A Taxing Opportunity

Charities compete for space in income-tax checkoff programs

Taxpayers dread the annual ritual of filing income-tax returns, but scores of nonprofit organizations look forward

eagerly to April 15, viewing tax time as a prime fund-raising opportunity.

Forty-one states and the District of Columbia have options on their income-tax forms that allow taxpayers to check a box to indicate that they want to contribute money from their tax refunds — or in some states, add money to their tax bill — to support a wide variety of causes.

Residents of New Jersey have used an income-tax checkoff option to help bring a historic battleship, the U.S.S. New Jersey, home to Camden as a permanent memorial. North Dakotans support tree plantings in their state, while Virginians finance efforts to prevent homelessness. And Californians underwrite medical research on Alzheimer’s disease, breast cancer, and lung disease. All while filing their income-tax returns.

But while state checkoff programs bring in millions of dollars for worthy causes every year, some lawmakers argue that it’s not fair for states to favor some nonprofit organizations over others by helping them raise money through the tax system. And although the checkoffs have become more prevalent, they have become a less-successful fund-raising tool, as donations are spread among an expanding universe of choices.

In 1990, states offered 126 checkoff programs, which brought in $30.1-million, according to a survey by the Federation of Tax Administrators, in Washington. By 2000, the number of state checkoff programs had jumped to 179, but donations had fallen to $27.3-million.

The increased competition has helped charities learn that just being listed on the tax form doesn’t ensure fund-raising success. Many of those with checkoffs on state tax forms are now mounting aggressive publicity campaigns. Some organizations are trying to persuade their supporters to make an additional gift using their tax refunds, while other groups are working with professional tax preparers and taking other steps to reach as many state residents as possible. In Colorado, the 10 nonprofit organizations and state agencies listed on the state tax form have banded together to encourage more taxpayers to make donations through the checkoffs.

Cumbersome Process

Getting on a state tax form isn’t easy. In most states, the legislature and governor must approve a new checkoff, so charities must find lawmakers who are willing to champion their causes. And even after securing a checkoff spot on a tax form, charities may have to work hard to keep it.

In California, organizations added to the tax form must raise at least $250,000 each year to remain on it. The American Lung Association of California, in Oakland, secured a spot on the state’s 2000 form, but was dropped the following year because taxpayers donated only $190,000 through the checkoff. The association persuaded state legislators to add it to the tax form Californians file this year, with the provision that it will meet the $250,000 threshold within two years.

Paul Knepprath, the lung association’s vice president for government relations, says he is confident that the group will be able to raise the minimum this year by making sure that donors, volunteers, activists, and staff members all know about the checkoff. The association has highlighted the option in its e-mail newsletter and on its Web site, and has sent publicity kits, which include flyers, sample letters to the editor, and other promotional ideas, to its 15 local offices.

“To educate the people of California would be a $5-million television-ad buy that the American Lung Association doesn’t have,” says Mr. Knepprath.

Favoritism Concerns

While charities included on the tax forms hail the potential benefits, some critics think that tax checkoff programs unfairly favor some causes over others.

California State Senator Dede Alpert, a Democrat who represents San Diego, says she can no longer in good conscience vote for charity checkoffs, even though she once sponsored legislation to win a checkoff for breast-cancer research.

Ms. Alpert says she used to view the checkoffs as an easy way to do something good at a minimal administrative cost to the state, but over time, she says, she became increasingly uncomfortable with checkoffs.

“We were basically saying that these are the favored charities for the state of California because we’re going to give you a chance to contribute to them on your tax form,” says Ms. Alpert. “The other ones aren’t, and we’re not going to give them that chance. It just didn’t seem to be fair.”

But voting against legislation designed to benefit worthy causes is difficult, says California State Senator Debra Bowen, a Democrat who represents Redondo Beach and a fellow critic of checkoff programs. The state currently offers taxpayers the option of donating to 11 causes and organizations as part of its income-tax form.

“It’s never comfortable when I have the parents of kids with cystic fibrosis, or the firefighters I respect so much, in my office asking me for an ‘aye’ vote,” says Ms. Bowen. “But there are many good organizations that aren’t on the tax checkoff list.”

Ms. Bowen says that some opponents of tax checkoffs question whether it’s appropriate for government to help any charities raise money, but she says that the fairness issue is her primary concern. Right now, she says, it would be a logistical nightmare to allow taxpayers to designate gifts to any charity of their choice through the income-tax form. But she thinks such an option might be possible if in the future everyone filed returns online.

In response to concerns about fairness, the Oregon legislature in 1999 added a second tier to its charitable checkoff program to help open it up to more nonprofit organizations. A new law established a process by which groups with annual budgets of more than $1-million can be listed in the tax-instruction booklet — if they collect 10,000 signatures of support.

Oregon State Representative Jeff Merkley, a Democrat who represents East Portland, came up with the idea after first considering a proposal that would have added Habitat for Humanity Oregon to the state’s income-tax form. After conducting research on the idea, Mr. Merkley learned that past efforts to authorize new checkoffs had failed after meeting with fierce opposition from supporters of the organizations that were already on the form.

This year 12 charities — including Doernbecher Children’s Hospital, the Oregon Coast Aquarium, and the Oregon Salvation Army — appear in the state’s tax-instruction booklet, in addition to the five causes that still appear on the form itself. Each charity in the instruction booklet has a number, which taxpayers can write in on a line of the tax form to designate a gift to that organization.

Promoting Causes

Publicity plays a key role in getting taxpayers to donate money to charity through their income taxes.

“Just seeing the name on a state income-tax form alone is not going to be adequate to motivate people to give,” says Nancy M. Paris, vice president of the Georgia Cancer Coalition, in Atlanta, a nonprofit organization created by Georgia’s general assembly in 2001, using a portion of the state’s proceeds from the national tobacco settlement. “If you just look at it as free money — and whatever comes, comes — then you really won’t be getting the benefit of having the state-income tax checkoff option.”

Part of the coalition’s marketing strategy this year is to try to reach Georgians when they are preparing or about to prepare their taxes.

The group is working with two companies that offer tax-preparation services, H&R Block and Jackson Hewitt, to spread the word about the coalition’s Breast Cancer, Prostate Cancer and Ovarian Cancer Research Program Fund. The companies have included information about the fund in training sessions for tax preparers in their Georgia offices, and they distribute information sheets about the fund to their clients. The coalition also has set up displays about the fund at libraries and post offices, where taxpayers can pick up tax forms.

In its first two years on Georgia’s income-tax form, the coalition raised a total of $467,000. The coalition hopes that its increased promotional efforts — which also include a public-service announcement that was produced by Georgia Public Broadcasting but is also airing on commercial stations — will bring the amount raised this year up to $500,000.

Names Withheld

While the broad reach of the income-tax form appeals to charities, they say it also is problematic. Nonprofit groups don’t know the names of the donors who gave through income-tax forms, since releasing tax information would violate taxpayers’ privacy.

“We don’t know what a contributor to our cause looks like,” says Jeff Muller, director of marketing and public relations at the Chesapeake Bay Trust, in Annapolis, Md. Established in 1985 by the Maryland General Assembly, the trust is a nonprofit organization that makes grants for educational activities that teach students about the bay and its ecosystems and for environmental-restoration projects that involve volunteers.

Last year the trust received $565,000 from the checkoff, or 45 percent of its budget. Proceeds from Maryland’s Chesapeake Bay license plate made up another 45 percent, with the rest coming from special events and contributions from individual donors. For both programs, the state tells the trust how much money is coming in from each county and what percentage of each county’s taxpayers and motorists are participating.

To help it reach out to new donors, the trust hired a research company last fall to bring together groups of state residents and to conduct a telephone survey to ask people about their views of the trust. The research found that the main reason people said they did not give to the trust was that they did not know enough about how donations would be used. Participants in the discussion groups also said they were more interested in the restoration of the Chesapeake Bay than in the trust’s other work of educating students about environmental issues.

The trust used the findings to reshape its promotional campaign, which in previous years had focused on the educational projects the trust finances. It also decided to underwrite programming on public-radio stations in Baltimore, Salisbury, Md., and Washington, because that is where the state said most previous donors to the trust live. Mr. Muller says that while the trust can’t specifically ask listeners to give in the 10- and 15-second underwriting announcements that are aired, the mentions are a good way to reach the affluent, well-educated Marylanders who are most likely to give.

Collaborating in Colorado

In Colorado, the 10 charities and state agencies on the income-tax form are working together on a publicity campaign, called Checkoff Colorado, that they hope will increase the percentage of Coloradans who donate through the checkoff option.

“Only 3 percent of Colorado taxpayers currently check off,” says Barbara Mattison, executive director of Colorado CASA, a Denver charity that coordinates 12 local programs to train volunteers as advocates for abused and neglected children in the court system. When Colorado CASA was added to the tax form last year, says Ms. Mattison, “we knew we wanted to help raise that number, and we thought that the way to do it was to mount an educational campaign all together.”

A major advantage of collaboration, she says, is that state officials and companies that might have hesitated to support the organizations individually, out of fear of appearing to favor one charity over another, are now promoting the checkoffs.

The coalition kicked off its combined effort with a press conference at the state capitol featuring the state’s attorney general, and Governor Bill Owens recorded radio and television announcements for the coalition that have been airing throughout the state. In addition, signs and posters promoting the checkoff appear at the Denver airport, on Denver buses, and at H&R Block offices and King Soopers grocery stores across the state. The organizations participating in Checkoff Colorado also are running campaigns to promote their individual checkoffs.

Ms. Mattison and others in the coalition acknowledge that it took time to get all of the groups on the tax form to agree to work together.

“We were skeptical,” says Dale E. Lashnits, chief of public affairs for the Colorado Division of Wildlife. “Efforts like this coalition had been attempted haltingly in the past and not really gone anywhere. The reason for that is, at some point in the year you become competitors with your fellow coalition folks.”

But Mr. Lashnits says he realizes much has changed since 1977, when the Colorado Nongame and Endangered Wildlife Fund was the first and only beneficiary of a state tax-form checkoff. Mr. Lashnits, who has been in charge of promoting the checkoff since the beginning, says that he has come to believe that all publicity is beneficial, and the more the better.

“I’d have a tattoo put on me, and I’d walk the Sixteenth Street Mall with it if I thought it would work,” says Mr. Lashnits. “But then I’d scare off donors.”

CAUSES TAXPAYERS CAN SUPPORT WHEN FILING STATE INCOME TAXES

Alabama

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Georgia

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

Utah

Vermont

Virginia

West Virginia

Wisconsin