Business Leaders Have Mixed Reaction to Proposed Giving Incentives

By DEBRA E. BLUM

Business leaders have given mixed reviews to three White House-backed

measures that administration officials say would encourage corporate giving. The proposals, which were approved by the House Ways and Means Committee as part of a measure to help faith-based groups and encourage charitable giving, would:

* Increase the annual limit on charitable deductions taken by corporations from 10 percent to 15 percent of a company’s taxable income, phased in over nine years.

* Exempt corporations from liability associated with their in-kind gifts.

* Allow all businesses, not just certain kinds of corporations, to receive an enhanced deduction for food donations.

The measures were first suggested in President Bush’s faith-based plan, and are part of the administration’s push to get corporations and foundations to increase their giving to help the poor, especially by helping religious groups. Mr. Bush has accused corporate America of discriminating against faith-based groups by not donating more to their efforts to serve poor people.

But despite White House endorsement of the measures, some business leaders and observers of corporate philanthropy say the proposals would do little to encourage more gifts. Corporate giving as a percentage of taxable income typically hovers around 1 percent, critics point out, nowhere near the current 10 percent limit. And, they say, few if any companies are holding back in-kind donations for fear of being sued.

Ed Ahnert, manager of ExxonMobil’s corporate-contributions program and president of the company’s charitable foundation, says the call to increase the deduction limit is a “nonissue” at most large companies because so few have come close to facing the deduction limit.

Mr. Ahnert says, too, that while he understands the principle behind efforts to exempt companies from liability related to their gifts of products and services, he doesn’t see how it will make a difference. At ExxonMobil, he says, concern about liability “is not something we feel is constraining our philanthropy.”

Shaped by Texas Experience

Anne Womack, a White House spokeswoman, says that the exemption idea was born out of concerns expressed by Texas companies to Mr. Bush when he was that state’s governor. The companies, she says, wanted to donate products to charity or allow nonprofit groups to use company facilities, but felt they first needed more protection against potentially costly lawsuits.

The legislation passed by the House panel says that short of gross negligence or intentional misconduct, a company cannot be subject to civil liability if someone is injured or killed when using something donated or lent by a company to a nonprofit group, or when visiting a company’s facility.

“This is another way of promoting corporate giving without undue risk of a possible costly lawsuit,” Ms. Womack says. “This is for groups that would normally give, but hold back because of concerns.” Neither she nor other supporters of the legislation would estimate how much more companies would contribute if the measure became law.

A report earlier this month from the Congress’s Joint Committee on Taxation does indicate how much more money and goods might flow to charities if the bill’s other two corporate-contribution measures are passed. It estimates that if all businesses were eligible for enhanced deductions for food donations, $626-million in tax revenue would be lost from 2002 through 2011. It also estimates that increasing the percentage limit on corporate charitable deductions would cost a total of $917-million in tax revenue during the same time period. Since corporations are typically subject to a 35-percent tax rate, those changes taken together would mean an extra $4.4-billion in donations. But even some of the proposals’ supporters say that estimate may be high.

Whatever the estimates, though, Paul M. Fleming, a Phoenix businessman who founded three restaurant chains, believes the corporate-giving measures President Bush has proposed could have a broad impact on companies’ willingness to support faith-based groups.

“Corporations that don’t give money now to faith-based groups may consider doing so after they see the government going to the trouble of leveling the playing field, offering incentives,” he says. “The measures in the legislation get the story out that it’s important for the private sector to step up its support.”