Local groups: Cutting tax deductions will hurt charities, colleges
CHARLESTON, W.Va. -- Ongoing discussions by political leaders in Washington, D.C., about how to avoid the "fiscal cliff" could lead to cutting tax deductions for charitable contributions.
Some proposals could affect the future of a variety of institutions, including colleges and universities, nonprofit hospitals, arts centers, churches, recreation centers, food banks and homeless shelters.
Ben Beakes, the University of Charleston's vice president for university development, said Friday, "We in the nonprofit world are very concerned about the elimination of charitable deductions.
"At the University of Charleston, we depend heavily on private donations to run the school, fund scholarships and execute capital projects.
"Since 2003, we have raised about $85 million from private donations. Those donations are a huge part of what we do. We fear that reducing charitable deductions would have a serious negative effect at the University of Charleston," Beakes said.
John M. Ballengee, president of the United Way of Central West Virginia, said, "While taking away those deductions could in fact save the country a lot of money, it probably would take away from local contributions.
"In a lot of cases, people making those contributions are in the middle class. I think people in the upper class may continue to give. People in the middle class give because it is the right thing to do, but [eliminating their tax deductions] would probably hurt.
"There are other opportunities we could look at. We need to do something. But it kind of drives me nuts to see what is going on in Congress," Ballengee said.
The Rev. Jeff Allen, executive director of the West Virginia Council of Churches, said, "The general thought is that this would not hurt day-to-day giving. But it will probably hurt when a family, or a person, comes into some extra money.
"If a person wants to donate some of that to a church, but cannot get a tax benefit, it might make that person think twice," Allen said. "It could hurt the work of organizations like the United Methodist Foundation and mission projects funded by churches."
Gail Pitchford, president of the Charleston Area Medical Center Foundation, a nonprofit group, said, "I think people give from the heart. They don't give just because of a tax deduction. But it is an added benefit to a gift.
"I think many charities will suffer. I think people will hesitate. They will not give as much," Pitchford said. "I think particularly about smaller charities, like a nonprofit charity of one or two people trying to feed the homeless. Small charities are the ones I am really concerned about."
'No area for experimentation'
President Obama has proposed limiting the amount wealthy people can write off to 28 percent of their taxable income, down from the current 35 percent.
On Oct. 18, two leaders of nonprofit organizations told the Senate Finance Committee that proposal could also devastate many charities, according to "The Chronicle of Philanthropy," a bi-weekly publication based in Washington, D.C.
Brian Gallagher, president of United Way Worldwide, told the Finance Committee that a recent study estimated Obama's proposal would cut charitable donations between $2.9 billion and $5.6 billion a year.
"That equates to eliminating all of the private donations each year to the Red Cross, Goodwill, the YMCA, Habitat for Humanity, the Boys and Girls Clubs, Catholic Charities and the American Cancer Society combined," Gallagher said.
Dallin H. Oaks, a former president of Brigham Young University, said the ability of people to deduct charitable donations on their income tax filings is vital to the financial health of charities, especially charities that attract millions of volunteers to help people in need.
Sen. Orrin Hatch, R-Utah, the Finance Committee's ranking Republican, said, "There has been a charitable deduction in the tax code for nearly a century, and the proposals on the table would undo it. This is not the area for experimentation by the federal government."
Judy Wellington, president and CEO of the Clay Center in Charleston, said, "Those tax deductions were put in because the government values what the nonprofit arena does. Those deductions were one of the ways government could support it. I believe we are still doing good work.
"We receive quite a bit of funding from the general public. I hate making predictions, but we have a really loyal donor base. Because of that, and because they feel we are serving the public, particularly in the education area, I expect they will continue to support us," Wellington said.
Jean Simpson, who runs Manna Meal at St. John's Episcopal Church in Charleston, praised the state's "neighborhood investment program" which now gives special state tax credits for up to $3 million in charitable donations.
Charities around the state fight to be part of the program, Simpson said.
"For every $500 people give us, we can give them a $250 tax credit from the state," Simpson said. "The first year I did that I got $22,000 in extra money, because I could give them back $11,000."
Simpson said, "It doesn't make any sense for the federal government to cut back on tax deductions. The government will just have to produce more money to take care of these people."
Earlier this month, the White House's National Economic Council released a report - "The Charitable Deduction and the Fiscal Cliff" - looking at problems that could be created by cutting the ability of taxpayers to claim charitable deductions.
Proposals to cap current income tax deductions are trying to generate "hundreds of billions of dollars of revenue from drastically cutting or eliminating the charitable deduction."
Legislative proposals putting caps on income-tax deductions, the National Economic Council warns, would threaten future donations to colleges and universities, nonprofit hospitals, social service providers, art institutions and other philanthropic groups.
For example, if the government put a $25,000 "cap" on itemized deductions, "millions of households would effectively lose their entire charitable deduction, since their other deductions (mostly state and local taxes and mortgage interest) already exceed the cap.
Under a $25,000 cap, 13 million households would lose their entire charitable deductions according to the council's report. Under a $50,000 cap, 3 million households would.
Creating a $25,000 cap, the council predicts, would reduce charitable giving by $200 billion over the next 10 years.
Under Obama's current proposal, the report pointed out, "the 98 percent of households with incomes below $250,000 ($200,000 for singles) would get exactly the same tax benefit for charitable giving as they do today. They would also get to keep all their other tax benefits."
Beakes said the University of Charleston is asking its "donors to think about making a larger contribution by the end of the year because of the uncertainty about what tax deductions will be next year.
"Every 501(c)3 nonprofit that depends heavily on nonprofit contributions will be affected by this.
"A major reason we raise money is to keep costs down for our students. We will depend even more heavily on private donations to do that in the future."
Reach Paul J. Nyden at firstname.lastname@example.org or 304-348-5164.