Charitable Giving Deduction: No Change for Minnesota, But Debate Continues in U.S. Congress

May 16, 2013

As in past years, Minnesotans will be able to claim a deduction for charitable gifts when filing their state income taxes next year.

The committee of Minnesota lawmakers who iron out the details of the tax plan to raise state revenue has dropped consideration of a House proposal that would have changed the tax deduction to a credit. The Minnesota Council on Foundations (MCF), along with other nonprofit organizations, opposed the proposed change.

As explained by MINNPOST, changing the state’s charitable giving tax deduction would have produced significant revenue for the state, but it posed a worrisome risk to an important revenue stream for charitable organizations.

MCF worked with other nonprofit advocates to ensure the Governor and Senate held fast in opposition to the House proposal. In addition to lobbying at the Capitol, the effort included a guest editorial in the Star Tribune.

But What of U.S. Tax Reform?
While the push for potentially harmful changes to charitable giving law seems to have waned in Minnesota, tax reform proposals are just gaining steam in the U.S. Congress.

The U.S. House Committee on Ways and Means continues to contemplate various tax reform proposals that impact the charitable sector.  Last week the committee issued a report proposing a variety of options, including changes to the federal charitable giving deduction.

MCF, in partnership with the  Charitable Giving Coalition, issued an immediate response to the report. We are particularly concerned about options that would unravel the charitable deduction and hurt our communities. We explained our concerns in a joint letter to all members of the U.S. House of Representatives.

Contact Your U.S. House Member
MCF is now contacting Minnesota’s Congressional representatives in Washington to explain concerns about the ideas in the working group report and to ask them to oppose changes in the federal charitable giving tax deduction. We encourage MCF members to also contact Minnesota’s members in the House of Representatives to express support for the current charitable giving tax deduction and reject proposed changes.

Do you have questions about state or federal tax reforms affecting the charitable giving deduction? Contact me at MCF.

– Bob Tracy, MCF director of government relations and public policy

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Charitable Giving Tax Deduction Challenged by Minnesota House

April 30, 2013

capitol1aThe Minnesota House of Representatives adopted a tax bill that replaces the state’s charitable giving income tax deduction with a tax credit. Neither the Governor nor the Senate has embraced this idea in their tax plans, but MCF is working with nonprofit advocates to oppose the House proposal.

Deduction vs. Credit

Currently, Minnesota taxpayers can reduce their taxable income by deducting charitable contributions. Those who itemize on their federal taxes can deduct all of their contributions, while non-itemizers can deduct 50%.

The House plan replaces the deduction with a credit. Rather than reducing taxable income, the credit would be subtracted from the tax bill after it is calculated. Under the House proposal, taxpayers who contribute $400 or more or who give 2% of their adjusted gross income could claim the credit. The proposed changes are in Article 6 of HF677. *

Advocates for the House plan suggest the bill is a win-win: The credit would create more resources for nonprofits, while also adding $40 million in revenue to the state through tax expenditure savings.

Their theory is that tax expenditures should be used to incentivize new investment, and not to reward people for what they might do anyway, without beneficial tax treatment. It assumes that — because donors donate a similar amount to the same beneficiaries each year — the credit would encourage them to increase their giving.

Unfortunately, the House plan is not supported by any projections that giving would, indeed, increase.

Investment in Civil Society

Supporters of the House plan fail to recognize that some tax deductions exist as an expression of public values, while others are designed to promote economic activity. Alexander Reid, former counsel for the Congressional Joint Committee on Taxation, suggests the charitable giving tax deduction serves to acknowledge that investment in civil society is an essential, core value in democratic society. Therefore, the economic test for the charitable giving tax expenditure’s worth may simply not apply.

MCF and our nonprofit allies oppose the proposed shift from a deduction to a credit because it raises fundamental and substantial policy questions about what makes democratic society work and whether charitable giving should be taxed.

More Conversation Needed

While first floated as an idea in 2009, the House proposal to change charitable giving pretty much came from out of the blue (many think it got added to the tax bill simply to help meet revenue projections). This change affects the revenue stream of nonprofits, which make up 10% of the state’s economy and are essential to creating vital, livable communities. It merits much more deliberative analysis and conversation.

It appears Senate leaders and the Dayton administration do not have much of a political appetite to enact the House charitable giving reforms this year. But the House action clearly points to a need for partners in the state’s independent sector to lead communities in conversations about the role and future of charitable giving in Minnesota.

- Bob Tracy, MCF director of government relations and public policy

* The language in HF677 states that contributions through trusts and estates would not be eligible for the credit. MCF brought this to the bill author’s attention, and she stated this was not her intent. Should the House’s reform advance, the author intends to make contributions through trusts and estates eligible for the credit in conference committee.

This post has been updated to reflect the current location of the repeal of the charitable deduction and establishment of a tax credit in HF677.

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Charitable Deduction Debate Heats Up

April 18, 2013
cgc

The Chartiable Giving Coalition continues to be a strong voice for preserving the charitable deduction.

The U.S. charitable giving tax deduction is working and should not be changed. That was the message MCF delivered to members of Minnesota’s Congressional delegation at Foundations on the Hill meetings in Washington, D.C. last month.

We learned in those meetings that the creation of the federal budget for 2014 will be linked to landmark tax reform and long-term deficit reduction. While most of the work of reconciling White House, Senate and House budgets will be done behind the scenes, we did watch part of the process unfold as the House budget plan was debated on muted television monitors as we moved from office to office.

Cap on Charitable Contributions

Last week the volume on the budget debate got turned up as President Obama released his plan. His proposal to limit the growth of entitlement programs captured the headlines, but what caught our eye was the recommendation to cap charitable contributions.

This is not a new idea from the Obama Administration. For the fifth year in a row, the White House has proposed capping the value of charitable gifts at 28% for higher income taxpayers.

What is new is the context. Congress and the Administration are much more likely to act this year, fundamentally altering the tax treatment of charitable giving.

The Charitable Giving Coalition responded strongly to the President’s plan. The group challenged the policy that lumps the charitable giving deduction with other tax expenditures and the Administration’s general characterization that these are all loopholes that “allow folks who are already well off and well connected to game the system.”

Why Charitable Giving is Different

The Coalition encouraged lawmakers to take a closer look at how the charitable deduction is different from other itemized deductions in that “it encourages individuals to give away a portion of their income to benefit others, not themselves.”

The response from the Independent Sector sounded less of an alarm, but no less concern. It pointed out how the President’s budget is at cross purposes. While its goal is to increase revenue to avoid cuts in federal services for individuals and communities in need, capping the giving deduction would effectively reduce dollars donated for these same community needs.

Independent Sector also challenged the perception that bigger donors favor the arts and universities by citing a Center on Philanthropy at Indiana University study showing that most giving from high-net-worth households supports basic needs.

Analysis by the Urban Institute and Tax Policy Center (PDF) also shows that a cap is likely to have the net effect of reducing overall revenue for charitable causes compared to the amount of increased tax revenue it produces.

Participate in the Debate
Now that the Senate, House and the President have all announced their budgets, the real work will happen in deliberations taking place outside of the headlines. Some of the most important conversations will take place in Congressional districts around the country as nonprofit and grantmaking representatives explain the impact of their work to members of Congress.

You can participate in these conversations. MCF and Minnesota Council of Nonprofits, with support from Greater Twin Cities United Way United Ways of Minnesota, are hosting Coffee with Congress events in communities around the state.

The next event will be with U.S. Rep. Betty McCollum on April 29. You can also connect with Minnesota’s Congressional delegation and the White House through the Council on Foundations — Action Center.

- Bob Tracy, MCF director of government relations and public policy

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PFund Seeks Nominees for Power of One and Philanthropy Awards

April 5, 2013

pfund1aMCF member PFund Foundation has issued its call for nominations for two annual awards: Power of One and Power of Philanthropy.

The Power of One Award recognizes individuals who work to improve the quality of life for the LGBT community through efforts such as volunteering, activism and leadership. For this award, PFund seeks nominees who:

  • Show significant contributions that reflect the PFund mission and vision
  • Demonstrate depth and breadth of service to the LGBT community in Minnesota, Iowa, North Dakota, South Dakota or Wisconsin
  • Are community leaders or activists

The award recipient will receive $1,000 to give to a nonprofit organization of his/her choice and that also aligns with PFund’s vision and mission.

The Power of Philanthropy Award honors a community philanthropist whose work has inspired giving within and toward LGBT communities and has advanced social justice for LGBT and allied communities in the Upper Midwest. PFund seeks those who:

  • Have given generously and have inspired, educated or motivated others to give generously
  • Exemplify thoughtful, purposeful, responsive or innovative giving strategies
  • Demonstrate significant or visible impact on efforts to advance social justice for LGBT and allied communities in Minnesota, Iowa, North Dakota, South Dakota or Wisconsin

Head to PFund’s website to see the full criteria and make your nominations. Submissions are due May 15, with recipients announced in August. Good luck to the nominees!

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Companies Remain Committed to Employee Giving

February 25, 2013

AmericasCharities-400wEvery year, the nation’s largest employers invite their employees to participate in a fall tradition: the Employee Charitable Giving Campaign. The campaigns funnel $3 billion annually (most of it unrestricted) to nonprofits across the nation.

In recognition of today’s International Corporate Philanthropy Day, America’s Charities released Trends and Strategies to Engage Employees in Greater Giving, a new report.

Among its findings:

  • Companies remain committed and recognize the benefits of a strong employee-giving program.
  • Employers are creating new giving models to involve and engage employees, particularly younger employees.
  • Technology and digital culture are transforming the employee-giving experience.
  • A new model that empowers employees to participate in giving inside and outside the walls of the workplace is emerging.

Good news:

  • More than two-thirds of companies surveyed offer matching payroll contributions, a 58% increase since 2006.
  • More than 80% of survey respondents agree or strongly agree that their company is committed to a strong program and that employee giving is a priority.

Warning signs:

  • Giving has increased at a majority of companies, but employee participation rates are down at nearly half. Average participation in 2006 was 41%; in 2012, it dropped to 33%. Experts say this is a sign that those who are already involved feel very comfortable, but that more must be done to engage additional workers at that level.
  • About 85% of respondents said administering the annual campaign is one of their top challenges. Time-crunched administrators find it difficult to devise engaging new ways to encourage participation. They want solutions that are easy to use, easy to administer and offer a platform to engage employees.
  • More than 92% of employers face challenges connecting younger employees to existing employee-giving programs. About 80% agree that the current model needs to be made more attractive for younger employees. More than 50% of employers surveyed plan to implement more social media tools into their employee-giving programs to attract younger employees and enable all employees to connect with peers and the causes they care about in real-time.
  • About 85% of respondents said that keeping the campaign fresh and vibrant is a challenge. Today, many employers are looking to integrate their efforts — the annual campaign, employee volunteering, pro bono work and more — into a one-stop shop, and new technologies may support this integration. Companies are developing strategies and ideas to address challenges and enhance engagement, and the number of year-round giving programs is growing.

You can find many more insights in the full report (PDF).

This is America’s Charities third report in the last 13 years about the $3 billion dollars employees donate on the job each year to worthy nonprofits. Participating companies employ more than 1.4 million people, represent more than 20 industry groups and are geographically diverse. Collectively, they raise more than $230 million through traditional employee-giving campaigns.

- Susan Stehling, MCF communications associate

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Funding Diversification Needed for Culturally Specific Theaters

February 21, 2013
penumbra

Penumbra is the largest theater representing African American experiences in the Twin Cities

A recent Minnesota Public Radio (MPR) piece examines the unique fundraising challenges faced by culturally specific and ethnic theater groups. These theaters present work by and about particular groups. Two local examples are Mu Performing Arts, representing Asian American experiences, and Penumbra Theater, representing African American experiences.

As art funding starts to rebound, most individual donors continue to support large, culturally western groups serving audiences who are whiter and wealthier than the American average. This trend, along with the reduction of foundation, government and corporate support for theater, has placed many culturally specific theaters in jeopardy. To survive, small arts groups must expand revenue sources, diversify funding and do a better job of networking with individual donors.

As Minnesota’s population diversifies, engaging diverse individual donors continues to be a challenge. According to MPR and Michael Kaiser, president of the Kennedy Center for Performing Arts, the average white theater company gets 60% of its funding from individual donors. That compares to (less than) 26% of funding that Penumbra receives from individuals. Two factors are cited as contributing to the gap: available wealth in the theater’s community and the history of philanthropy within the culture.

Another factor contributing to the decline is the diversification of offerings from mainstream theaters. As large theaters start to embrace multicultural programming, they attract support that may traditionally have gone to small ethnic theaters, which may have trouble competing for grants against large, more established groups. And, even with a shift toward more mainstream multicultural theater, criticism about a lack of representation from women and communities of color on America’s stages continues, as a backlash against the Guthrie’s 2012-2013 season showed.

However, Penumbra has also demonstrated that there is hope for building and diversifying fundraising capacity. After cutting staff and suspending programming indefinitely as a result of a major 2012  budget short fall, Penumbra focused all its energy on raising the $340,000 needed to keep its doors open. According to MPR, by the end of 2012, the theater had raised $359,000 from more than 1,400 individuals, corporations and foundations. To grow future sustainability, Penumbra is now developing a new business plan and examining ways to maximize revenue streams.

Culturally specific theaters are worth supporting. They provide ethnic and minority communities with a place to express their cultures using their voices. In addition, they bring another group’s individual and shared experiences to broader audiences. Funding diversification is key to making these theaters sustainable.

For more on a similar topic, read a post I wrote a year ago for Philanthropy Potluck on the need for arts giving to contribute more to the common good.

-Kaitlin Ostlie, MCF administrative assistant

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The Top Ten Posts of 2012

December 27, 2012

fireworksAs the year quickly draws to a close, here’s a look back at some of the most popular content on the Philanthropy Potluck Blog in 2012.

Have a look to get a refresher or catch up on the ones you missed!

  1. Measuring the Value in Social Media Dashboards, metrics and insights for measuring internal and external values, while always tying it all back to high-level organizational goals.
  2. Visualizing Philanthropy: Storytelling with Data Takeaways from an MCF program with Cole Nussbaumer, people analytics manager at Google.
  3. Connect for Health with the Blue Cross Foundation The launch of Blue Cross and Blue Shield of Minnesota Foundation’s innovative grant program that engaged the community through a voting process.
  4. Performance Measurement: No More Excuses A first look at the new PerformWell website, designed to give nonprofits accessible, valid tools for evidence-based measurement of their work.
  5. Diversity and Donors of the Future The first blog post from Lissa Jones, MCF’s new director of diversity, equity and inclusion, looks at 12 key giving trends for nonprofits.
  6. Social Media Engagement Lessons From Knight Foundation Why are foundations seeing limited engagement from their grantees on social media? Knight Foundation’s Elizabeth Miller shared tips to turn that around.
  7. Sandy Vargas Recognized as Outstanding Citizen The Minneapolis Foundation president and CEO was honored by The Caux Round Table.
  8. The Best Free Ways to Collaborate Online Tools for project management, file sharing, online meetings and more. Also see the longer feature in Giving Forum.
  9. Karen Kelley-Ariwoola Lauded for Community Contributions A celebratory send-off for Kelley-Ariwoola as she stepped down from her role at The Minneapolis Foundation after 18 years of service.
  10. Striving to Reduce the Achievement Gap A look at the Twin Cities Strive initiative and its future impact on education grantmaking in the state.

Join the conversation: What were your favorite blog posts of 2012?

Photo cc MJIphotos

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A New National Day of Giving Back

November 21, 2012

With this year’s Give to the Max Day in the bag, it’s clear that Minnesotans have widely embraced this day-long giving extravaganza. More than $16 million was given by 53,000 donors to almost 4,400 nonprofits and schools, all new records for our state’s annual event.

Now, a new movement that starts next week  is seeking to harness that same charitable impulse on a national level.

Called Giving Tuesday, it aims to take back some of the holiday season attention currently devoted to Black Friday, Cyber Monday and shopping, shopping, shopping. After several days spent buying, it asks people around the country to consider giving back.

Making donations will be a big part of Giving Tuesday, but unlike GiveMN, the Giving Tuesday website won’t be a one-stop portal for contributions. Instead, individual nonprofits will create their own campaigns and encourage donations through their normal channels.

The organizers also suggest other ways to get involved, including:

  • Committing to volunteer during the day
  • Asking employers to provide matching contributions or declaring Giving Tuesday a day of volunteerism
  • Becoming a social media ambassador, spreading the word and rallying others to the cause

With major media partners like Mashable and the Huffington Post supporting the effort, Giving Tuesday might well be on its way to breaking into the national conversation on how we spend our time and money during the holiday season.

Visit the website and follow #GivingTuesday on Twitter to follow along and participate!

-Chris Oien, MCF web communications associate

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