Wednesday, December 3, 2008


Aiding others in times of need is as American as Thanksgiving and pumpkin pie. Our history is replete with examples of Americans - individuals, families, communities, foundations and corporate giving programs - assisting others suffering the effects of adversity. Today we find ourselves in the worst economic crisis since the 1930s, one that is having devastating effects here - on our neighbors, colleagues, friends and fellow citizens - as well as overseas. Americans are a generous people, but some federal laws inhibit our ability to be as generous as we might like to be.

With so much talk about the need for an economic stimulus package, now is the time for government to lift restrictions to increased contributions by individuals and foundations. The Council on Foundations estimates that philanthropy has lost an estimated $200 billion in the value of its endowments. So, it is critical to remove the obstacles to giving generously when generosity is most needed. If not now, when?

There are three actions the new Congress should immediately take to remove barriers to increased philanthropic activity.

1. Expand and make permanent the IRA (individual retirement account) Charitable Rollover.

The IRA Charitable Rollover allows donors aged 70 and older to make tax-free contributions of up to $100,000 to charities from their traditional or Roth IRAs. While the provision is a valuable tool - individuals have donated more than $130 million in the first two years of the provision’s existence - modifications to the law could be exceptional, enabling more people to give more resources to more organizations.

Senate Bill 819, introduced by Sen. Byron Dorgan, North Dakota Democrat, and Sen. Olympia Snowe, Maine Republican, lowers the age of access from 70 to 50, removes limits to the amount of contributions that can be made, and permits donor-advised funds, private foundations and supporting organizations to receive gifts from IRAs. Making the provision permanent would provide the stability individuals need to develop their philanthropic plans.

This bill recognizes the value of donor-advised funds, a vehicle of philanthropic giving that is increasingly popular and instrumental in democratizing philanthropy. A donor-advised fund allows a third party, usually a community foundation or other institution, to manage and distribute funds to causes identified by the donor. Because donor-advised funds offer tax advantages and allow minimum contributions - in some cases as low as $5,000 - philanthropy is no longer limited to the rich but available to middle-income families. The Council on Foundations recently completed a national study of donor-advised funds and learned that such funds were the source of 60 percent of community foundations’ grantmaking.

2. Support the Charity Enhancement Act of 2008.

The Charity Enhancement Act of 2008 permits donor-advised funds to be treated in the same fashion as all other charitable vehicles. Passage of this bill would make modest but much needed improvements to reform legislation enacted in 2006, including the removal of barriers to civic organization scholarship funds at community foundations. Earlier this year, the bill, sponsored by Rep. John Lewis, Georgia Democrat, passed in the House but was not considered by the Senate. The new Congress would be wise to move promptly to pass this vital piece of legislation.

3. Establish a uniform, revenue-neutral excise tax rate for private foundations.

Ironically, the current law is a disincentive to increased grantmaking by private foundations - i.e., foundations established by individuals or families and that do not fund raise. Under a complicated formula used by the Internal Revenue Service to determine tax on investment income, many private foundations that increased their giving in a given year - for example, in response to Hurricane Katrina or the tsunami that devastated Indonesia - are required today tax at a higher rate for the next five years, simply by returning to their normal rate of giving. This is especially unwelcome in today’s weakened economy, when increased grantmaking is urgently needed.

The value of these three proposals is self-evident, as is the need. The strength of these proposals is that none requires direct appropriation but only legislative authorization. The new Congress should take swift action to adopt these proposals, thus giving individuals and foundations the choice to do more to help those who are struggling with less.

Steve Gunderson, a former Wisconsin congressman, is president and CEO of the Council on Foundations.

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