February 24, 2000 | Read Time: 4 minutes
President Clinton’s proposed budget for the coming fiscal year calls on Congress to increase spending on the arts, social welfare, community service, and a variety of other areas.
Mr. Clinton also asks for key changes in tax laws that would affect many charities and their donors.
The House and Senate will spend the next few months debating their version of a spending plan, and will try to work out a final budget deal with the Clinton administration before October 1, the start of the government’s 2001 fiscal year.
Among the proposals:
Arts and humanities. Mr. Clinton is seeking $150-million apiece for the National Endowments for the Arts and the Humanities. That would be an increase of 53 percent for the arts agency — mostly for a new $50-million “Challenge America” program that would encourage the development of cultural groups in communities not previously served by the agency — and an increase of 30 percent for the humanities endowment.
Community service. President Clinton wants more than $850-million — a 16-percent increase — for the Corporation for National Service. His request includes a $73-million increase for AmeriCorps, the program that aids people who spend a year or more performing community service.
Donor-advised funds. The administration asked Congress to tighten the rules that govern so-called donor-advised funds. Such funds enable donors to turn over cash and appreciated assets to a charity, claim a charitable deduction, and then recommend how, when, and to which organizations to distribute the money.
“There is concern that amounts maintained in donor-advised funds are not being distributed currently for charitable purposes,” the Treasury Department said. “The lack of uniform guidelines governing the operation of donor-advised funds also raises concerns that such funds may be used to provide donors with the benefits normally associated with private foundations (such as control over grant making), without the regulatory safeguards that apply to private foundations.”
Among the Administration’s proposals: Require that charities that maintain those funds make annual distributions from them that are equal to at least 5 percent of the net fair market value of the organizations’ aggregate assets that are held in such funds — or be classified as private foundations.
Housing. The Community Development Block Grant program, which provides funds to local governments to be disbursed to charities and other groups for housing and economic development, would receive $4.9-billion under the president’s budget, an increase of $119-million.
Mr. Clinton wants to expand the Low Income Housing Tax Credit to encourage construction of low-cost housing. His plan would increase tax credits for businesses by $5-billion over the next five years.
Public broadcasting. The Corporation for Public Broadcasting would receive $360-million in fiscal year 2003, an increase of $34-million, or 10.4 percent, over spending that Congress has already approved for fiscal year 2002. (Public-broadcasting money is approved two years in advance of the time it is needed because of the timetable involved in producing shows.)
Social services. One of the president’s top priorities is a major expansion of Head Start, a program that helps preschool children. Mr. Clinton wants nearly $6.3-billion for the program in fiscal 2001, an increase of $1-billion or nearly 20 percent above the amount budgeted for this year.
In addition, Mr. Clinton would increase the amount awarded to the Legal Services Corporation, which helps provide lawyers for poor people, from $305-million to $340-million.
Tax deductions and limits. Mr. Clinton asked Congress to allow people who do not itemize on their federal income-tax returns to write off a portion of their charitable contributions.
Individuals would be eligible to deduct 50 percent of the amount of their total contributions that exceeded $1,000 each year until 2006, when the dollar-threshold amount would drop to $500 a year.
Mr. Clinton also wants to make it more attractive for individuals to donate items that have appreciated significantly in value, such as art, real estate, and stocks. Under existing law, donors who claim a tax deduction for gifts of appreciated assets to charities are generally limited to writing off no more than 30 percent of their adjusted gross income. Donors who give appreciated assets to private foundations generally cannot deduct more than 20 percent of their adjusted gross income. The president seeks to increase the deduction limits to 50 percent for gifts of appreciated property to charities, and 30 percent for such gifts to foundations.
Taxes on private foundations. Mr. Clinton offered a proposal that the White House said would simplify and reduce the excise tax on private foundations. Foundations currently must pay an excise tax of up to 2 percent on investment income, although they can qualify for a reduced tax rate if they distribute at least a certain percentage of their assets to charities over a period of years.
The president wants to simplify and, in many cases, reduce the excise tax by replacing a tiered tax structure with a single, 1.25-percent excise tax for all private foundations.
The Clinton Administration’s 2001 budget plan and related documents are available at the Government Printing Office’s World Wide Web site: http://www.access.gpo.gov/usbudget.
