first, HR 3134, was introduced by Rep. Mike Kelly (R-PA) and Rep. Bill Enyart (D-IL). It would give people until April 15 to make charitable contributions eligible for the charitable deduction, instead of requiring those gifts to be made by the end of the calendar year. The other, HR 4691, was introduced by Rep. Erik Paulsen (R-MN) and Rep. Danny Davis (D-IL). It would permanently streamline the excise tax on a private foundation’s investment income to a flat 1 percent instead of the current two-tier structure.

For a comprehensive review of the comments, amendments, and votes taken at the markup, please click here. We also partially documented the progress of the hearing via social media, which can be seen below. The Committee ultimately approved all of the measures, including the Paulsen-Davis and Kelly-Enyart bills, with Republican-only support. 

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