A long Chronicle of Philanthropy article, Paying it Forward — And Back, says that “nonprofit leaders worry as Congress rethinks tax breaks for donors and other charity policies.” Excerpts:
Congress in recent years has stepped up scrutiny of tax-exempt organizations that seem too rich, too extravagant, or too much like businesses to resemble “charities.”
Rep. Xavier Becerra called the charitable deduction one of “the least accountable tax breaks,” complaining that it is hard to get information about who gives money to whom and how the money is spent. … (N)ext year he plans to press the Ways and Means Committee to gather more information about the deduction, possibly through hearings or studies.
No matter who wins November’s elections, Congress will be looking for ways to rein in the country’s enormous budget deficit and pay for new programs. Many states have been hit hard by the economic downturn and are looking for new revenue. Social-service charities are struggling to meet growing demand while big universities and arts groups report record gifts.
Examples of recent scrutiny of the nonprofit sector cited in the article:
- The Minnesota Supreme Court’s 2007 ruling that narrowed the definition of “organizations of purely public charity” that is used in determining property tax exemption (see update from May)
- Whether nonprofit hospitals should be required to provide a minimum percentage of their budgets to charity care
- A study that showed that only 5 percent of $1-million donations from 2001-03 went to social service groups
- Sen. Charles Grassley and the Finance Committee may hold a hearing on “the basic tax code for charities, which has not been significantly revised since 1969.” (See a related article, Foundations vs. Charities: Should Rules Be the Same?, which requires a paid subscription to the Chronicle.)
How are nonprofits and philanthropy responding?
The national Council on Foundations is planning to gain legislative support for Low-Profit Limited Liability Corporations (L3Cs). From the article:
Steve Gunderson, the council’s president, would like the Internal Revenue Service to rule that foundations may give money to such entities as “program-related investments” that could be counted toward meeting the federal requirement that foundations distribute at least 5 percent of their assets each year.
(See A Push for Investments Instead of Grants, from the Youth Today newspaper, for more information about L3Cs.)
Independent Sector’s response:
Last spring, [Independent Sector president Diana Aviv] assembled 16 foundation and nonprofit leaders to form the Advisory Group on Defining the Charitable Sector. Its mission: to examine the roles of charities and foundations and the rationales for their tax exemptions, as well as the charitable tax deduction.
Join the conversation: How would you advise your nonprofit and philanthropic support organizations to respond to the issues raised in this article? What do you think about government oversight and involvement in decisions about charitable giving and nonprofit spending? How does your foundation or nonprofit organization plan to proactively engage in these upcoming public policy debates?
Posted by Crystal Colby 
