Mich. Gov. Snyder Defends Use Of Nonprofit Funds

Amid reports that his nonprofit paid for the living and travel expenses of a government official, Michigan Gov. Rick Snyder is saying that taxpayers should not be alarmed.

According to a report in Crain's Detroit Business, Snyder spoke out in defense of the New Energy to Reinvent and Diversify Fund (NERD), a foundation he started to promote various charitable causes. Various reports indicated that NERD paid $4,200 to cover Detroit Emergency Manager Kevyn Orr's stay at a hotel and that the fund is also paying for Orr's flights home to see his family in Maryland on the weekends.

When asked about whether taxpayers should be concerned about this at an event at the Michigan State University club, Snyder indicated that it was an appropriate use of the organization's money and that it was actually saving people money.

"We've been very clear it's all legal, it's all been presented, the information that's required," Snyder said. "It doesn't go to my personal benefit, it's actually offsetting costs of government, so people should feel comfortable with that."

NERD is registered as a social welfare, or 501(c)(4), organization, meaning that donors can contribute to the fund anonymously. Federal tax records show that the organization raised $368,000 in 2012, down from the $1.3 million it received in 2011. It had total expenses of $590,453 last year, compared with spending of $865,830 in 2011.

You can read the full story in Crain's Detroit Business.

Philadelphia Considers PILOT Program

Two Philadelphia council members are pushing for changes that could potentially open the door for a payment in lieu of taxes (PILOT) program in the city.

According to The Philadelphia Inquirer, Councilwoman Blondell Reynolds Brown started the push by calling for a hearing on property tax exemptions for nonprofits in Philadelphia. The city holds nearly $13 billion in exempted property -- 10 percent of the total market value -- making it a prime candidate for PILOTs.

In addition to the hearing, which is to be held sometime this spring, Councilman Bill Green introduced legislation that would require nonprofits to prove they deserve their tax exemptions and would identify programs that should pay business taxes.

Some of the city's nonprofits are not greeting this news with open arms particularly hospitals, which would stand to pay $112 million in taxes if they were not exempt. Curt Schroder, regional executive for the Delaware Valley Healthcare Council, told The Inquirer that he is "concerned" about the discussion and hopes the council doesn't end up implementing a PILOT program.

Though Philadelphia nonprofits might not like them, PILOT programs are common in the United States. They typically arise in cities with vast hospital systems and universities such as Providence, R.I., which recently agreed to a deal with Brown University to receive doubled payments from the college. The biggest recipient of PILOTs is Boston, which collected $19.4 million from nonprofits in 2012.

In addition, a study by the Johns Hopkins University Center for Civil Society Studies featured last year in The NonProfit Times revealed that 63 percent of nonprofits reported paying fees or taxes to local governments.

You can read the full story in The Philadelphia Inquirer.

Mass. AG Asks Nonprofit For Overdue Reports

A Dorcester, Mass., nonprofit faces civil penalties if it does not file a series of overdue annual reports in the next few weeks with state regulators.

According to a report in The Dorcester Reporter, Massachusetts Attorney General Martha Coakley's office sent a letter to the New Vietnamese American Community of Massachusetts, Inc., on Dec. 20, requesting missing annual reports from 2008 to 2011. Nonprofits and public charities in the state are required by law to submit their annual accounting reports with the AG.

"As a result of the organization’s failure to file as required, the Division is authorized to bring an action to restrain the organization from transacting business in the Commonwealth,” wrote Amy Bryson, the compliance officer, in the Dec. 20 letter. "Furthermore, the Division will not issue a certificate of solicitation while your organization is not compliant with the filing requirements."

New Vietnamese's alleged lack of action regarding its annual reports has sparked concern among Vietnamese-Americans in Dorcester, according to the newspaper. Members of that community met at the offices of VietAID, a local development organization, to discuss whether they need to create a new organization to represent Vietnamese residents. The Reporter spoke with one resident, who said that others in the community had alleged the organization has not been transparent with them.

Diane Huynh, Boston Mayor Thomas Menino's liaison to the Vietnamese community, acknowledged to the paper that New Vietnamese does not always share information with the city.

You can read the full story in The Dorcester Reporter.

The Fiscal Cliff Deal: How Does It Affect Nonprofits?

Politicians and the members of the media have been talking about the "fiscal cliff" -- the combination of expiring tax cuts and automatic spending cuts -- for so long, it almost seemed anti-climatic when the country tumbled off it yesterday.

Although the Senate had successfully passed -- 89-8 -- a bill that would have averted the cliff, the Republican-controlled House of Representatives declined to take up the bill, opting to consider it on New Year's Day instead. The bill was passed that evening, which closed the door on tax rates and delayed the spending cuts for another two months.

President Barack Obama campaigned on raising taxes on those making $250,000 or more and, though he wasn't able to get Congress to pass a bill with that threshold, taxes were raised on the wealthiest Americans (specifically, individuals earning $400,000 and couples earning $450,000). That is the main headline from the bill, but it also will have an effect on the nonprofit sector.

In an article on The NonProfit Times website, it was revealed that the legislation will cap deductions for wealthy itemizers. It also reduces the amount of itemized deductions by a fixed percentage for each dollar of income (AGI) above a specified amount (up to 80 percent of the total). In this case, it would be 3 percent above the threshold.

Does this mean the charitable deduction has been affected? Not yet, said Joseph Rosenberg, a research associate at the Urban–Brookings Tax Policy Center in Washington, D.C. He told The NonProfit Times that since the cap is based on income, "it essentially operates as an income tax surtax, not a cap on itemized deductions (i.e., deductions retain the full marginal tax value for most taxpayers)."

That doesn't mean nonprofits are out of the woods yet. In a statement shortly after the bill was passed, President Obama expressed his desire to pursue further deficit reduction through a combination of spending cuts and increased revenue from tax reform, which could potentially place a cap on charitable deductions. The spending cuts could also impact organizations, depending on what government programs are targeted.

Stay tuned to the NPT website for more details on the fiscal cliff deal as they emerge.

5 Ways Nonprofit Advocacy Can Succeed

All eyes right now are on the so-called fiscal cliff and while most of the arguments echoing in the congressional halls are about whether there should tax hikes on the wealthiest 2 percent, there are some issues that will directly impact the nonprofit sector. For example, there are still talks about capping the charitable deduction to generate revenue for the government, to which most in the sector are adamantly opposed.

This is where effective advocacy can come into play.

While nonprofits are forbidden to directly influence lawmakers, they can use their supporters to rally for causes like the charitable deduction. In the book "Five Good Ideas," Sean Moore wrote about how organizations should scrap the focus on the nuts and bolts of advocacy in favor of a reliance on concepts, approaches, and mindsets that can help them become a constructive player in public policy.

Moore laid out five ways to avoid the common pitfalls organizations face while lobbying:

• Understand how the government thinks. Key to successful persuasion is understanding those who you are trying to convince: Their values, objectives, needs, and way of looking at the world.
• Undertake do-it-yourself public policy. One of the most important things you can do is provide public officials with material they can use in a format with which they are familiar.
• Build political capital. Whether its leadership realizes it or not, every organization has political capital. This includes the reputation and accomplishments of your nonprofit and its leaders.
• Be strategically opportunistic. Aim for a balance between being reliable and avoiding being taken for granted. Be prepared to be active, but wait for the opportunity where you can have the greatest influence.
• Find your champions. Having a champion is a litmus test for your work: If you can’t get someone to play this role, that may be an early warning about the practicality of what you are asking.

Illinois Seeks Pay Data From Nonprofits

A new bill pending in the Illinois State Senate would require publicly-funded nonprofits to expose the pay their executives receive from private management companies.

The bill would accomplish this by closing a loophole that currently allows organizations to hide this data, according to a report in The Chicago Tribune. State Rep. Greg Harris (D-Chicago) filed the legislation after reading a series of reports in the Tribune that revealed that the nonprofit executive pay at 18 state-funded organizations rose at double the rate of the private sector in 2009 and 2010.

The report in question showed that nonprofits were able to hide their pay data by paying salaries through for-profit management companies they formed. The proposed legislation would amend Illinois's procurement code to specify that organizations would also need to reveal what executives are paid even if those salaries came through a private company.

This is the latest step in a series of efforts by the state to bring greater transparency to publicly-funded groups. In July, the Illinois Department of Human Services, which funds many organizations in the state, started requiring all tax-exempt organizations that received $250,000 or more to release the pay data for all employees, including those paid through private companies. This requirement will extend to any nonprofit receiving $250,000 or more in DHS funding.

Harris's bill will bring similar requirements to many organizations in Illinois, regardless of which agency is funding them. During Fiscal Year 2011,  more than $9.8 billion was distributed to almost 6,000 nonprofits throughout the state.

You can read the full report in The Chicago Tribune.

Law Would Shine Light On Nonprofit Finances

The financial records of North Carolina nonprofits receiving state aid would be subject to public access, should a recently ratified law be signed by Gov. Bev Perdue.

The Accountability for Nonprofits Act is one of 59 bills awaiting the signature of the governor, according to The Triangle Business Journal. It requires nonprofits that receive more than $5,000 in grants or loans from the state, local, or federal level to provide their annual financial statements should a member of the public request them. Organizations would also be required to provide copies of their most recent IRS Form 990 or 990-EZ or a document providing confirmation of the submission of tax forms from the IRS.

The bill allows nonprofits to comply with these requirements by posting the forms and reports on their website. If signed by Perdue, the bill would become law on Oct. 1.

While proponents of the bill argue this is necessary considering the amount of money going into local nonprofits (about $600 million annually according to the North Carolina Auditor's Office), Dave Heinen of the North Carolina Center for Nonprofits told The Triangle Business Journal that organizations have already been providing their Form 990s for inspection. He said that nonprofits can fulfill the Accountability for Nonprofits Act by continuing to provide their tax forms to online databases such as GuideStar.

Heinen said that the only real new wrinkle in this law is the insistence that nonprofits disclose how they use public money. However, he said even that is something that most groups already do when filling out various state or federal reports.

You can read the full story in The Triangle Business Journal.

Proposed Rule Would Curb Nonprofit Hospital Debt Collection

The United States Treasury Department released a proposed guidance last week that, if enacted, would make changes to the debt collection process by nonprofit hospitals.

The new rules, which are regulation on a provision in the 2010 Affordable Care Act, were released last Friday, according to a blog post on National Public Radio's (NPR) website. The changes would require hospitals to take the following actions before requesting payment from patients:

• Provide patients with a plain language summary of the financial assistance policy before discharge and with the first three bills;
• Give patients at least 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions;
• Give the patient an additional 120 days (for 240 days total) to submit a complete application; and,
• If a patient is determined eligible for financial assistance during these 240 days, refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

In a statement, Acting Assistant Secretary for Tax Policy Emily McMahon said the proposal was made because their had been many reports of aggressive hospital debt collection activities, including allowing collectors into emergency rooms.

"These practices jeopardize patient care, and our proposed rules will help ensure they don't happen in charitable hospitals," she said. "These rules also require charitable hospitals to establish and publicize financial assistance policies, and give hospitals the flexibility to establish programs that meet the needs of their communities."

The American Hospital Association (AHA), a trade group, has already come out in opposition to the proposed rules. Melinda Hatton, the group's general counsel, say the changes put too much of the blame on hospitals for the actions of third-party debt collectors. She also said that the penalties for being in violation were too severe, with with hospitals standing to lose their tax exemption.

At a hearing on the proposed changes in the U.S. Senate, Accretive Health Vice President Greg Kazarian apologized to patients about these aggressive tactics, but also said that their actions were exaggerated during investigation. A patient of Kazarian's company, Deb Waldin, said during the hearing that she was approached by a debt collector while she was in extreme pain from kidney stones.

You can read the full story on NPR.

Senate To Investigate Veterans Charity

Sen. Max Baucus (D-MT)

The U.S. Senate Finance Committee will investigate whether a charity for disabled veterans deserves to keep its tax-exempt status after giving millions of dollars to a direct mail company, and not spending enough money on aid to veterans.

CNN reported that committee Chairman Sen. Max Baucus (D-MT) announced the investigation of Washington, D.C.-based Disabled Veterans National Foundation (DVNF) on Wednesday. He said that the investigation will determine whether the organization will be able to keep its tax-exempt status.

"The tax exemption for charities exists to promote worthwhile causes like assistance to veterans, not to provide tax loopholes to abuse," Baucus said in a Wednesday news release. "DVNF has a responsibility to show it's genuinely helping veterans and playing by the rules."

A two-year investigation by CNN's "Keeping Them Honest" series found that very little of the $56 million raised by DVNF over the last three years went to direct aid for disabled veterans. Instead, the nonprofit has paid almost $61 million to Quadriga Art and its subsidiaries, according to IRS 990 forms. Quadriga Art is one of the nation's largest direct mail providers to charities and nonprofits.

The investigation also found that DVNF supplied unnecessary contributions to veterans aid groups, such as candy, hand sanitizer, and dress shoes -- all surplus items that the charity gets for free.

DVNF President Precilla Wilkewitz said in a statement that her organization will "will happily answer the questions posed by the United States Senate Finance Committee and provide it with information that others have sadly, chosen to ignore."

You can read more about this story on CNN.

Hawaii Nonprofits Fighting Against Itemized Deduction Caps

Hawaii nonprofits are pushing back against a 2011 law that they say will discourage charitable giving for the local population.

The Pacific Business News reported yesterday that local nonprofits, led by the Hawaii Alliance of Nonprofit Organizations, asked state lawmakers to remove a provision in a State Senate bill that places a cap on the amount of itemized deductions can claim on their charitable contributions.  The cap applies to individuals that earn an adjusted gross income of $100,000 or more, a joint or surviving spouse that earns $200,000 or more, and a head of household that earns $150,000 or more.

Nonprofits say that these caps will remove a big tax incentive to give for wealthy individuals.  The thought is these people would be more willing to spread their money around via large donations to charities.  While this is certainly not the only reason people give donations, nonprofits say that it does help boost giving.

The issue of charitable deduction has been national in recent months.  President Barack Obama has repeatedly tried to cap it, most recently in his latest federal budget proposal.  He had last tried to insert it in the American Jobs Act he proposed last fall.  That provision was eventually pulled from the bill by Senate Democrats.  An October 2011 study by the Center on Philanthropy at Indiana University estimated that itemized giving would decline by nearly $800 million in the first year if Obama's proposal were to have been instituted.  That decline would increase to $2.43 billion in the second year.

You can read the full article on this story on The Pacific Business News website.

State Department Bans Nonprofit Over Guest-Worker Probe

The U.S. State Department has taken steps to ban a nonprofit group for two years from a cultural-exchange program.  The announcement comes after the organization sent 400 foreign students to work at a Hershey Co. candy packaging plant last year.

According to The Philadelphia Inquirer, California-based CETUSA brought students, mostly from Ukraine and Turkey, to the U.S. on J-1 visas, which are used for cultural and educational exchange opportunities.  In addition to their summer work, the students were to practice English and learn more about America.  It turned out they had little time for either.

In August of last year, the students protested on Chocolate Avenue in Hershey, Pa., claiming they were forced to work long hours for low pay at the packaging plant, which left them with little time or resources to travel the country and interact with Americans.  The State Department quickly began an investigation of the working conditions in Hershey.  Secretary of State Hillary Clinton also backed a top-down review of the J-1 program, which determined that CETUSA should be barred from participating further for the next two years.

The nonprofit is also involved in other J-1 exchange programs, and their eligibility for those are currently under review.

The J-1 program is meant to expose foreign students to the American lifestyle, and the State Department is likely to announce new regulations in the coming months to make sure this goal is realized.  They want students to be working at jobs that allow them to interact with other Americans, not in hazardous or hard-labor occupations.

You can read the full story in The Philadelphia Inquirer.

Nonprofits Face Licensed Worker Problem

There are thousands of nonprofits in New York that employ licensed social workers.  But now, thanks to a recently passed law, all of these groups are committing a crime.

NY1 reported yesterday on a law passed by the state last week that makes it illegal for nonprofits to hire licensed professionals, from social workers to acupuncture specialists.  The state decided to make this move because it believed that these workers should not be supervised by unlicensed professionals.  As a result, they will not be unable to work for corporations or nonprofits.  Hospitals, as well as specialty stores like Lens Crafters, will be exempt from this rule.  Social services groups had until last week to apply for a waiver.

While this is now the law of the land, it's unclear how it will be enforced.  It seems unlikely that organizations, such as Coalition for the Homeless, which employs a half-dozen licensed social workers and a nurse, will be prosecuted for violating this new rule.  Even so, it will create problems for nonprofits wishing to apply for city funding.  This is because a group is required to be complying with all local and state laws. 

There have been some calls from legislators to change the law.  State Senator Toby Ann Stavisky, for instance, told NY1 that it makes more sense to adjust the law than to sit through countless waiver claims.  But as of this writing, no legislation is being considered to adjust the current law.  You can read the full story in NY1.

Manassas City Council Stands By Nonprofit Funding Method

Despite a push for change, the Manassas City Councils has decided to stick with its current method of funding nonprofit and arts groups.

The Washington Post reported yesterday that the Council voted unanimously to keep its current funding method rather than switch to another that is used in Prince William County.  That system appoints a citizen panel to make recommendations on which nonprofit groups to fund and how much.  It has been under fire by groups like the Prince William County Symphony, whose members say too much money has gone towards the Manassas Ballet ($1.6 million since fiscal year 2005).  One of the biggest advocates for changing the current system is Council member Mark D. Wolfe (R) whose wife, Amy, is the ballet's artistic director.  Wolfe abstained from the vote given his relationship to the ballet.

The city decided to keep the current system in part because it believes taxpayer money should be handled by the Council.  The current funding system in Manassas appoints a subcommittee of council members who make recommendations to the City Council on which nonprofits should receive support.  One change was made, however: The subcommittee will now have only two council members, instead of the usual three.

You can read more about this story in The Washington Post.

Romney's Tax Returns Shed Light On His Giving

One of the big issues that had surrounded GOP presidential hopeful Mitt Romney was his tax returns.  Romney was under intense pressure to release them and he said they would be available in April.  After a loss in the South Carolina primary last week, he decided he would hasten that schedule.

The NonProfit Times took a look at Romney's tax payments and found that he had given more to charitable organizations ($7 million) than he paid in federal income taxes ($6.2 million).  During a recent Republican debate in Florida, Romney said that the American public would be satisfied that he had paid his fair share during the past two years.  Let's take a deeper look and see exactly where Romney's money went:

• The largest charitable contribution noted was a $1,525,000 donation to the Church of Jesus Christ of Latter-day Saints.  Romney is a noted member of the Morman faith, and he has donated at least $4.1 million to the church over the past two years.
• For 2010, available tax returns show Romney's itemized deductions totaled $4,519,766.  His total income was $21,661,344, with an adjusted gross income of $21,646,507.
• None of his income came from wages.  They came instead from capital gains, stock dividends, and interest payments.
• Romney had an effective tax rate of 13.9 percent.  Note that, according to the nonpartisan Tax Foundation, the average effective tax rate for millionaires is 25 percent.

In President Barack Obama's annual State of the Union address last night, he stated his belief that millionaires and billionaires pay a lower rate than average Americans.  He announced the so-called "Buffet Rule," where individuals who make more than $1 million would pay 30 percent in taxes.  If that rule were in effect in 2010, Romney would have had to pay a lot more in taxes.

Read the full article on Romney's tax returns in The NonProfit Times.

How Would SOPA Affect Nonprofits?

Visitors to Wikipedia or Google today will find things a little different.  Both sites are participating in a web-wide "black out" to protest pending anti-piracy legislation in Congress.

The two bills, the Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA), have drawn heavy criticism from its detractors, who say that the laws are an assault on the "free and open Internet."  The legislation would essentially allow the Justice Department to shut down websites accused of copyright infringement without a traditional court hearing.

You're probably wondering: How would either of these laws affect nonprofits?  According to The Huffington Post, SOPA and PIPA could have a huge affect on fundraising.  SOPA would give the government the ability to block suspicious sites' Domain Name System (DNS) servers, which convert .com names into IP addresses.  This could have a direct impact on a nonprofit's donation process, as interfering with the DNS servers makes websites more vulnerable to identity theft and cyberattacks.

Some organizations are already speaking out against the legislation.  In the same piece, The Huffington Post mentioned that Global Voices, an international volunteer community of citizen journalists, is joining the protests by "going dark" for 12 hours.  The organization is concerned that the laws would "inflict broad damage" to the work of digital activists around the globe, and would hinder free speech.

Learn more about SOPA and PIPA by reading the full article from The Huffington Post.

White House Announces Summer Jobs+ Program

Orignally Posted On The NonProfit Times

The White House announced Summer Jobs+, a call to action for businesses, nonprofits, and government to work together to provide pathways to employment for low-income and disconnected youth during the summer of 2012.

American youth are struggling to get the work experience they need for jobs of the future. According to the U.S. Department of Labor’s Bureau of Labor Statistics (Current Population Survey), 48.8 percent of youth between the ages of 16-24 were employed in July, the month when youth employment usually peaks. This is significantly lower than the 59.2 percent of youth who were employed five years ago and 63.3 percent of youth who were employed 10 years ago.

Minority youth had an especially difficult time finding employment this past summer. Only 34.6 percent of African American youth and 42.9 percent of Hispanic youth had a job this past July.

Summer Jobs+ was initially proposed as a $1.5 billion for high-impact summer jobs and year-round employment for low-income youth ages 16-24 in the American Jobs Act as part of the Pathways Back to Work fund. When Congress did not approve the legislation, the White House started working with private-sector employers to commit to creating nearly 180,000 employment opportunities for low-income youth during the summer of 2012, with a goal of reaching 250,000 employment opportunities by the start of summer, at least 100,000 of which will be placements in paid jobs and internships.

“America’s young people face record unemployment, and we need to do everything we can to make sure they’ve got the opportunity to earn the skills and a work ethic that come with a job. It’s important for their future, and for America’s,” said President Barack Obama.

“While young people who are currently disconnected from school or work are not contributing to our economy, we see these young people as ‘Opportunity Youth’ – because of the untapped potential they bring to the Nation, said Patty Stonesifer, chair of the White House Council for Community Solutions (WHCCS) and former CEO of the Bill & Melinda Gates Foundation.

The Administration also announced its intention to launch, within 60 days, the Summer Jobs+ Bank, a one-stop search tool for youth to access postings for any participating employers seeking to reach them where they are online. The search tool builds upon an open standard, the JobPosting schema endorsed by schema.org in November, 2011 in support of the Veterans Jobs Bank, and will include technical and promotional support by Google, Internships.com, AfterCollege, LinkedIn and Facebook.

The Corporation for National and Community Service has released a new toolkit created in collaboration with the WHCCS and employers to support businesses and communities in their efforts to help young people become productive citizens and connect to greater opportunities, both of which are critical for the long-term strength and competiveness of the Nation.

A new analysis released today by the WHCCS showed that in 2011 alone, taxpayers shouldered more than $93 billion in direct costs and lost tax revenue to support young adults disconnected from school and work. Over the lifetime of these young people, taxpayers will assume a $1.6 trillion burden to meet the increased needs and lost revenue from this group. Read the full analysis here.

Businesses, nonprofits and government can accept the President’s call-to-action by directly hiring youth as well as providing corporate mentorship experiences, internship, and other opportunities that connect young people to jobs. The three key ways organizations can engage are:

• Learn and Earn: Provide youth jobs for the summer of 2012 in the form of paid internships and/or permanent positions that provide on-the-job training. Of the roughly 180,000 job commitments announced today more than 70,000 are Learn and Earn commitments.
• Life Skills: Provide youth work-related soft skills, such as communication, time management and teamwork, through coursework and/or experience. This includes resume writing or interview workshops and mentorship programs.
• Work Skills: Provide youth insight into the world of work to prepare for employment. This includes job shadow days and internships. More information about this initiative can be found at dol.gov/summerjobs

Eliminate Charitable Deduction?

Should charitable deduction be eliminated?  One former foundation president thinks so.

Jack Shakely, who ran the California Community Foundation for 25 years, recently wrote an opinion piece in The Los Angeles Times that is sure to cause some controversy in the nonprofit sector.  He proposes that the best way to reduce the national debt is to completely scrap the charitable-giving tax deduction.  If you've been following politics lately, you already know that capping charitable giving at 28% for the nation's highest earners has been a priority of the Obama administration.  They have tried it four times already, most recently in the American Jobs Act.  Each time it has failed after major backlash from nonprofits. 

Yet even with the administration's proposal, charitable deduction would remain in place.  If Shakely's suggestion was to be put into place, the deduction would completely disappear.  His reasoning comes down to this: After nearly a century of existence, nobody can say for sure whether it truly stimulates giving.  The argument has been put out there, most recently by Brian Gallagher of United Way of America, that capping charitable deduction for high earners at 28% would cause donors to "withhold the difference to cover the tax."  But is that really the case?

Shakely argues that it isn't.  He cites what happened when the cap on deductions for the top tax brackets was reduced in the past.  In 1980, it went from 70 percent to 50 percent, and then from 39 percent to the current 35 percent in 2003.  If stood to reason that giving should have declined as the cost of giving increased.  But according to the Giving USA Foundation, charitable donations over the last 25 years have remained consistent, staying around 1.7-percent and 1.95-percent of personal income.  If giving didn't decrease then, he argues, why would it decrease now?

All these examples are when the deduction was reduced.  Shakely's suggestion, however, is to get rid of it entirely.  Would that have any significant impact on giving?  It's hard to say because, as he argues, it's hard to pinpoint how much it really stimulates giving.  Regardless, the article is a great read, and we suggest you check it out if you have the time.

Legislators Introduce Postal Reform Bill To Save USPS

Struggling to stay afloat in a down economy, the United States Postal Service (USPS) is receiving much needed life support from a bi-partisan group of legislators.

At a press conference held this morning, four members of the U.S. Senate's Committee on Homeland Security and Government Affairs backed The 21st Century Postal Service Act of 2011: Joseph Lieberman (I-Conn.), Susan Collins (R-Maine), Tom Carper (D-Del.), and Scott Brown (R-Mass.).  It contains a number of provisions, including:

• Preserving six-day delivery for another two years.  After that period, the Government Accountability Office (GAO) will determine whether the Postal Service's financial situation is in good enough shape to support a six-day delivery.  The prospect of a five-day mail cycle was a huge concern for nonprofits and other businesses, so this will be a major relief for them should the bill pass.
• Refunding $7 billion to USPS through the Office of Personnel Management (OPM), as overpayment to the Federal Employee Retirement Health System (FERS).  About a quarter of that money would be used as retirement incentive buyouts of up to $25,000 (or credit service years toward retirement annuity) to reduce staff by 100,000, and pay down USPS debt.
• Giving USPS the authority by 2015 to deliver to curbside, sidewalk, or centralized mailboxes, rather than direct delivery.

These provisions, and the others included, are designed to help USPS and those that rely on it.  As Lieberman said at the press conference: “Too many people still rely on the Postal Service for us to sit back and allow it to collapse."  Tony Conway, executive director of the Alliance of Nonprofit Mailers, has already announced that his organization will support the bill.

In this era of bank bailouts, the members of the committee were quick to emphasize this is not a bailout of USPS.  The senators emphasized the $7-billion in payments to the FERS that originally came from ratepayers.

The 21st Century Postal Service Act of 2011 joins two other measures that are currently held up in Congress.  This one, however, seems to have a better chance of success since the four members who introduced it hold key committee assignments related to USPS.  Still, nothing is ever a given, so we will have to wait and see what happens with this bill.  Stay tuned for further updates as they occur.

Tax Hikes And Giving

For all the discussion about how a cap on the charitable deduction would affect giving, it seems like proposed tax hikes by the Obama administration might have an even bigger impact.  According to a study by the Center on Philanthropy (CoP) at Indiana University, itemized giving would decline if the Bush-era tax cuts are allowed to expire after next year.  Giving by households would have seen a decline in giving by 1.6 percent in 2009 and 2.4 percent in 2010 if both policies had been in effect.  Total itemized giving would have declined by 0.4 percent in 2009, 1.3 percent in 2010.

These numbers may represent a relatively small direct impact on giving but Patrick Rooney, executive director of CoP, explains that the numbers become more significant when you take into consideration "the weak economic climate, funding reductions and increased demand for services" that are already impacting nonprofits across the country.

The Bush tax cuts were extended through 2012 for all taxpayers last year.  The Obama administration still argues that those tax cuts should be eliminated for households making more than $200,000.  This puts the president on yet another collision course with Republican, and some Democratic, lawmakers who believe that the tax cuts should be made permanent for all households.  You can get the full scoop on the CoP study in The NonProfit Times.

Senate Finance Committee Hearing To Focus On Charitable Giving Incentives

UPDATE: Please read our article about the hearing on our website.

Incentives for charitable giving will take center stage on Tuesday as the Senate Finance Committee continues hearings related to tax reform.

The hearing, scheduled to begin at 10 a.m., will feature four speakers scheduled to testify: United Way Worldwide President and CEO Brian Gallagher; Eugene Steuerle of The Urban Institute; Elder Dallin Oaks of The Church Jesus Christ of Latter-day Saints; Frank Sammartino, assistant director for tax analysis at the Congressional Budget Office, and Roger Colinvaux, associate professor at Catholic University’s Columbus School of Law.

Senate Democrats last week replaced in the American Jobs Act (S. 1549) a cap on charitable deductions for the nation’s highest earners with a 5.6-percent surtax on millionaires. Coalitions of nonprofits have been lobbying lawmakers to preserve the cap on charitable deductions after it was introduced a fourth time by President Barack Obama as away to pay for his jobs bill.

Under the original proposal, put forward a fourth time by the Obama administration, tax deductions on charitable contributions – in addition to other deductions – would have been capped at 28 percent for taxpayers in the highest tax brackets, earning more than $250,000 annually. Currently, those deductions can be as high as 35 percent.