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Giving the Gift that Counts
New bill could mean new tax deductions to help troubled non-profits
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Business New Haven
9/29/2003
By: Melissa Nicefaro
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A bill passed by the U.S. House of Representatives September 17 encourages charitable contributions by individuals, businesses and foundations.
The "Charitable Giving Act" is intended to improve the effectiveness and efficacy of the government’s delivery program for these important donations. The tax incentives in H.R. 7 will encourage and promote philanthropic donations by removing barriers that currently restrict giving.
This bill also includes legislation to authorize a new compassion capital fund to support worthy social programs while extending and strengthening current efforts that urge low-income families to save to pay for school, start a business or purchase a home.
The bill provides an above-the-line deduction for cash contributions in excess of $250 for individuals/$500 joint filers, and allows a maximum deduction of $250 single/$500 joint filers for 2004 and 2005.
Individuals aged 70 and a half or older can also roll over charitable individual retirement account (IRA) distributions tax-free.
Cindy Kissin, president of the Greater Bridgeport Area Foundation, says she’s waiting eagerly to see the legislation move through conference committee and be approved by both chambers of Congress.
"When the final act is approved there will be a number of benefits to community foundations," she says. "Specifically, the IRA Charitable Rollover is an important feature. Previously, community foundations have helped individuals give their retirement assets through their wills. Now, retirees and older Americans can use these assets to make the tax-free gift of a lifetime and take advantage of all the opportunities that community foundations such as the Greater Bridgeport Area Foundation can offer."
If signed into law, the Charitable Giving Act would also directly impact foundations. They could no longer include administrative expenses other than those directly attributable to charitable activities, grant selection activities, grant monitoring and administration activities and compliance with state, federal or local law.
In addition, foundations would not be permitted to include: 1) compensation paid to a disqualified person in excess of an annual rate of $100,000; 2) air travel other than a regularly scheduled commercial flight; and 3) air travel in excess of coach accommodations.
On the other hand, there is more good news for foundations and charities: the provision raises the cap on corporate charitable contributions from ten to 20 percent.
"While this does not directly impact the foundation, we support any measure that encourages the corporate sector to increase their giving and participate in the community in a more meaningful, substantive way," Kissin says.
The bill also enhances incentives for food inventory donations, reduces some excise taxes related to private foundations, reforms taxes on charitable remainder trusts, expands incentives for donations of scientific property and computer technology and equipment, exempts qualified blood-collection organizations from certain retail and manufacturers excise taxes, eliminates the separate limitation for grass-roots lobbying expenditures applicable to electing charities, and creates a pilot project that would allow eligible nonprofit organizations to use tax-exempt bonds to acquire certain forest land.
The Greater Bridgeport Area Foundation, a community foundation, is part of a network of 650 similar organizations across the country.
"We differ from the United Way in that people give donations that the foundation invests, and a small percentage of that is spent out every year," foundation director of communications Julie Konwerksi explains.
"United Way passes money directly through from donors to community agencies," she adds. "We maintain gifts and try to grow them. As some people describe it, the United Way is the "people’s checkbook," while community foundations are like savings accounts."
About one-third of the money that leaves the foundation each year goes to scholarships, mainly for local high school students who are graduating to go on to college.
"Another third of our granting every year is made through our unrestricted funds. Money from these funds should be used to address the needs of the community." Konwerski says that happens through a competitive grant process.
Though the process remains more or less unchanged, the world of charitable giving — and receiving — has changed tremendously in the past few years.
Most nonprofits will agree that the events and aftermath of the September 11, 2001 terror attacks delivered a crippling blow to budgets.
"Every non-profit is feeling the affects of a shift in people’s focus or in what they’re giving to," Konwerski says.
The folks at United Way of Greater New Haven agree.
"Corporate giving is up in some areas and down in others," says Heather Calabrese, spokesperson for the local branch of United Way. "Some corporations have adjusted their giving policies, or we see reflected a greater involvement in the campaign since September 11. Others are faced with the challenges of the current economy or changes in their industry that are causing them to have to cut back. Where we see an enormous increase is in the support in civic engagement and volunteerism on the part of corporations."
Calabrese describes New Haven-based TransPro, which has a corporate team of employees who volunteer in activities during the year: "They really encourage volunteerism and more than 100 [workers] are involved. They’ve adopted Christopher Columbus School and have developed a whole steering committee with emphasis on volunteerism. That’s a message at TransPro that comes right from the top: the CEO, Charlie Johnson."
Earlier this month the United Way held its annual Day of Caring, which is part of National Civic Participation Week. Traditionally United Way will have 15 to 20 companies involved in roughly 40 or 50 projects. Last September there were 90 projects, and this year there were more than 100 projects.
"In that sense, I think the growth in Day of Caring is directly related to a business community and corporate response to September 11," Calabrese says. "I think we built on the momentum from last year, but people want to do something constructive and positive on a day that ought to be respected and honored."
She adds, "But at the same time, businesses are finding that they can take a day like that and make it positive to strengthen their own community."
As far as year-round corporate giving to United Way goes, some companies are up — and more are down.
"The companies that we’re seeing are down, and there’s not a lot we can do about it. It’s the economy, it’s their business, it’s that they’re not locally controlled anymore," Calabrese says.
On the other hand, United Way is seeing an increase in individual giving. The campaign has grown 40 percent in six years and that is almost entirely due to the increase in individual giving and "leadership" ($1,000 and over) giving. Many who give at the leadership level are leaders in the business community, making their own personal gift.
The Greater Bridgeport Area Foundation has also felt a shift in giving in the past several years, though Kissin does not characterize September 11 a root cause.
All non-profits are feeling a pinch, and Kissin attributes that to a variety of sources.
"One that’s very obvious is that individuals who are supportive of the not-for-profit community — whether it’s more specifically social service, or the arts or education and scholarship — when their own personal wealth goes down, there’s simply less giving done," Kissin says.
"In addition, there is more unemployment, more tenuousness about jobs, and people are very cautious about where their money is going."
Kissin adds that the state has suffered some serious economic fallout.
"Whatever the cause, the result is that there have been draconian cuts to many, especially social-service agencies who are providing incredibly important services. Nobody was weaned off — it was just a sudden slam," Kissin says.
"We’re talking about services for children, services for poor people,
educational budgets around the state, mental health, economic development money — it’s been really slammed across the board. Affordable housing is a huge issue in our area."
In Bridgeport, there has been some tremendous progress made in cooperation of businesses and individuals, she adds.
Though the foundation is not linked to a tremendous number of corporations, it does have important corporate partners such as People’s Bank.
Banks and utilities — traditionally major sources of funding for local arts organizations — have had to pull their belts in, but People’s Bank has remained faithful.
"People’s is working very hard to honor their commitment and take the belt-tightening and try to do it very strategically so that they can continue to support the good work that’s being done," says Kissin. "It’s been a real thoughtful struggle. People’s could do a lot less and still be considered a good corporate friend."
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