Nonprofits worry they’ll take a hit in debt-reduction proposals

JONATHAN ERNST/REUTERS - An aide carries a signage as a group of lawmakers calling themselves the "Go Big Coalition" meet for a news conference to encourage members of the so-called "super committee" on debt reduction to find a large compromise.

Some Washington area nonprofits and foundations expressed concerns that potential reductions in the charitable tax deduction, under consideration by Congress’s deficit-reduction supercommittee last week, would have a chilling effect on contributions.

So far proposals offered by both Democrats and Republicans have included caps on deductions for charitable giving as a way to cut $1.2 trillion in federal spending over the next decade. President Obama’s proposal would limit tax write-offs for the wealthy to a 28 percent cap from 35 percent.

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“For Feeding America, like a lot of charities, our work is dependent on gifts from individuals and the private sector,” said Maura Daly, spokeswoman for Feeding America, a hunger-relief charity connected to 61,000 volunteer-run agencies. “The need is up, unemployment is still high, food coming from federal sources is down and the entire nonprofit sector is experiencing decline, so any provision that would change incentives to donate would have a really negative impact on our work.”

Sandra Swirski, executive director of the Alliance for Charitable Reform, said she would be surprised to see the charitable tax code targeted.

“It would be hard to decide that the charitable deduction is ripe for reform, and that scaling back or limiting it is the way to close the deficit,” she said.

Two weeks ago, the alliance and 4,000 other nonprofits sent a petition calling on members of the supercommittee to save the charitable-giving incentive, fearing reduced fundraising already jolted by reductions in federal grants since the recession.

If the supercommitte agreed on Obama’s proposal that would reduce write-offs for the wealthy while allowing existing tax breaks to expire, philanthropy experts calculate a reduction of nearly $1 billion in charitable giving from the highest earners. The “relatively modest” reduction would “place the nonprofit sector under further fiscal strain,” according to a report by The Center of Philanthropy at Indiana University.

Experts say smaller charities and charities that receive most of their funding from the private sector would be the hardest hit.

Some also say the proposal would have a more adverse effect on fundraising in the Washington region because of the amount of wealthy givers here.

 
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