The Tax Man Cometh
The Need For Jewish Nonprofits To Lobby On Behalf Of Charitable Giving
By Robert Evans and Bryan Schwartzman
Sometimes, reading the tea leaves in Washington can be as difficult as filling out a perfect March Madness ballot.
Could Congress really enact tax code changes that could be detrimental to the nonprofit sector, or is there absolutely nothing to worry about? Well, it depends on whom you ask. Some observers suggest that 2015 could be the year that Republicans and Democrats finally compromise on a plan to overhaul and simplify the bloated U.S. tax code. Others say there’s virtually no chance that Republicans and Democrats will be making any big compromises.
Jewish nonprofits should take a middle approach, neither sounding the alarm, nor passively dismissing the debate as pie-in-the-sky chatter. Every time a volunteer or professional representative of a Jewish nonprofit meets with a lawmaker, there should at least be a mention about the necessity of preserving existing charitable contribution deductions. The case for nonprofits must continue to be made. While our donors aren’t necessarily motivated primarily by tax returns, most savvy and wealthy philanthropists strategically make their gifts to maximize tax benefits.
Much of the chatter of the past few years has focused on two proposals: one hailing from the White House and other from Congressional Republicans. Both proposals would, if enacted, seriously erode the century-old system established with the personal income tax. Essentially, the government agrees to forgo some tax revenue so that two, three and four times that amount can benefit the public via nonprofits.
In February, for a seventh consecutive year, the president included in his budget a 28 percent cap on charitable tax deductions on individuals in the top tax brackets. The administration has said this will bring much needed revenue to Uncle Sam, but experts predict losses to nonprofits ranging from $1 billion to $9 billion.
The second idea was proposed last year by the now retired House Ways and Means Committee Chairman Dave Camp (R-Michigan.) Camp’s massive tax overhaul proposal called for limiting charitable deductions to instances when donations exceed 2 percent of the taxpayer’s adjusted gross income. Experts predict that, if enacted, this could cost the nonprofit sector $3 billion in lost donations. Though Camp is no longer in office, his overhaul proposal is considered to still be meriting serious consideration.
Jason Lee, general counsel for the Association of Fundraising Professionals, said in a recent webinar organized by the Giving Institute that when it comes to tax proposals in 2015, everything remains on the table. He recommended not being complacent regarding Congressional discussion of the 28 percent just because the idea has been around for seven years and has failed to generate momentum. There’s interest from both parties in doing something before all gears shift to election mode, and nonprofits, Lee said, must be as vigilant as ever in lobbying their own lawmakers against changes that could hurt the nonprofit sector.
Meanwhile, Steven Woolf, senior tax policy analyst for the Jewish Federations of North America, said in a recent interview with us that it is highly unlikely that Congress will pass either the 28 percent cap or the 2 percent floor this year.
“The politics of it becomes so difficult to achieve,” said Woolf. “There still isn’t a sense of urgency, as it pertains to individual taxation. With corporate taxation there is a lot more consensus of the need for change.”
“I don’t think the environment has changed all that much, support for the charitable sector remains very strong, I don’t think there are more than a handful of members who would say we need to cut charitable giving,” he noted.
Still, he doesn’t discount the possibility that, if talks on a grand deal really progress, and negotiations go late into the night, someone may offer one of the deduction proposals as a way to make the numbers. That is why, he said, JFNA staffers are currently and constantly having meetings on the Hill, explaining the importance of the nonprofit sector and how eliminating tax benefits for charitable contributions could hurt the nonprofit sector. Reasonable people, he said, can disagree on projections for how much the sector would be harmed, but no one disputes that donations would drop.
“Many of the staff within the House Ways and Means Committee are still in their positions and would have some input,” said Woolf, referring to the staff members who helped Camp draft his proposal. “Again we would continue our educational efforts with those folks.”
For the past five or six years, JFNA has been a major part of the Charitable Giving Coalition. That coalition has brought together disparate nonprofit forces to lobby in a bipartisan manner on behalf of the charitable sector. The group has educated lawmakers and the public about the value that nonprofits offer, from services provided to jobs created. It has also championed nonprofits at a time when cynicism toward nonprofits is at an all time high and in which scandals and mismanagement have been reported in the press.
By lobbying lawmakers, advocates have managed to convince lawmakers not to tinker with Donor Advised Funds (DAFs), an increasingly important philanthropic vehicle championed by strategic donors. The original Camp proposal contained several changes for DAFs, including new reporting and annual disbursement requirements.
And in February, the House passed the America Gives More Act, which would make deductions for IRA charitable rollovers and donations of food inventory permanent, as opposed to having to be periodically renewed. Now it falls to the Senate to take up the measure. In the previous Congress a similar bill passed the House only to languish in the Senate.
The Jewish community should be proud of playing a part in these victories and JFNA deserves kudos for making this case effectively on the Hill. But our work is far from done. In an era in which partisanship appears near an all time high, our organizations must lobby in a nonpartisan way. We must educate about the services we provide, the people we help, the communities we support, the ideas we inspire.
Jewish organizations cannot afford to think of advocacy as a dirty word. There is a wealth of resources available on the Charitable Giving Coalition’s website. Check it out. If your organization partakes in a mission to Washington, make sure some of its lobbying efforts relate to maintaining deductions for charitable contributions. The economy may be improving but our political climate remains volatile. Those who care about philanthropy and about the work of the Jewish community cannot afford to take anything for granted.
Robert Evans, President of the Evans Consulting Group in suburban Philadelphia, has more than 35 years of experience advising nonprofits on fundraising campaigns and strategic planning. A member of the Giving USA editorial review board and a board member of the Giving Institute, Mr. Evans is frequently quoted in media outlets such as The New York Times and is a regular contributor to eJewishPhilanthropy.com.
Bryan Schwartzman, an award-winning journalist, is manager of marketing and communications at Evans Consulting.