Legislation

Ted Hart speaks with Canadian charity law expert Mark Blumberg, partner at Blumberg Segal LLP, on his Nonprofit Coach radio show.

The number of nonprofits organizing to preserve the charitable deduction grows every day, but most charities have remained silent about a far more pressing concern: the severe cuts in government funds for domestic needs. Even more disturbing is that few people in the nonprofit world seem aware of a new legislative proposal that could add $35 billion a year or more to such programs perhaps including their own organizations.

I spent the first day of spring 2013 fast-walking Capitol Hill with foundation colleagues from all across the country. Hundreds of us were there for Foundations on the Hill, philanthropy's annual push to remind lawmakers why giving matters. In brief encounters with our elected officials and their staff, we tried to connect the dots between their priorities and ours. We reminded them of the essential work our grantees are doing every day to make communities better, to make our nation stronger and more just.

In the high-stakes game of sequestration being played out between the White House and Congress, Democrats and Republicans, one side seems certain to lose: America’s nonprofit sector.

If sequestration occurs and $85 billion in automatic cuts are enacted, funding for charities in the form of grants and government contracts will be dramatically curtailed. Even if a compromise is reached and sequestration is avoided, deep cuts in nonprofit funding — in addition to caps on itemized deductions, including the charitable deduction — could still be implemented.

Less than two months after Congress and President Barack Obama showed charities a little love by leaving the charitable tax deduction untouched in their budget compromise, the House Ways and Means Committee has scheduled a Valentine’s Day hearing that will examine the tax break yet again. The deduction will be one of many issues considered at a session the committee is holding as it assesses what issues to consider in a broad overhaul of the tax system.

Three fundraising professionals on the front lines discussed a multitude of issues surrounding the fundraising sector, including corporate trends, major donor concerns and changes to the tax law at the Association of Fundraising Professionals New York City Chapter's annual meeting.

Those were the words from Association of Fundraising Professionals President and CEO Andrew Watt at the AFP New York City Chapter annual meeting last Wednesday. Watt gave a keynote presentation where he "sounded the warning," stating those very words, that "the tax deduction in the big scheme is not all that important."

Legislation the Congress passed Tuesday to avoid the fiscal cliff limits how much wealthy people can claim in deductions for charitable contributions and other spending when they itemize their tax returns. The legislation raises the top tax rate to 39.6 percent on household incomes above $450,000 but maintains current rates for everyone else, or about 98 percent of all Americans. It also delays for two months the $110 billion in federal spending cuts scheduled for 2013.

A week after saying it wanted to avoid wading into the “middle of a partisan political struggle” on any specific tax proposal, Independent Sector, the coalition of charities and foundations, on Wednesday stated its support for President Barack Obama's plan to raise rates on the wealthy.

“We believe a plan that includes a modest tax increase on the 2 percent of Americans who can most afford it offers the best hope of moving forward in a fair and balanced way,” it said in a statement.

Senior Obama administration officials invited nonprofit leaders to the White House this week to enlist them to push for increased taxes on the wealthy, a request that went unheeded as charity officials from across the country spent Wednesday lobbying Congress to preserve the charitable tax deduction during deficit-reduction negotiations.

The White House request put new attention on a rift that has emerged in recent weeks among charity and foundation leaders deciding how best to harness their collective advocacy as Congress and President Obama negotiate steps to avoid going off the so-called fiscal cliff.