By Kris Hermanns
Executive Director
Pride Foundation

Each year Philanthropy Northwest and a group of our member grantmakers travel to Washington, D.C., to share our views on the latest charitable legislation. Attendees have the opportunity to develop and grow relationships with Members of Congress, who are most influenced when constituents from their states or districts advance a cause on behalf of themselves and their national organizations. This year, a number of funders that are based in or support causes in Montana attended, including representatives from Dennis & Phyllis Washington Foundation, M.J. Murdock Charitable Trust, Northwest Area Foundation, and Pride Foundation.

Kris Hermanns

I was fortunate to be invited to Foundations on the Hill last March, an event coordinated by the Council on Foundations and the Forum of Regional Associations of Grantmakers, which includes our own Philanthropy Northwest. The two-day program came as the U.S. Senate was debating and voting on the FY2013 Continuing Resolution to prevent the government from shutting down one week later. It was also a timely opportunity to be in our nation’s capital because of the growing chorus calling for serious tax reform. Senator Max Baucus (D-Montana), Chair of the Senate Committee on Finance, is heading this effort.

Changes in the tax code could include eliminating or restricting charitable tax deductions. While different scenarios are being hashed out, one thing we do know is if we create disincentives for people to donate to charity, it will seriously affect the lives of economically vulnerable people who count on nonprofit groups to provide a safety net for themselves and their families.

The nonprofit sector is a critical component of the U.S. economy that deserves to be protected. The Urban Institute projects that nonprofits generate more than $1 trillion every year through jobs and services, including employing 10 percent of the workforce. And according to Giving USA, individuals donated nearly $300 billion to charitable causes in 2011. It is also important to state the obvious—since the onset of the Great Recession, many nonprofits have been asked to do more with less. If the charitable deduction is reduced and the government simultaneously continues to cut back the services it provides, all of us worry about the deep and long-term consequences that will impact our communities.

It was in this context that I, along with other colleagues from the sector, met with many members of our congressional delegation and their staff, sharing stories of how the charitable deduction positively impacts nonprofits. Since Pride Foundation works across five Northwest states, I was able to meet with the Chiefs of Staff for Sen. Baucus and Sen. John Tester (D-Montana) as well as Sen. Tester himself, along with his Senior Economic Advisor. I also met with Sen. Patty Murray (D-Washington) and her staff, Sen. Maria Cantwell (D-Washington), and a legislative assistant for Sen. Mike Crapo (R-Idaho). Many of us also had the chance to meet with the Chief Tax Counsel to the U.S. Senate Committee on Finance, who is gathering input and feedback from various constituencies who will likely be impacted by tax reform.

During these meetings, we emphasized how community groups are continuing to find innovative solutions to long-standing challenges, filling voids created by government cutbacks, and providing critical and essential services in our communities. We discussed how the charitable tax deduction is unique among all other deductions because it does not solely benefit the individual taxpayer – it provides essential financial support to every nonprofit in this country; we should be creating more incentives for people to give, not fewer.

One of the highlights of the trip for me was when Sen. Tester stopped by on his way to the Senate Floor to vote on the Continuing Resolution. A few of us were meeting with his Senior Economic Advisor, Alison O’Donnell. When I introduced myself, he immediately recognized Pride Foundation’s name, and said that he knew of our good work and appreciated all that we were doing.

I am grateful for the time the Senators and their staff gave to us as well as their willingness to listen to our hopes for further strengthening the philanthropic and nonprofit sectors in our region. I walked away with a strong sense that the Northwest is blessed to have such a respected and powerful congressional delegation.

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

We’ve been keeping our eye on the Oregon legislature and its efforts to cap or eliminate the state charitable tax deduction for high income earners. The legislation, HB 2456, is just one of the tax reform bills before the Oregon legislature that would sunset, eliminate, or cap at $30,000 all itemized deductions, including the charitable giving incentive.

The proposal was developed as part of an effort to raise $275 million in revenue. The Nonprofit Association of Oregon, Oregon Community Foundation, Grantmakers of Oregon and Southwest Washington, and others, have banded together to send a message to legislators that making cuts to giving incentives could further strain nonprofit organizations and make it hard to maintain or expand services in an economy that is still recovering. Capping deductions would impact the communities nonprofits serve, not just the taxpayers who benefit from the deduction.

On Monday, April 15, Oregon Democrats announced they are working on an amendment that would carve out the charitable deduction from their tax package. You can read the news media coverage or follow the Nonprofit Association of Oregon for updates on these efforts.

In other state-level policy news, we’re following the Endowment Tax Credit in Montana. Originally enacted in 1997, the Montana Income Tax Credit for Endowed Philanthropy encourages charitable giving to qualified endowments by offering incentives to Montana taxpayers. The Montana Department of Revenue reports that the tax credit has been claimed on over $123 million in gifts to Montana charitable endowments from 1997 to 2010. On Monday, April 15 the bill passed out of the House of Representatives, having passed out of the Senate in February. The bill now moves on to the desk of Governor Steve Bullock, who has promised his support.

At the federal level, President Obama has released his budget, which, as expected, calls for a cap on charitable giving. For further reading, The Chronicle of Philanthropy has three articles on the President’s budget: Obama to Renew Call to Limit Charitable Deduction and Obama Budget Shows Promise for Nonprofits cover the charitable deduction and other items our sector is following. Check out White House Seeks to Force Charities to File Tax Forms Electronically to learn about Obama’s proposal urging Congress to require all charities to file their returns electronically within the next three years.

On the tax side of things, the chairmen of the two tax committees – Senator Max Baucus, Chair of the Senate Finance Committee and Representative Dave Camp, Chair of the House Ways and Means Committee – co-authored an op-ed in the Wall Street Journal discussing their shared commitment to passing a comprehensive tax reform package, laying out three principles for tax reform, and asking the public to share their input with the two committees.

To stay plugged in to policy-related news that affects nonprofit and philanthropic organizations in our region, follow us on Twitter or search the hashtag #pnwpublicpolicy.

This post is part of Northwest Area Foundation’s (NWAF) Giving Voice series. The content originally appeared on the NWAF website and has been re-posted here with their permission.

By Kevin Walker
President and CEO
Northwest Area Foundation

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.

The best Foundations on the Hill moments come when you find yourself sitting across a small table from a United States senator as she nods and says, “Exactly. I know. I’m with you. Tell me what I can do to help.”

The funniest moments come when you realize the junior staffer who’s been tapped to meet with you doesn’t actually know what a foundation is. He blinks and asks, “So, foundations – is that the construction industry then?“ I am a great believer in the value of humbling experiences. Foundations on the Hill is good that way.

Most of the years I’ve done this, we’ve put forward a number of talking points on policies to protect and enhance philanthropy. This year, though, as deficit reduction and tax reform dominate the national discourse, the Council on Foundations and its Foundations on the Hill co-sponsors urged us to focus on one single point: preservation of the charitable deduction in the tax code.

The charitable deduction works roughly like this. If you give $100 to a charitable organization and itemize that gift on your tax return, your taxable income is reduced by that $100. If you pay federal income tax at the 25 percent rate, you pay $25 less in tax that year. If you pay at the highest rate, which is now 39.6 percent, you pay $39.60 less. So the deduction provides a larger savings to wealthier taxpayers. That fact has led to repeated proposals by the current administration to cap the deduction at 28 percent, as a way to make sure more revenue remains subject to taxation at the highest level. In other words, a $100 gift from a taxpayer in the 39.6 percent tax bracket would reduce the giver’s taxable income not by $39.60, but by $28. The notion is that such a cap will bring desperately needed funds into the treasury in a way that wealthier donors can easily afford.

This sounds good – but credible research suggests the change would drive down charitable giving. The negative impact on the nonprofit sector could be massive – on the order of $5.6 billion in yearly donations that would dry up. The Charitable Giving Coalition points out that this is more than the annual budgets of the American Red Cross, Goodwill Industries International, YMCA of the USA, Habitat for Humanity, Boys & Girls Clubs of America, Catholic Charities USA, and the American Cancer Society combined.[i]

This loss of resources, which would be felt by nonprofits already hit hard by the Great Recession, is unacceptable. Our charitable institutions and the communities they serve simply cannot afford a deficit solution that drives down charitable giving.

I also came away from Foundations on the Hill with a sharpened sense of why this idea is not just alarming in practice, but flawed in theory, too. Ever since its creation a century ago, the charitable deduction has enshrined in the tax code a quintessentially American idea: that charitable giving – neighbor helping neighbor, citizens organizing their own institutions and supporting them ourselves – comes before our obligation to fund Uncle Sam. That’s why the deduction operates by reducing taxable income. The money my family chooses to give to the local food shelf, or our public radio station, or the Red Cross – we have invested that money in the common good rather than saving or spending it ourselves. It should not be subject to government intervention, including the government’s taxing authority.[ii]

We in the social sector should embrace the challenge of meeting our nation’s fiscal challenges. We should offer our help and our best thinking. But if we accept the idea that a charitable deduction capped at 28 percent is good enough, then we accept that the government comes first. In this country, the people come first, not our government. We, the people, give generously to the community organizations we care about. The tax deduction for those gifts has endured through many crises, including two world wars and the Great Depression. Lawmakers who assert that today’s challenges are graver than those, and that therefore we must weaken this provision, should look elsewhere for the revenue we need.

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

Last week a delegation of 17 staff and members of Philanthropy Northwest traveled to Washington, D.C. for Foundations on the Hill. Joined in Washington by 300 fellow foundations and regional associations from across the country, our delegation met with 25 members of Congress from the Northwest over three days, plus staff from the Senate Finance Committee, House Ways and Means Committee, and five federal agencies for a total of 32 meetings.

My blog post from last week highlights the talking points our delegation planned to cover, which included the importance of giving to communities in the Northwest and the critical role of nonprofits in our society.

It’s difficult to summarize what was shared in 32 separate meetings. However, we heard general support for our sector from both Republicans and Democrats, and recognition of the importance of philanthropy and nonprofits to our communities and civil society. We also know that members of Congress and their staff on both the House and Senate are working on tax reform this year—and tax policy that affects foundations and nonprofits has and will be part of those conversations.

As mentioned in earlier blog posts here and here, the House Ways and Means Committee held a hearing on tax reform and the charitable deduction and has created 11 working groups on different aspects of reform. Representative Dave Reichert from Washington State is leading the working group on exempt and charitable organizations and The Chronicle of Philanthropy recently ran an article about Congressman Reichert where he shared his goals for the workgroup and his own views on the charitable sector.

“Charitable organizations are vital to the success of many in our society. They provide opportunities for training, education, counseling, housing, jobs, health care, and the list goes on. They also encourage our communities to get involved, to recognize the needs of the neighbors, and then take action. They bring our neighborhood families closer.”

If you would like to make public comments to the work group on charitable and exempt organizations, you can find instructions here.

We also met with staff from the Senate Finance Committee and learned the committee will be reviewing eight or nine option papers related to different aspects of the tax code. The first paper has already been posted here. The paper related to nonprofits and foundations will be available in April. We hear the Senate Finance Committee will be examining giving incentives (asking themselves if there is a better option than the current charitable deduction) and strategies to simplify the tax code. The committee will also be looking at non-cash contributions and valuation, the unrelated business income tax, and commercial activity of nonprofits.

If you have any thoughts about giving incentives or ways to simplify the tax code for foundations and nonprofits, now is the time to contact your elected officials. All Philanthropy Northwest states, with the exception of Alaska, have a Senator on the Finance Committee. Email me if you would like Philanthropy Northwest’s assistance in creating a statement to your members of Congress.

Philanthropy Northwest has a great deal of follow-up to do and will continue to meet with elected officials and their staff members back in their districts as well.

Philanthropy Northwest Deputy Director David Landers had the opportunity to inform Alaska members of Congress that our Annual Conference will be coming to Juneau this fall. They all seemed excited to show off Alaska to foundations from across the Northwest!

Thanks again to the amazing group of members that went with us to D.C.:

• Don Andre and Donald Chamberlain, Campion Foundation
• Mike Halligan, Dennis & Phyllis Washington Foundation (Public Policy Committee Chair)
• Kris Hermanns, Pride Foundation
• Jeff Jessee, Alaska Mental Health Trust Authority
• Diane Kaplan, Jordan Marshall, and Aleesha Townes-Bain, Ramuson Foundation
• Lawson Knight, Blue Mountain Community Foundation
• Steve Moore and Jill Tatum, M.J. Murdock Charitable Trust
• Adrienne Quinn and Piper Henry Keller, Medina Foundation
• Kevin Walker, Northwest Area Foundation
• Candace Winkler, Alaska Community Foundation
• David Landers and Mindie Reule, Philanthropy Northwest

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

Foundations on the Hill takes place this week. The annual trip to Washington D.C. to meet with members of Congress and their staff is made by more than 250 individuals from foundations and regional associations across the country.

The goal of these meetings is to build new, and deepen existing, relationships with elected officials to increase their understanding of the philanthropic and nonprofit sectors and the value the sectors add to society. This opportunity allows foundation and regional association staff and trustees to illustrate the impact philanthropy is having on local communities. Philanthropy Northwest is particularly interested in communicating the public policy positions we have taken on behalf of our membership, including our support of tax policies that incentivize charitable giving.

This year, 18 individuals from the Northwest region are attending Foundations on the Hill. Representatives will participate in approximately 30 meetings. In each meeting, we’ll be working to make sure elected officials understand the value the nonprofit sector adds to our economy, and to society in general, and underscoring the importance of charitable giving in the United States. In addition to meetings with legislators, we’ll also have the opportunity to meet with tax experts and staff from the committees that oversee the charitable sector.

The Northwest delegation looks forward to the next two jam-packed days of meetings and we’re excited to represent the Northwest philanthropic sector to policymakers. You can follow the happenings at Foundations on the Hill on Twitter using the hashtag #FOTH. Re-visit the blog later this week for a recap of our trip.

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

Today Philanthropy Northwest submitted a written statement to the U.S. House of Representatives Committee on Ways and Means for the hearing they held on tax reform and charitable contributions.

Read our position below and click here to see a PDF of the full statement that includes stories detailing the great work philanthropy is doing in our region.

At Philanthropy Northwest, we believe that philanthropy—with its extraordinary resources and influence, and its explicit commitment to improve lives—has a unique role to play in society.

On behalf of Philanthropy Northwest and our 175 member foundations across Alaska, Idaho, Montana, Oregon, Washington, and Wyoming, we would like to reaffirm our belief in the importance of the charitable sector in our country. We see first-hand the transformational work of philanthropy in our communities; whether it’s funding for education, arts and culture, or basic needs—we know our members are committed to the public good and working across sectors to solve problems and improve lives.

We support tax policy that encourages giving—through a charitable contribution deduction or other means that sustain or enhance the amount that Americans give to charities. We also support considering alternatives to the current tax mechanisms that might achieve similar results. Most importantly, the charitable contribution deduction is fundamentally different from other deductions because it encourages Americans to give to their communities and to causes they care about.

We take this position, rather than a hard line to protect the current charitable deduction, because we have listened to our members who strongly believe that it is incumbent on our sector to work with our elected representatives to be open to alternatives that broaden and perhaps even strengthen charitable giving.

Our position on the charitable deduction reinforces our view that the nonprofit sector is critical to our society and we should continue to strengthen it. Comprising nearly 10 percent of our nation’s workforce, the sector is a critical employer and meaningful part of our economy. The sector is the mainstay of our civil society and plays a crucial role in stabilizing and strengthening our communities.

We would like to offer ourselves as a resource to you and your staff as you carry out the work of tax reform for our country and we’re happy to provide you with whatever research, background information, or stories that might be helpful.

We would like to thank the members of the Ways and Means Committee and especially the members that serve the Northwest: Congressman Reichert, Congressman McDermott, and Congressman Blumenauer for all that you do for our communities.

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

The House Ways and Means Committee has announced a hearing to examine itemized deductions for charitable contributions on Thursday, February 14 at 9:30 a.m. EST. This hearing is a part of the Committee’s work on comprehensive tax reform.

In the announcement Chairman Dave Camp of the Ways and Means Committee said, “Public charities and private foundations perform invaluable services for our society, especially during this time of economic slowdown and high unemployment. These organizations depend upon the goodwill of the American people – the most giving and charitable people in the world. Because of the critical role that charities play, the Committee must hear directly from the charitable community before considering any proposals as part of comprehensive tax reform that might impact their ability to obtain the resources they need to fulfill their missions.

Philanthropy Northwest supports tax policy that encourages giving – through a charitable contribution deduction or through other means that sustain or enhance the amount that Americans give to charities. Read more about our position.

Philanthropy Northwest will submit a comment for the record and we encourage you to do the same. The Council on Foundations urges our sector to offer “specific examples of how philanthropy drives innovation and creates change that our government and the private sector cannot.”

Information on how to submit a statement is available in the hearing announcement. Comments must be received by Thursday, February 28. If you have any questions about this issue or want more information, please contact me.

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

This month, Philanthropy Northwest’s board of directors voted to take an official position on the charitable deduction – one that is a bit more nuanced than many national organizations working on the issue. Our position is this: we support tax policy that encourages giving—through a charitable contribution deduction or through other means that sustain or enhance the amount that Americans give to charities.

We take this position, rather than a hard line to protect the current charitable deduction, because we have listened to our members who strongly believe that it is incumbent on our sector to work with our elected representatives to be open to alternatives that broaden and perhaps even strengthen charitable giving. Our board of directors felt strongly that Philanthropy Northwest should be willing to have honest and open conversations with lawmakers rather than just holding hard and fast to one particular position.

Philanthropists in the Northwest have expressed all sorts of views on this issue. We’ve heard from many that the charitable deduction is critical to trustee donor giving; and we’ve heard from others who say it won’t impact their giving at all. Some members tell us they’re concerned about how much more strain nonprofit organizations can take when they’ve already taken hits as they fight their way out of this recession; others believe that the wealthiest Americans should pay more in taxes.

Regardless of the diversity of opinions among our members across the Northwest, we heard from all of them a commitment to do our part to help address the grave fiscal challenges confronting our nation and a deep belief in the importance of the nonprofit sector.

Our position on the charitable deduction reinforces our view that the nonprofit sector is critical to our society and we should continue to protect it. Comprising nearly 10 percent of our nation’s workforce, the sector is a critical employer and meaningful part of our economy. As the mainstay of our civil society the sector plays a crucial role in stabilizing and strengthening our communities.

We believe that the Federal government should continue to encourage charitable giving through the tax code—whether via a charitable contribution or other means that incentivize giving. We believe that encouraging charitable giving in general, and gifts that support nonprofit organizations and communities in particular, is wise public policy.

To follow the national conversation on the charitable deduction search the hashtag #protectgiving on Twitter or follow Philanthropy Northwest’s public policy tweets using the hashtag #PNWPublicPolicy.

By Mindie Reule
Program Manager, Public Policy
Philanthropy Northwest

Philanthropy Northwest has been following the news out of Washington, DC about tax reform and what it means for our sector. I’ll be using our blog to regularly share some of the most interesting news articles, opinions and research about tax policy and how it will affect funders and the nonprofit sector.

Over the past couple of weeks there’s been quite a bit of talk about the charitable tax deduction, and here are a few pieces that caught our eye:

Last week in “Charitable Deductions Under Fire” Laura Saunders of the Wall Street Journal writes about how some of the current tax proposals would impact the deduction, including the “Pease” provision which could limit the value of itemized deductions.

The June 9^th edition of The Economist writes about “Sweetened Charity” which looks at the history of the charitable tax deduction in both Britain and the United States and brings up some of the current arguments for and against the deduction. You can also read NP Quarterly editor Rick Cohen’s take on the Economist article here.

And finally, the Urban Institute’s Tax Policy and Charities Project just released analysis of the deduction, “Evaluating the Charitable Deduction and Proposed Reforms.”

Stay tuned to the Philanthropy Northwest blog to stay up-to-date on the elements of tax reform that are relevant to the nonprofit sector.

By Alaina Smith
Communications Consultant
The Giving Practice

In a recent Chronicle of Philanthropy blog post re-capping a session from the Independent Sector conference, author Ben Gross wrote:

“[The] discussion of how tax incentives affect charitable giving turned heated [...] as audience members weighed whether a gift to a university provides as much benefit to society as a gift to a soup kitchen.

The opening speaker at the session, Rob Reich, the author of a paper called “A Failure of Philanthropy: American Charity Shortchanges the Poor and Public Policy Is Partly to Blame,” began “on a provocative note by questioning whether tax deductions for giving were even necessary.”

The session exploring this question at Philanthropy Northwest’s own conference did not veer to those extremes – yet is was certainly a lively discussion, with panelists and audience members presenting a multitude of perspectives. As Gross pointed out, “The debate about incentives is not just an academic question.” Senate Finance Committee staff, representing the offices of Senators Baucus and Grassely, participated in the session by phone from Washington, D.C., and were quick to point out that while the calling for an end to tax exemptions for foundations is not currently on the table, they have received a clear charge to assess the “bang for the buck” of tax exempt dollars from the perspective of federal tax code.

Aaron Dorfman of the National Committee for Responsive Philanthropy, Ann Cramer, representing IBM and the Council on Foundations public policy committee and Philanthropy Northwest CEO Carol Lewis rounded out the panel, moderated by Mike Halligan of the Dennis and Phyllis Washington Foundation. The panelists agreed that the tax-exemption for charitable giving is a powerful tool, and explored whether it made sense to adjust the current policy, or whether it was better to keep it in place as is.

According to Gross, one of the speakers at the Independent Sector session maintained that it is “the wrong time for such a debate, with state budgets in turmoil and charities in great need of private support.” While the picture that emerged from Philanthropy Northwest’s session on state budget crises showed some grim fiscal realities facing the Northwest, the mood at the Philanthropy Northwest conference was more optimistic. All the panelists in our session agreed that now is the time for philanthropy and government to come together in partnership, to recognize that both care deeply about the issues of social justice and inequity.