Witness Testimony

Jake Schrum, president of Southwestern University, testified on behalf of CASE and the National Association of Independent Colleges and Universities. His testimony focused on the challenges educational institutions continue to face in the aftermath of the recession, such as decreasing endowment returns and cuts to state and federal funding. He urged the committee to preserve the charitable deduction and other policies that incentivize giving. Schrum also said that major donors often base the size and timing of their gifts on tax considerations and that any limitations on the charitable deduction would hurt giving to educational institutions.

Eugene Steuerle of the Urban Institute expressed support for examining the charitable deduction and reforming it when needed. He focused on possible policies that could both increase revenue and charitable giving. Steuerle suggested reforms, such as extending the charitable deduction deadline to the April 15 tax day deadline, extending the charitable deduction to non-itemizers and removing or reducing the excise tax on private foundations. He suggested that Congress could put a floor on deductions and reform ineffective subsidies (such as deductions for donated clothing) to pay for these additional giving incentives. Steuerle argued that the charitable deduction promotes an altruistic society and limiting it would not hurt donors but instead would negatively affect those who would benefit from the services made possible by these donations.

Kevin Murphy, the chairman of the board of the Council on Foundations, spoke about the importance of the charitable deduction and charitable organizations as a final safety net in American society. He pointed out that the charitable deduction encourages behavior that benefits society, not the taxpayer. Murphy said that regardless of the size of the deduction, individuals who make charitable contributions are left with less money than they had before they made the gift. He also stressed that charitable giving is discretionary, unlike other tax deductions, such as the mortgage or state/local tax deduction, which makes it very sensitive to changes in the law. Murphy said the charitable deduction should not be viewed as a cost to the government because philanthropy can ease its burden by meeting needs that it would otherwise have to handle.

David Wills, the president of National Christian Foundation, testified on behalf of the Alliance for Charitable Reform. He focused on how the charitable deduction is different from other tax deductions and how it benefits American society. He argued that any cut, cap or limit on the charitable deduction would be ill-advised and would affect giving. Wills spoke of donors who have adjusted the timing and size of gifts based on tax changes. He also noted higher demands for services that have been placed on charitable organizations because of the recession. Reductions in nonprofit budgets would produce more joblessness in a sector that employs about 10 percent of America's workforce, according to Wills.

Brian Gallagher, the president and chief executive officer of United Way Worldwide, encouraged the committee to preserve the charitable deduction for all donors and also consider ways to further incentivize private charitable giving. He argued that while donors do not give primarily because of a tax incentive, the charitable deduction does affect how much they give. He spoke of how many people would be affected by even a small decrease in donations to the United Way and how a cap on deductions could severely impact the services the United Way would be able to provide. Gallaher argued that instead of limiting the charitable deduction, Congress should make the charitable giving incentive stronger and expand the deduction to taxpayers who do not itemize their tax returns.

Roger Colinvaux, a professor at Catholic University's Columbus School of Law, focused on the rationale for the charitable deduction and challenges of noncash charitable contributions. He outlined the base measurement and subsidy rationales of the charitable deduction and said that both a floor on contributions and a narrowing of the scope of eligible charitable organizations would provide administrative benefits and be consistent with both rationales. Colinvaux also discussed problems with noncash charitable contributions, particularly donors who take inflated deductions for gifts of property. He encouraged the committee to consider tightening the rules around noncash contributions.

Eugene Tempel, the dean of the Indiana University School of Philanthropy, provided historical background on charitable giving in America and discussed how tax policy can affect giving levels. He discussed the school's research on the impact that federal tax policies have on charitable giving and specifically how a deduction cap would decrease giving. Tempel stressed that charitable organizations depend on the health of the economy even more than on tax changes. He encouraged the committee to find ways to address the nation's economic challenges without curbing the growth of the nonprofit sector.

Mark Huddleston, president of the University of New Hampshire, testified on behalf of a number of higher education associations, including the American Council on Education. He discussed how charitable giving to education funds scholarships, groundbreaking research and technological breakthroughs. Huddleston also outlined the financial challenges facing colleges and universities, especially noting declining state support for public institutions. According to Huddleston, private support ensures that institutions can continue to offer great services despite a decrease in government assistance.

A list of all witnesses with links to their testimony is available on the Ways and Means Committee website.

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Highlights from Q&A

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