Many Provisions in President’s Budget Could Affect Philanthropy

Tucked into President Clinton’s proposed budget for the coming fiscal year were numerous provisions that could affect philanthropy. The President asked Congress for increased spending for education and social-welfare, and for an extension of a tax break for people who donate stock to their foundations.

The President’s proposal opens the debate on federal spending each year. House and Senate appropriations committees will now consider the proposals and send their versions to the White House for approval. Lawmakers hope to complete their work before October 1, the start of the government’s 1999 fiscal year.

Among the key proposals in the budget:

Arts and humanities. President Clinton sought $136-million apiece for the National Endowments for the Arts and the Humanities. That represents an increase of 39 per cent for the arts agency and 23 per cent for the humanities endowment.

Donations to foundations. The President recommended a one-year extension of a tax break that encourages people to give gifts of appreciated securities to private foundations. The provision, which allows people to claim a deduction on their income taxes for the full market value of gifts of stock, expires on June 30. If the tax break is not extended, donors will only be able to deduct the amount they paid for the stock, starting July 1. Extending the break would cost the Treasury an estimated $40-million in 1999.

Food aid. President Clinton proposed spending $2.5-billion over the next five years to restore food-stamp benefits to legal immigrants. Children, the elderly, and the disabled, as well as their families, would be eligible for food stamps under the plan. The Administration estimates that the proposal would restore benefits to 730,000 of the 935,000 legal immigrants who were dropped from the food-stamp rolls under the 1996 welfare law.

The President also proposed spending $20-million on a new “gleaning” program that would provide grants to non-profit groups to collect unused crops and other food to feed the hungry.

Allocations for existing government programs that support food banks, soup kitchens, and other charities that feed the hungry would get the same amount they now receive. For example, the Emergency Food Assistance Program would receive $146-million — the same as it does in the current fiscal year.

Housing. The President asked for a major expansion of the Low Income Housing Tax Credit to spur construction of low-cost housing. His proposal would increase tax credits by $1.6-billion and encourage the construction of at least 150,000 housing units over the next five years.

The President proposed an increase of 16 per cent in grants for programs that help the homeless, with the amount rising from $823-million to $958-million.

Other programs saw smaller gains in the President’s budget. For example, 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 $4.7-billion under the President’s budget, an increase of about $50-million.

Said Benson S. Roberts, vice- president for policy at the Local Initiatives Support Corporation, a national charity that works to develop low-cost housing: “This is clearly the best budget for housing and community development in many, many years.”

Planned giving. While the President made no specific recommendations on rules for charitable gifts from estates or other types of planned gifts, some financial advisers predicted that Mr. Clinton’s move to tighten some laws that govern trusts and estates could indirectly hurt giving if enacted.

In particular, financial advisers pointed to Mr. Clinton’s proposed elimination of a tax strategy known as the “Crummey” provision. The provision has been used by people to pass money to their heirs, usually in the form of life-insurance payouts, in a way that avoids estate or gift taxes.

“Anything which creates hurdles may dissuade people from being charitable,” said Vaughn Henry, a planned-giving consultant in Springfield, Ill. “So while some of the provisions in and of themselves are not tools that have a lot of charitable implications, they have huge estate-tax-planning implications and may cause people to rethink their priorities.”

Public broadcasting. The Clinton Administration’s budget would provide $450-million over five years to help public-broadcasting stations install digital-broadcasting facilities. Most of the money would be distributed by the Corporation for Public Broadcasting, which would get $375-million, beginning with $50-million in fiscal year 1999.

Public-broadcasting officials had hoped for $771-million in federal funds to make the transition to digital technology, based on their estimate that the process will cost about $1.7-billion.

Under the President’s budget, the Corporation for Public Broadcasting would see its annual appropriation for programming and other needs rise to $340-million in fiscal year 2001, a $40-million increase over spending that Congress has already approved for fiscal year 2000. (Public-broadcasting money is approved two years in advance of the time it is needed because of the timetable involved in producing shows.)

Volunteerism. The President sought a total of $781-million for the Corporation for National Service, a 14-per-cent increase. The corporation funnels federal dollars to volunteer and community-service programs such as AmeriCorps, the Points of Light Foundation, and VISTA.