Philanthropy, Congress, and the New Administration: the Key Issues

As Congress and the new president get down to business, philanthropy is a topic commanding much attention in Washington.

Many legislators, as well as President Bush, have expressed strong

interest in passing new tax incentives to encourage charitable giving. Mr. Bush and several members of Congress are seeking to restore charitable deductions for people who do not itemize on their tax returns — a tax break that was abolished in 1986. Mr. Bush also vowed during his campaign to increase limits on the percentage of income companies can deduct each year for their charitable contributions.

Just as important to the fate of charities and fund raisers could be a tax measure that is not directly related to charity: repeal of the estate tax, which Mr. Bush has promised as a main goal for this year. Charities are divided on the effect of such a repeal. Some fear that without the tax, wealthy people would be less inclined to make charitable bequests. But others argue that tax considerations play only a minor role in decisions to include charities in wills.

Beyond the tax issues, a growing number of politicians have made speeches in recent weeks expressing interest in reshaping the relationships between government, businesses, and nonprofit groups. As part of such efforts, Congress is likely to seek additional ways to make it easier for religious or faith-based organizations to apply for federal money to help them deliver a wide range of social services.

President Bush has said he will use the federal government to support the work of “armies of compassion.” He plans to establish an “Office of Faith-Based Action” within his Executive Office. Sources close to the administration suggest that the leading candidate for the position is Stephen Goldsmith, the former mayor of Indianapolis who served as Mr. Bush’s domestic-policy adviser during the campaign.

The emphasis on faith-based and other nonprofit groups led to an unusual call from one of Capitol Hill’s most prominent conservatives. Sen. Jesse Helms, Republican of North Carolina and a vocal critic of international aid, recently said he would seek an increase in such support if the money could go to charities instead of government.

Speaking at the American Enterprise Institute, in Washington, Senator Helms called for eliminating the U.S. Agency for International Development and replacing it with “a new International Development Foundation whose mandate would be to deliver block grants’ to support the work of private relief agencies and faith-based institutions, such as Samaritan’s Purse, Catholic Relief Services, and countless others like them.”

Democratic Views

Democrats have their own views about what creating new relationships between the federal government and charities will mean.

Hillary Rodham Clinton, the Democratic freshman senator from New York, has said that she plans to continue to promote many of the ideas that grew out of the first-ever White House conference on philanthropy that she and President Clinton held in October 1999.

Speaking at a follow-up meeting in Washington earlier this month, Senator Clinton told nonprofit leaders that she would use her new role to promote philanthropy. “As I look to the needs for America and for the world, I know full well that unless we have a strong philanthropic foundation, and unless we have a public-private sector partnership, much of what we had hoped to accomplish will not be achievable,” she said.

Senator Clinton lamented that she and her husband had not been successful in persuading Congress to pass major new tax incentives to encourage giving during his administration. But she stopped short of outlining any specific tax issues she will promote as a senator.

Two Proposals

All the talk of philanthropy could prove good news for nonprofit groups trying to promote changes in the way charities raise money and interact with government.

To further the debate, two groups have issued comprehensive proposals for the new administration and Congress. The Capital Research Center, a philanthropy watchdog organization in Washington, has come up with one list; another has been proposed by a coalition of four Washington nonprofit organizations — the Advocacy Institute, which trains charities to lobby; the National Committee for Responsive Philanthropy, a watchdog group; OMB Watch, an organization that monitors federal spending policies; and the Union Institute Office for Social Responsibility.

The two sets of recommendations agree on many points. For example, both support allowing people who do not itemize on their tax returns to claim a charitable deduction.

But they take very different views on other topics. Both like the idea of creating a tax credit for charitable gifts, which would be more valuable to taxpayers than the charitable deductions now available.

However, the groups differ in how it should be carried out. The proposal by OMB Watch and others supports a credit that applies to donations made to any type of charity and that “supplements, rather than decreases, overall government funding for programs and services.”

By contrast, the Capital Research Center wants to limit a tax credit to “charities that provide direct services to the needy.” The center adds: “Instead of paying taxes that support bureaucratic federal programs, taxpayers would give the amount of the credit directly to groups that help the needy.”