The Power of A

Despite more downcast estimates, the Giving USA Foundation and its research partner, the Center on Philanthropy at Indiana University, released a report showing American charitable contributions have declined only about 4% in 2009. The total contributions, given by U.S. individuals, corporations and foundations, slid from $315.08 billion in 2008 to $303.75 billion in 2009.

Individual contributions dropped by 0.4% while charitable bequests fell more heavily by 23.9%, which echoes the IRS report given in late 2009 of the significantly high degree of bequest giving in 2008. The 2009 estimate is 2.5% higher than the 2007 estimate. Grant making by private, community, and operating foundations was $38.44 billion, dropping 8.9%– a rate lower than expected by the two organizations.

Giving USA Foundation Chair Edith H. Falk remarked that although the economic times in 2009 were strenuous, Americans still contributed quite generously. “While overall giving declined, many donors-including individuals and foundations-made special efforts in 2009 to respond to greater humanitarian needs,” commented Falk. Furthermore she mentioned that some nonprofits received unprecedented aid from corporations, specifically from information technology firms and pharmaceutical manufacturers.

Charitable beneficiaries that suffered the most were those who expected to receive their gifts through capital campaigns, contributions to endowments, and donations of art and property such as recipients in education, grant making foundations, cultural organizations, and public-society advancement organizations.

Foundations (private, community and operating) saw a decline of 8% in donations, a drop to $31 billion. Still, they received 10% of total contributions.

Although charitable giving has declined again this year, the result is not as grim as forecasters predicted. ASAE, along with other nonprofits, are committed to ensuring that tax-exempt organizations are not prevented from growing through the current economic times and opposes limiting charitable deductions.

by Narine Mehrabian

Members of Congress and staffers have the day off in recognition of Yom Kippur, but even with the break they are preparing for a contentious week of health care debating.

Most of the attention this week will be on the Senate Finance Committee, which resumes its markup of the Chairman’s Mark health care language tomorrow.  Last week, the committee took an immense amount of time debating a few amendments, and moved many of the major debates (including financing) to this week.  Among the major amendments debated last week was the Nelson amendment that would require drug makers to provide rebates on drugs they sell to Medicare and Medicaid participants.  The amendment had aimed to close the Medicare “donut hole” but was opposed by the White House and Chairman Baucus as potentially undermining the deal the White House had with the Pharmaceutical Research and Manufacturers of America (PhRMA) to help pay for health care reform.  The amendment was defeated 10-13.

The following are the major issues that the committee will likely discuss over the next week, and may help pass or sink the legislation:

- The Rockefeller-Schumer Public Option Amendment: This is likely to be one of the most controversial amendments debated in the committee. The two Senators have pushed for an amendment that would replace the privately-owned cooperatives concept with a public option contained in the Senate HELP and House bills. It is likely the amendment will be defeated in committee but could be reoffered on the Senate floor.

- The “trigger” amendment: While an immediate implementation of a public option in a health care bill may be a non-starter, the idea of a public option “trigger” or delayed implementation may gather enough votes to pass. The trigger has the tentative support of Senator Olympia Snowe (R-ME) and would create a public insurance option if specified insurance reforms were not in place within a certain timeframe.

- Subsidies for middle class Americans: A major concern with some Senate Democrats is the perilous balance between an individual mandate and the cost of insurance. At issue is the concern that by mandating a certain level of insurance, some middle class families would face an increased insurance bill and instead opt to pay a financial penalty. Insurers are concerned this would weaken the pool of insured, especially since many of the opt-outs would be younger, generally healthier Americans. Others call it a tax on middle class Americans, something the bill seeks to avoid.

- Charitable deductions: Chairman Baucus has said any amendment that would add cost to his bill must be offset, and this is the most popular offset offered in members’ amendments. The provision would cap the value of itemized deductions at 33% or 35% for taxpayers whose brackets would be set to rise to 36% or 39.6% in 2011. ASAE and a host of other nonprofits oppose this provision as detrimental to charitable giving in a poor economy.

- Grassley amendments #489 and 490: While not tracked by most media, these two amendments by Senator Grassley would be onerous to many nonprofits. The amendments would they would (1) give the IRS statutory authority to require tax-exempt organizations to report governance and management information and (2) give the IRS expanded authority to challenge executive compensation. Both are being offered as “pay-fors” for health care reform, but it is unknown if the amendments will be debated this week or simply dropped.

Quick Hits:

The U.S. Chamber of Commerce emails the Finance Committee its objections to three major amendments to be considered… The White House shows how a health insurance exchange would work with a working example… Insurers advocate for an individual mandate without an easy opt-out… How the National Association of Insurance Commissioners would play a large role in reformed health care… USA Today offers pros and cons of taxing high-cost insurance plans.

Late yesterday Senate Finance Committee Chair Max Baucus (D-MT) announced that the Congressional Budget Office (CBO) had rescored his committee’s health care legislation and the new cost for the bill over ten years was a number that could be offset: $1 trillion.

Earlier this week, CBO scored the Finance Committee’s proposal as costing $1.6 trillion over 10 years.  Senator Kent Conrad (D-ND) outlined some of the new savings to reporters yesterday, including reductions in future spending on Medicare and Medicaid in the form of hospital and doctor reimbursements as well as reducing federal premiums to purchase insurance for low-income workers.

The committee, however, is still struggling to determine how it will offset the $1 trillion legislation.  Last night, members of the committee told reporters that they will look outside of the health care system to find revenue for the health care legislation.  Senator Conrad told reporters that a possible revenue raiser could be adoption of President Obama’s budget proposal to reduce the tax deduction for charitable contributions for the highest tax bracket to 28 percent. 

Previously, the proposal had drawn criticism from many members of Congress and the philanthropic community as further reducing donations in an economy where fundraiser has grown increasingly difficult.  However, a major Congressional proposal to raise revenue by removing the tax exemption for employer-sponsored health care plans has continued to meet resistance from Finance committee members.  The concern is that removing the deduction would be akin to a tax increase.

With the report from the Giving USA Foundation last week that charitable donations actually decreased nation-wide last year for the second time ever, is adjusting the charitable tax deduction rate a viable way to finance health care legislation?

Quick Hits

Associations and organizations increase public advocacy on health care in preparation for next week’s Congressional district work period… New York Times article on President Obama balancing his proposals to balance the budget and pay for health care… White House Chief of Staff gives his definition of bipartisanship… Debate in the House over climate change legislation intensifies today in the face of a potential final vote.