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Back in December the Christian Science Monitor ran “Retink Tax Breaks for Charitable Giving” by Daniel Grant. In his opinion charitabe giving should be restricted to helping the poor. He points to a Clinton-era proposal to allow full deduction for gifts to help the poor, and partial deduction for gifts to any other public good, such as our historical organizations. Grant notes that current tax code will not likely change soon. As 501(c)(3) tax deductible organizations, how might we join this discussion? Is there any reason to be concerned about opinions like Mr. Grant’s?

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9 Responses to Threat to Tax Deductions

  1. Claudia Nicholson says:

    Yes, this is something that we should be concerned about, and we should be part of the discussion, but I’m not sure how. No doubt, we’ll be joined by every other nonprofit that is not strictly devoted to helping the poor. So, he is proposing that educational institutions only receive a half-deduction too? Interesting.

    The main issue is the whole nonprofit sector in the U.S. Marie Malaro lays out its place nicely somewhere (I think it’s in Legal Primer . .. ), but her point is that in the U.S., a choice was made to encourage private organizations to do things for the public good that government then would not have to do. The tax deduction was the way government encouraged these organizations, and the people who supported them.

    By tinkering with the tax deduction, they are tinkering with the whole structure of organizations doing work that the government would otherwise have to do. (Maybe the government wouldn’t have to save historical artifacts, but it sure as hell would have to save its own archives.)

    I suppose in the present climate, everything has to be on the table, but in all honesty, I don’t see the tax-deductibility of gifts to nonprofit organizations begin changed any time soon. This sector has a lot of weight behind it–not only from the organizations, but also from our supporters.

    However, knowing that this is under discussion forces us to think hard about how we justify our work to the public. It keeps us sharp!


  2. Mike Worcester says:

    I’ll second Claudia’s notions that it is doubtful that there will be major changes to tax-deductibility of contributions to 501c3’s any time soon and that forcing this discussion does keep us sharp.

    One of the big issues I have is how smaller non-profits, which covers most all historical societies, have had to pay the price for abuses by larger non-profits. Case in point: postage rates. While discussing with our postmaster recently the seemingly constant increase in bulk mailing costs for non-profits, she mentioned how the postal service was doing this due to "abuse of mailings" by larger groups. AARP was one specific group mentioned. (They mail more before morning break in one day than I do in a year.)

    My hope is that in an effort to assuage "concerns" about non-profits and how they operate, we smaller organizations are not caught up in the waves.

    Oh, and I do think that in our own special way, we do help the less advantaged. How? By keeping access to their heritage and culture readily accessible and in most cases, affordable. Sure it may not put food on their table, but our agencies do play a role in helping everyone’s quality of life. Access to that culture and heritage should not be limited due to economic means. Nuff said.



  3. Mary Warner says:

    Great thoughts, Mike and Claudia. I want to jump off something that Mike said about how abuses by larger nonprofits lead to stress on smaller nonprofits. Whenever the government cracks down on abuses, it increases regulations for everyone without looking at the burden it places on the smallest among us.

    Our accountant has asked us to do time studies this year in order to track how much of our time is spent on administration, fundraising and programming. When these items are reported on the 990 form, the IRS and public want to see the majority of our revenue spent on programming, which is as it should be. That’s where most of us would like to spend our time. However, as the IRS increases its demands for reporting, it is unwittingly asking us to spend more time on administration. So, which is it? Would they rather we spend our time on administration or programming? It’s a Catch Twenty-two, with the small organizations feeling the greatest pinch because we don’t have enough staff to spread out the extra administrative tasks.

    This subject is weighing heavily on my mind because I just spent all day yesterday filling out year-end tax forms and have been involved in rewriting our policy manuals for the past couple of months. Heavy administration, but required.

    Claudia makes a good point about the reason for our tax exempt status. Does the government really want to take on what nonprofits are doing? I think not. Remember the initiative put forth by President Bush a few years ago, wherein he encouraged churches to take on issues related to poverty? The government needs to choose between the tax revenue or the services nonprofits provide. It can’t have it both ways.


  4. David Grabitske says:

    This is a good discussion thread. However, I am wondering if small nonprofits suffer consequences because another nonprofit is larger, or simply pushes the envelope?

    Anyone look at the new Form 990? In your opinion, is it more straightforward?


  5. Mary Warner says:

    Either way, David. If a large organization pushes the envelope, we’re expected to keep up, even if we don’t have the resources to do so. Also, the larger org may be pushing the envelope in a way that we wouldn’t necessarily push it.

    I haven’t seen the new 990 yet, although am curious about it. Does the new form get adopted for use this year?


  6. Mike Worcester says:

    The IRS put out a brochure for 501c3’s back in October (at least that is when I downloaded a copy). It talked about the changes to the Form 990s. If anyone wants a copy, I’ll gladly send it.

    Also, it is precisely when the larger orgs push the envelope the "wrong" way that we smaller orgs pay the price. Take for instance recent legislative initiatives to publicize the salaries of executives from non-profits that receive state funding. If that includes grants, will our salaries be public record? (Mine already is owing to my status as a city employee.)


  7. Mary Warner says:

    Hey, Mike – You said you downloaded the brochure. Could you provide a link here for the download? Then I’ll grab a copy that way. Thanks!


  8. Mike Worcester says:

    Hopefully this works. The title of the publication is Compliance Guide for 503(c)(3) Tax Exempt Organizations. Form 4221-PC



  9. Mike Worcester says:

    There is a good column in the Jan. 29 edition of the Mankato Free Press regarding the MN supreme court decision on non-profits. Is short, but good info nontheless.



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