Too Little Charity Goes to the Needy, Congress Told

Many large nonprofit groups and wealthy donors fail to give enough money and other resources to regions with large concentrations of minority and poor residents, charity leaders and other experts last week told members of a key Congressional subcommittee.

As a result, they said, the regions most in need of resources are not getting adequate help.

That message was reinforced throughout a hearing of the House Ways and Means Subcommittee on Oversight, which has jurisdiction over federal tax policy. And it prompted some lawmakers on the committee to question whether Congress should re-examine how the tax system rewards people who donate money to charity.

Rep. Xavier Becerra, Democrat of California, said that he has reservations about whether donations to institutions such as art museums and universities should be given the same tax treatment as contributions to social-services charities that help poor people.

Mr. Becerra said that when Congress examines its tax policies, it should “take a look at whether or not we are serving the best purpose” by maintaining the current system, which allows donors to write off their gifts to all charities regardless of their mission.

Lessons of Hurricane Katrina

That issue was also raised by Rep. John Lewis, a Georgia Democrat and the chairman of the subcommittee, who said he believes not enough attention is being given to the neediest Americans.

Mr. Lewis called the hearing after witnessing what he believed was an inadequate response by charities and the federal government to citizens in Louisiana and Mississippi who were displaced by Hurricane Katrina in 2005. Most of those who were most affected by the hurricane were poor and minorities.

“Sadly, those with the greatest need are not always served,” Mr. Lewis said at the beginning of the hearing. “We must ask the question: How well do we reach diverse populations?”

A significant portion of the hearing, in fact, was devoted to the American Red Cross’s efforts following the disaster — a response that highlighted the strained relationship between some nonprofit groups and low-income people and minorities who needed aid.

Kevin M. Brown, the Red Cross’s chief operating officer, told the committee that his organization drew considerable criticism following its response to Katrina, because it did not have a diverse staff of workers and volunteers and because it had not established relationships with local and national nonprofit groups that were also working to help those who had been displaced by the storm.

Because the organization failed to develop those relationships, many victims did not receive adequate help. “The sense was that the Red Cross lacked cultural competence in its response to Katrina,” Mr. Brown said.

The Red Cross has since been working to build relationships with local charities in low-income neighborhoods and to redesign the way it provides help to people who speak other languages.

‘Short of Resources’

More broadly, experts said national organizations such as the Red Cross, as well as most donors, are more likely to focus their philanthropic efforts on what they know — rather than taking the time to find out who has the greatest need.

“If diversity is defined as synonymous with concentrated poverty and social needs, then charitable organizations are woefully short of resources commensurate with needs,” said Julian Wolpert, a professor of public affairs at Princeton University. “Little charity or volunteerism passes from wealthy suburbs to inner cities or rural areas of Appalachia. Local charity in those needy communities, no matter how generous, makes only a small dent.”

The current tax system, Mr. Wolpert said, is not giving wealthy donors enough incentive to dedicate money to needy people and minorities.

“They are not redistributing,” he said. “We already know that.”

That point prompted Mr. Becerra to question whether the government should instead structure tax incentives to give more-generous breaks to donors who support groups that serve poor people and minorities — and less to those who contribute to other charities.

Byron Laher, director of public policy at Minneapolis’s United Way, offered another possible solution — allowing those who do not itemize their tax returns to deduct their charitable contributions on their federal tax returns.

Mr. Laher said such an effort would encourage more giving by less-affluent donors who would be more likely to contribute to causes that would support needy people. “I know it’s an expensive issue,” he said. “But it’s an important thing that as a country we need to consider.”

Lesley Grady, vice president of community partnerships for the Community Foundation for Greater Atlanta, said extending legislation that allows donors the opportunity to avoid tax penalties when they donate money to charity directly from their individual retirement accounts would also help to democratize philanthropy. A law that now allows such a tax break expires at the end of of the year. Ms. Grady says she favors extending the law and expanding the benefit to include the transfer of IRA assets to donor-advised funds. “It allows everyday people to use their IRA’s to help charitable organizations,” Ms. Grady said. “That’s a good starting point to figure out how to better work together to improve the communities we all care about.”