Charities Urge Congress to Reinstate IRA Gifts and Other Donor Incentives

This year the Nature Conservancy is losing a key incentive that prompted donors to give nearly $9-million to the environmental charity in the past six years.

Many other charities also mourn the loss of the incentive, a tax break that allows older donors to transfer up to $100,000 tax-free from their individual retirement accounts to charity every year.

Congress failed to renew the incentive when it expired at year’s end.

That’s a familiar happenstance; the measure has been renewed for short spurts several times since it was first passed in 2006.

“We’ve had great success with this program, and we will miss it, definitely,” says Angela Sosdian, the Nature Conservancy’s chief philanthropy officer.

The measure could still be enacted retroactively by Congress sometime this year, as it was at the end of 2010.

But that possibility offers scant comfort to fundraisers who advocate expanding the provision to younger donors and making it permanent. Plus, they complain, waiting and hoping for Congress to act every year hampers charities’ ability to secure gifts by providing reliable, timely information to donors.

“The uncertainty has a negative effect,” says Lisa Davis, vice president for public policy at Feeding America, a network of more than 200 food banks. “We want a permanent fix.”

Congress also failed to extend a handful of other temporary giving incentives that affect charities, including deductions that allow:

• Donors who give farm, ranch, or forested land to conservation charities to write off up to 100 percent of their adjusted gross income (depending on the value of the gift).
• Companies and restaurants that donate food to charities to write off more than the cost of producing it.
• Some businesses that give books and computers to educational and scientific organizations to get write-offs that are more generous than in years past.

Reducing Tax Deduction

The expired giving incentives are just the latest development on Capitol Hill that could depress donations. Nonprofit leaders are even more worried about proposals to limit the value of charitable deductions, which so far have not gained much traction but could gain popularity.

Among the lapsed giving incentives, the IRA provision has benefited the most organizations nationwide, but the other giving breaks have had a big impact on certain types of charities that are now urging lawmakers to reinstate them.

The Land Trust Alliance, which represents 1,200 conservation charities, has formed a coalition of more than 100 other groups urging Congress to make the deduction for property gifts permanent. The alliance estimates that the provision has generated $300-million worth of conservation gifts every year.

And Feeding America hopes to recover the lapsed deduction for companies that give food to its member food banks. That provision, Feeding America officials say, helped its network increase giving by 50 percent during the past few years.

“This is a key selling point for me in talking to companies,” says Tony Mann, a director who seeks product donations for the Second Harvest Heartland food bank in St. Paul, Minn. With the enhanced tax deduction, he explains, companies get a better tax break for donating food than they would by discarding perishable or unsold products and writing them off as a loss.

A Distracted Congress

Record budget deficits and a bitterly divided Congress are among the reasons experts say lawmakers may not re-enact the IRA provision or other giving incentives.

The Joint Committee on Taxation, a nonpartisan group of experts who advise Congress, has estimated that the federal government lost $571-million in tax revenue last year because of the IRA provision, another $92-million from companies that donated food, and $63-million from the break for land gifts.

The IRA incentive is particularly vulnerable to the budget axe, some experts say.

“I do not have a lot of confidence this will be renewed,” says Brian Sagrestano, a Utica, N.Y., fundraising consultant who helps charities seek large gifts from older donors. “Congress is desperately seeking ways to cut the deficit, and lawmakers may just let this quietly lapse.”

Yet other charity officials are determined to do everything they can to get the IRA provision and other giving incentives reinstated. However, that could be difficult in an election year when lawmakers are “quite distracted,” admits Diana Aviv, president of Independent Sector, a Washington coalition of nonprofits. As a result, says Ms. Aviv, “my guess is that it would be difficult to get more than a one-year extension for 2012.”